USA to Screw Canada…Back

At Cafe Hayek, Russell Roberts explains why cheap Canadian drugs won’t stay cheap or available or both for long. He links to a longer article of his that explains the situation very well.

In short, Canadian drugs are cheaper because price controls keep it down rather than any fundamental fact of Canadian efficiency. I would expect that the supply is smaller than it would be otherwise, as well, but the effect may not be large given Canada’s small share of the North American market.

The implication of that is that drug companies make up the profit difference elsewhere; the obvious location is here in the U.S. So we’re paying higher prices to subsidize the consumption of Canadians.

Re-importation will start to make up for that imbalance, but Canadians won’t see it that way. They’ll see it as an attack on their health care system. After all, we’re not being dupes anymore, so there will be much wailing and gnashing of teeth as they rant about the evil Americans screwing up another good thing with capitalist greed.

Roberts gives two possible responses: drug companies will raise prices to Canada whether Canada likes it or not, or Canada will act to criminalize the export of drugs. I suspect that it will actually be the latter, given the likely way the issue will be framed.

But remember, Canada is currently screwing the U.S. They just like it when they pitch rather than catch.