Like Ponce de Leon searching for the fountain of youth, politicians keep looking for that magic elixir of lower-cost drugs. Now, Sen. Olympia Snowe thinks she’s found it. Two bills sponsored by Snowe would legalize the importation of prescription drugs from Canada. The Bangor Daily News (“Cheaper Drugs, Inevitably,” May 8-9 editorial) backs the idea.
But is this really the answer?
It is true prescription drugs cost less in Canada, but not because pharmaceutical companies are overcharging U.S. consumers. Nearly everything is less expensive in Canada. Maine tourists have enjoyed travel bargains in Canada for years. Prices are lower in Canada – 25 percent lower by one estimate – because Canadians have a lower standard of living. Canada also limits lawsuits against drug manufacturers. One-third to one-half of the drug price difference between the United States and Canada is a result of less litigation in Canada.
The Canadian government sets the prices for brand-name medicines and restricts the drugs available to Canadians. If you compare brand-name prices in Canada and the United States you will find differences.
If you add in generic drugs, though, which account for nearly half of U.S. prescriptions, the savings evaporate. One study of total drug usage – brand-name and generic – found Canadians pay 3 percent more overall because price controls on brand-name medicines discourage the use of less-expensive generics.
If consumers can save money on brand-name drugs in Canada, what’s wrong with buying them there? A lot.
Around the world, drug prices reflect standards of living. Countries with higher living standards pay more for drugs. Poorer countries pay less. In Africa, AIDS drugs sell for hundreds of dollars for a year’s supply. Here, the same drugs cost thousands more. Manufacturers have lowered their prices, admittedly after some protest, to forgo profits and recover only the cost of manufacturing and distribution.
What if all AIDS patients started buying lower-cost drugs by mail from Africa? Drug companies would get back only the cost of manufacturing the drugs and not the cost of the research spent developing them. There would be nothing left over (profits) to invest in research for newer and better drugs. As a result, the stream of new products, like the protease inhibitors that have cut the death rate from AIDS by 80 percent, would dry up.
Multiply that by millions of people shopping cross-border for all of their drugs and the problem is magnified. Pharmaceutical company profits would be squeezed and drug research would have to be curtailed. Pharmaceutical manufacturers spend 20 percent of their revenues on research and development – more than $30 billion last year. Save $25 on a lower-priced drug from Canada and there is $5 less for research and development. Cross-border bargain hunters are siphoning money out of the drug research and development pipeline. The money they save will be paid by future generations in higher health care costs.
Does this mean we should berate cash-strapped seniors for saving money on their prescriptions by shopping in Canada? Of course not. Part of the fault lies with a Medicare system that, until recently, did not include a drug benefit. A Medicare prescription benefit will begin in 2006. Until then, seniors can sign up for federally supported prescription discount cards.
The final solution, however, lies in an equitable sharing of drug research costs. Currently, Americans pay 80 percent of drug research costs because of artificially low prices in countries like Canada. There are calls for a more equitable sharing of those costs around the world. When that happens the supply of better drugs for future generations will be assured.
Douglas R. Johnson, Ph.D., is executive director of the Maine Biotechnology Information Bureau, an educational nonprofit in Stonington. His e-mail is info@mainebioinfo.org
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