Markets and the State

[Berzerker]

Why do Americans pay more for drugs than Canadians? Or other countries? I know people here who get their drugs from Canada, they even opened up a little store in town. And they pay less... Whats going on?

Apparently the Canadian govt has price controls on many drugs imported from the USA, so pharmaceutical companies shift the cost to Americans while our (their) politicians try to invent reasons why Americans shouldn't be allowed to get their drugs from (thru) Canada - safety 'concerns'

But the market "failure" was created by a state's laws, not market forces. The housing boom and bust was blamed on the market when the fingerprints of slimy politicians were all over the crime scene. Why does the market get blamed for the actions of politicians?

If anyone needed proof of state incompetence and corruption creating a market failure, its the real drug war. But this is more about "legal" markets distorted by state intervention.

 

[Terxpahseyton]

Berzerker, in your cheerful praise of the market forces you seem to forget what those forces are. US companies sell to make a profit, right? Which means that the earnings received must cover the costs. So when US companies sell in Canada, they make a profit. There is no minus left which they could put on US-American shoulders. Otherwise - they wouldn't sell. In fact, the profit provided by Canada will only help the US companie. Maybe the US citizens have a bigger share in research contribution, okay. But the end price still can not be blamed on Canada as the prime cause. What if where today Canada is was just sea? Who would be then to blame? I suggest to rather focus at how your pharma industry is structured, how it operates and how the free pharma market actually works in practice - instead of in a dummy theory.
You need to realize what kind of corrupt and harmful forms of organization the praised free market can produce. The prime example is pharma. And not only in the USA. The Bavarian chief prosecutor once candidly described the structures of German pharma mafia-like on a talkshow.

 

[Angst]

The state incompetence in regards to the financial crisis was seeded by lobbyists that poured money into the politicians' pockets, resulting in an outcome even worse than the horrible situation a free market creates in regards to subjugating monopolies and crippling errs on the behalf of CEOs.

 

[MagisterCultuum]

The United States is one of only two countries in the world that legally allow pharmaceutical companies to advertise prescription drugs directly to the consumer. (The other is New Zealand.) We have only had prescription drug advertisements on broadcast media since 1999, when the FDA (under pressure from the pharmaceutical industry) decided to permit TV ads without requiring the detailed risk information mandated in print advertisements. Since then the drug industry has been hugely invested in direct to consumer advertising, as its profits have been increasing by $4.20 for every $1.00 spent on DTC ads. The increased demand they have been generating has permitted price increases. If I recall correctly, prescription drug prices before 1999 were no higher in the US than Canada, even though they already had price controls and we did not. I know that the prescription I use for eczema tripled in price almost immediately after its manufacturer started advertizing it on TV.

 

[Old Hippy]

Australia gets them cheap pharmaceuticals because we have UH... low income groups get a card entitlement to subsidized drugs ... the government then uses market forces to get the "best" deal from pharmaceutical companies to get on the list (nearly all of them)...

basically collective bargining... beats individual contracts everytime...

and with a reduced demand for full priced drugs... actually creates a competive enviroment between all the pharmaceutical companies in the market place on price... thank you America... isn't the free market great
you dump you T.V. shows here on the cheap, threatening our home grown product ... we will take your pharmaceuticals too

 

[Traitorfish]

It doesn't really make sense to talk about the market and the state as two wholly distinct and opposed spheres, as the OP does. They are necessarily intertwined, and in practice mutually-constituting. There would be little in the way of a market if the state was not willing to enforce property laws, for example, and little in the way of a state if there was not a monetary economy from which it could extract it's funds. It's a manichean construction which supplies a few rhetorical flourishes, but doesn't actually describe how the modern world works.

 

[Cutlass]

Why do Americans pay more for drugs than Canadians? Or other countries? I know people here who get their drugs from Canada, they even opened up a little store in town. And they pay less... Whats going on?

Apparently the Canadian govt has price controls on many drugs imported from the USA, so pharmaceutical companies shift the cost to Americans while our (their) politicians try to invent reasons why Americans shouldn't be allowed to get their drugs from (thru) Canada - safety 'concerns'

But the market "failure" was created by a state's laws, not market forces. The housing boom and bust was blamed on the market when the fingerprints of slimy politicians were all over the crime scene. Why does the market get blamed for the actions of politicians?

If anyone needed proof of state incompetence and corruption creating a market failure, its the real drug war. But this is more about "legal" markets distorted by state intervention.

Why do you blame government for the actions of the market?

While politicians did have a hand in the housing bubble, none of the top 5 reasons there was a bubble or a bust had anything whatsoever to do the government. It was all private actions taken for the purpose of private profits. And the rest, the private actors seeking private profits very aggressively lobbied the politicians to do these things.

You cannot separate the failures of a market from the profit motive of market actions.

As for the drug industry you have:

• Consolidation of drug makers through merger and acquisition. A market action.
• Few sellers, many buyers. A market action.
• Weak negotiating positions on the part of buyers. A market action.
• Artificial demand drivers through direct to consumer advertising and the bribing of doctors to prescribe too much. A market action.
• Heaven drug seller involvement in making medical policy decisions that benefit them at the expense of patients. A market action.
• Lack of government regulation. A market action.

I could go on. But you should see the point. These things do not happen because government made them happen, but rather because the private sector pursues its own interest both by working around existing laws, and by lobbying the government to make laws in their favor.

 

[kochman]

Berzerker, in your cheerful praise of the market forces you seem to forget what those forces are. US companies sell to make a profit, right? Which means that the earnings received must cover the costs. So when US companies sell in Canada, they make a profit. There is no minus left which they could put on US-American shoulders. Otherwise - they wouldn't sell. In fact, the profit provided by Canada will only help the US companie. Maybe the US citizens have a bigger share in research contribution, okay. But the end price still can not be blamed on Canada as the prime cause. What if where today Canada is was just sea? Who would be then to blame? I suggest to rather focus at how your pharma industry is structured, how it operates and how the free pharma market actually works in practice - instead of in a dummy theory.

Not true.
The volume of selling in France, Canada, etc (countries with artificial price controls) enables them to make more cheaper due to mass production, and maximize on the US profit where they don't have price controls.

 

[Core Imposter]

Deregulation of the drug market would decrease costs to consumers.

The problem is too much government. A retired person gets funds and insurance coverage from the government, which regulates the market to death. Since said retired person has no privacy from the government and is dependent to it, he or she cannot easily participate in black market medical endeavors.

Young people haven't the need for black market medical care as they are too healthy.

The absence of a black market ensures that the government controlled medical system has carte blanche to distort endlessly. Prices have thus risen exponitially since the Federal government got involved. And will continue to do so.

Putting funds directly into the hands of the people, via subsidies, with the Federal government blind to all health records would allow a black medical market to evolve, which in turn would break the back of the Federal medical monopoly. Prices would adjust to market norms.

 

[Quintillus]

I like how half the responses are "there is too little regulation of prices" and the other half is "there is too much government regulation". It wouldn't be a good debate without that.

I'm don't know enough about drug prices to speculate on the causes. But I don't believe for a moment that Canadian drugs are unsafe. There's probably a small number that require a prescription in Canada that don't in the U.S., and vice versa, but there's no reason to believe the Canadians are any worse at determining drug safety thatn the U.S. More generally, I think most of the "advisories" and "cautions" about travel and living outside the U.S. are baseless, and mostly the result of fearmongering and efforts to make Americans think there's something inherently better in America. There's a few that are sensible, such as that you have to watch out for pickpockets a lot more in some cities, such as Paris, than in pretty much any American city. But I think that the "Canadian drugs are dangerous" one falls squarely in the fearmongering, baseless, arguably xenophobic category.

The United States is one of only two countries in the world that legally allow pharmaceutical companies to advertise prescription drugs directly to the consumer. (The other is New Zealand.) We have only had prescription drug advertisements on broadcast media since 1999, when the FDA (under pressure from the pharmaceutical industry) decided to permit TV ads without requiring the detailed risk information mandated in print advertisements. Since then the drug industry has been hugely invested in direct to consumer advertising, as its profits have been increasing by $4.20 for every $1.00 spent on DTC ads. The increased demand they have been generating has permitted price increases. If I recall correctly, prescription drug prices before 1999 were no higher in the US than Canada, even though they already had price controls and we did not. I know that the prescription I use for eczema tripled in price almost immediately after its manufacturer started advertizing it on TV.

An interesting post. It does seem kind of strange that drug companies can advertise something to you that you can't actually get unless your doctor says you need it - which ideally, will be based on the doctor's understanding of best medical practices, not what you saw on TV.

 

[kochman]

Deregulation of the drug market would decrease costs to consumers.

Which regulations? A lot of them are there for our safety after all.
Regulation does not equal bad.

 

[JollyRoger]

Once deregulation causes your death, your drug budget goes way down.

 

[Terxpahseyton]

Not true.
The volume of selling in France, Canada, etc (countries with artificial price controls) enables them to make more cheaper due to mass production, and maximize on the US profit where they don't have price controls.

I have honestly no idea what your actual point is and how it relates to my post.

 

[BvBPL]

But the market "failure" was created by a state's laws, not market forces.

You've got it backwards: social forces (particularly political policies) are shaped by the market, not the other way around. The underlying system of economics defines the social system that rests upon it.

 

[Ailedhoo]

When it comes to medicine the best way to regulate is to make a national health service as be in the UK. We Brits are proud to have free healthcare, with thoses on benefits or in Wales can get free medicine.

 

[Ayatollah So]

If the OP had started out by pointing out the US government's massive corporate welfare handout to Big Pharma, in the form of excessively generous patent terms, I'd be more sympathetic. Of course that goes to show that blaming the government for our woes is not necessarily exclusive with blaming the market. In other words ...

It doesn't really make sense to talk about the market and the state as two wholly distinct and opposed spheres, as the OP does.

... this.

The increased demand they have been generating has permitted price increases. If I recall correctly, prescription drug prices before 1999 were no higher in the US than Canada, even though they already had price controls and we did not.

Magister, either I don't grok your politics, or you have an unusual talent for not letting your ideology get in the way of your ability to see a fact

 

[G-Max]

Berzerker, in your cheerful praise of the market forces you seem to forget what those forces are. US companies sell to make a profit, right? Which means that the earnings received must cover the costs. So when US companies sell in Canada, they make a profit. There is no minus left which they could put on US-American shoulders. Otherwise - they wouldn't sell. In fact, the profit provided by Canada will only help the US companie. Maybe the US citizens have a bigger share in research contribution, okay. But the end price still can not be blamed on Canada as the prime cause. What if where today Canada is was just sea? Who would be then to blame? I suggest to rather focus at how your pharma industry is structured, how it operates and how the free pharma market actually works in practice - instead of in a dummy theory.
You need to realize what kind of corrupt and harmful forms of organization the praised free market can produce. The prime example is pharma. And not only in the USA. The Bavarian chief prosecutor once candidly described the structures of German pharma mafia-like on a talkshow.

You forget this thing called "overhead": operating expenses that stay the same regardless of how much or how little you produce and sell. Ergo, while selling drugs to Canadians at stupidly low prices is profitable, the profit is not enough to make the company as a whole profitable, and the difference must be sought elsewhere.

The United States is one of only two countries in the world that legally allow pharmaceutical companies to advertise prescription drugs directly to the consumer. (The other is New Zealand.) We have only had prescription drug advertisements on broadcast media since 1999, when the FDA (under pressure from the pharmaceutical industry) decided to permit TV ads without requiring the detailed risk information mandated in print advertisements. Since then the drug industry has been hugely invested in direct to consumer advertising, as its profits have been increasing by $4.20 for every $1.00 spent on DTC ads. The increased demand they have been generating has permitted price increases. If I recall correctly, prescription drug prices before 1999 were no higher in the US than Canada, even though they already had price controls and we did not. I know that the prescription I use for eczema tripled in price almost immediately after its manufacturer started advertizing it on TV.

Hmmm... I think you're on to something. What if we banned ALL forms of advertising? Surely, that would make the price of everything go down... and, in the process, kill off every form of media that relies on advertising for funding: newspapers, radio, television... brilliant idea

(thinks for a moment)

Actually, would switching our media to a 100% pay-to-play system be such a bad thing? Every TV channel like HBO, every magazine as advertisement-free as a novel? It's worth considering. Or would companies just make heavier use of product placement? I recall a movie in which Donnie Darko starred as a Viagra salesman, and I swear to God, they mention Viagra by name so many times that I wouldn't be surprised of Pfizer had provided 100% of the funding for the project.

Australia gets them cheap pharmaceuticals because we have UH... low income groups get a card entitlement to subsidized drugs ... the government then uses market forces to get the "best" deal from pharmaceutical companies to get on the list (nearly all of them)...

basically collective bargining... beats individual contracts everytime...

and with a reduced demand for full priced drugs... actually creates a competive enviroment between all the pharmaceutical companies in the market place on price... thank you America...

You'd better be thanking us. If we weren't paying so much, your "collective bargaining" would drive these companies out of business, and then you wouldn't be able to get your drugs at ANY price.

As for the drug industry you have:

• Weak negotiating positions on the part of buyers. A market action.

• 
  
  Bullcrap. The last time I was prescribed something, I looked at the price tag, and I was like "WTH? Screw that! I'd rather go unmedicated and keep my $300/month"
  
  That's the free market at work.
  
  

  • Artificial demand drivers through direct to consumer advertising and the bribing of doctors to prescribe too much. A market action.

  
  I doubt that. Watching a TV ad for Cialis doesn't give me ED, and pharmaceutical companies have no way of knowing what doctors are prescribing without breaking doctor-patient confidentiality.
  
  

  • Heaven

  
  
  
  

  • drug seller involvement in making medical policy decisions that benefit them at the expense of patients.

  
  Examples?
  
  

  • Lack of government regulation. A market action.

  
  
  
  Market action? It is a lack of action by definition.
  
  

  Young people... are too healthy.

  
  
  
  

  Which regulations? A lot of them are there for our safety after all.

  
  You mean like the laws preventing me from getting Seconal over the counter, forcing me to rely on vodka to control my insomnia? Yeah, that's really good for my "safety".
  
  

  Once deregulation causes your death, your drug budget goes way down.

  
  Regulation has brought me closer to death than a free market ever could have. You fail. Good day, sir.
  
  

  When it comes to medicine the best way to regulate is...

  
  When it comes to suicide, the best thing to tie around your feet before going for a swim is...
  
  

  If the OP had started out by pointing out the US government's massive corporate welfare handout to Big Pharma, in the form of excessively generous patent terms, I'd be more sympathetic.

  
  Indeed, IP laws in general need to be cut back drastically. Mickey Mouse has been copyrighted for the past 80 years or so, and will remain copyrighted for the next 70.

 

[Terxpahseyton]

You forget this thing called "overhead": operating expenses that stay the same regardless of how much or how little you produce and sell. Ergo, while selling drugs to Canadians at stupidly low prices is profitable, the profit is not enough to make the company as a whole profitable, and the difference must be sought elsewhere.

I didn't forget them. I merely focused on the point of the OP. Because if those "operating expenses" are the actual cause, then one should first wonder why they are so high / if that is normal that they are so high - instead of trying to blame Canadians (while you surely may do so later on).

 

[Leoreth]

Regulation has brought me closer to death than a free market ever could have. You fail.

That sounds more like regulation has failed, then

 

[G-Max]

I didn't forget them. I merely focused on the point of the OP. Because if those "operating expenses" are the actual cause, then one should first wonder why they are so high / if that is normal that they are so high - instead of trying to blame Canadians (while you surely may do so later on).

Well, the collective bargaining by countries with universal health coverage is certainly a part of it. However, another part of it is the lengthy, expensive FDA approval process, which takes a lot of perfectly safe stuff off the market just because it's toxic to species other than humans. Fun fact: if everything had to go through the FDA approval process, chocolate would be illegal. It's quite toxic to most mammals, but humans have a unique ability to tolerate it. And yes, there's the advertising issue. And probably other stuff, too.