ISAS Insights

The Government of India has constituted a Group of Ministers (GOM) to finalise the National Pharmaceutical Policy. One of the issues before the GOM is the question of price controls for patented drugs and formulations. Though such controls are distortionary, it appears that there is a direction to propose such controls. This paper examines the features of price control mechanisms in different countries and suggests two alternatives. The first is a Vietnam-like approach where prices are negotiated for government purchases, and are merely intimated and approved for public markets. The second is a mechanism where the price fixed is not higher than the lowest in any of the comparator countries. The paper describes the processes involved in making this mechanism work.