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Letters to the editor, summer 2004

From M, summer 2004

Prescription drug pricing


Many thanks for Deane Morrison's story "A Hard Pill to Swallow" (spring 2004). Valuable insight on extending patents, etc. We shouldn't have to go to Canada for meds. I started with Sen. Dayton's bus and was most impressed with the clinic and pharmacy; now save nearly $1,000 a year. As for "dangerous drugs," it's a non-issue for me. --Pauline Walle, '58
Best article I've read on the subject. Would like to see it published in the Star Tribune. E-mailed it to my legislative reps. I was glad to see that we have people at the U who are thinking about this subject and are so straightforward. --Sue Wunderlich

The article "A Hard Pill to Swallow" fails to point out several important facts about the differences in the pharmaceutical markets in Canada and the U.S.

First, the litigious nature of the U.S. means that product liability costs for pharmaceutical manufacturers are higher in the U.S. than Canada. Higher costs usually mean higher prices. The article does not address this factor.

Second, the article points out that incomes are lower in Canada than in the U.S. Income differences mean that prices of many products are higher in the U.S. than Canada. For example, potatoes and automobiles cost more in the U.S. than in Canada.

Third, Canadians spend more of their health care budget on pharmaceuticals (15.2 percent) compared to the U.S. (10.5 percent).

Fourth, the flaw in any policy to encourage shipment of drugs from Canada to the U.S. is the assumption that firms will continue to ship large quantities to Canada, with 27 million people, if those shipments are merely coming back to the U.S., with 300 million people. Canadians will lose access to some products. Allowing differential drug prices [between the countries] enhances consumer welfare by expanding the number of patients served.

--Richard P. Rozek, Ph.D.
National Economic Research Associates, Inc.


Ed: We asked one of our experts quoted in the article, Steve Schondelmeyer, to respond to Dr. Rozek's comments:

First, legal expenses account for 1-3 percent of total drug company budgets. Differences between prices in U.S. and Canada run 30-40percent. Liability is a small factor.

Second, the U.S. has one of the greatest income disparities of any country in the world. Drug pricing based on median incomes works well in countries--like Canada--with a narrow range of income and where the government pays for drugs. As for potatoes and cars, it's legal to buy them in Canada and bring them to the U.S. Not so for drugs, though the law isn't enforced.

Third, a per capita expenditure is a better measure of drug spending. Average pharmaceutical spending per person in Canada is $367; in the U. S., it's $492.

Fourth, the article did not advocate reimportation of drugs, which has its problems. It is merely a band-aid for the deeper issue of how to make sure that poor Americans can obtain the drugs they need. Physician samples or pharmaceutical firm-sponsored programs for indigent patients provide a false safety net and do not take the place of real drug-pricing reform.

Send your letters, comments, questions, or suggestions to: M Editor, 3 Morrill Hall, 100 Church St. S.E., Minneapolis, MN 55455-0110. Phone: 612-624-6868. E-mail: editorUR@umn.edu. Letters selected for publication, which may be edited for length, in no way reflect the opinion of M's publishers.