NCPA - National Center for Policy Analysis

Uniform Global Prices Would Raise Drug Costs

March 5, 2002

Some advocates of cheap drugs for Americans have hit upon an idea they think would yield prices in America similar to what are often found in other countries -- many of which have price controls. Supposedly "uniform global prices" on pharmaceuticals would reduce prices to an average "world level." However, critics point out that many studies have shown that standardized products like Coca-Cola and cars sell at different prices in different countries. The reasons vary, but include different taxes and distribution chains, as well as differences in average incomes and standards of living.

Experts say that it is more likely that drug prices in lower-priced countries would increase.

  • Drug prices in Canada and other countries would rise to those of the United States rather than the reverse, as drug manufacturers attempt to maintain profitability.
  • The profits that drug companies use to fund innovation would fall without benefiting consumers.
  • Reduced drug innovation would slow improvements in health care in the future.

Experts say that competition among drug companies assures that, on average, prices are set at levels that bring profits just high enough to attract and keep capital in a high-risk environment. And regional differences in drug prices reflect variations in demand within those countries.

Source: Herbert Grubel, "Uniform Global Prices Mean Higher Prices for Drugs," Fraser Forum, February 2002, Fraser Institute, 4th Floor, 1770 Burrard Street, Vancouver, BC, Canada V6J 3G7, (604) 688-0221.

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