UPSC Prelims Practice Questions — Are lower MRPs on cancer drugs translating into affordable care?

Q1. When the price regulator caps the trade margin on a group of non-scheduled medicines at 30% of the retail price, which of the following brands are likely to see the steepest reduction in what patients pay?

  • A. Brands whose ex-factory price includes heavy recovery of research and development costs
  • B. Brands sold at many times the price the manufacturer charged its first distributor
  • C. Brands of formulations already sold within a ceiling price fixed under Schedule-I
  • D. Brands whose manufacturer charges distributors a high price owing to patent protection

Q2. Consider the following facts about a recent drug-pricing measure: I. The trade margin on certain non-scheduled anti-cancer drugs was capped at 30% of the Maximum Retail Price. II. Before the cap, these drugs carried an average mark-up of about 170%, and over 700% in some cases. III. Prices of the affected brands fell by up to 70–93%. Which of the following inferences can be drawn from the above facts?

  1. Before the cap, for some brands the distribution chain received more of the retail price paid by the patient than the manufacturer did.
  2. The cap works by lowering the price at which manufacturers sell these drugs to the first point of distribution.
  3. After the cap, every patient buying the affected brands pays at least 70% less than before.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1 only

Q3. Consider the following assertion: 'A lower MRP on cancer drugs does not by itself make cancer treatment affordable for patients.' Which of the statements given above support the assertion?

  1. The trade-margin cap covers about 900 brands of anti-cancer medicines.
  2. Hospital pharmacies can buy drugs at deep discounts and still sell them to patients at the printed MRP.
  3. The 2019 pilot of trade-margin capping reduced the MRPs of over 500 cancer-drug brands by up to 90%.
  4. Diagnostics, hospital stay, surgery and radiotherapy fall outside the scope of drug price control.
  • A. 1 and 3 only
  • B. 1, 2, 3 and 4
  • C. 2 and 4 only
  • D. 2, 3 and 4 only

Q4. With reference to the Patents Act, 1970, consider the following statements in the context of access to costly patented medicines: Which of the statements given above is/are correct?

  1. A compulsory licence transfers ownership of the patent from the patentee to the licensee.
  2. Non-availability of a patented invention to the public at a reasonably affordable price is a ground for seeking a compulsory licence.
  3. A mere new form of a known substance that does not enhance its known efficacy is not treated as a patentable invention.
  • A. 2 and 3 only
  • B. 1 and 2 only
  • C. 1, 2 and 3
  • D. 3 only

Q5. A patented anti-cancer drug is expensive mainly because its sole manufacturer charges stockists a very high price, while the distribution mark-up on it is already modest. Which one of the following measures would most directly reduce the price patients pay for it?

  • A. Granting a compulsory licence that allows a generic firm to make and sell the drug
  • B. Capping the trade margin between the stockist price and the retail price at 30%
  • C. Requiring hospital pharmacies to display the drug's maximum retail price prominently
  • D. Limiting any further increase in the drug's retail price to 10% in a year

Q6. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. A cut in the GST rate on a scheduled formulation lowers the maximum amount a patient can lawfully be charged for it, even if the price regulator does not revise its ceiling price.
  2. Manufacturers of scheduled formulations must sell within the ceiling price fixed by the price regulator plus the applicable GST.
  • A. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • B. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • C. Statement-I is correct, but Statement-II is incorrect
  • D. Statement-I is incorrect, but Statement-II is correct