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Prescription Drug Prices in Canada and the United States, Part 4: Canadian Prescriptions for American Patients Are Not the Solution

Type: Research Studies
Date Published: September 24, 2003
Research Topics:

In the last couple of years, a grey market has risen between Canada and the United States: the illegal diversion of prescription drugs meant for Canadian patients to medically uninsured Americans who want prescriptions at Canadian prices, which are often much lower than those in the United States. Although sales are currently only about US$650 million, a drop in the bucket of America's huge prescription-drug market, this growing business has drawn criticism from physicians, pharmacists, community pharmacies, and research-based drug manufacturers, and attention from legislators and regulators. On the other hand, a growing number of American patients are taking advantage of Canadian cross-border mail-order pharmacies to save money on their life-saving prescriptions.

This paper looks at the cross-border mail-order pharmaceutical trade and determines that it suffers serious flaws:

  • it exists because governments in the United States have made it very difficult for uninsured, low-income patients to get prescription drugs at low prices;
  • it can only grow with government support;
  • it violates the principles of free trade, and possibly the North American Free Trade Agreement (NAFTA);
  • it is a less safe method of distributing prescription drugs than a free market that operates with the cooperation of research-based drug makers;
  • it poses a serious risk that research-based drug makers will stop supplying Canada with their products, which would force the Canadian government to make difficult decisions about its commitment to patent law; and
  • importing Canadian prices generally into the United States would reduce the profits of research-based drug makers to such a degree that they would reduce annual investment in research and development (R&D) by US$5 billion to US$15 billion, the latter estimate being almost half of global pharmaceutical R&D for 2002.

Therefore, the Canadian government must take steps to discourage and eliminate this illegal business. Furthermore, the American government must reduce government intervention that limits uninsured, low-income patients' access to prescription drugs. Both countries must undertake reforms that will allow patients and drug makers, not governments, to determine appropriate prices for prescription medicines.

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