Cross-Border Pill Shopping: Canadians Patients Will Suffer More Than Canadian Doctors

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posted December 7, 2001

Doctors have a professional monopoly on prescribing drugs, and the profession’s leaders are right to worry about doctors who abuse this authority by co-signing prescriptions for patients whom they have never examined.

Some Americans fill prescriptions in Canada because many drugs cost less up here than down there. Some American politicians see this as an opportunity to buy senior citizens’ votes by promising to bring American drug prices down to Canadian levels. In the twilight of the Clinton administration, the President signed a new law that will allow middlemen to hijack prescription drugs from their manufacturers, en masse, from Canada to the United States. This law has yet to take effect. If it does, it will have far worse consequences for the health of Canadian patients than the current cross-border traffic does for the reputations of a handful of rogue doctors.

Like most smugglers, Canadian pharmacies involved in the cross-border prescription business are reluctant to reveal the extent of their trade. Smuggling is often an honourable activity. For example, there might be nothing immoral in smuggling American milk into Canada. Governments in Canada prevent free trade between American dairy producers and Canadian consumers, causing Canadians to spend one billion dollars per year more for higher priced Canadian milk than if they could freely buy milk from the US.

In the case of prescription drugs, however, the goal is not to bypass a government that prevents willing producers and consumers from trading, but to enlist government’s help in coercing unwilling producers to sell their medicines at prices that they would not freely accept.

The number of Americans who fill prescriptions in Canada is unknown, but the examples are legion. Rosemary Morgan of Massachusetts takes tamoxifen, a breast cancer drug. She buys it from a Canadian Internet pharmacy for 12% of the US$1,357 she would pay annually to her local pharmacy. Unreported is the fact that she is buying a different product in Canada than she would in the US, where the drug is patented. The only drug-maker that sells it there is the one that invented it.

In Canada, any manufacturer that can prove to Health Canada that it can copy the pill safely and effectively can sell the drug. Since these companies did not invest the millions of dollars necessary to invent the drug, they can sell it for a much lower price. In any case, most patented drugs are not too expensive for ordinary Americans. Tamoxifen’s annual cost of US$1,357 works out to US$3.72 per day. American seniors spend far more on entertainment than prescription drugs.

As long as relatively few Americans take advantage of cross-border Internet prescription shopping for personal use, the manufacturers are unlikely to worry that it will kill their profits in the US. However, the tragedy of America’s law is that it will not reduce prices to poor Americans and will stop the supply of innovative prescription drugs to Canada.

This is the tradition of American legislative interference in pharmaceutical prices. A 1996 law that demanded that drug-makers give their best prices to government drug-buying programs caused the companies to increase prices to non-government buyers.

Canada comprises less than 2% of the global market for prescription drugs, and the US about 50%. It would take about one minute for the CEO of a multinational pharmaceutical company to figure out that the cost of cutting off the Canadian market would be infinitely less than that of allowing the US government to pirate cheaper Canadian drugs into the US.

On the other hand, if American politicians stopped interfering in drug-makers’ marketing strategies by repealing laws which unnaturally lead them to charge the same price to everyone, the companies would profitably, and therefore gladly, sell drugs to poorer Americans at a lower price than they do to affluent Americans, in the same way that they currently sell drugs to poorer countries, like Canada, for lower prices than affluent countries, like the US.

Unfortunately, the momentum may be in the direction of more government intervention. Thanks to a law that will internationalize American lawmakers’ misguided drive to force the same drug price on everyone, Canadians must now take seriously the threat that we may soon no longer have access to many prescription drugs that are important to our health.

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