The rate of new drug development in Nation X has changed little over

Argument:

1. The rate at which new drugs are developed in Nation X hasn't changed much. I.e. if the rate of development was 15%, it is now 18%
2. Simultaneously, the cost of developing these drugs has increased a lot. I.e. initially it cost $1M to develop the drug, it now costs $10M to develop one
3. The patent system in nation X "insulates drug developers" i.e. it protects the company that develops the drug from its competitors.
4. The company that develops the new drug can sell it at whatever price it wants to. And, it doesn't even have to worry about any threat of competition

So all in all, because of such a strong patent system, companies invest a lot (and thus drive up development costs) in the R&D of new drugs so that they can later sell these drugs at whatever price they want for however long they want to.

Conclusion: If the patent system reduces the time duration for which these companies can sell their drugs then the cost (investment in R&D) will reduce.

Pre-thinking: What if even after the reduction in time duration of the patent protection, the companies have an incentive to invest a lot in R&D of new drugs? Then in that case even with a limited duration of patent protection, the companies will continue to drive up the cost of development

Assumption: Once the time duration of patent protection is reduced, the companies will have no incentive to invest how they currently do in the development of new drugs


Incorrect: Whether the current patent system creates some challenges for the development process doesn't affect the conclusion. If we negate this choice we get "the current protections DO NOT create impediments to the development of new drugs". The negation does not break out the conclusion.


Correct: By reducing the protection time of the patents, the drug companies are motivated to minimize their research and thus the cost of development will be reduced. If we negate (B) we get "If the prices of newly developed drugs were subject to market pressures sooner, companies would NOT have a GREATER incentive to minimize research costs." So if they don't have an incentive greater than what they get with protection (even with its limited time period) then they would continue to invest and thus the cost of development will not drop. The negation of (B) breaks the argument


Incorrect: Irrelevant. The number of drugs is not of concern. All we care about is the overall cost of development. We want the companies t reduce the cost of development and not increase the number of drugs developed. In fact, it is likely that as the number of drugs increases, the cost of development will increase. So this choice (could possibly) break the conclusion


Incorrect: Some companies lie about the cost of development. Even if that's the case, how does this fact help us understand whether the reduction in patent protection time will help us reduce the cost of development?


Incorrect: Does producing medically necessary new drugs translate to a reduction in research cost/cost of development of new drugs? We have no information that could help us understand this connection

Correct: (C)

Understanding the argument - 
The rate of new drug development in Nation X has changed little over the last decade, even though, over the same period, the cost of developing a new drug has increased significantly. - Fact. Background info. 
The patent system in Nation X, because it insulates drug developers from various market pressures, can be expected to produce this sort of cost explosion. - Opinion. 
Such patent protection allows firms to sell a drug at several times its free- market price for many years, and thus pharmaceutical companies have no incentive to minimize research costs. - Fact
Greatly limiting the duration of these patent protections would promote more cost-efficient new drug development. - Conclusion. But what if "limiting the duration of these patent protections" is just one of 100 other factors? So, while it may be necessary or a minimum condition, it may not be sufficient. 

What do we need to do here? Find an assumption. What is an assumption? A missing premise, a minimum condition, or an assumption. 

Option Elimination - 

A. In Nation X, current patent protections create impediments to the development of new drugs. - Opposite of what the author is trying to say. 

B. If the prices of newly developed drugs were subject to market pressures sooner, companies would have a greater incentive to minimize research costs. - It converts it into a sufficient condition, ensuring that "If the prices of newly developed drugs were subject to market pressures sooner," it'll 100% ensure that "the pharma companies take cost-efficient drug development."

C. If the prices of newly developed drugs were subject to market pressures sooner, pharmaceutical companies would have a greater incentive to increase the number of drugs they develop. - "The number of drugs" is out of scope. 

D. Nation X's current patent system causes some pharmaceutical companies to exaggerate their research costs to consumers. - "Some" can be at least 2. Moreover, we already know this from the argument. Remember, an assumption is a missing premise and does not state what we already know from the argument. 

E. If the prices of newly developed drugs were subject to market pressures sooner, pharmaceutical companies would have a greater incentive to develop the most medically necessary new drugs. - "the most medically necessary new drugs" is out of scope. 

The rate of new drug development in Nation X has changed little over the last decade, even though, over the same period, the cost of developing a new drug has increased significantly. The patent system in Nation X, because it insulates drug developers from various market pressures, can be expected to produce this sort of cost explosion. Such patent protection allows firms to sell a drug at several times its free- market price for many years, and thus pharmaceutical companies have no incentive to minimize research costs. Greatly limiting the duration of these patent protections would promote more cost-efficient new drug development.

The proposal above relies on which of the following assumptions?


A. In Nation X, current patent protections create impediments to the development of new drugs.

B. If the prices of newly developed drugs were subject to market pressures sooner, companies would have a greater incentive to minimize research costs.

C. If the prices of newly developed drugs were subject to market pressures sooner, pharmaceutical companies would have a greater incentive to increase the number of drugs they develop.

D. Nation X's current patent system causes some pharmaceutical companies to exaggerate their research costs to consumers.

E. If the prices of newly developed drugs were subject to market pressures sooner, pharmaceutical companies would have a greater incentive to develop the most medically necessary new drugs.

The passage talks about how a patent system may be creating a situation in which pharmaceutical companies don't feel the need to reduce their research costs. And that reducing the years of protection the patent system provides would result in more cost efficient drug development.

We're asked to look for an assumption.

(B) is the answer. The core issue here is more cost efficient drug development. If the prices of newly developed drugs were subject to market pressures sooner and companies still DID NOT have a greater incentive to minimize research costs, that would be harm the argument greatly.

 

­
Premises:
The rate of new drug development in Nation X has not changed much over the last decade,
But the cost of developing a new drug has increased significantly.
The patent system in Nation X leads to this cost increase because developers know that they can earn a lot of money out of it, without free market pressures.
The system allows the developing firm to sell the drugs at much higher prices for many years (by giving exclusive rights)

Conclusion: Greatly limiting the duration of these patent protections would promote more cost-efficient new drug development.

What is the assumption here?

A. In Nation X, current patent protections create impediments to the development of new drugs.

No. Current patent protections likely encourage drug development by giving incentives of high exclusive profits for many years. 

B. If the prices of newly developed drugs were subject to market pressures sooner, companies would have a greater incentive to minimize research costs.

Yes, we are assuming that if prices of new drugs are subject to market pressures sooner, the developer would have incentive to minimize research costs. This would promote more cost-efficient new drug development. This is an assumption. 

Negate it: If the prices of newly developed drugs were subject to market pressures sooner, companies would not have a greater incentive to minimize research costs.
If this were true and companies would not have a greater incentive to minimize research costs, restricting patent duration will not promote more cost-efficient new drug development. Hence our conclusion breaks then.

C. If the prices of newly developed drugs were subject to market pressures sooner, pharmaceutical companies would have a greater incentive to increase the number of drugs they develop.

Number of drugs is irrelevant. We are talking about cost of development. 

D. Nation X's current patent system causes some pharmaceutical companies to exaggerate their research costs to consumers.

Out of scope. I am not even sure what "exaggerate their research costs to consumers" actually means. Does it mean they passed on higher costs to consumers or does it mean they claimed that their costs are higher than they actually were - in either case, it is not an assumption for us. The point is whether reducing the duration of these patent protections would promote more cost-efficient new drug development.

E. If the prices of newly developed drugs were subject to market pressures sooner, pharmaceutical companies would have a greater incentive to develop the most medically necessary new drugs.

"medically necessary new drugs" is out of scope for us. 

Answer (B)