That old Senate gadfly, Bernie Sanders, tried to win points as the self-proclaimed leader of the Democratic party by proposing a naive and impractical amendment to the Senate health care law to allow Americans to import Canadian drugs. The amendment specifically stated that it would “establish a deficit-neutral reserve fund relating to lower prescription drug prices for Americans by importing drugs from Canada.”
The Amendment failed but not in the way you could imagine. Actually, 12 Republican Senators supported it, which in this environment of politics is nearly a miracle. You’d think that it would have passed, but it didn’t. Thirteen Democrats voted against the Amendment, which caused it to fail.
The liberal internet decided to come down hard on Senator Cory Booker of NJ, because just a day before he had the intestinal fortitude to stand up to the nomination of the backwards Jefferey Sessions for Attorney General, so how dare the perfect liberal not be perfect on everything. Senator Booker voted against the amendment for good reasons, though the crazy liberal media is fairly angry at him. And of course, the meme-makers had to pull out the old Big Pharma Shill Gambit, accusing all thirteen Democrats of being pawns of Big Pharma.
To be fair to Senator Booker, his office issued a statement to the media after the vote. It said he supports the importation of prescription drugs but that “any plan to allow the importation of prescription medications should also include consumer protections that ensure foreign drugs meet American safety standards. I opposed an amendment put forward last night that didn’t meet this test.”
In other words Sen. Booker and others are saying that, before we import Canadian drugs, let’s make sure they are safe. Yes, Canada’s drug distribution is fairly safe, but it’s not perfect. There are a lot of issues of safety that should be considered (and Sanders did not, because I’m beginning to be convinced his analytical skills are weak). But there’s a bigger concern – would Canada allow this to happen, and why would they? And that is the concern that Sanders failed to acknowledge.
Let me be absolutely clear. The USA needs some sort of drug pricing regulation, although I doubt it will happen under the Trump administration for lots of reasons.
Setting aside the positives and negatives of this amendment, let’s take a look at whether we can or should import Canadian drugs.
American pharmaceutical prices
Pharmaceutical companies are large multinational companies with branches, joint ventures and subsidiaries all over the world. It’s kind of hard to pinpoint what is an American, French, Swiss, British, Japanese or German pharmaceutical company except by looking at their actual headquarters location – even that may or may not mean anything. A drug can be developed in America, manufactured in France, and sold by a British company back into the US. It makes a Rube Goldberg machine seem positively straightforward.
Many countries have systems whereby prices are managed by a central bureaucracy focused on pharmaceuticals. No, they don’t demand specific prices from Big Pharma, they actually negotiate a price with each company based on usage or demand across that nation. The USA is one of the very few nations that does not do this, except in small ways. Large health care plans often negotiate directly with Big Pharma for lower prices, but one healthcare company doesn’t have the buying power of a whole nation.
But this leads to a major issue, one that people tend to ignore. Medicines sold in the USA often cost more, sometimes significantly more, that the cost for the same medicines in other countries. For example, many drugs cost 50% less in Spain, the Netherlands or Greece than it does in the USA. I’m sure you all are jumping up and down saying, “we need to do that.” If only saying so made it so.
In the real world, a cancer patient in France is getting a cheap drug on the backs of Americans. I can’t write this with enough frustration, but Americans pay high prices so that French cancer patient gets better and cheaper health care. Yes you read that right. The citizens of the USA are actually subsidizing the health care systems of other countries by paying the costs of drug development, investment in manufacturing, and other substantial items in higher prices.
There seems to be numerous tropes that new drugs fall on the lap of Big Pharma execs who make billions out of it. In fact, it is vanishingly rare for a drug discovery to appear out of nowhere. As I wrote before, the failure rate for drug discovery is huge. And no, Big Pharma doesn’t have a vault filled with gold bars to pay for these failures – the costs of failures are rolled into the costs of successes, otherwise the company would never have funds to research another failure, or, more hopefully, a success.
Furthermore, the costs of getting one product to market is billions of dollars. It’s not a trivial system where some scientist says “this will work” and suddenly it’s on the market the next day. The world leader in pharmaceutical R&D is the United States, which does over 46% of the worldwide R&D in pharmaceuticals – this investment is a significant part of the US economy, making this country the leader in the world in this industry. Most of our higher costs for pharmaceuticals are plowed back into the economy paying for high wage earners (no, not just the executive suite, but all the employees up and down the corporate ladder), purchasing of equipment and plants, and investment in small start up companies.
My concern about pushing down prices in the USA (which will push up prices in those countries that get their socialized medicine on the backs of Americans) is that we’ll lose this investment in R&D to other countries. Those other countries are going to argue “if we’re paying more for your drugs, then you are going to develop and manufacture it here.”
Instead of putting together an inane, and ultimately useless, plan to buy pharmaceuticals from Canada, the USA needs a powerful bureaucracy, like Medicare, to negotiate prices with pharmaceutical companies to get prices down. There will be consequences – since Big Pharma still needs to bring to market new products, prices in Canada, France, Japan, everywhere will start moving up to the new US pricing levels.
But you are thinking, “well, you’re right, American shouldn’t be shouldering all the costs, so let’s get this done.” Again, it’s not a system where the government says “Drug XYZ will now be sold for $10 for 30 pills.” Uh no no no no. The President will put together a real agency that negotiates with each drug company for each drug. It will be based on usage across the country (which is, actually, pretty easy to determine). And maybe throw in a rule that our prices cannot be more than 5-10% higher than the average of European prices.
I’m ok with Germans paying more for their pharmaceuticals. Because I don’t think our country should be providing cheap health care to France or Germany or the UK. I’m pretty altruistic, but I have my limits.
But you know what will happen. Republicans will scream “SOCIALIZED MEDICINE. WE’RE COMMUNISTS.” Or some other nonsense that gets the juices flowing for the right wing.
Unfortunately, what Bernie Sanders did was introduce an amendment that put a tiny, used, thin, putrid bandaid on a huge bleeding wound of pharmaceutical pricing. This shows such a lack of in-depth thinking that has always frustrated me about that man.
To import Canadian drugs – what say Canada?
This infuriates me about some narcissistic liberals. They push a law just to say “hey, I’ve got liberal cred here,” but they don’t consider the consequences, some of them pretty severe to a country like Canada.
Let’s take a look at how Canada gets lower prices for drugs, and it’s not all that difficult. First Canada has a single-payer health system, which has a separate agency to regulate the cost of drugs for the health system. The USA has neither.
Canada has a boring, uncomplicated system to set prices on drugs, which is approximately how it’s done in almost every developed country except the USA. I’ll digest the process down to a few essential steps:
Step 1 – Big Pharma, Inc., which holds the patent in Canada for Drug XYZ, goes to the Canadian Patented Medicine Prices Review Board (PMPRB), and professionally asks to sell the drug to Canadian distributors (drugs are almost never sold directly to hospitals, doctors or patients, they all go through drug distributors).
Step 2 – The PMPRB first decides if the drug is useful to Canadian citizens. Then, they determine what percentage of the population needs it. Then, they tell Big Pharma, Inc. how much Canada will pay for it.
Step 3 – Professional and civil negotiations begin between PMBPRB and Big Pharma, Inc.
Step 4 – They agree on a price.
Step 5 – The contract is signed, stating the price for Canada, and, more importantly, how many Drug XYZ tablets can be sold in Canada for that year. This is important, stay tuned.
In case the careful reader missed it – Canada is NOT negotiating drug prices for Americans. I’m sure Canadians are nice people but they’re not going to sacrifice their pharmaceutical pricing system to a poorly thought-out American law.
So what happens if Sanders got his way with this amendment? First, American purchases of Canadian pharmaceuticals will cause Canada to hit its caps for numerous drugs. Those are hard caps, because the drug companies produce and export exactly what is needed for that country, in this case, Canada.
Those extra purchases will cause the drug prices to skyrocket, since the country’s overall purchases of Drug XYZ will exceed the negotiated level – exceeding the cap doesn’t mean Canada gets better pricing on the additional purchase, it doesn’t work that way when you’ve set up a system that limits the number of pills being shipped to Canada. Probably, it will mean that Canada will be hit with significant penalties in the form of much higher prices for Drug XYZ.
I know that some liberal Americans are quite selfish, and haven’t thought through the consequences of this boneheaded plan – Canadian citizens will pay more for their medications. Or those Canadians will be unable to afford the prices when they skyrocket, so they don’t get the health care they thought they had. Drug XYZ may get so expensive, because Americans were buying it cheaply, that Canadians just can’t have access to it.
However, since Canada is actually run by intelligent liberals, as opposed to ours, they will block Americans from buying it. They’re going to protect their citizens, not some Americans who could not be bothered to put into office politicians who’d actually fix this problem at the ground.
Once Canada starts exceeding the limits that they negotiated for all drugs, and they realize that Americans are the cause, they will simply prevent Americans from having access to Canadian drugs. It’s actually quite simple to do so. All they have to do is demand that Americans have a Canadian prescription (so you’ll have to pay for a Canadian doctor), and then charge a huge export tax for anyone with a US Passport buying Canadian drugs. It wouldn’t take much for Canada to make their cheap medications no longer cost effective for Americans.
And America will be back at having no control over pricing, because some intellectually challenged liberals tried to create a law to harm citizens of another country. Excellent strategy, Senator Sanders.
The TL;DR version
- Canada isn’t some magical place filled with unicorns that fart out drugs at a cheap price for their citizens. They are actually a part of the world’s economy on pharmaceutical products. They negotiate lower prices for their own citizens based on their best guesses on how many will be purchased. Big Pharma has a staff person who does that with every country, it’s really a time consuming process.
- Canada does not negotiate prices for Americans. If a large number of Americans cross the border to get cheap medications, Canadians will lose access to cheaper pharmaceuticals, and will be harmed in the process. Expect the Canadian government to build a wall, that Trump will have to finance, to keep Americans from wrecking the Canadian healthcare system.
- American liberals are too intellectually lazy to fight for a system that really works, instead of one that will falter after about a few weeks when Canada shuts off access to its unicorn drug producers. You can bet Canada will protect its own citizens from higher drug prices.
- America, because of the lack of pharmaceutical price controls, bears the burden of R&D and capital investment so that much of the world to get their cheaper drugs. If America would ever negotiate prices with Big Pharma, don’t expect prices to fall as far as they are in Canada. Just expect Canada, France, Germany and all other states with controlled pharmaceutical pricing to pay a lot more. And they will then demand that America’s pharmaceutical might be moved to those countries so they can share in the industry.
- To go after Cory Booker, who has shown a pair of steel testicles that many liberals lack, makes no sense to me. None at all. Booker’s reasons for not wanting the amendment may or may not be justifiable. But in the end, it was still a useless bill that ignores the actual international pricing strategy of all medications
So get your facts right liberals. Lowering drug prices is incredibly hard work. Wasting time on a bogus, inane, and naive system to hurt Canada by stealing its medicines? No, that’s not going to work.
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