Drugs here and there

What’s the dang deal with these cheap Canadian drugs? Will they poison you? Are we idiots to pay so much here in the US? Is the Canadian government subsidizing the medical expenses American senior citizens? There’s a lot of trash talk going on, but when you look at the macroeconomics of it, there are some straightforward truths.

First of all, we can dispense with the idea that Canadian drugs are unregulated and dangerous. This is insulting and absurd. As for subsidy, Canadian drugstores are happy to sell to Americans. They’re making money on every sale. So where is the imbalance coming from? The problem is this: drugs cost a lot of money to invent and develop, and that expense has to be paid for across all markets. But medicine is a funny business. In broad terms, Canada, like a lot of countries, legislates low drug prices; the US lets them float. If you beat down prices one place, they need to pop up somewhere else, namely the US. All this means the US is paying for the lion’s share of new drug development. Of course we can beat down prices here too, but you won’t get many new drugs that way. Profits permit research and development. It’s a very simple equation. Everybody likes cheap pills, but the drug you really want is the one that will save your life one day but has yet to be invented.

My favorite information source on the drug industry is Derek Lowe on Corante.com. Read what he has to say on this topic, including this question: “Just how many of the best-selling drugs in Canada were invented or discovered there?”

5 thoughts on “Drugs here and there”

  1. Corante claims no best-selling drugs were developed in Canada. He lists no evidence, but it sounds right to him. However, David Olive of the Toronto Star has already refuted this claim.

    “As it happens, 3TC, one of the most widely used treatments for HIV and AIDS, was developed by Montreal’s BioChem Pharma Inc. And, the first genetic test for HIV drug resistance, approved by the FDA last September, was developed by Toronto-based Visible Genetics Inc. Both companies have been gobbled up by multinationals hungry to fill their new-product pipelines — Britain’s Shire Pharmaceuticals Group PLC and Germany’s Bayer AG, respectively. That still leaves more than 400 biotech firms operating in Canada.”

    The Toronto Star’s article is no longer on-line that I can find, but there’s a cache here:

    I notice that Corante himself named a few more Canadian developments on November 25.

    Olive also points out that big pharmaceutical companies spend billions on sales reps and marketing, because they’re caught in an arms race with their competitors, and channel much of their research money into inventing new versions of old drugs (time release versions etc), rather than looking for the “drug which will save my life someday.”


    I’m not sure if these companies could do anything different, because of this arms race, but that’s a reason to find other ways to develop drugs. The free market doesn’t seem to give the best results here.

    Tim at Mooselessness (a currently broken weblog)

  2. I suspected Lowe’s challenge would result in some significant Canadian drugs coming to light. As you point out, Lowe acknowledges some in his November 25th post. The more important observation is that the money to develop these drugs probably came from the US market, and that investment would likewise be primarily recouped in the US market.

    The pharmaceutical industry is definitely broken in multiple ways, but the fact that dollars drives most new research is hard to deny.

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