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.]
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