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For most goods – like cars or shoes or groceries etc – the market does a good job of determining how much producers should supply and at what price to sell it. It does this by matching the quantity that consumers are willing to buy at a given price to the quantity that suppliers are willing to sell at that price. The market, through the interaction of supply and demand, then arrives at a price at which the quantities consumers are willing to buy is equal to the quantity suppliers are willing to provide. For pharmaceuticals, the market cannot determine the ideal prices and quantities. Two reasons at least are behind this: The insurance effect and prescribers’ awareness of drug prices and therefore government should regulate this sector for: 1- Those factors that we discussed earlier (Insurance & Prescriber’s lack of awareness of drug’s prices) distort the normal relation between price and quantity. As in many countries, government regulates or negotiates the prices since market is not doing well at setting prices and levels of use (quantities consumed). Meaning we have a market failure. 2- Consumers are not always willing to pay for things that are good for them. They are willing to pay for things that aren’t good for them – like cigarettes and lottery tickets. So, insurance results in consumers using more prescription medicines than they would be willing to pay for is healthy. 3- The price elasticity of demand. Prescription drugs fall into the category of price elasticity is lower for products that are necessities, those that have few or no good substitutes, and when incomes increase. When the price of a doctor’s visit rises, people will not dramatically reduce the number of times they go to the doctor, although they might go somewhat less often.