2013_MI_H1_Econs_QP

Class Adm No Candidate Name: This question paper consists of 8 printed pages. [Turn over 2013 Promotional Examination 2 Pre-university 2 H1 ECONOMICS 8819/ 01 Paper 1 17 September 2013 Additional Materials: Writing Paper 3 hours READ THESE INSTRUCTIONS FIRST Write your name, class and admission number in the spaces at the top of this page and on all pages of the work you hand in. Write in dark blue or black pen on both sides of the paper. You may use a soft pencil for any diagrams or graphs. Do not use staples, paper clips, highlighters, glue or correction fluid. Answer all questions. Begin answers on a fresh sheet of writing paper. At the end of the examination, hand in all answers scripts. You are reminded of the need for clear presentation in your answers. The number of marks is given in brackets [ ] at the end of each question or part question.

2 [Turn over Question 1 The Pharmaceutical Industry Extract 1: AIDS: Branded and Generic anti-HIV drugs Roche, the pharmaceutical giant, recently announced a price of $20,424 for a year's supply of its anti-HIV drug Fuzeon in U.S. This was almost three times the price of the most expensive AIDS drug. Roche claimed that Fuzeon is more expensive to produce than other anti-HIV drugs, claiming that it spent $600 milli on developing the drug. However, many HI V drugs that cost up to $15,000 a year in the U.S. can be made for less than $300 a year by generic manufacturers overseas. These generic firms are allowed to enter the market and sell copies of the original drug when the pharmaceutical patent expires. As generic drugs contain exactly the same active chemical substances, these are considered as strong substitutes to the original branded drugs. Figure 1 Sources: World Street Journal, 1 Dec 00 and ACT up press release 13 Mar 03 Extract 2: Regulation of branded drugs In the past year, critics have complained that prescription drugs are contributing to escalating health care costs in the developed countries. Some also assail drug manufacturers, contending that drug prices are too high. They propose price controls as a way to lower drug prices. Price controls have a consistent history: they don't work. Whether they apply to air fares, gasoline, telecommunications or medicines, they discourage innovation, create shortages and fail to keep prices in check. Further, they harm the poor by making whatever is controlled more difficult and more expensive to obtain.

3 [Turn over However, according to leading prescription drug price and sales database information company, IMS Health, drug costs are rising primarily because of rising costs of innovation that contributed to record sales of new products and a changing mi x of available products. Price increases have been relatively modest over the past 10 years. Sources: National Centre for Polic