Will Canadian prescription drugs cost more in a year?

I was watching the debate the other night and it occurred to me that if Kerry gets elected, and he gets his wish of being able to import prescription drugs from Canada; costs will most probably rise. I was wondering how many people believe that will boost the price of those drugs in Canada? And if you believe that companies will boost the price of Canadian drugs what will be Canada�s reaction?

I doubt they will rise too much.

The reason Canadian drugs are cheaper than the US is because they have price controls in place that restrict price increases to a level that's tied to the overall rate of inflation.

Pented Medicine Prices Review Board (PMPRB)
16. How does the PMPRB review the pricing information for all patented medicines sold in Canada?

In summary:

* Most new patented drug prices are limited so that the cost of therapy is in the range of the cost of therapy for existing drugs sold in Canada used to treat the same disease;
* Breakthrough drug prices are limited to the median of the prices for the same drugs charged in other specified industrialized countries that are set out in the Patented Medicines Regulations (France, Germany, Italy, Sweden, Switzerland, U.K. and the U.S.).
* Existing patented drug prices cannot increase by more than the Consumer Price Index (CPI);
* In addition, the Canadian prices of patented medicines can never be the highest in the world.

When Board Staff finds that the price of a patented drug appears to exceed the Guidelines, and where the criteria for commencing an investigation is met, Board Staff will conduct an investigation to determine the facts.

An investigation can result in its closure; in a Voluntary Compliance Undertaking by the patentee to reduce the price and to pay excessive revenues; or in a public hearing and remedial action.

The price control board controls the prices that the manufacturer charges.
They don't control the price the retailers charge but the retailers will have competition from other Canadian retailers so I doubt they will raise their prices too high.

Originally posted by AceOfBase
I doubt they will rise too much.

I understand they have price controls, but that assumes that it would be more profitable to the companies to undercut their own American prices. That raises an even more nasty possibility....that the companies will just discontinue shipping said drug to Canada.

There is a point and I�ve seen it over and over were a company just makes the decision that it is more profitable to not do business�..there are many businesses that will not deal with the American government any longer because it is just too big a pain in the butt. That is one of the overriding factors in the occasional $600 dollar hammer and the Halliburton scheme. One of the other overriding factors is that the pain in the butt causes the unreal pricing schemes to a large extent. I�m not saying that the pharmaceutical companies would just up and stop sending the drugs. Just notify the Canadian government that they plan to�.then tell the Canadian government how much they will have to subsidy it�..that would be rich the Canadian people underwriting American prescription costs.

I don't think they are selling at a loss in Canada because that would mean they are also selling at a loss in Italy, France, Sweden, Germany, the UK and Switzerland.

They're just trying to make as much as they can get away with in the US.

Here's a price chart showing the price difference between the US and other countries:

PMPRB 2003 Annual Report

Originally posted by AceOfBase
I don't think they are selling at a loss in Canada because that would mean they are also selling at a loss in Italy, France, Sweden, Germany, the UK and Switzerland.............

You missed the point.....what I was saying is that it might be more profitable for them to skip the Canadian market. Not that they aren't currently profitable....as the Canadian market is much smaller. To capture a larger share of a less profitable market and lose a share of a more profitable market might not be a decision that they are comfortable with. It might make more sense for them to instead of lowering US costs to just forgo the Canadian market. The end result will be that they will be faced with a decision: 1. lower profits in America, 2. raise costs in Canada, 3. skip the Canadian market and hope Canadians will come over and pay the increased costs or do without. It would ensure that they would have a choice to make. You can be sure that they already have bean counters calculating the decision.

Actually if you look at your costs quoted you will realize that what I said is even more likely�.the difference between American and Canadian costs are pure profit. The costs below the Canadian price are a mixture of operating cost and profit. As the American market is so much more immense than the Canadian market, they will probably be forced to make a choice find it much more profitable to skip the Canadian market altogether.

Lets just say very round numbers here that the American market is 100 sales and the Canadian market is 50�..further that the cost of medicine A in Canada is 100 dollars 75 of that is cost 25 profit. Then the American cost is 150 and 75 dollars is profit�.now faced with a choice to reduce costs to say 110 dollars in America. Or skip the Canadian market which would you do.

Profit prior.
America 7500
Canada 1250

After
America 3500
Canada 1250

Obviously in the very simplistic model it would behoove the company to skip the Canadian market altogether. Now is the model exact�.no that is not the point. What I believe will happen is that costs will rise in Canada. Costs will lower in America a little and they will limit supply to Canada causing shortages. Limiting supply and forcing Canadians to either do without or cross the border and pay at the higher rate�..look to New York price controls are a market failure�.always have been always will be.


I still think it would be rich for Canadians to underwrite American medicine

[edit on 11-10-2004 by keholmes]

In my opinion, I would say yes. Economics would say that the prices would drop, since the 'amount' of product would increase, but I bet political motives will rule in this one...IMHO.

Originally posted by keholmes
Obviously in the very simplistic model it would behoove the company to skip the Canadian market altogether. Now is the model exact�.no that is not the point. What I believe will happen is that costs will rise in Canada. Costs will lower in America a little and they will limit supply to Canada causing shortages. Limiting supply and forcing Canadians to either do without or cross the border and pay at the higher rate�..look to New York price controls are a market failure�.always have been always will be.

I still think it would be rich for Canadians to underwrite American medicine

If they did lower supply to Canada, couldn't Canadians just fill their orders from one of the European countries that have even cheaper prices?

Originally posted by AceOfBase
If they did lower supply to Canada, couldn't Canadians just fill their orders from one of the European countries that have even cheaper prices?

Point being that the market is global in nature. do you think that the global companies are going to sit by while one government robs them of well over half of their profits. Do you think that they are going to say, oh gee the US made a law I guess we need to make less in profits. No, as I said they are the ones shipping the drugs around....if they see an increase in demand in a country that they make less money from, and a corresponding drop in demand from a nearby country....simply limit supply to the country that has the increase in demand. Guess what will happen to the price in that country (hint). What you and others are proposing is that a global company is going to simply give up profits because the US legislates so. First off I think that most legislation that seeks to control company behavior in foreign lands would be found unconstitutional. If you need an example of why price controls are such an atrocious idea in the US look to the NY real estate market.

[edit on 16-10-2004 by keholmes]