Why are drugs offered at different prices in the USA and Canada?

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zut212

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This constitutes pricing discrimination, and therefore, the prices of drugs should be same everywhere. Heck, even Gillette Sensor razorblades are the exact same in the USA as it is in India, but not drugs!

I'm specifically trying to find out the drug company's role in the Healthcare Crisis that we're in, and how the fact that drugs in Canada are cheaper than they are in the USA.

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Long story short, Canadian government is the only purchaser of prescription drugs in the country, giving it complete monopsony power.

Drug companies have a choice. Sell for the price the Canadian gov't wants or don't sell in the country at all. Given that the marginal cost of pharmaceuticals is very low, it increases drug company profits to sell at a lower price in Canada. instead of not selling at all.

It also increases their profits to lobby the government to keep the US from importing the same drugs back from canada for "safety reasons"
 
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You also have to remember that these companies literally spend a billion dollars just bringing one drug to market, after all the dead ends, phase 1, 2, and 3 trials, etc. Then, when one country artificially holds down the price of the drug through laws or monopoly power, the company needs to make their investment back somewhere. Unfortunately, if the US jumped on the bandwagon and did the same, then there would be no place to make back the investment so you would likely see companies stop investing.
 
You also have to remember that these companies literally spend a billion dollars just bringing one drug to market, after all the dead ends, phase 1, 2, and 3 trials, etc. Then, when one country artificially holds down the price of the drug through laws or monopoly power, the company needs to make their investment back somewhere. Unfortunately, if the US jumped on the bandwagon and did the same, then there would be no place to make back the investment so you would likely see companies stop investing.


I'm very surprised about this! But you're right. I researched it on the net just now.
 
Long story short, Canadian government is the only purchaser of prescription drugs in the country, giving it complete monopsony power.

Drug companies have a choice. Sell for the price the Canadian gov't wants or don't sell in the country at all. Given that the marginal cost of pharmaceuticals is very low, it increases drug company profits to sell at a lower price in Canada. instead of not selling at all.

It also increases their profits to lobby the government to keep the US from importing the same drugs back from canada for "safety reasons"


Very good.

What would you like to see the drug companies to do? What would you like to see the healthcare insurance companies to do?
 
You also have to remember that these companies literally spend a billion dollars just bringing one drug to market, after all the dead ends, phase 1, 2, and 3 trials, etc. Then, when one country artificially holds down the price of the drug through laws or monopoly power, the company needs to make their investment back somewhere. Unfortunately, if the US jumped on the bandwagon and did the same, then there would be no place to make back the investment so you would likely see companies stop investing.

Not likely -- although I do understand your point. You would more likely see a decrease in risk taking (regarding drug discovery), a decrease in new drug development, a decrease in margins / revenues, and a decrease in drugs designated for orphan drug status -- but the "stop investing" and the "threats of bankruptcy" is largely drug company posturing. These contracts are two way streets and they are, in fact, negotiated (unlike Medicare physician payments), so the likelihood of a company signing on to a contract that will put them under is pretty low. They would be better off saying eff the government and selling directly to the populace....
 
Very good.

What would you like to see the drug companies to do? What would you like to see the healthcare insurance companies to do?

For drug companies: While they do spend a ton of money on R&D, they spend more on marketing. The vast majority of drug marketing is to convince patients and physicians to ask for/prescribe more expensive but equally effective drug X over less expensive drug Y.

They get away with this because when they got drug X approved, they demonstrated that drug X was better than placebo. When drug Y was approved, it was demonstrated that it was better than placebo. Is drug X better than drug Y? noone really knows. There is very, very little research comparing relative effectiveness of different drugs within the same category.

I would reinstate the ban on Direct to Consumer drug marketing, and mandate active controlled trials (trial compared to current standard of care) instead of placebo controlled trials (trial compared to placebo) for FDA approval.
 
I used to be against direct to consumer advertising, but c'mon -- docs just need to man up and tell patients their options and costs. People should be free to choose how their money is spent... including ways that are both ignorant and wasteful.

Also, the FDA's tasks should not include pricing in any way. They are not a consumer direction agency, they are (supposed to be) a consumer protection agency. They should only concern themselves with safety and efficacy.
 
I used to be against direct to consumer advertising, but c'mon -- docs just need to man up and tell patients their options and costs. People should be free to choose how their money is spent... including ways that are both ignorant and wasteful.

Also, the FDA's tasks should not include pricing in any way. They are not a consumer direction agency, they are (supposed to be) a consumer protection agency. They should only concern themselves with safety and efficacy.

Agree that FDA shouldn't set prices. They should, however mandate active controlled trials, so people can see how much (if any) of an additional benefit they are paying for. Insurance Cos will then decide to cover or not cover a drug based on its relative benefit / cost ratio
 
I am not disagreeing with you. Just raising some points for discussion.

For drug companies: While they do spend a ton of money on R&D, they spend more on marketing. The vast majority of drug marketing is to convince patients and physicians to ask for/prescribe more expensive but equally effective drug X over less expensive drug Y.

They get away with this because when they got drug X approved, they demonstrated that drug X was better than placebo. When drug Y was approved, it was demonstrated that it was better than placebo. Is drug X better than drug Y? noone really knows. There is very, very little research comparing relative effectiveness of different drugs within the same category.

I would reinstate the ban on Direct to Consumer drug marketing, and mandate active controlled trials (trial compared to current standard of care) instead of placebo controlled trials (trial compared to placebo) for FDA approval.

So you advocate reforms that would reduce drug company revenue (by limiting marketing and therefore sales) and increasing costs to bring a drug to market by requiring additional studies. While this might reduce some of the problems created by direct pharma marketing and some instances of inappropriately high cost med substitutions it would certainly cut down the ability of pharma companies to get new drugs out. That's always their big argument, If you cut their revenue or raise their costs you'll get fewer new drugs.

Agree that FDA shouldn't set prices. They should, however mandate active controlled trials, so people can see how much (if any) of an additional benefit they are paying for. Insurance Cos will then decide to cover or not cover a drug based on its relative benefit / cost ratio

The insurers already do this. The problem is that they are coming at it from the other extreme and often refuse to cover any newer drugs wheter or not there is a benefit over the older, cheaper stuff.
 
Long story short, Canadian government is the only purchaser of prescription drugs in the country, giving it complete monopoly power.

We have single-payer health care, but when it comes to prescription drugs, our system is very similar to state-side. Prescription drugs are only covered by the single-payer plan when you're in hospital: when a Canadian doctor writes a prescription to a patient in his office, the patient has to go to the pharmacy to fill it, and pay either out of pocket, or get it covered by a private, or sometimes public plan, similar to your medicaid.

So pharmacies buy their drugs from drug companies. Some drugstore chains, like Shoppers, for whom I used to work, have large buying groups, as do hospitals. And the provincial governments - who run health care - do buy some drugs. But there's no massive government drug inventory, other than some stockpiles against biological terrorism, like for anthrax. And I imagine your government has similar stockpiles. Oh, and they buy the vaccines.

Which doesn't really answer the question posed by the o/p. I think it's because provincial governments have formularies which limit what pharmacists can charge, and in turn pharmacists can't buy these drugs from drug companies for more than they can charge, and stay in business. So drug companies' prices for their products are limited by the provincial drug formularies.

In a nutshell, why do Americans pay more? Because drug companies can get away with charging more to Americans.
 
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