Monday, February 20, 2006

Canada drug-pricing questioned

The latest report from the Vancouver-based Fraser Institute has suggested no less than the total dismantling of the price control system in place on Canadian pharmaceuticals, all in the name of protecting the drug supply from American cross-border shoppers. The Institute suggests that a "temporary" price increase would put internet pharmacies out of business then drug companies would happily go back to previous regulations.

Is it me, or is this simply crazy? In an era of rising health care costs, drugs are one of the fastest growing areas of spending. Canadian pricing controls keep these costs somewhat in check. Meanwhile, Americans pay the highest drug prices in the world. I'd like to see the Fraser Institute convince provincial health ministers that having to double their expenditures on drugs for a couple of years to ensure that Canada doesn't run out of supply. This is like saying we need to double the price of milk for a couple of years because we're worried about the milk supply running out. It's the weirdest economic theory I can think of.

And maybe it's just me, but I think if price controls are removed, the drug companies would be quite reluctant to go back to the old system. After a couple of years of increased profits, it would be hard to convince them to turn back the clock. This would be a dream scenario for drug companies, and a nightmare for provincial governments, medical insurance companies, and individual customers and it would all be in the name of stopping internet pharmacy.

The report fails to mention that the Bush administation along with the FDA are totally against imporation and would never allow the mass imporation that the Fraser folks say would clean out the Canadian supply. So the whole argument is a moot point as I see it.

More on the story in the Calgary Sun article below....

Canada must abandon regulated drug-pricing to stop Americans from draining brand-name prescription medicines through bulk buys from Internet pharmacies, says a report released Wednesday.

The Fraser Institute says such a move could see Canadians temporarily paying more for some drugs, but it would be worth it to prevent widespread shortages. There's no evidence to suggest brand-name drug makers would take advantage of "flexible pricing" and permanently boost the cost of drugs, said report author Brett Skinner. ...more

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