Drug pricing policy is a waste of resources. Remove price and export barriers and see how drugs get cheaper. The prices based on the cost of production are the worst. It’s how Karl Marx and the socialists used to think before their economies collapsed. The prices are not a factor of the costs of production alone, but rather what the consumers are willing to pay. If a Pakistani company makes a drug at a cost of double the cost of foreign countries then would that be a justified cost for Pakistanis to pay?
The first is cost plus pricing, a mechanism by which the final price of drugs is based upon the manufacturing cost of individual units.
The absurdity of that argument is obvious. If things are cheaper abroad then get them from there. No need to devise a policy or employ government resources to figure out how to set prices and what to do if there are shortages. The competition between producers in a free market automatically ensures that they produce the best product at lowest cost. Short of that and the consumers move to a different company.
There are some 600 companies in Pakistan out of which four foreign highly reputable firms left the country due to inconsistent and ad hoc policies.
Whatever government tries to control ends up getting worse. Sooner or later after this policy is implemented the drug prices are going to get higher because of the formation of cartels or the quality of drugs is going to drop if the prices are set artificially lower.
The most powerful and across the board quick way to increase the wealth of a nation is to allow freedom of commerce. Pakistan and the people in charge of the policy try their very best to ensure that never happens. They maintain the few cartels that have formed and keep telling the people about the supposed profiteer who’ll take everything from them if the government didn’t set up rules.
Is the government setting up rules to determine what the shoe sizes should be? Are people going without shoes? Are the shoes not fitting? Is one shoe bigger than the other? Had the government been involved in the shoe business we’d all have the same shoes and probably of lower quality. People would have been terrified to think how a free market would provide shoes as they would only have seen the government provide it. Same’s the case with drugs.
Drug pricing policy is a waste of government resources. The free market works like a charm, based on what sells and what doesn’t, whether it be shoes or drugs. There’s no need for intervention and there’s not need to set up an elaborate and wasteful system in an attempt to monitor everything.