Drug price control: an evaluation

Abstract

This payer sets out to achieve the following three objectives: (1) to develop a framework: for examining the problem of price control in the context of the drug industry; (2) to use this framework: for considering whether there is a conflict between the short-term and the long-term benefits of the price control to the consumer; and (3) to use this framework: again to analyse the Tariff Commission Report and the Position Paper on Drug Prices submitted by the OPPL Lack of adeqaate empirical data made it difficult to achieve the second objective. In our analysis of the Tariff Commission's Report and the OPPI Position Paper, it became evident that there was considerable difference of opinion between the two on what should be the 'adequate rate of return and on methodology for its measurement These differences are discussed in detail. One of the positive aspects of the Price Control Order is that it has once again brought into sharp focus the problem of maintaining profitability through higher sales at lower prices. [The authors acknowledge the assistance given by R N Karanjia, H K Agarwal S G Ratnam, P S Vishwanathan, and R Sampath, who collected, compiled, and analysed the data for this paper; the financial assistance given by the Indian Institute of Management, Ahmedabad in the preparation of this paper; and the OPPI who made available their Position Paper' on drug prices for the study.]