UPSC Prelims Practice Questions — Trade Margin Rationalisation on 137 Anti-Cancer Drugs

Q1. With reference to the regulation of drug prices under the Drugs (Prices Control) Order, 2013, consider the following statements: Which of the statements given above is/are correct?

  1. For a scheduled formulation, every manufacturer, whether it sells a branded or a generic version, must sell within the ceiling price notified by the National Pharmaceutical Pricing Authority (plus applicable GST).
  2. For a non-scheduled formulation, the manufacturer fixes the launch MRP itself but cannot raise it beyond a prescribed percentage over the MRP prevailing in the preceding twelve months.
  3. The ceiling prices of scheduled formulations can be revised every year in line with the Wholesale Price Index, without waiting for the National List of Essential Medicines to be revised.
  • A. 1 and 3 only
  • B. 2 and 3 only
  • C. 1, 2 and 3
  • D. 1 and 2 only

Q2. Which one of the following best brings out the difference between Trade Margin Rationalisation and ceiling-price fixation as tools of drug price regulation in India?

  • A. The former applies only to medicines on the essential medicines list, while the latter applies to medicines outside that list.
  • B. The former sets one uniform retail price for all brands of a molecule, while the latter leaves each brand free to choose its own price.
  • C. The former limits the manufacturer's ex-factory price as a share of its cost, while the latter limits only the margins of stockists and retailers.
  • D. The former limits the share of the final retail price that the supply chain can keep, while the latter limits the final retail price itself.

Q3. Suppose the pricing authority caps the trade margin on a non-scheduled drug at 30% of its MRP. With reference to the likely effects of this cap, consider the following statements: Which of the statements given above is/are correct?

  1. After the cap, all brands of the drug will carry the same MRP.
  2. A brand whose distribution and retail margin was well above 30% of MRP will have to cut its MRP even if the manufacturer's price to the stockist does not change.
  3. The cap allows a percentage mark-up over the price at which the stockist buys the drug that is higher than 30%.
  • A. 3 only
  • B. 2 and 3 only
  • C. 1, 2 and 3
  • D. 1 and 2 only

Q4. With reference to the extraordinary powers available to the National Pharmaceutical Pricing Authority under Paragraph 19 of the Drugs (Prices Control) Order, 2013, consider the following statements: Which of the statements given above is/are correct?

  1. These powers can be exercised in respect of a drug whether or not it is listed in Schedule-I of the Order.
  2. A drug must first be added to the National List of Essential Medicines before these powers can be used to regulate its price.
  3. These powers have been used to regulate trade margins on certain medical devices as well.
  • A. 1 and 3 only
  • B. 2 and 3 only
  • C. 1 only
  • D. 1, 2 and 3

Q5. Suppose an anti-cancer medicine that is currently non-scheduled is added to the National List of Essential Medicines and so to Schedule-I of the Drugs (Prices Control) Order, 2013. Consider the following statements about the consequences: Which of the statements given above is/are correct?

  1. The medicine would become subject to a ceiling price fixed by the National Pharmaceutical Pricing Authority.
  2. Its manufacturers could still raise its MRP each year by the percentage permitted for non-scheduled formulations, whatever the ceiling price.
  • A. 1 only
  • B. 2 only
  • C. Both 1 and 2
  • D. Neither 1 nor 2

Q6. Consider the following facts. In 2019, the trade margin on 42 non-scheduled anti-cancer medicines was capped at 30% of MRP. Shortly afterwards, 390 of the 426 brands reported by manufacturers showed a reduction in MRP, with the largest reduction being 87%. Which of the following inferences can be drawn from the above facts?

  1. Before the cap, the trade margins on some of these brands were far above 30% of MRP.
  2. The size of the price reduction differed from brand to brand rather than being uniform.
  3. The manufacturers' own selling prices to stockists for these brands fell by up to 87%.
  4. The price reduction led to market shortages of these medicines.
  • A. 1 and 3 only
  • B. 1 and 2 only
  • C. 2 and 4 only
  • D. 1, 2, 3 and 4