The Great White North, Part 2

I promised you a Dirty Little Secret last time, but I lied (Sorry!) – I actually have TWO Dirty Little Secrets to share with you about why prescription drugs are cheaper in Canada.

The first Dirty Little Secret is that prescription drugs ARE NOT Cheaper in Canada then they are in the US. The truth is that prescription drugs are cheaper in Canada, in Mexico, in Europe, in Africa, and almost everywhere else in the world!

The second Dirty Little Secret has to do with WHY these drugs are cheaper everywhere else, and that reason is call ‘Price Discrimination’.

Now, we all know that ‘discrimination’ is a bad thing, so I find it amazing that the Spin Doctors have yet to dream up a nicer term for this practice. “Price Discrimination” is a recognized academic economic term, so maybe that’s why no one has thought up a better term for it. “Price Discrimination” simply means charging different prices to different buyers for the same product. A bag of flour probably costs more in Manhattan that it does in New Jersey, and this is “Price Discrimination”. The price difference can be partially due to the higher overhead in Manhattan and partially due to the fact that people in Manhattan make more money and can therefore afford to pay more for their flour. Of course, if a Manhattanite wanted to purchase their bargain flour by driving into New Jersey, there is no law against this, and as a result, many Manhattanites do their shopping across the river.

The citizens of Niagra Falls, New York, or El Paso, Texas, are not legally afforded the same privilege. Here is where the pharmaceutical company Spin Doctors start earning their keep: As they explain it, prescription drugs are a unique product, because they cost a lot of money to develop, but are relatively inexpensive to make. They need to recoup these high R&D costs, and they do so by charging US consumers more for their product. By not passing on the R&D costs to consumers in other countries, they can keep the prices there lower and therefore they can still make a profit selling in these countries. If they were to pass on the R&D costs evenly and fairly to consumers in every country, people in other countries might not be able to afford their medications. This is the primary reasoning why we are not permitted (in theory, at least) to buy our medications from Canada or Mexico – if enough people did this, it would upset the balance of the system and drive up the costs in Canada and Mexico. This is how pharmaceutical company Spin Doctors explain their reasons behind their “Price Discrimination”, and why we are not allowed to ‘drive across the river’ and save money.

As ‘nice’ as it sounds, this is patently unfair. The truth of the matter is that other country’s governments won’t allow them to price gouge their citizens, so they make up for it by gouging Americans even more. Offering drugs to third world countries in Africa at a substantially lower prices may indeed be a righteous and humanitarian thing to do, but the same argument does not hold water when you are talking about doing the same thing for countries that have similar economic conditions to the US. Pharmaceutical companies are charging US consumers more for our prescription drugs for one very simple reason – they can.

Of course, they have Spin Doctored a response to this as well. If they were to pursue price equity for their products amongst leading nations, it would upset the established order and cause havoc in those fortunate countries (i.e everywhere but here) with low cost prescription drugs. Lower prices in the US would mean higher prices everywhere else, and that would not be fair to those countries. This is, of course, absurd. Where else, in normal economics, does the largest consumer pay the highest price for goods? “These Widgets are a dollar a piece, but if you want to buy them in larger quantities, they sell for three for ten dollars”. And why is it that we should be raped for our prescription drugs so that everybody else can pay a ‘fair’ price?

Think of this in another way – what would you do if you found out that the same Ford that you were interested in buying was selling in Canada for 1/3 of the U.S. price? I don’t know about you, but I would buy a Chevy! The problem is, of course, you wouldn’t be allowed to buy a Chevy – you only had a ‘permission slip’ to buy a Ford, even though the Chevy was 98% functionally equivalent. Besides, GM, Chrysler, and every other manufacturer would gleefully jump on the same price gouging bandwagon as Ford, so long as you were prohibited from buying your car in another country..

There is really only one solution to this pricing disparity - our elected officials start standing up to these companies and demand – or legislate – fair pricing, just like the leaders in Europe and Canada did for their oppressed citizens.

Until then, as far as our pharmaceuticals are concerned, US consumers will remain the ‘Suckers of the World’. If you are an American citizen who purchases non-generic prescription drugs, welcome to the Schmuck Club. For those interested, we’ll be issuing ID cards and secret decoder rings shortly. In the meanwhile, you can print and laminate this card for your wallet.




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