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Changing this number frequently is even worse. Regulating the price based on a number that is not in any way related to cost is a strategy that is guaranteed to distort the market. And some are very cheap to produce, less than 5% of the brand price. Some drugs are relatively expensive to produce, and should be priced above 25% of the branded product. Prices in competitive markets - and generic drugs are very competitive - should be related to cost. This pricing strategy is hopelessly wrong.
![judicial consent 1994 alley scene judicial consent 1994 alley scene](https://image.tmdb.org/t/p/w185/u0DOzyTNZhtFgPHIFX5OITMb7wm.jpg)
The only discernable rationale for these percentages is that they are round numbers.
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Over the past few years in Ontario, generic prices have faced a ceiling based on the price of the equivalent brand product: The ceiling started at 75%, and then was revised to 50%, and then unexpectedly revised again to 25%. Prices are set arbitrarily and change suddenly and substantially. Unfortunately, Canadian regulations around generic drug pricing seem to be based on exactly the opposite set of principles. There are some basic principles: Price should be related to cost the process of price setting should be fair, and preferably open and subject to appeal through an independent authority and the goals of the regulation should be explicit. Price regulation is an exceptionally powerful tool for controlling markets it is also dangerous and needs to be deployed judiciously.