Prices are low in Canada because they have the negotiating power of the entire country behind their single payer system driving prices down. To do the same in the US would require taking on the very powerful (because they have huge piles of cash from drug prices being so high) pharma lobby and getting it past the rabidly pro business Republican party. The only real way to do it would be a) move to a more centralized insurance system to negotiate prices (did you know Medicare the largest insurance in the US can't legally negotiate the prices it will pay for drugs?) or b) have legal limits on the prices of drugs set by fiat.

I'm dubious this is going anywhere, it seems like a ploy to get some talking points for the election in 2020.

Strictly speaking, this is not true. The Patented Medicine Prices Review Board does set prices based on comparable prices in other countries, but the actual purchasing happens by a wide variety of public and private payers. Most working Canadians have private insurance that covers pharmaceuticals, and each province maintains its own separate drug insurance scheme for low-income citizens.

In response, pharmaceutical companies inflate prices of new medications, then negotiate confidential deals that make it difficult to get a realistic comparison for the purpose of setting prices. Because we don't actually have a single payer for pharmaceuticals (there is no national pharmacare program), this program fails at price discovery, since the review board does not go about the actual purchasing of said drugs.

The net result is that Canada has the 3rd-highest per capita drug spend in the world (Switzerland is #2).

> pharmaceutical companies inflate prices of new medications, then negotiate confidential deals that make it difficult to get a realistic comparison for the purpose of setting prices.

In reality, this occurs because the “new” product is junk and no better than the cheaper generic it’s replacing. With these government-sanctioned rebates, the manufacturers save themselves the embarrassment of trying to explain why nobody’s insurance will pay for it (it’s expensive junk).

Maybe for some products that are merely isomers of existing off-patent medications, but biologics are pretty amazing - Hep C is basically curable now, for example.

A drug like that pretty much names its own price. Even Canada's system has exemptions from its usual pricing controls for drugs like that.

> Prices are low in Canada because they have the negotiating power of the entire country behind their single payer system driving prices down.

This is not correct for a variety of reasons, first and foremost that the Canadian healthcare system (systems, really, each province administers its own) do not cover drugs in most cases. There are public programs for low income earners, otherwise it's out of pocket or covered by private insurance.

The real answer is simply that there are legal caps on pricing for most patented medicines, as a condition of being patented.

United Health Care, one of the largest private insurers in the US covers more lives than the Canadian Government and has every incentive to negotiate low prices.

This simple answer is satisfying to many who otherwise prefer single-payer plans, but doesn't really hold up to scrutiny

Health insurers in most states are subject to a minimum loss ratio that says they must payout 85% of the premiums they take in. Insurers operating near this cap actually have an incentive to pay out more money in order to raise the cap on their profits.

Then competing insurers can steal their insureds away with lower premiums. The caveat is that we must abolish employer sponsored healthcare, dump everyone on healthcare.gov, and provide a sufficient pool of healthy lives to make providing insurance viable.

I don't think that can explain it, because IIRC that rule has only been around since Obamacare, but the US/world price disparity for prescription drugs has existed much longer than that.

> This simple answer is satisfying to many who otherwise prefer single-payer plans, but doesn't really hold up to scrutiny

I mean, it fails the even more basic scrutiny that Canada simply does not have a single payer for pharmaceuticals, or even a handful of single payer provinces. It's much like the US in structure (out of pocket or private insurance), simply with price controls.

Well, if UHC decides to negotiate hard and fails, then people will leave UHC and move to another insurer which is willing to pay those insane prices.

If country X (with single payer plans) does the same thing, the only choice the pharmaceutical company has is to not be covered by insurance, which mean they won't sell their drug. Also the state can just pass laws to make the pharmaceutical company life's miserable. UHC can't do that.

I'm sure they are able to negotiate but the question is whether the savings get passed to the customers or payments keep going up?

> Prices are low in Canada because they have the negotiating power of the entire country behind their single payer system driving prices down.

A clarification: Canada does not have a single payer system. Rather it has multiple single payer systems.

Canada is a federation, in that while it has one national government, it also has ten provincial governments (and three territories).

Health care is the responsibility of the provinces, and so there is not "national" health care system (like in France or UK's NHS).

And drugs aren’t automatically covered by that single-payer system (except in hospitals).

Some groups are a federal responsibility for health care: (aboriginals, military, federal police, federal prisoners and veterans)

This can be solved overnight if voters wanted it, however majority seem to think that somehow the system is OK,so why bother? Pharmaceutical companies absolutely should be able to make money,and tons of it,if the drugs are good,but then one needs to ask himself: what's more important,human health,or the company,which will make 1 billion instead of, let's say 2 or 3? Also people temd to forget thst there a lot of large pharmaceutical companies outside US with no footprint in its market,yet they are pulling billions selling drugs to all those so called poor countries.

Canada has lower drug prices for the same reason Wal-Mart has low prices--exercise of monopsony power: https://www.becker-posner-blog.com/2009/12/should-the-govern.... Because the government can set prices for such a huge proportion of the demand, it can drive the price of a product from suppliers to below market prices.[1]

That may or may not be a good idea. But the reason it's easier to allow imports from Canada, instead of doing what the Canadians do, is politics. The U.S. has a long history of price regulation. After FDR, the government regulated everything from the price of milk to what airlines could charge for a ticket between Chicago and New York. That regime was almost uniformly disastrous, and starting with Jimmy Carter there was a bi-partisan move to eliminate price regulation all over the economy. So there is a huge political opposition in the U.S. to anything that smacks of price regulation.

Allowing imports from Canada effectively outsources the regulatory exercise of price setting to the Canadian government. So the U.S. can achieve the effect of price regulation, without having to actually admit that it's engaging in price regulation.

[1] https://en.wikipedia.org/wiki/Patented_Medicine_Prices_Revie...

> The Review Board establishes the maximum prices that can be charged in Canada for patented drugs.[1][2]

As others have mentioned, United Healthcare has more patients on it's plan than the population of Canada. In addition, each province of Canada has their own drug plan (some don't and people buy private insurance), so there is no monolithic entity buying drugs for all of Canada.

The real reason is that the gov't simply decides what drugs are worth and then tells the drug companies. If the drug companies don't like it, then the gov't tells them they can't sell them in Canada. Think of it more like "price by fiat" than anything else.

But the only reason "price by fiat" works is because the Canadian government has the authority to set a price ceiling for a huge number of buyers. UHC doesn't have the same market power, because it's competing with other insurers who can potentially cover the same people. If Canada decides that a drug is worth no more than $X, there is no way to sell to Canadians without agreeing to that price. If UHC decides a drug is worth no more than $X, in the short term you can't sell to UHC customers without agreeing to the price, but in the long term you can exert leverage over UHC because people might switch to other insurers who cover more drugs.

You need to know the history: the pharma companies wanted the current system in Canada, because the previous system was compulsory licensing: ie: anyone could manufacture a patented drug as long as they paid a royalty.

It was a lot like playing songs on the radio: nobody could stop you as long as you paid.

Then the system was switched to give the pharma companies total control of the distribution of their patented molecules.

That sounded a lot like nationwide monopsony power. Compare to "Wal-Mart simply decides what TVs are worth and then tells the manufacturers. If the TV manufacturers don't like it, they can't sell them in Wal-Mart."

Perhaps United Healthcare cannot negotiate as much because it's bound by regulation, there's a large number of drugs that it cannot realistically stop covering, and the drug companies know it?

Monopsony is “one buyer”. The group doing the price regulation in Canada isn’t buying anything.

On practical terms, they are acting as a monopsony. They are negotiating with the manufacturers. If the price they set is too low, the manufacturers will indeed stop selling in Canada.

And the pharmaceutical companies are a monopoly.

Usually we use the market to set the prices of goods which works unreasonably well. But the pharmaceutical market is so far divorced from any normal market forces that what's the right price probably has very little relation to the prices charged.

And I think there are definitely two different discussions to have. "How much should be spent on pharmaceuticals" and "what should the unit price be?". The holy grail are solutions that reduce the cost of bringing a drug to market. But I'm also very interested in solutions that reduce the unit price without affecting total pharmaceutical spend.

Drug companies are not a monopoly any more than Apple is a monopoly because only Apple can sell iPhones. While a company may have a monopoly on making a specific branded drug, its rare that there is just a single branded drug on the market that can address a particular condition. Look how many different drugs are FDA approved for treating HIV: https://www.webmd.com/hiv-aids/aids-hiv-medication. Or the long list of drugs approved for treating high blood pressure: https://www.rxlist.com/high_blood_pressure_hypertension_medi.... Or insulin: https://www.drugs.com/drug-class/insulin.html.

Drugs aren’t a perfectly competitive market involving commodities, like say wheat or corn, but there is oligopolistic competition similar to say mobile phones, internet search, or social media. Would having the government set prices in those markets improve efficiency? Or are they competitive enough—even if not perfectly competitive—where the government probably wouldn’t do better?

You seem to be looking at this like "price setting by proxy" but I think a more natural view would be "stopping the enforcement of government mandated price segmentation".

I'm in 100% agreement that the government shouldn't get involved in markets that look anything like what you'd see in an ECON101 course. But the prices of drugs and healthcare in general are set in a way that is so far removed from ECON101 models that I don't think you can call the price of any pharmaceutical medicine a "market price". There are 100's of market prices, the price negotiated between any given oligopolistic supplier of drugs with a oligopsonic collection of governments and large insurance companies(which all set different price). The actual price an individual pays for a given medication and insurance, and the price the oligopolistic supplier sets for a lone individual.

I'm not sure why we call the price set by one relationship(uninsured individual with large oligopolistic supplier) with the largest negotiating imbalance the "market price".

It seems like this policy has two effects.

"Reduce the unit price of drugs to individuals". Good because more people can access medication, and consumers pay less.

"Reduce funding available for drug R&D". Probably bad because this reduces the number of future drug we have.

I'm don't know whether this will be good or bad on net for U.S. consumers in the long run but I think it requires analysis far more detailed than assuming the highest of a 100 possible prices for a medication is "the market price" and any deviation from it is creating an inefficient market.(Which is a good assumption for most near-perfect markets).

Would the importation from CA incentivize local mfgs to lower prices and disincentivize importation? Barring regulation to render imports illegal of something.

> That regime was almost uniformly disastrous

Weird then that we became the richest most powerful country in the world precisely during that same time period.

No we did that throughout the 19th century: https://upload.wikimedia.org/wikipedia/commons/thumb/9/9b/1_.... We became the richest country in the world around 1890 when we overtook China.

It's basic rent-seeking.

From https://en.wikipedia.org/wiki/Rent-seeking

> The word "rent" does not refer specifically to payment on a lease but rather to Adam Smith's division of incomes into profit, wage, and rent.[4] The origin of the term refers to gaining control of land or other natural resources.

Our current regulatory environment sets up a situation where you can only buy medication from either one manufacturer, or a limited set of manufacturers, who then charge whatever they want.

But, going into more detail is very political, and much more political than I think is appropriate for a Hacker News discussion.

It's naive to think that high capital, high knowledge required industries would suddenly be in a neat price competition market if we only just stopped regulating the patents or enforcing manufacturing quality standards.

Expired patents didn't keep generics manufacturers from raising prices on US consumers. And even allegedly colluding on price fixing.

And removal of manufacturing QA is a recipe for flooding the market with counterfeit and ineffective drugs. Imagine if you didn't know if your cancer drug actually had sufficient active ingredients in it or any active ingredients for that matter. Individual testing at scale for something as complex as drugs is massively more expensive and fraught with distributing all sorts of failures.

That is not to say we shouldn't fight for efficient regulation, and against regulatory capture.

The Patented Medicine Prices Review Board [1] regulates drug prices in Canada. Politically it's easier for the US Government to look at band-aid solutions, such as this, rather than address the issue through regulation.

[1]http://pmprb-cepmb.gc.ca/home

I am not an expert so this is an uneducated guess, but probably because it's easier to allow competition than to force lower prices on a market riddled with regulatory capture.

Conceptually it's the same reason it's far easier for Trump to use executive orders to go after healthcare prices & transparency, than to go through Congress and spend years battling lobbyists only to get nowhere (bought & paid for Congress members will sabotage the efforts, or otherwise dilute it to nothing).

People understandably dislike Trump. His biggest legacy is actually not going to be his obnoxious personality however. It's going to be that he has unleashed the executive order as an acceptable method of action in combating eg the ridiculous US healthcare system. Just wait until the next Democrat is in the White House. If you're big pharma or big healthcare, you better put on your seat belt.

George W Bush vastly expanded the use of executive orders. Libs like myself complained about that to no end.

Then Obama came in and did it even more!

So yes, we've already seen this problem escalate from one president to the next. My history isn't deep enough know for sure, but it might even go back to the Vietnam Police Action. It wasn't a war since congress didn't authorize it you know.

Edit: Looks like I was bamboozled: https://en.wikipedia.org/wiki/List_of_United_States_federal_... thanks ambicapter.

> George W Bush vastly expanded the use of executive orders. Libs like myself complained about that to no end.

> Then Obama came in and did it even more!

What are you basing that on? How are you arriving at either 1) W expanding the use of executive orders, or 2) Obama doing it even more?

I did some wikipedia'ing and it doesn't look like its based on reality https://en.wikipedia.org/wiki/List_of_United_States_federal_...

Sheer count's not everything. I thought maybe there was some other analysis that'd support the assertions (first thing I did was check that page, which certainly doesn't support them).

News radio strikes again. Thanks for the correction.

Regarding health care in practice what has actually been accomplished by said executive order? Seems extremely likely to be a whole lot of nothing.

I think you're entirely missing the point.

The next Democrat President will be belligerent with the use of EOs against the healthcare industry, thanks the Trump making their use far more acceptable (Trump is flinging them around on anything and everything as he sees fit to pursue his personal agenda). They will pursue policy - such as fixing healthcare industry problems - on things they can't get through Congress, using EOs. The healthcare industry is so disliked at this point, there will be very few defenders standing up against the use of EOs in that manner.

This will also likely be commonly seen in regards to environmental related issues. The next Democrat in the White House will use EOs extremely liberally toward policy in that area. Far more so than any prior Presidents have.

If you're the healthcare industry what are you going to do against a large volume of executive orders each year targeting you? Good luck fighting even a small fraction of them all, executive orders are difficult and costly to turn back. And the President can just keep burying you with them. Over the last few decades the President has increasingly been given ever wider discretion to use EOs, and Congress has largely been reluctant or plain unwilling to roll that power expansion back meaningfully. If you're big healthcare, you'll be battling the 'unlimited' resources of the largest, most powerful entity in world history, good luck.

It will soon become very obvious - if it's not already - that the best way to fix many of the malign parts of the US healthcare system, is through an abusive spamming of executive orders that chokes the whole thing to death and begins modifying how it all works. There is nothing that can be done to stop this approach, if a President decides to do it (Congress is very unlikely to agree to curtail the EO abuse). The healthcare industry would be on its knees begging for mercy in five minutes.

Democrats should properly already recognize there is no means to go through Congress to fix the US healthcare system. They had a supermajority and couldn't come close to fixing the disaster that is the system. There is one route to go and only one. They will use it, just watch. It's the obvious path.

Personally, I'm not a Democrat or Republican, more independent politically. I don't like the abusive use of EOs. At this point, given the entirely broken nature of US healthcare (and that Congress will never agree to anything that would fix it; not even remotely close), I'd support giving the next Democrat President carte blanche to obliterate the healthcare industry using executive orders. Bring it down by any means necessary.

I think we're about to find out there's a lot of asymmetry in the ability to use executive power, in that laws put some sort of ceiling (fuzzy, perhaps, but it's there) on the power of the executive branch in various areas, but there's no court-enforced floor on it, for the most part. So it's easy to, say, stop the CFPB from doing anything at all or cripple the EPA, but much harder to push those offices beyond their congressional mandate.

Restraint in this regard, and (especially) Republican willingness to let agencies, laws, and policies they don't like even sort-of work when they're in power, has essentially been due to courtesy or deference to convention. That may be going away.

Looks like FDR took Executive Orders to a new level! 3,728 in total over 12 years. Trump has 118 over 2.5 years and Obama had 276 over 8 years.[1]

[1]https://en.wikipedia.org/wiki/List_of_United_States_federal_...

FDR had both the Great Depression and World War II during his terms, of course.

The raw counts are unlikely to tell the full story, and I suspect Congress's ongoing ceding of power to the executive has reduced the quantity of them in normal practice as well.

> I'd support giving the next Democrat President carte blanche to obliterate the healthcare industry

The top 5 recipients of healthcare lobbying money for '17 and '18 have been democrats [1]. Democrats received more healthcare lobbying money on both the '08 and '16 elections [1]. No reason to expect the party "for the people" to actually do anything for the people besides make emotional campaign commercials. Both parties are the same. Bernie is leading the way, however. Calling on all Dems to stop accepting their money. (personally, I wish they'd just accept the money and then betray the donors en masse).

[1]. https://www.opensecrets.org/industries/indus.php?Ind=H

For many government matters, Trump just made obnoxious and visible what was quietly being done already.

> is there a simple explanation for why it's easier to allow importation from Canada than to lower domestic prices in the US?

There is no simple answer to your question.

Here are a few issues:

1. It is fundamentally difficult to price a good with a high fixed cost and a low variable cost. International pricing is even more difficult.

2. Different countries have different regulations around the manufacture and sale of drugs, which can add to the cost to manufacture and distribute in those countries.

3. Many countries with socialized medicine use their monopsony position to negotiate good/better prices for drugs. Sometimes this involves credible threats to ignore patents.

4. Fake drugs are a thing and are a real, serious problem. My understanding is that drugs that pass through Canada (and possibly other places) do no go through the same verification processes that drugs for internal consumption do.

For 4., I’m pretty sure Canada has a similar verification process. It’s whether or not the U.S. considers that process to be the same with in terms of standards, or a threat to whatever vested interests the U.S. verification process protects. The latter point might sound like anti-American rhetoric, but the same thing happens within the U.S. . Consider the bidding process for the U.S. military project involving Amazon, Oracle, and IBM and the latter two companies accused the process of being heavily skewed to favouring Amazon [0].

[0] https://www.businessinsider.com/heres-why-amazon-is-heavily-...

Canada negotiates drug prices before they're approved, the US lets drug companies charge whatever they want.

i think companies can charge a lot more because individuals can't import from abroad, so this is an important step on that path

Canada doesn't get lower prices because they can import drugs as individuals. They get such low prices because the Canadian government is the insurance for the whole country and has the negotiating power to actually get lower prices out of drug companies. Medicare part D in the US can't even actually negotiate for lower prices in the US!

Allowing import from Canada is just a bandaid to make it seem like they're doing something about the actual problem and will only work as long as we assume the supply of Canadian drugs can absorb both it's own demand and the US demand.

This is actually not true. Healthcare is a provincial matter in Canada, not a federal one, and there is no broad-based pharmacare program. Many Canadians have private insurance covering the cost of pharmaceuticals.

This isn't true, Canadian's have private insurance for pharmaceuticals that isn't a part of their broader single payer system for standard healthcare. As a matter of fact, the current proposed medicare for all bill, would go far beyond what exists within Canada in terms of coverage.

... until the supply to Canadians becomes affected, making the government impose export restrictions.

Drug companies might stop selling in canada entirely to protect US profits.

Drug companies only have any kind of exclusivity or advantage at the pleasure of governments. They can't go too long playing hardball or countries will just start ignoring their patents.

It's beneficial to both parties once that point is reached.