REAL LIVES 2007 PLUS A FIXED

Mock Test-2 29.Price regulation is an exceptionally powerful tool for controlling markets it is also dangerous and needs to be deployed judiciously. (b) is clearly true as is directly mentioned in the passage. DAWN also records the number of drug-related suicide deaths.(c) The year 2007 is an ordinary year, so it has 1 odd day. 5 Rates of drug-related deaths range from 1.1 per 100,000 in Sioux Falls, South Dakota, to 26.1 per 100,000 in the New Orleans area. A 2007 DAWN survey of 63 metropolitan areas found an average of 12.1 deaths per 100,000 persons related to drug use.

This pricing strategy is hopelessly wrong. The only discernable rationale for these percentages is that they are round numbers. Over the past few years in Ontario, generic prices have faced a ceiling based on the price of the equivalent brand product: The ceiling started at 75%, and then was revised to 50%, and then unexpectedly revised again to 25%. Prices are set arbitrarily and change suddenly and substantially. Unfortunately, Canadian regulations around generic drug pricing seem to be based on exactly the opposite set of principles.

Generally, price regulation is applied because a firm has the ability to exercise market power. And the current process of price setting is unpredictable, unfair, opaque, and politicized. Changing this number frequently is even worse. Regulating the price based on a number that is not in any way related to cost is a strategy that is guaranteed to distort the market. And some are very cheap to produce, less than 5% of the brand price. Some drugs are relatively expensive to produce, and should be priced above 25% of the branded product.

Real Lives 2007 Plus A Fixed

The profits arenвЂ™t left with the generic manufacturers, who, if they want to make the sale, have to pay allowances to the pharmacy as an inducement to carry their product (instead of another manufacturerвЂ™s). Since consumers donвЂ™t worry about price, pharmacies buy generic products with the highest reimbursable wholesale price, which governments are setting at a fraction of the brand price. This hasnвЂ™t worked out well. Competition among generic drug producers is then supposed to lead to low prices. Insurers have attempted to limit this markup by reimbursing pharmacies only for the wholesale cost of the drugs dispensed, plus a fixed markup and a dispensing fee.

We need a system that drives reimbursable prices down to the level of cost. Setting the reimbursable price at 50% or 25% of the brand price guarantees that even products that are very cheap to produce will be sold at the highest reimbursable price. Thus, wholesale prices donвЂ™t reflect the cost of manufacturing, which varies a lot between drugs.

It should instead have started at perhaps 60% and fallen with every additional entrant. Ontario tried doing this, but only at the price levels of 70% (with one generic) and 63% (with two or more generics). Generics will then keep entering until the price is driven down to a level close to costs.

First, it needs to reward generic firms that invest in litigation to eliminate invalid patents and thus clear the way for competition. A regulatory authority also needs to take care of two other problems. These approaches could make price related to cost.

Financial Post Aidan Hollis is professor of economics at the University of Calgary. This isnвЂ™t rocket science: If we want low prices, we need a system that rewards competition-enabling litigation, uses competition to deliver low prices, and predictably pays for the appropriate level of pharmacy services. Setting the generic price at an arbitrary ratio of the brand price is one of the worst systems of price regulation ever devised. Provinces are already engaging in price regulation, but they are putting price regulation inside the political system, rather than in an independent regulatory authority with a clear mandate to ensure a fair вЂ” but not excessive вЂ” return to pharmacies and a suitable level of service provision. Second, we need a reasonable process of regulating the dispensing fees and markups charged by pharmacies. If we want generic firms to litigate to create competition, we need to reward successful litigants.

Real Lives 2007 Crack