The median wait for drug approval in Canada is nearly half a year longer than in the United States.
The world is in the midst of a “third revolution” in pharmaceutical drugs that is both saving lives and improving their quality.
More than 400 new drugs came onto the market in the 1990s. More than half were developed in the United States. They often provide treatment where none was available before. There are pills to treat Alzheimer’s Disease and high cholesterol; clot busting drugs that make strokes less debilitating; non-addictive remedies for depression and anxiety; biologics that halt rheumatoid arthritis; less toxic time-release treatments for Hepatitis, and let’s not even mention male impotence. The list goes on and on.
And the coming years promise more of the same. More than 400 new medicines are in development to fight cancer, 120 for heart disease and stroke, 80 for HIV/AIDS and 170
for neurological diseases.
But some politicians are threatening to restrict the profits that spur life saving innovation in order to save people – and, maybe more important, the government – money.
“We are the only industrialized country in the world that does not negotiate on the cost of prescription drug prices,” intones Maine Rep. Michael Michaud. He and other elected officials are looking into importing prescription drugs from Canada where, for a variety of political and economic reasons, the prices of some well-known drugs are substantially lower than in the United States.
In essence, what Michaud and other politicians are proposing is to import Canada’s system of price controls – through re-importation at the federal level or by states copying Canada’s provincial system of formularies that restrict patients’ choices of new medicines.
Canada’s system of controls is based on a premise that many Americans likely wouldn’t buy – that prescription drugs aren’t medically necessary. Canada’s National Health Act, which provides universal care, does not require prescription drug coverage under its medicare system. Instead, Canada’s provinces provide coverage for low-income elderly Canadians and about 60 percent of the rest of Canadians receive drug coverage through third-party insurance.
What Canada does do – that the United States up to now has not – is tightly regulate the prices at which pharmaceutical companies can sell to distributors.
The result is that, indeed, yes, the prices for some high profile drugs are lower in Canada than in the United States. But why is this so? Government controls provide only part of the reason.
One reason is that the general price level in Canada is lower, and prices for most products tend to be lower as a result. Another is that lawyers in Canada can’t sue away drug companies riches as in the United States. But there is an economic reason that benefits Canadians as well.
Because they are such a small market, Canadians get a free ride on the U.S. system. Only because Americans pick up the full cost for drug development – which averages around $897 million for each new product and costs $32 billion to the industry each year – can Canadians get bargain rates for meeting the cost of manufacturing. If Americans didn’t, then Canadians wouldn’t be able to. Prices there would soar; prices here would not go down, unless other price control measures were instituted.
Also imported would most likely be the waits for new drugs. The median time for drug approvals in Canada is nearly half a year longer than in the United States. Under formulary rules, a new drug place in a category cannot increase the cost of drug treatment for a disease, even if it reduces the other medical costs associated with the treatment. More effective drugs thus can be kept off the market or made more costly to buy for Canadians for years.
Do American politicians really want to put people through so much physical pain for no real savings gain? It is a false economy, when what health care needs are real economic remedies.
Sally Pipes was born in Canada but currently lives in the United States. She is the president of the Pacific Research Institute and member of Gov. Arnold Schwarzenegger’s transitional team. This article is a shortened version of a series of articles written for Techcentralstation.com, an online think tank.
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