First, a little backstory.

The Canadian government has very strict price controls on prescription drugs. Canadian citizens are rather proud of this, since they claim that it shows that evil greedy uncaring corperations can’t reap undeserved profits while callously allowing people to die simply because they can’t help the bottom line.

This is a matter of pride in Canada. The idea is that they’ve proven that they’re caring and compassionate while being efficient and fiscally responsible.

US pharms sell to Canada because they do get some profit and it’s a big market, even though they claim that they’re not realizing a fair return for the product.

Now consumers and government agencies here in the US are getting into the act. They’re ordering drugs over the Internet from Canadian firms to realize significant savings.

US pharmas are calling foul. They say it costs an enormous amount to develop new drugs, and the high prices they charge are just an attempt to earn a fair return on their investment before the patents expire.

So which view is the correct one? Who has the closer line on the truth?

This report by the Frasier Institute goes a long way towards debunking claims that the Canadian system is more efficient. (Hat tip to Innocents Abroad.) According to the report, Canada provides one of the worst level of care amongst other countries with universal health care, and at significantly higher cost.

Thomas Sowell has an op-ed that’s pretty interesting. (Hat tip to No Watermelons Allowed.) Sowell points out the enormous costs that is required when developing any medical resource, from drugs to your family doctor. He also says that one of the really big expenses that many people ignore are various liability concerns, either lawsuits themselves or insurance to protect from same. Canadian pharmas don’t develop their own products so they dodge this bullet.

10 thoughts on “VOTING WITH YOUR FEET”

  1. Time to get tough, if you ask me. American taxpayers subsidize R&D at the CDC, and also bear the liablity burden. Make the Canadians pay full price. If they break the drug patents, start imposing trade penalties. I’m tired of paying for drugs for Canadians with my tax and prescription dollars.

  2. In addition, this is just another argument for long overdue torte reform. That will actually help reduce costs in the whole medical system.

    I’d also like to see RN’s and PA’s given more responsibility, freeing up doctors for oversight and more demanding work. Why can’t an RN or PA apply stitches? Why can’t they prescribe common drugs? Isn’t it an incredible waste of a college education?

  3. Not just Canada, but Western Europe as well. 25% of frogistan’s on tranqs, Chiraq was trying to get them to cut back by raising prices, IIRC.

    I am tired of subsidising our enemies militarily and medically.

  4. Actually, I think the long term effect this is going to have is that the drug companies are either going to stop selling drugs to countries where they can’t make enough profit to cover the cost of development. This is where this is headed.

    The other result this is going to have is that the limited supply of drugs that goes to Canada will all end up in America where they can get a higher price, leaving shortages for Canadians. Either way I think this will end up causing Canada more problmes than America, Canada will probably put a stop to this procatice themselves when it starts hurting them, which basic supply and demand says it will.]

    The real result of these price controls that many of these countries have imposed is (tell me again children of the Chicago school, what happens when governments control the price of something?) that their citizens get less drugs. I’ve seen several studies that show that Canada, Germany etc,. have access to less than half of the drugs that we have in America, at any price. Germany has about killed it’s once thriving pharm. industry.

    I say re-import away, the Canadian government will eventually stop it anyway.

  5. Actually, the entire tort issue is irrelevant. Some specialities, obstetrics eg, do pay huge malpractice bills, but the most important factor driving health care cost increases is the technology. Technological improvements are coming at too fast a rate for economies of scale to be able to kick in. Not that I’m arguing against malpractice reforms – obviously, given the recent numbers from the NIH concerning deaths from malpractice, the system as designed today is not working. All I’m saying is that expecting lower costs through malpractice reform is a fantasy.

  6. Actually, the entire tort issue is irrelevant.

    Oh, I don’t know about that. My family practioner pays $150 grand a year in malpractice insurance. That means, of course, I’m paying for that in my fees. His student pays $100 grand.

  7. Via Live From Brussels 5/11 posting:

    Unintended Consequences

    Radio morning news made me chuckle while driving to work. The genius in charge of health care in our government decided that costs needed to be cut by reducing people’s expenses on drugs. So they issued a directive which forced drug companies to lower the prices of all drugs that were available for more than 15 years. And another directive which made large packages of drugs more expensive than smaller ones.

    The thinking was, people would buy the cheaper (older) drugs and also smaller packages, thus reducing waste as well.

    Predictably, market forces came into play: drug manufacturers, seeing they would have to sell the older drugs at a loss, simply replaced them with newer, more expensive ones. The old drugs were simply discontinued. And doctors just kept on prescribing large packets to their patients, because they needed them.

    The result: even higher expenses overall, no efficiency gained… That’s what happens when you mess with a free market.

  8. California has had malpractice award limits since the seventies, and they’ve recently had the largest increase in insurance costs. The medical insurance and re-insurance industries (like oh so many others) put way too much money into the dot-com boom, and they’re having to make up for that now. Additionally, the insurers tend to be regionally, rather than nationally, based.
    It used to be (back when dinosaurs roamed the earth) that pregnant women went to an ultrasound specialist when they needed a scan; women still go to these specialists, but the average obstetrician also has an ultrasound machine in his or her office. About five years ago, the cost of such a machine was a quarter of a million dollars. Replicate expenses of that magnitude across every field in medicine and you can explain a lot of the increases in the cost of health care – and don’t even get me started on HMOs!
    /rant mode off

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