Question

Last week, the government used the Drug Price Control Order, 2013, to increase the price ceiling for 21 medicines by as much as 50% to ensure their availability in the market. This is a welcome move because lower prices would have further limited the availability of these drugs, some of which include those used for malaria, leprosy and allergy. The decision by the regulatory authority – usually known to reduce prices of essential drugs – was prompted by repeated petitions by the pharmaceutical industry, which pointed out that the increasing cost of imports had made the production of some of these drugs unviable. Prices of bulk drugs and active pharmaceutical ingredients have, in fact, gone up by up to 88%, and are largely imported. 

This raises a basic question: Should the government control prices? The motivation for controlling drug prices is not very difficult to understand. Unlike some of the developed countries, where most of the population has insurance coverage or medical facilities are provided by the state, medical expenses in India are borne by citizens, largely through out-of-pocket expenses. Therefore, the state intervenes by keeping prices of some drugs in check to contain such spending. However, the unintended consequence is that it affects the supply of drugs and can potentially make citizens worse off. The risk of non-availability was an important reason for raising prices. Although all pharmaceutical companies may not stop producing drugs with price control, they may limit the supply. Further, the government usually dithers on price hike because of political considerations so that it is not accused of favouring private companies.

Thus, the government should stay away from dictating prices and allow the market to function. Competition in the marketplace will ensure that no company is able to make extraordinary profits in basic and essential drugs. Since the state has limited resources, it should focus on regulation, and ensure that the quality of drugs supplied in the market is not compromised at any point. 

An essential medicine, ‘Formula A’, is used to treat cancer, and there is only one company engaged in its manufacture. If this is true, then, based on the author’s reasoning in the passage above:

विकल्प

• The state should not control the price of Formula A, since it should allow the market to function.

• The state should control the price of Formula A, since there is no competition in the marketplace, and it cannot function to control the price of the medicine.

• The state should ban the sales of Formula A, and ask patients to consider using some other medicine that is made by more than one manufacturer.

• The state should take up the manufacture of Formula A itself.

Answer 1

The state should control the price of Formula A, since there is no competition in the marketplace, and it cannot function to control the price of the medicine.

Explanation:

The correct answer is – the state should control the price of Formula A, since there is no competition in the marketplace, and it cannot function to control the price of the medicine. The author argues that competition in the marketplace would ensure that no company is able to make extraordinary profits, in the last paragraph of the passage above. If, however, only one company manufactures Formula A, there would be no competition in the marketplace, and thus, the state would have to control its price.