By Arnold Kling
Can we lower drug costs by importing from Canada? Perhaps not, according to this story.
Canadians must stop Americans from using Internet pharmacies to raid its medicine chest or face a drug shortage, a coalition of Canadian groups representing seniors, pharmacies and patients has warned.
The groups, claiming to represent 10 million Canadians, or about one-third the population, called on the Canadian government Monday to ban prescription drug exports.
This is why the Cato Institute’s Roger Pilon says that drug re-important might not have the consequences that its supporters expect.
with the ban lifted, and the threat of underpriced drugs flooding the American market, companies would be “forced” to adjust. They could offer a country lower prices, but the country would have to police its exports, since America would no longer be policing imports. That places the incentive where it belongs, on the country benefiting from the bargain.
In The New Yorker, Malcolm Gladwell writes,
As the economists Patricia Danzon and Michael Furukawa recently pointed out in the journal Health Affairs, drugs still under patent protection are anywhere from twenty-five to forty per cent more expensive in the United States than in places like England, France, and Canada. Generic drugs are another story. Because there are so many companies in the United States that step in to make drugs once their patents expire, and because the price competition among those firms is so fierce, generic drugs here are among the cheapest in the world. And, according to Danzon and Furukawa’s analysis, when prescription drugs are converted to over-the-counter status no other country even comes close to having prices as low as the United States.
Read the whole thing. Thanks to Nick Schulz for sending me the pointer.
Laurence Kotlikoff takes on what Bryan Caplan would call anti-market bias against the drug companies. Of drug-company basher Marsha Angell, he writes
she claims the drug companies are super profitable, don’t spend enough on R&D, waste money on marketing and advertising, don’t generate enough new discoveries, and free-ride on government research support. Rather than debate these dubious propositions, let’s assume, for argument’s sake, that they are all true. In this case, Dr. Angell should set up a new drug company or engineer the buyout of an existing company. With her new company, she can choose to spend more on R&D, make more discoveries, bring more drugs to market, cut back, if not eliminate, marketing and advertising, benefit from government research support, and end up with higher profits than current drug companies.
In contrast with Dr. Angell’s prescription, Forbes reports on an economic approach to lowering prices and profit margins in the drug industry.
George Mason University economist Alexander Tabarrok has a different idea: Abolish FDA-required efficacy testing altogether. Such testing is a big reason it typically takes 10 to 15 years from the time a new drug is discovered until the FDA approves it for sale. In Phase I trials a company studies how a drug moves through the body and its safety for human use. Then a drug enters Phase II and Phase III trials, which typically take years and focus on efficacy as well as safety. The long wait can cost lives and runs up new-drug costs–to an estimated $900 million per successful drug.
Thanks to Tyler Cowen for the pointer to the Forbes piece. Later on, the Forbes piece says,
Tabarrok and Klein also offer some alternative proposals at FDAReview.org. One is to make all FDA testing optional. Drugs that didn’t go through the process would be labeled “Not FDA Approved.” Under this approach, they say, “the FDA would become a genuinely voluntary institution, much like Underwriters Laboratories.” Another idea is for the FDA to award letter grades, A to D, to claims made by drugmakers, much as it is considering doing for health claims for foods and dietary supplements. The FDA could still have its say, but wouldn’t be able to impose long delays, since a new drug could be marketed at first as “unrated.”
For Discussion. If we could replace drug prohibitions with reputation systems, why not also replace medical license requirements with reputation systems?