Governments around the world implement price controls in healthcare with the intention of increasing consumer welfare, relative to charging a uniform price across all countries. The Sri Lankan government also has imposed price controls on medicines from time to time. For example, on 21 October 2016, Sri Lanka transformed the pricing of essential medicines, making drugs more affordable for patients. The Government issued a notice by Extraordinary Gazette setting a price ceiling for 48 essential medicines used to treat non communicable diseases (NCDs), such as diabetes, heart disease, high blood pressure, high cholesterol, and other common diseases (World Health Organization, n.d.). According to economic theories, when a price control (maximum price) is implemented on drugs it creates a shortage in the market. But being a necessity, medicines has not experienced any shortage. Hence, my aims of writing this extended essay are to find the reasons caused to continue the same market situation even after the maximum price and also to examine the economic effects of price controls (maximum price) in medicines in Sri Lanka. When we look at the global context, while  OECD countries (Organization for Economic Co-operation and Development) apply a wide range of price regulations, ranging from product-to-product pricing to partial price freedom, the two countries Canada and Mexico adopt price ceilings (maximum price) for all patented drugs on the market ( Narayan , 2007). To write this essay I am using secondary data collected through researches, articles and reports on the same topic and find different experience in different markets in the world and thereby to analyze those experiences with market situations in Sri Lanka. Further, I hope that my extended essay will be helpful for the policymakers in making suitable price regulation policies in the pharmaceutical sector in Sri Lanka.

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