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.