Should be A

B: Population increase may lead to a higher overall expenditure on drugs. But the opening sentence talks about the per capita expenditure. Not related.

C: Manufacturers maintain high profits. Does not say they raised prices, so they would have done it by lowering their costs. Not related.

D: If the doctors are prescribing more generic drugs instead of expensive prescription drugs, the per capita expenditure on drugs should decrease.

E: Not related

A - The manufacturers can not raise prices of any of their existing drugs. But they can launch new drugs at high prices...

Thanks arocks.

I have a question -

D: If the doctors are prescribing more generic drugs instead of expensive prescription drugs, the per capita expenditure on drugs should decrease.

- In this case is the assumption that generic drugs costs less than prescription drugs correct?

A - The manufacturers can not raise prices of any of their existing drugs. But they can launch new drugs at high prices...
- the choice didn't mention that drug companies launched new drugs. It merely mentions that they are working on them.

I am finding it always tough in finding the right assumption.

D - ...encouraged doctors to prescribe generic versions of common drugs instead of the "more expensive" brand-name versions.
>>>So if the generic drugs are 'replacing' the more expensive drugs, they would be cheaper...

A - The manufacturers concentrated on "producing" new medications to "replace" existing products.

Let us look at it this way - the usage of prescription drugs did not rise - still the per capita expenditure is rising. But that can not be unless they purchase the more expensive drugs.

but the price of existing drugs has also not risen "government has imposed a price freeze on the existing drugs" - so this means they are purchasing more expensive drugs not covered under the price freeze - "new medications which have replaced the existing drugs"?
i agree the statement only says manufacturers concentrated on producing - they may not have already produced new medications and "replaced" existing products....but that is we have just proved....

Not the greatest explanation, but i hope this makes it clearer....

It seems to me that the correct answer is A.