2003 September 21 Sunday
Many Drugs Available In United States Not Available In Canada

Sally Pipes, president and CEO of the Pacific Research Institute, has written an excellent article in the Washington Post on the reduced availability of drugs in Canada due to price controls and the bureaucratic barriers to availability of drugs in Canada. The Patented Medicines Prices Review Board (PMPRB) and provincial drug approval boards prevent many drugs from becoming available in Canada.

In addition, each of Canada's 10 provinces also maintains a government-approved formulary, which determines which drugs will be available to Canadians. Once approved by the PMPRB, medication must then get the nod from each of the provincial formularies. Many provinces approve fewer than half of all the new drugs the board has okayed.

Faced with the combination of price controls and the uncertain prospects of various provinces ever approving each drug for some drugs the pharmaceutical companies never even seek permission to sell them in Canada. But for the drugs whose makers do seek approval not all get approved by the PMPRB and of those that do then at the next step not all get approved by each province.

One hundred new drugs were launched in the United States from 1997 through 1999. Only 43 made it to market in Canada in that same period. Canadians are still waiting for many of them.

But since some provinces approve less than half the drugs that first receive PMPRB approval the net result is that less than a quarter of the new drugs that make it to market in the US are available in those provinces. Think about that. Some politicians and left-leaning political commentators in the United States hold Canada up as a shining example due to lower prices for some drugs. Well, the Canadians have taken their desire to avoid spending as much on drugs to the point where individual Canadians can't even get many of the drugs that cost us so much money to buy in the United States. So the governments are saving money big time. But what if you happen to be a Canadian who would benefit from one of those prohibited drugs? Well bummer dude.

Leave aside, for the moment, the effects on individuals in terms of increases in suffering and death. Even from the government's standpoint what the Canadians are doing may be counterproductive. If people could function more efficiently on some some drug then the effect of not having that drug reduces that person's economic output and hence that person's generated income and taxes collected by their government.

Why should Americans care about this? Self interest. Americans would have longer life expectancies if the governments of other governments were not able to force price controls on pharmaceutical companies. The resulting much reduced profit margins reduce the incentive for pharma cos to develop new drugs and hence the total amount of new drug development is lower than it otherwise would be. The US government ought to make the elimination of drug price controls a goal in international trade talks.

See my previous post which links to data on relative cancer case fatality rates in US states and Canadian provinces. The best Canadian province, British Columbia, has higher cancer case fatality rates than half of all US states. This is not an example we should want to emulate.

Share |      By Randall Parker at 2003 September 21 02:22 PM  Socialism, Capitalism

John-Boy said at September 30, 2003 9:19 PM:

As someone who has lived an equal number of years in both Canada and the US I find the pro/anti single-payer debate extremely bothersome. There are problems with both approaches, yes, even with the free market US approach (and this comment from a free market advocate with graduate degrees in economics and business.) I ain't your local leftist pinko :)

For all those who fear single payer, it ain't so bad. There is rationing of access through waiting so that's a definite negative to those who actually have health insurance in the US. For those without insurance, the Canadian approach is a step up. There are economies of scale to be gained by single payer. There is loss of vigor in the single payer system. Others more able than I have detailed the differences between the two systems ad infinitum.

Its interesting also that the US pays more per capita than Canada for its public healthcare
and politicians are noticing that the US isn't gettings its money's worth (yes, it's Daschle but he does speak to a significant group of Americans who agree with him so don't discount him too quickly)

I fully recognize the power of the free market to capture efficiency within a system, but I also recognize that markets are not the salvation of every societal ill. The free market concept has limits. It also has vested interests that are protecting themselves, - let's reconginze that.

I agree with David Frum's piece that you quoted. He too recognizes the limitations of both approaches but for ideological reasons is set against the single payer system. That's fine. I generally share his philosophy but I'm not as strident. He should propose a free market approach to the US health quagmire. Perhaps it is impossible to reconcile free market philosophy to a service such as health care. Then what? Nero playing the fiddle as Rome burns around him?

As for the Sally Pipes piece, she's a free market advocate, so that's her spin. She's not an objective commentator. Her facts are petty much correct but she doesn't give background. A number of the drugs that are not in the Canadian supply pipeline are newly patented "improvements" on drugs losing patent protection. Most often the improvements are miniscule or not even improvements, just new formulations that are patented. It's not as black and white as she makes it out to be.

The Canadian systm definitely needs a reform to address its ills. So too does the US system. Both can learn from the other. OK now, let's all hold hands and sing Kumbaya. I hate being put in the position to write such clap-trap but there is a truth to it.

The US health approach is wreaking havoc with the US industrial sector. $1,200 of each GM car goes to health insurance costs for its employees. Retired people are at risk of losing coverage. Corporate bankruptcy casts aside health coverage for the retired.

How do you think that this affects US corporate decision making. It makes industrial relocation to Canada a more attractive option because the health care costs aren't solely borne by the corporation. How is that good for the US?

Medicare is in crisis. http://www.heritage.org/Research/HealthCare/HL797.cfm

On another point, and strictly from a brutal economic analysis, the preponderance of health care costs are incurred by those persons of advanced years. This point blunts your argument about the economic costs of health care rationing. They are past their economic prime and contribute little productivity to the economy, although they are consumers. I recall former Colorado Governor Richard Lamm's appearance on 60 Minutes where he advocated rationing care to the elderly. What a firestorm that caused. Why don't the pure free-market think tanks push that agenda. It makes brutal economic sense, but can you imagine that happening?

I'm not for a minute advocating that Canada is following this policy but if the result of drug rationing is to not spend a half a million dollars keeping a 78 year old cancer patient alive for another torturous 18 months and those funds are available for use elsewhere, then the Canadians are accomplishing a more efficient economic transaction than could be accomplished in the US. Strictly economic analysis with no human emotion in the equation. There ain't no such thing as a free lunch.

Where does the US free market approach lead? Currently 14% of GDP. How much higher? How many more working uninsured, and even worse, the retired uninsured who have lost their bargaining power in the job market (where health insurance is a benefit.)

The Canadians tried one approach and the Americans another. I see a move to the middle for each as being the best alternative.

Beware the pure ideologues on both sides!

Don't even get me started on Canadian immigration policies. Arghh.

Keep up your amazing work.

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