NCPA - National Center for Policy Analysis

Drugs From Canada Won't Lower Drug Prices

December 20, 2002

Drugs prices are often cheaper in Canada, sometimes much cheaper. That is partly because Canadians are poorer, and cannot afford price levels similar to those found in the United States. In addition, Canada also controls the prices of pharmaceuticals. This has prompted many to call for drug reimportation, whereby drugs exported to places like Canada can be re-imported by Americans as similar savings. However, experts point to problems with this argument:

  • Pundits argue that drugs in Canada sell, on average, for about 43 percent less than the price found in the United States.
  • But with more wealth and nearly 10 times the population of Canada, the U.S. is a more lucrative market.
  • If required to equalize drug prices between the U.S. and Canada to prevent re-importation, Canada prices will climb to the U.S. levels.

Another likely result is that many drug firms would simply stop shipping drugs to Canada. For instance, Europe dominated drug research prior to the advent of European price controls in the 1980s. Since then, U.S.-based pharmaceutical manufacturers have increased their share of the top 50 drugs worldwide from 19 to 33. In 1999, they sold 80 percent of the top 10 drugs.

Source: John Calfee, "Why Drugs from Canada Won't Cut Prices," Consumers' Research, November 2002.


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