Is the 2013 Price Control Regulation Necessary?

Abstract

In this chapter, we address whether pharmaceutical price control regulations, introduced in India in the 1970s when the domestic pharmaceutical industry was still in its infancy, are relevant today. India is currently among the largest exporters of generic, low-cost pharmaceuticals to countries around the world. Also, other countries such as China have removed price caps regulations on low-cost medicines due to rising concerns about the declining quality and shortages of regulated medicines (Burkitt 2014). We complement the historical account of the policy process detailed in the previous chapter resulting in the 2013 DPCO regulation with a quantitative approach in this chapter. In particular, we use Pharmatrac data to examining whether pharmaceutical markets in India are competitive and whether greater competition is sufficient to ensure lower prices in these markets. Our goal here is neither to advocate a greater role for market forces nor call for government intervention in general, and we refer the readers to other studies for such discussions (e.g., Datta-Chaudhuri 2000). We envisage a limited role for reasonable regulations in the Indian pharmaceutical industry, given its unique characteristics.