Pharma Pricing in India : A failure of the Market(s)?

In economic literature, market failure is said to occur when inter alia under the following conditions. 1) When adequate competition does not exist. 2) Buyers and sellers are not well informed. Without information uneducated decisions are made. 3) Resources are not free to move from one industry to another (resource immobility). 4) Prices do not reasonably reflect the costs of production. 5) Presence of : (a) Negative externality- harmful side effect that affects an uninvolved third party. In most events, it constitutes external cost. (b) Positive externality- beneficial side effect that affects an uninvolved third party. 6) Production of public goods (supplementation by the government or subsidy). This policy note argues that conditions 1, 2, 4 and 5 definitely hold for the pharma formulations sector in India and raises critical issue on pharmaceutical pricing.