How Price Control Raises Prices: A Case Study from Karnataka

By : Viren Shetty, Director and SVP of Strategy at Narayana Hrudayalaya Ltd

In 1936, Columbia sociology Professor Robert K Merton published a seminal paper entitled, “The Unanticipated Consequences of Purposive Social Action”. He wrote about the ‘imperious immediacy of interest’, in which government legislation that desperately seeks one outcome, wilfully ignores the unintended consequences of that action. The most famous example of unintended consequences is the US Food & Drug Administration – which has a backlog of several years’ worth of new drug approvals. The FDA, originally created to protect consumers has, through its own inefficiency, killed thousands of people waiting for those lifesaving medications, and raised the costs of drug discovery for billions of people around the world.

In 2016, the government of Karnataka created a committee of health experts chaired by retired Chief Justice Vikramajit Sen to propose amendments to the Karnataka Private Medical Establishments Act of 2007, with the hope of reducing healthcare costs for patients. On the 13th of June, the government tabled a bill before the Karnataka Assembly that bore little resemblance to the Justice Sen proposal. Two key provisions of the bill will make the biggest impact have on the future of healthcare …

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