Why Bernie is Wrong About Prescription Drugs in Canada

Sanders Doesn’t Understand Why Canadian Pharmaceutical Industry isn’t that Great

[dropcap size=big]O[/dropcap]nce again, Bernie Sanders has taken to Twitter to educate us all on how great the Canadian healthcare system is. The Vermont Senator is a big fan of the Canadian “universal” healthcare system, and therefore infers that because the government pays for their prescription drugs, they must be superior to and cheaper than American drugs. Ironically, what Bernie chooses to ignore is that Canada already is trading pharmaceuticals with America, more so than most of the world. Not only that, but Canada’s prescription drugs aren’t that affordable or universally accessible.

 

If we can import tomatoes from Mexico, there is absolutely no reason why we cannot import affordable prescription drugs from Canada.

— Bernie Sanders (@SenSanders) February 22, 2016

When analyzing the Canadian Government’s pharmaceutical industry profile, we quickly see from data compiled by Statistics Canada contradictory to the sentiment that Canada isn’t exporting to America enough. The data actually shows that not only is America already Canada’s primary recipient of pharmaceutical exports, but Canada actually imports 33% of all its pharmaceutical’s from America, with another 43% of their imports coming from the EU.

 

What’s also interesting about the profile is that 3 out of the top 5 pharmaceutical companies in Canada are American, and only 2 out of the top 10 are Canadian.

 

 

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Despite this, somehow the top-selling prescription drugs in Canada are mostly sold by Canadian companies.

 

 

One can only speculate that this is because the Canadian government gives preferential treatment to these companies, but most of it is probably because Canada employs price controls to keep its drug prices in check. Of course, we learn in economics this doesn’t work.

An article from the National Center for Policy Analysis outlines the effects of Canada’s price controls. Because Canada’s provinces mandate that the cheapest possible identical alternative be used on patients, many are suffering from inadequate care. The article states:

• Twenty-seven percent of physicians in British Columbia report that they have had to admit patients to the emergency room or hospital as a result of the mandated switching of medicines.
• Sixty-eight percent report confusion or uncertainty by cardiovascular or hypertension patients, and 60 percent have seen patients’ conditions worsen or their symptoms accelerate due to mandated switching.

Certainly a contributing factor for the expensive medicine is that Canada takes a lot longer to approve drugs than the United States does. The aforementioned NCPA article details this problem. It summarizes that if a drug wins federal approval, it takes several months, even years, to gain the approval of all 10 provinces. From the article:

• Nova Scotia approves drugs for its formulary in 250 days.
• The wait for approval in Ontario is nearly 500 days.

 

Because of this, Canada’s own pharmaceutical industry is very weak by global standards. A report from AARP’s Public Policy Institute fully outlines how small of an impact Canada’s drug market has on the global economy. An excerpt from the report states:

 

“With just 2 percent of worldwide pharmaceutical sales, Canada accounts for a small share of worldwide pharmaceutical use. Canada is also home to a relatively small research-based pharmaceutical industry, thereby making a small contribution to new drug development globally. Research-based drug manufacturers spent nearly 10 percent of their Canadian sales revenues on pharmaceutical research and development (R&D) in Canada in 2001—above the 6 percent level of the late 1980s but somewhat less than in the mid-to-late 1990s. Canadian R&D spending reached its peak of 11.7 percent of Canadian sales in 1995.

By contrast, the United States leads the world in both use of prescription drugs and development of new drug products. The United States is home to many of the world’s top pharmaceutical manufacturers. Pharmaceutical R&D spending in the United States equaled about 18.0 percent of U.S. sales in 2001, a rate that is similar to recent years but below the peak of 20 percent reported for 1995–1998.”

The question Senator Sanders should be asking isn’t “Why can’t we import from Canada?” The questions he’s asking should be, “What can we do to make our own system more efficient? What is Canada doing right, and what is it doing wrong? What does the data show?” If he did ask these questions, he’d find Canada’s minuscule drug sales primarily go to the US, its drugs are so expensive they require price controls, and the few drugs that do get approved are so hard to come by that they need to ration them. He would also realize that what Canada is doing right, if anything, is allowing the greedy American capitalists to sell drugs in their country, and taxing them less than the US government does.

 

Special thanks to The Modern Libertarian Grant Phillips for help with the research.

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