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The prospect of more government interference in setting prices in the medical sector is disheartening. Currently, pharma companies are allowed to raise the prices of non-scheduled drugs by 10% annually. Now, the government is considering linking the prices of such drugs to the wholesale price index.

There has been a rash of such dubious decision-making of late. The cap on coronary stent prices aside, the National Pharmaceutical Pricing Authority has also capped the prices of orthopaedic implants and expanded the list of scheduled drugs whose prices are capped.

Disincentivising companies in an area where vigorous competition serves as a check and long-term capital investment is necessary for research and development is lazy policymaking at best. Past experience shows that this backfires. The government would do better to focus on improving healthcare supply to check profiteering by some private hospitals. Improving access to medical insurance as Modicare aims to do and bulk procurement of drugs via government orders to secure better prices are also better solutions.

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