Despite a politician’s recent explanation of supply and demand by saying, “If you put the supply out there, the demand will follow,” that is not how the economic principle works. Briefly, it means that if there is more supply than demand, the price of the commodity goes down to increase demand. If supply is less than demand, the price of the commodity goes up.
It’s not a difficult concept, but it is one that the Indian government learned firsthand late last year with regards to Wilson disease medication.
Wilson disease is a rare genetic condition in which a person’s body cannot break down copper, thereby resulting in ever-growing deposits in various internal organs, in particular, the brain and liver. There are limited treatment options available for this disease.
Only one drug therapy is manufactured in India. However, a shortage of the active ingredients being shipped into India late last year slowed production. The politicians of the country are pointing fingers as to whom is to blame, most citing the pricing control that led manufacturers of the compound to seek other markets.
The lesson about supply and demand can now be seen. The supply from the Chinese manufacturer did not change. However, India’s legislated maximum price was lower than other markets. Thus, the manufacturer sold to the markets willing to pay more, resulting in India’s shortage.
As of February, the crisis has been averted. The Indian government negotiated with manufacturers in China to set up immediate shipments of the ingredients as well as regular imports for the foreseeable future.