Wednesday, November 08, 2006

Time to get off your meds

As liberals tend to be very focused on the 'me' and the 'now' it's no wonder that one of the Democrats primary missions is to lower prescription drugs in the US. A noble concept to be sure, but their methods may cause all of us up here in the Great White North a severe headache, and make getting anything to treat it much harder.

By proposing to open the border to prescription drug traffic they will be removing the vital key to why drugs are so much cheaper here in Canada than in the US. Simply put, we are a small fish and drug companies are more than willing to cut us a deal because they know that they will make all their necessary profits through sales in the US. They already restrict their losses by setting limits to how much of a given drug can be sold in Canada at the current prices.

Open up the border and then suddenly they can no longer afford their two tier pricing structure. In very short order the pharmaceutical companies will force the Canadian government to remove their pricing restrictions or face shortages of required drugs like never before. This is already happening to a much smaller degree with the online drugs purchases being made by American's through Canadian sites. Sure Americans will probably save a few dollars but Canadians will be forced to pay prices many times higher than they currently are.

Here's a simple calculation to show my point:

Assumptions:
  • Drug companies maintain their sales of roughly $250 Billion (this is US sales alone).
  • They are selling it to Canadians for roughly 75% of the American price.
  • Populations remain constant at the current 10 to 1 ratio.
So on a per capita basis the current spending is levels work out to approximately $580 spent by Canadians for every $775 spent by Americans. Once the Democrats open the borders and the pharmaceutical industry reacts to maintain current revenue levels the new universal cost would be somewhere in the neighborhood of $757.50. That means while every American saves less than $20 on their drug costs, every Canadian will end up having to pay roughly $177.50 more.

While taken as a whole this would mean a vast savings for the American system, on a person by person basis while the average American will save 2% on prescription drugs the average Canadian will end up paying 30% more.

Not to be greedy, since I rarely buy anything stronger than Advil, but there must be a better way to lower drug costs in the US without having to punish Canadians to do it. My worry is that in a rush to grab good press, the Democrats won't be willing to take the time and find it.

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