Monday, October 18, 2004

Increasing demand + price ceilings = shortages 

I think we have a winner in the No S--- Sherlock Sweeps:

More than 30 Canadian internet pharmacies have decided not to accept bulk orders of prescription drugs from US states and municipalities.

...growing concern in Canada that growing exports to the US could lead to rising prices and shortages north of the border has prompted the Canadian International Pharmacy Association (Cipa), whose members include several of the biggest internet and mail-order drugstores, to act. �We don't want to give Americans the impression that we have unlimited supply for them to tap into on a commercial basis,� said David Mackay, the association's executive director. Americans, he added, �can't get everything from Canada. We can't be your complete drugstore�.

Prescription drug prices are significantly lower in Canada than the US, because of price controls and bulk buying by the 10 provinces. Individual Americans have crossed the border for years to buy cheap medicines, but the internet and spiralling healthcare costs in the US have led to a wider movement for states and cities to sourcethe drugs they need from Canada. Several states, such as Minnesota and New Hampshire, have set up websites directing residents to approved pharmacies in Canada. Cipa members would continue to service these customers, Mr Mackay said, but would not deal with states such as Illinois and Wisconsin that have proposed turning over their entire supply system to a Canadian internet pharmacy.

You could have seen this coming from a mile back. The Canadian system is simply too small; the whole purpose of the drug reimportation approach was to try to embarass U.S. pharmaceuticals for high margins in the U.S., when in fact those margins are supporting R&D costs exacerbated by FDA regulation. Canada and other countries have in essence free-ridden on the costs of R&D. (I hope Dave will post a comment on this.)

Politically this cuts both ways -- while the immediate harm is to Kedwards' plans for health care, it also is a blow to Governor Tim Pawlenty here, who has supported these plans. While Minnnesota appears to be grandfathered in, getting special treatment is likely to be something that won't play well should Pawlenty have plans beyond the governorship. I suspect it won't be long before Cipa reconsiders servicing the state contracts it has already agreed to.

Hat tip: Instapundit, who recommends as well Tom Maguire's note.