Drug makers threaten to reduce shipments to Canada

The New York Times reports today that drug makers are threatening to reduce shipments to Canada if the United States begins importing drugs. U.S. consumers pay higher prices for pharmaceuticals than anyone else in the world, and large drug companies are not anxious to give up this profit source.

Eduardo Porter writes:

Drug makers like Pfizer say they would reduce their shipments of drugs to distributors in Canada and other countries that re-export to the United States. "We are not going to supply drugs to diverters, in Canada or elsewhere," said Hank McKinnell, chairman and chief executive of Pfizer.

And Canadian health officials, fearing shortages and higher prices of their own, would probably clamp down on their own pharmacists and distributors to keep their drugs from leaking into the United States. Canadian patient-advocacy groups have already complained about shortages from the exports to the United States that already occur, even though they violate American law...

"Is it sensible for the United States to have price controls?" asked Jean O. Lanjouw, an economist at the University of California, Berkeley. "It is a real question. But we don't discuss the real questions"...

For all the shortcomings, the Kerry campaign argues that drug imports should be given a chance. "If the impact is so negligible, why are the drug companies fighting it so much?" said Sarah Bianchi, Senator Kerry's policy director. Even if the overall bulk of imports were not that large, she added, "they would apply some pressure on the drug industry and make them revisit their pricing policies."

And some of the drug companies' defensive tactics could be barred by law. The Senate legislation, for example, would bar pharmaceutical companies from denying supplies to distributors and pharmacies that export to the United States...

Currently, Pfizer charges an American wholesaler an average of $2.07 for a 10-milligram pill, and some 15 percent less to an H.M.O. In Canada, by contrast, the health care system run by Ontario's provincial government will reimburse only 1.60 Canadian dollars (about $1.28) for the same pill - the same price as in 1997...

Such policies have kept Canada's prescription drug prices 30 to 80 percent cheaper than in the United States.

Because most other industrial countries maintain some kind of price controls on prescription drugs, the United States has a similar drug price gap with the rest of the world. The Congressional Budget Office estimated that average prices for patented drugs in 25 other top industrialized nations were 35 percent to 55 percent lower than in the United States.