November 6, 2003
SOMEBODY'S GOTTA PAY THE PIPER:
Drug discounts for foreigners (Alan Reynolds, November 6, 2003, Townhall)
I recently received an email asking me to add my name to a letter signed by some prominent economists. It says allowing U.S. citizens to buy drugs from Canada or Europe amounts to adopting their price controls. But one could just as well say that it amounts to taking advantage of the discounts pharmaceutical companies choose to offer to some big buyers -- including the U.S. government and HMOs.Unfortunately, deep discounts create powerful incentives for arbitrage. To sustain the wide gap between U.S. and Canadian drug prices therefore requires high enforcement expenses. There is no reason U.S. federal and state governments should bear those expenses just to give Canadians a bargain.
The complaint about "importing price controls" assumes that the actual effect of greater drug imports would be to drop U.S. drug prices to the Canadian level. But that could happen only if drug companies were willing to ship tons of drugs to Canada. In reality, several major drug companies have already moved to restrict sales to Canada in order to limit that country's ability to re-export. If that does not work, the Canadian government will have to step in and try to restrict re-exports to the United States.
If the drug companies or Canadians manage to keep cheaper drugs from being arbitraged back into the U.S. market, then officially sanctioning reimportation would have little impact. But if U.S. shoppers instead contribute to critical drug shortages in Canada, then the Canadian government would have no practical choice but to ease up on price controls. To presume the adjustment can only take the form of lower U.S. prices seems presumptuous.
Isn't it more likely that companies will just raise the prices they charge other countries? Posted by Orrin Judd at November 6, 2003 8:53 AM
Mr. Judd;
No.
This analysis is fundamentally flawed because it ignores the most likely situation - foreign countries will simply bypass the patents and manufacture the drugs themselves. That's the real reason the pharmaceutical companies accept the price controls, because the alternative is no money at all. Manufacturing pharmaceuticals isn't that hard, the only thing stopping foreign companies from doing so is a legal framework. Push the price high enough, or cause critical shortages, and that legal protection won't last ong.
Posted by: Annoying Old Guy at November 6, 2003 9:41 AMAOG:
You really think Canada is going to stop recognizing American patents and trademarks at the risk of us not recognizing theirs?
Posted by: oj at November 6, 2003 9:46 AMTwo answers:
Ask the Brasilians
What Canadian patents and trademarks.
(I know, that is a cheap shot - I am ignoring Labatts and CCM)
Bobardier is the only one I can think of
offhand.
Mr. Judd;
Mr. Johnson has the right of it. Canada itself is unlikely to do so, but there are plenty of other nations that would and are capable of doing the manufacturing (Brazil being #1 on the list). Some legal fiction will be invented to cover the trail. The question will then be, is the US willing to engage in all out trade war with Canada over BigPharma?
However, I believe that you are failing to reckon with the mythic status of health care for many socialist nations like Canada. Consider that the rallying cry for any repressive country that instantly sanctifies it for the Left is "universal health care". And for Canada in particular, what is left of Canadian culture except universal health care? I consider it unlikely but quite possible that Canada would enage in that kind of behavior on this issue.
On a side note, curse you for creating another topic I should write a post on but won't have time!
I think Guy's right, as the first step.
If you put effective pharmaceuticals "in play," I expect the ultimate results would be a surprise -- certainly I cannot predict them -- and I also bet you wouldn't like 'em.
Posted by: Harry Eagar at November 6, 2003 12:21 PMSo, Canada will not, itself, manufacture pirated drugs, but will buy them, undercover, from a third party...
Won't perscription records reveal, quite easily, that this is occuring ? Then BigPharma, which is at this point the lifeblood of US health care, will sue... Somebody, maybe individual patients...
The meta-point is, pharmaceutical research is the driving force behind improving health care, worldwide, and some nations are free-riding on US research.
As health care expenditures are about $1.5 trillion, annually, in the US, it's a big issue, and well worth wrangling over.
Canada's easy. "Notwithstanding any other provision of law, no copyright on any intellectual property made, written or created within Canada, of any nature or kind, including but not limited to any protection against copying, sale or use of any article, novel, magazine, television program, film made for theatrical release or otherwise, or any computer program, shall be valid in the United States, nor shall the Courts of the United States have jurisdiction over any claim for the infringement of any copyright granted or recognized under the law of any nation or of a suit brought to collect damages for the violation thereof."
Posted by: David Cohen at November 6, 2003 2:31 PMA drafting error led me, in the above post, to prevent all lawsuits to enforce any copyright. That was overbroad. I meant only to prevent lawsuits to enforce copyrights on works created in Canada.
Posted by: David Cohen at November 6, 2003 2:35 PMHarry:
We can safely assume it wouldn't advance research on new drugs, right? So I'm okay with just about anything.
Posted by: oj at November 6, 2003 3:22 PM"So, Canada will not, itself, manufacture pirated drugs, but will buy them, undercover, from a third party..."
Hey all, it's been a bad year, but I assure you you have no reason to fear the Canadian Government is now competing with the Hell's Angels. "Canada" does not manufacture, import or sell drugs, although Canadian companies that may or may not be sibsidiaries of American companies do. You are arguing the way totalitarian regimes do when they expect democratic regimes to take full responsibility for the words and deeds of their citizens.
I doubt very much Canadian public opinion cares a whit about how much Americans pay for their drugs or where they buy them. Nor is a competitive country with a small domestic market that depends heavily on trade and is in a huge free-trade market likely to start acting like protectionist Brazil. There have to be several relatively straightforward ways to stop re-importation or arbitrage. I have not yet heard of any US authority asking. Is it possible this is more about American politics than Canadian transgressions?
Sorry, David, I know that must have felt real good, but I think you should save it for when we try to invade Maine.
Posted by: Peter B at November 6, 2003 3:40 PMPeter:
Yes, it's about American politics.
It's also slightly about Canadian free-riding, just as you enjoyed US nuclear protection.
That was fine during the Cold War, but now, especially with the Iraqi war snub, it's come down to: Ass, gas, or grass.
Posted by: Michael Herdegen at November 6, 2003 5:13 PMYes, Orrin, I know you believe that all needful drugs have already been invented. Not many people will agree. None who are attending the MS soiree I'm going to on Nov. 22 would.
It is a fact that virtually every useful drug we know about was discovered within my lifetime. The possibility of even half as much discovery in the next 57 years is more devoutly to be wished than sending someone out into space in a capsule to die.
Posted by: Harry Eagar at November 6, 2003 5:36 PMHarry:
Yeah, but if this kind of law cripples research, I win.
Posted by: oj at November 6, 2003 9:10 PMMichael:
I assure you you are preaching to a very supportive (and unhappy) audience, but I respectfully submit that has nothing to do with drugs or trade.
Posted by: Peter B at November 6, 2003 9:28 PMAfter running this through my political syllogism, I've changed my mind, and now think that it would be best for the US to allow or even encourage reimportation from Canada.
Major premise: Left/liberals want reimportation because they think this will make drugs for the US consumer as cheap as they are for Canadian citizens.
Major premise: Just about every policy favored by left/liberals has the opposite effect as the hoped-for effect.
Therefore: What will actually happen is that low Canadian drug prices will be disappear, and their drug cost will go up to the US level.
Posted by: ray at November 6, 2003 9:41 PMAs a pharmacist, I've been following this pretty closely.
Canadian pharmacies close to the US border are now complaining of certain medicine shortages. Canadians pay lower prices for drugs because the Canadian government sets the prices. When the supplies run low, the pharmaceutical companies understandably are NOT going to increase the supply to Canada.
The costs of developing even one successful drug are sky-high; freeloading Canadians and Europeans will not be subsidized by productive pharmaceutical manufacturers.
So, if a Canadian pharmacy has to decide whether to sell an important medicine in short supply to Americans or Canadians, guess which nationals will get priority.
Posted by: John J. Coupal at November 7, 2003 10:44 AM