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> we put high tariffs on Chinese steel to counter heavy Chinese government subsidization of that industry That's not a good comparison, because we're talking a

> we put high tariffs on Chinese steel to counter heavy Chinese government subsidization of that industry That's not a good comparison, because we're talking about reimportation - ie, drugs that are produced in the US and exported to another country before being reimported. In general, nobody's interested in reimporting steel produced in the US and exported to China. > Because the healthcare system is publicly funded, the government has enormous market power that it can use to drive drug prices below efficient levels First, Canadian healthcare is run at the provincial level, not at the federal level. So while each province/territory is a monopsony, they're each fairly small. Secondly, pharmaceuticals are typically not covered in Canada; patients pay for most drugs out of pocket, and their generic prices are actually not much lower than they are in the US[0] > Allowing re-importation of those drugs into the U.S. in effect allows the Canadian government to set drug prices in the U.S. With free trade, another country is still free to subsidize the goods that it imports from the US, but with the knowledge that they'll be subsidizing whatever portion of Americans choose to reimport those drugs at the subsidized prices. In reality, that reimportation won't need to happen, because it'll just apply backpressure on the initial sale prices in both markets from the manufacturer. [0] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3107113/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3107113/

kbenson 10y ago
> With free trade, another country is still free to subsidize the goods that it imports from the US, but with the knowledge that they'll be subsidizing whatever portion of Americans choose to reimport those drugs at the subsidized prices. But that's the whole problem. Canada presumably doesn't want to subsidize U.S. citizens. The whole point is to provide a benefit for their own citizens. If Canada subsidizes a popular but expensive drug so that it costs $1 for Canadians, with that drug being freely exportable, that could be billions of dollars lost, depending on how much of the savings compared to the country that imports it is in a better negotiated price and how much is subsidized by the government of Canada. > In reality, that reimportation won't need to happen, because it'll just apply backpressure on the initial sale prices in both markets from the manufacturer. It will happen for as long as the manufacturer resists. If the price difference is mostly because of subsidies and not a better negotiated price, that cost difference would be paid by Canada, and the manufacturer has no incentive to change the price. In fact, they may have the opposite, since they are still getting paid well, and the drug is effectively marketable as being much cheaper than what they are charging.
- chimeracoder 10y ago
  > But that's the whole problem. Canada presumably doesn't want to subsidize U.S. citizens. Well, right now the US is effectively subsidizing Canadians, because the US is funding the majority of the pharmaceutical research that produces the drugs they consume. Half of the entire world's funding for pharmaceutical research comes from the US. A large chunk of that is funded by earnings on pharmaceutical sales[0][1]. > If Canada subsidizes a popular but expensive drug so that it costs $1 for Canadians This is kind of a moot point, because Canada doesn't do that. > It will happen for as long as the manufacturer resists. I don't understand what you mean by "resist". If reimportation were permitted, the manufacturer literally has no power to prevent cross-border trade. In your hypothetical scenario, yes, Canada would probably adjust the degree to which they subsidize their drugs, but that's a moot point because they're not actually doing that. [0] and again, most of that come from the US, because earnings will be higher where the sale prices are highest [1] http://www.slate.com/articles/news_and_politics/explainer/2000/05/why_do_drugs_cost_less_in_canada.html http://www.slate.com/articles/news_and_politics/explainer/20...
  - kbenson 10y ago
    > I don't understand what you mean by "resist". Resists changing the price in the country that is imported into. Let's consider this hypothetical scenario. A popular drug is sold for $100 in the U.S., but the Canadian government subsidizes it to the degree that Canadians pay $50 for it (and Canada has negotiated a price of $80). The drug can by and is imported into the U.S. and sold for $60. There is no incentive for the manufacturer to lower the price. Even if they lower it to $80, they are losing out on some purchases who choose to buy at the higher price. They either make $80 or $100 depending on where they sold, but for ever unit that is imported, Canada is losing $30, which is partially going to subsidize the price for U.S. citizens, and partially to import/export costs. With open export regulations on drugs, there is effectively no way to subsidize a drug for your own citizens without subsidizing it for others where it is lower than another country that allows importation as long as the combined import fees and subsidized cost are not more than the cost in the importing country.
    - 10y ago
gleb 10y ago
That is so interesting. I had no idea Canada didn't cover drugs.
jessriedel 10y ago
> patients pay for most drugs out of pocket, and their generic prices are actually not much lower than they are in the US[0] But rayiner's entire point is about incentivizing R&D by allowing the collection of monopoly rents on patented drugs; he's not talking about generics. How the market for generics is structure has essentially no impact on R&D. And as you say, since Canada's generics are nearly as expensive as in the US, or are more expensive (see below), re-importing generics does not usefully push down prices. http://news.nationalpost.com/news/canada/this-is-why-canada-has-the-second-highest-medication-costs-in-the-world http://news.nationalpost.com/news/canada/this-is-why-canada-...
- chimeracoder 10y ago
  > But rayiner's entire point is about incentivizing R&D by allowing the collection of monopoly rents on patented drugs. I'm pointing to the generics as an illustration of Canada's pharmaceutical prices not being as controlled as people often think. (In fact, in Canada they're not controlled directly at all - they're simply pegged by law to other countries which set their own prices). I actually agree with rayiner's point about incentivizing R&D by allowing (temporary) collection of monopoly rents on patented drugs. I'm just saying that they should be collecting those monopoly rents from all countries that consume the drugs. Right now, they basically collect them only in the US, and allowing reimporting from other countries which respect US patent laws would ensure that all countries are contributing towards that in proportion to the amount that they actually consume the results of the R&D.
  - jessriedel 10y ago
    Ahh, I see. Thank you for clarifying.

kbenson 10y ago

> With free trade, another country is still free to subsidize the goods that it imports from the US, but with the knowledge that they'll be subsidizing whatever portion of Americans choose to reimport those drugs at the subsidized prices. But that's the whole problem. Canada presumably doesn't want to subsidize U.S. citizens. The whole point is to provide a benefit for their own citizens. If Canada subsidizes a popular but expensive drug so that it costs $1 for Canadians, with that drug being freely exportable, that could be billions of dollars lost, depending on how much of the savings compared to the country that imports it is in a better negotiated price and how much is subsidized by the government of Canada. > In reality, that reimportation won't need to happen, because it'll just apply backpressure on the initial sale prices in both markets from the manufacturer. It will happen for as long as the manufacturer resists. If the price difference is mostly because of subsidies and not a better negotiated price, that cost difference would be paid by Canada, and the manufacturer has no incentive to change the price. In fact, they may have the opposite, since they are still getting paid well, and the drug is effectively marketable as being much cheaper than what they are charging.

chimeracoder 10y ago
> But that's the whole problem. Canada presumably doesn't want to subsidize U.S. citizens. Well, right now the US is effectively subsidizing Canadians, because the US is funding the majority of the pharmaceutical research that produces the drugs they consume. Half of the entire world's funding for pharmaceutical research comes from the US. A large chunk of that is funded by earnings on pharmaceutical sales[0][1]. > If Canada subsidizes a popular but expensive drug so that it costs $1 for Canadians This is kind of a moot point, because Canada doesn't do that. > It will happen for as long as the manufacturer resists. I don't understand what you mean by "resist". If reimportation were permitted, the manufacturer literally has no power to prevent cross-border trade. In your hypothetical scenario, yes, Canada would probably adjust the degree to which they subsidize their drugs, but that's a moot point because they're not actually doing that. [0] and again, most of that come from the US, because earnings will be higher where the sale prices are highest [1] http://www.slate.com/articles/news_and_politics/explainer/2000/05/why_do_drugs_cost_less_in_canada.html http://www.slate.com/articles/news_and_politics/explainer/20...
- kbenson 10y ago
  > I don't understand what you mean by "resist". Resists changing the price in the country that is imported into. Let's consider this hypothetical scenario. A popular drug is sold for $100 in the U.S., but the Canadian government subsidizes it to the degree that Canadians pay $50 for it (and Canada has negotiated a price of $80). The drug can by and is imported into the U.S. and sold for $60. There is no incentive for the manufacturer to lower the price. Even if they lower it to $80, they are losing out on some purchases who choose to buy at the higher price. They either make $80 or $100 depending on where they sold, but for ever unit that is imported, Canada is losing $30, which is partially going to subsidize the price for U.S. citizens, and partially to import/export costs. With open export regulations on drugs, there is effectively no way to subsidize a drug for your own citizens without subsidizing it for others where it is lower than another country that allows importation as long as the combined import fees and subsidized cost are not more than the cost in the importing country.
  - 10y ago

gleb 10y ago

That is so interesting. I had no idea Canada didn't cover drugs.

jessriedel 10y ago

> patients pay for most drugs out of pocket, and their generic prices are actually not much lower than they are in the US[0] But rayiner's entire point is about incentivizing R&D by allowing the collection of monopoly rents on patented drugs; he's not talking about generics. How the market for generics is structure has essentially no impact on R&D. And as you say, since Canada's generics are nearly as expensive as in the US, or are more expensive (see below), re-importing generics does not usefully push down prices. http://news.nationalpost.com/news/canada/this-is-why-canada-has-the-second-highest-medication-costs-in-the-world http://news.nationalpost.com/news/canada/this-is-why-canada-...

chimeracoder 10y ago
> But rayiner's entire point is about incentivizing R&D by allowing the collection of monopoly rents on patented drugs. I'm pointing to the generics as an illustration of Canada's pharmaceutical prices not being as controlled as people often think. (In fact, in Canada they're not controlled directly at all - they're simply pegged by law to other countries which set their own prices). I actually agree with rayiner's point about incentivizing R&D by allowing (temporary) collection of monopoly rents on patented drugs. I'm just saying that they should be collecting those monopoly rents from all countries that consume the drugs. Right now, they basically collect them only in the US, and allowing reimporting from other countries which respect US patent laws would ensure that all countries are contributing towards that in proportion to the amount that they actually consume the results of the R&D.
- jessriedel 10y ago
  Ahh, I see. Thank you for clarifying.