A price control is either a price ceiling or a price floor. Essentially a law is passed that controls a maximum a product can sell for (price ceiling) or the minimum a product can sell for (price floor). A negative effect of a price ceiling, for example on prescription drugs, would be that drug companies would possibly produce less than they currently do because it wouldn’t be cost effective to make more. With the economy on the downward slope there has been a lot of discussion on the rising price of America’s prescription drug costs. In the United States no outside drugs from other countries are allowed to be imported except by individuals for personal use. Each new drug goes through FDA inspections and must pass to be available to the public, and these new patented drugs are basically monopolized by the company that created them. Due to the fact that the company holds the patent they can charge high prices because they have no competition. In Canada, prices of new drugs with held patents are subject to a price ceiling that controls how much a company can charge for their new product. Many consumers in the US desire a similar system as an answer to the high prices of our own prescriptions. The price ceiling in Canada and the lobbying of one in the United States is an example of a price control because the government would pass laws that set a maximum price for a product, and it can be assured this ceiling would be lower than the free market price would be. It would thus “control” the price of prescription drugs.
Article – “Government Interventions in Healthcare” / “Importing Drugs from Canada” located @ http://www.medscape.com/viewarticle/521378_3
Please join StudyMode to read the full document