The Answer to America`s Healthcare Problems Does Not Lie in Importing Canada`s Failures
The Congress and state governments in the U.S. currently are considering proposals to import prescription drugs from Canada and to use government`s so-called bargaining clout to wring discounts from drug makers. Unfortunately, both initiatives are fraught with self-delusion.
In Canada, the state pays for about 50 percent of prescription Drug costs. Governments have resisted making prescription drugs a universal entitlement like physicians` and hospitals` services. And the state`s plans are clearly inferior to those offered by Canadian private insurers. About 80 percent of private plans in Canada reimburse any available prescription drug; whereas government-operated plans have restrictive lists of drugs they subsidize.
Furthermore, governments can arbitrarily drop drugs from the list, and increase deductibles and co-payments, and have recently done so. Patients covered by these plans have no legal recourse in this situation, as they would with a private insurer. Even with these restrictions, Canada spends a larger share of its health expenditures on prescription drugs than the U.S. does: 15.4 percent
versus 11 percent, according to the latest figures.
The governments` unwillingness to pay for innovative drugs that save money in the long run probably is one reason for Canada`s higher prescription drug cost. And it may well be a major reason for the declining quality of Canadian healthcare in recent years. Since they can often help patients avoid major surgery and lengthy hospital stays, today`s advanced prescription drugs ought to be considered the super weapons in our arsenal of preventive medicine. Probably the last area that government bureaucrats should be involved in is purchasing prescription drugs.
Everybody in a government-run program tries to game the system to his own advantage, but pharmaceutical manufacturers are the most easily demonized by politicians and other interest groups.
The average American senior spends more on entertainment than prescription drugs, but because drug makers are profitable, multinational corporations, they offer an easy target for politicians looking to buy seniors` votes.
The positive relationship between drug makers` profits and their spending on research and development is abundantly clear, and an increasing body of evidence demonstrates the benefits of new drugs, launched over the past few years.
Nevertheless, the incentives for politicians to sabotage innovative drug development in favor of grandstanding over prices are irresistible. The notion that government intervention will reduce prices because the state is a shrewd bargainer is a fallacy. Americans who still ruefully remember the Pentagon`s purchase of $400 toilet seats most assuredly know better.
The US government has already caused prices to increase. After 1990, when drug makers were forced to give their best price to government agencies, prices went up because the manufacturers reduced discounts to other, smaller, buyers.
Governments are notoriously ineffective at purchasing goods and services. The best way to ensure that drug makers charge fair prices is to have them compete for patients` dollars, not the favors of a government bureaucracy.
So, why are Canadians getting such low drug prices? A lot has to do with the declining Canadian dollar and Canadians` increasing poverty versus Americans. Because of high taxes and destructive government policies, the average Canadian worker earns about one third less that his American neighbor. Companies cannot charge American prices here because Canadians, either individually or through their governments, cannot pay those prices. This is why new cars, soft drinks and Internet access cost less in Canada too. The fantasy of importing prescription drugs from Canada against their manufacturers` interest also is unworkable.
The United States comprises about 50 percent of the world`s pharmaceutical market, and Canada less than 2 percent. A law allowing renegade imports will simply make pharmaceutical manufacturers restrict supplies to Canada, to prevent the importing from taking place. No astute business will ever sign a sales contract that reads like a suicide pact.
Increasing the availability of reasonably priced prescription drugs in America can best be achieved by two actions:
· Reduce the corpulent regulatory burden which increases costs and reduces competition in pharmaceutical manufacturing,
· And edit and delete the thousands of pages of confusing government guidelines that have forced the U.S. healthcare system to become bloated and bureaucratic.
Take it from a Canadian who knows about government-run healthcare; the answer to America`s current crisis does not lie in importing Canada`s policy failures.
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