Drug Policy

[Craig Read]

So Canada imports its drugs from the US and slaps price controls to buy the votes of Seniors and the blue hairs. Poor dears. I wonder how much this costs the younger taxpayer ?

Now it wants to export Price controls to the States, so Politicians there can buy votes and cry. Poor dears. When was the last time there was a drug which was actually invented in Canada that went to market ? Where is the inherent logic in free riding off US R&D and not in accounting for proper costs and prices here in this country ?

[KrustyKidd]

We are competing with Mexico here. Better watch out or we may find our greatest industry to be selling cheap silver medallions on some beach in Newfoundland to really really rich American tourists.

[Craig Read]

Well true - the anti-trade Liberals will point out that all jobs will disappear unless we have protective tariffs. This is nonsense but plays well to the Unions.

The Pharma industry in the US pays huge taxes and employs advanced scientists and engineers from across the world. The State of NJ lives off of its Pharma cluster. In Canada we have some smaller firms in TO and MTL doing research in certain areas, but they are far smaller in scope, research $ and employment power, even given the market size difference than their US counterparts. I can't name the year of the last drug produced in Canada. Can anyone ??

If health care and services and products in that space will account for 15-20% of the GNP within 10 years then why isn't Canada allowing the setting of market rates and prices to allow for firms to expand, conduct R&D, make profit and then hire value added workers ?

What is the point of free riding off the US industry and setting price controls on drugs funded by taxpayers in this country ? Don't you want higher paying jobs in Canuckistan ?

[Morgan]

Here's an American economist's take on this pharmaceutical issue. He gives some good cost figures for R&D.

Drug Industry Destruction

-Once a drug is produced, the cost of an additional pill is very low. The real cost of a new drug lies in developing it and getting it through the Food & Drug Administration's regulatory hurdles. FDA requirements cost drug companies an average of $800 million per drug, and then, according to a Tufts University study, only three in 10 drugs produce sales sufficient to allow the companies to recoup their development and FDA approval costs.

- Then there's a class of drugs known as "orphan drugs" that don't make it to the market. These are drugs effective in the treatment of a rare disease, but coupled with FDA approval costs, their expected sales make them a losing economic proposition for the drug companies.

- Though pharmaceutical CEOs lack the moral courage to say so, the drug price difference between the United States and Canada is simply price discrimination not unlike the thousands and thousands of other cases of price discrimination. In order to practice price discrimination, sellers must be able to separate markets to prevent arbitrage – buying cheap and selling dear.

- In the case of drug companies, they must prevent re-importation either through contracts or law, then they can charge foreigners drug prices that only have to cover the incremental costs of manufacture and distribution. But given broad economic ignorance in Congress and among many Americans, talking about price discrimination might be hopeless.

- If Congress enacts laws preventing price discrimination, both foreigners and Americans will lose because it will reduce the profitability of drug manufacturer and hence drug development incentives. I ask you which is preferable: a life-saving drug at a high cost or no life-saving drug at all? Americans would be much better served by trying to do something about FDA's costly approval process.

[Craig Read]

Exactly correct.

Price controls always fail. I don't understand the morality in destroying the Pharma industry, which invents drugs that keep people alive, through gov't controls, when the population around the world will suffer.

Bush's Medicare bill is bad - precisely because it will grant gov't the power to further manage drug prices and profits in the pharma industry. The pharma industry thinks it has 'won' through this bill. They are being shortsighted. The bill will open up in the future new legislative opportunities to limit drug prices. As well it does not exclusively or clearly state that importation of Cdn drugs is illegal. This is a mistake [albeit done for political purposes].