Medical Drug Prices
Posted on February 18th, 2005 in General, Economics by tavaresforby ||
There are many people yelling about the high prices of drug cost which leads some Americans to do illegal things like purchase prescription drugs at Canadian prices over the Internet. Being that this transaction is illegal, many Canadian drug manufacturers start restricting supplies to online pharmacies that export drugs to the U.S. These drug manufacturers are threatened by having their license pulled away if they continue to do this. Also, the Canadian drug market is so small that if all Americans go and purchase drugs in Canada, Canadian supply would run out in about a month. That would lead to higher prices close to U.S levels.
There is some data that goes to show that generic drugs or over the counter (OTC) drugs in the U.S. are actually cheaper than Canadian and other countries drugs.
For example, a study by the consulting firm Palmer D’Angelo found that Canadians pay more than twice as much as Americans for Canada’s 27 top-selling generic drugs. This is consistent with research conducted by the federal Food and Drug Administration (FDA). For five of seven generic drugs studied, the FDA found that Canadians pay more than Americans do; in some cases two to three times more. [See the figure.] Considering that half of all drugs sold in the United States are generic, it is surprising how little attention has been paid to them in the reimportation debate.
Wharton economists Patricia Danzon and Michael Turukana have found a similar pattern for OTC drug prices overseas. In France and Italy, OTC drugs sell for more than four times the U.S. price. Prices in Japan are three times higher, and in Germany, twice as high.
Here are some reasons why Canadian generic drug prices are so expensive:
Since brand-name drugs are principally produced by foreign manufacturers, the Canadian government willingly imposes strict price controls that benefit Canadian consumers. In the generic market, however, Canadian producers dominate. In fact, two companies (Apotex and Novopharm) account for more than half of the total Canadian generic market.
Through regulation, therefore, the Canadian government protects its generic producers from lower-priced American competitors — at the expense of its own citizens. Where it has no domestic producers (for example, brand-name drugs), it flexes its muscle to push prices down.
This is why it is good to let medicine R&D companies and manufactures to develop new medicines and get their profits before their patent expires. This way, there is an incentive for these companies to produce good medicine and once their patent expires, other companies can make generics of that brand, which will lead to cheaper prices for the public.
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