Replies to post #136676 on Zeev's Turnips Patch-No Politics (ZEEV)

[extelecom]

ot, Schloss, I think they can raise prices as they are reviewed every year. I found this old article talking about pricings and some misconceptions:

 Forbes Magazine 
 The Cheap Drugs Myth 
 Thursday January 16, 6:38 pm ET 
 By Ira Carnahan 
 Canada is offered up as proof that price controls would dramatically cut 
 the cost of medicine. The proof has some holes. 
 In Canada a three-month prescription for Merck's cholesterol reducer 
 Zocor goes for $172. In the U.S., patients who pay retail fork over $328 
 for the same pills. The media are full of such shocking comparisons 
 aimed at demonstrating that Canadians, thanks to price controls, pay far 
 less for medicine than do Americans. Just one problem: It isn't so. 
 While some high-profile brand name drugs are much cheaper in Canada, 
 other lesser-known drugs and generics are not. In fact, 21 of 27 
 top-selling generics cost more in Canada than in the U.S., reports a 
 study of lowest available prices by Palmer D'Angelo Consulting, an 
 Ottawa firm that works for brand-ed drugmakers. For all 27 combined, the 
 average Canadian premium is 37%. Why? Just two companies dominate the 
 Canadian generics market, says study coauthor Neil Palmer. 
 That lack of competition is, ironically, partly a side effect of 
 Canadian drug-price controls. Generic makers find countries with 
 controls on patented drugs less attractive. So fewer jump in when a 
 branded drug goes off patent. The end result: In the U.S., generic drugs 
 cost an average of 74% less than equivalent brand name drugs; in Canada, 
 generics average just 38% less. 
 Canada's rules can also discourage branded drugmakers from discounting 
 older drugs to compete. John R. Graham of the Fraser Institute in 
 Vancouver explains why: Canada's Patented Medicine Prices Review Board 
 typically sets the maximum price for a new drug by comparing it with 
 similar drugs already on the market. So if companies lowered prices on 
 old drugs, that could cut into profits on new ones, too. 
 How did the myth of cheap Canadian drugs gain such wide acceptance? It 
 began with a 1992 study by Congress' General Accounting Office and was 
 reinforced by a 1998 report from the Democratic staff of the House 
 Committee on Government Reform. Both studies were flawed. They compared 
 only top-selling brand-name drugs, ignoring lower-priced generics that 
 now make up half of U.S. prescriptions. Furthermore, prices in the 
 studies weren't properly weighted to reflect market share or volume 
 discounts, argues Wharton School health economist Patricia Danzon. 
 Correcting for such flaws, Danzon and Li-Wei Chao, also of Wharton, 
 found that if Americans had paid Canadian prices for the drugs they 
 bought in 1992, they would have saved, at most, 13%. 
 Yes, the Wharton economists have received research funding from the drug 
 industry, and yes, the price break Canadians enjoy has likely widened 
 since 1992. But it's doubtful that Canada's price controls on patented 
 drugs, as opposed to economics, are the main cause of lower prices 
 there. 
 The truth is, notes the Fraser Institute's Graham, all kinds of goods 
 cost more in the U.S. than Canada. A turbo Chrysler PT Cruiser retails 
 for $23,100 in the U.S. and the equivalent of $17,800 up north. Yet 
 there's no Canadian Retro Car Prices Review Board. Even bigger price 
 differences are common for goods with high fixed costs but lower 
 variable costs, everything from music CDs to online service. Prices are 
 lower in Canada because incomes there are a fifth smaller and the 
 Canadian dollar is weaker. Producers logically try to recoup most of 
 their high fixed costs from wealthier consumers and charge those who 
 can't pay as much a price closer to marginal cost. 
 There's another reason for lower drug prices in Canada: lower liability 
 costs. In Canada, judges--not juries--typically set damages, and awards 
 for pain and suffering are capped at $185,000 U.S. Such differences 
 account for a third to a half of the gap, a 1997 study in the Journal of 
 Law and Economics concluded. Yet the politicians and do-gooders who 
 complain most about U.S. drug prices are often the least likely to favor 
 reining in legal costs. 
 Sources: "Generic Drug Prices," Palmer D'Angelo Consulting, Aug. 2002. 
 Bargains, South of the Border 
 Generic(Brand Name) Type U.S. Pricevs.Canada Price 
 Amoxicillin(Amoxil) Antibiotic 49% less 
 Atenolol(Tenormin) Beta-blocker 86% less 
 Minocycline(Minocin) Antibiotic 21% less 
 Naproxen(Naprosyn) Anti-inflammatory 36% less 
 Verapamil(Calan) Calcium channel blocker 43% less 
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[James T Kirk]

I think you missed the point I was trying to make. Drug companies create drugs through R&D. If all other countries cap the prices and we pay full price, we (Americans) are paying for all the R&D and Canadians and others are reaping the benefits of the R&D but not paying their "fair share".