Monday, March 16, 2009

Canadians Pay 2X As Much For Generic Drugs

In 2007, Canadians paid more than twice as much as Americans paid for the same generic medicines (see chart above). The evidence suggests that generic retail drug prices are higher in Canada than they are in the United States because of various provincial and federal policies in Canada that are not found in the US. In particular, there are 3 policies that are chiefly responsible for distorting retail price competition for generic drugs in Canada.

1. Provincial and federal drug programs direct public reimbursement of prescriptions to pharmacies instead of consumers, insulating consumers from the cost and removing incentives for comparative shopping that would put downward pressure on prices.

2. Public drug programs reimburse generics at a fixed percentage of the price of the original, brand-name drug. Under fixed-percentage reimbursement, there is no incentive for retailers to undercut each other to win sales. This is because the buyer (government) offers every seller the same price and the price is known in advance.

3. Federal price controls on patented drugs unintentionally prevent brandname companies from reducing prices on these products once a patent expires. This is because Canada’s price-control policy uses the highest price of the existing drugs in the same therapeutic class as a reference for establishing the maximum allowable price for new patent-protected drug formulations entering the market. Therefore, makers of brand-name drugs are extremely reluctant to reduce the price of the original drug when it goes off patent for fear of inadvertently lowering the maximum allowable entry price for new drugs in the same class.



At 3/16/2009 11:55 AM, Anonymous Anonymous said...

All government health care systems operate on the same premise, rationing increases "fairness" and reduces costs. Socialized systems actively work to stifle competition and innovation.

From Bloomberg:

What penalties will deter your doctor from going beyond the electronically delivered protocols when your condition is atypical or you need an experimental treatment? The vagueness is intentional. In his book, Daschle proposed an appointed body with vast powers to make the “tough” decisions elected politicians won’t make.

The stimulus bill does that, and calls it the Federal Coordinating Council for Comparative Effectiveness Research (190-192). The goal, Daschle’s book explained, is to slow the development and use of new medications and technologies because they are driving up costs. He praises Europeans for being more willing to accept “hopeless diagnoses” and “forgo experimental treatments,” and he chastises Americans for expecting too much from the health-care system.


The Canadian socialized health care system, like it's English, Swedish, Australian, etc. counterparts, is dysfunctional. The media, which is little more than the propaganda arm of the left-wing of the Democrat party, does everything they can to bury the horrific reality of socialized medicine in these countries, while working to stifle debate in this country. Soon, that horrific reality will be ours.

At 3/16/2009 10:36 PM, Anonymous Anonymous said...

I think you need better sourcing than the Fraser Institute. Their studies are not usually subjected to standard academic peer review or derived via the scholarly method.


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