More on Drug Reimportation: Price Convergance

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The massive discounts on drug prices in Canada don't appear to be too sticky.

Americans purchasing their drugs from Canadian online pharmacies didn't save as much money last year as they did in 2003, with the average discount dropping to 29 percent from 38 percent, a new study found.

The average drug price on Canadian Internet pharmacies rose 23 percent from the first quarter of 2003 until the end of last year. Meanwhile, drug prices at American online pharmacies rose 8 percent, according to PharmacyChecker.com, which tracks Internet pharmacy prices and released the study.

Apparently the efforts to block exportation to the US were tighter than I had thought:

To circumvent the restrictions and keep supplying their American customers, Internet pharmacies have been buying drugs from Canadian brick and mortar drug stores, which charge them a markup of between 7 percent and 15 percent above wholesale prices. The higher acquisition costs combined with being paid with weak American dollars is hurting Internet pharmacies' profits.

"This has become a really low margin business for us," said David MacKay, executive director of the Canadian Internet Pharmacy Association. "We are just trying to hang on."

The comment about the weak dollar here sounds a little like a comment about US economic conditions (though I might be a bit over-tuned, I admit), but in this case it can be seen as a small plus: drugs in the US are now relatively less expensive.

2 Comments

This is great! I had argued previously that allowing reimportation would have the effect of raising drug prices in Canada a decent amount, and lowering or slowing the growth of prices in the US as profit generation or r&d coverage is now not the sole responsibility of the US consumer. Imagine how much more effective this process would be if the laws were changed to facilitate this process. (Which is really ending protectionist policies.) You could go a step further and say that drug companies cannot limit their sales to Canada, which is really allowing them to allocate sales to the detriment of the US consumer. In the long run, this would establish a near universal drug price in the US/Canada, with the US consumers benefiting to the extent Canadians are denied their free ride. If Canada wants to live up to Tucker Carlson's label, fine, but lets not subsidize through protectionist laws on reimporting drugs.

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This page contains a single entry by published on January 5, 2005 4:13 PM.

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