The pharmaceuticals industry in the US, certainly seems to be on a collision course with the Canadian pharmaceutical industry.
The Canadian pharmaceutical companies have taken a great share of the US home market. Since prices of drugs in Canada are significantly lower than those in US and this trend will seem to continue for a long time, Canadian companies are reaping a rich harvest, at the expense of the US Companies. Hit hard by this, US companies are crying foul and accusing their Canadian counterparts, of indulging in unfair trade practices.
The origin of this, dates back to the early 90’s, when the American companies, made a forceful appeal to open up the trade between three North American states – USA, Canada and Mexico, at allow for free flow of goods amongst these three countries, without imposition of any duty whatsoever. NAFTA or the Northern American Free Trade Agreement, then came in to existence, carrying all these provisions.
The American companies derived great benefit from this agreement as they changed their manufacturing facilities to these countries, where the costs were cheaper and again sell the finished products back to them. The manufacturing cost of US Companies started going down and profits shot up. US companies, whose main rivals were from Europe, benefited from the fact that all the R&D facilities were in Canada, where costs were lower.
The bright phase of US companies soon came to an end because the Canadian companies became wiser and started selling the same drugs to US customers at cheaper cost. The Canadian companies thought that since their R&D manufacturing costs were lower, they could sell their drugs cheaply to US customers and still make good profit. The prices of drugs in Canada are under strict government control.
Displaying an aggressive spirit, Canadian companies forayed in to their border states and also started selling to customers via internet and also through mail order.
US laws ban import of scheduled drugs from Canada. An exception however, is made in case they are meant for a patient’s personal use, then 3 month quota is allowed. Any patient can on an average save between $50-200 per month on buying drugs from Canada.
Most of the Americans are forced to buy drugs, which are exported and then imported back for its own use, resulted in a steep price hike.
Online selling of drugs, has become big business for Canadian pharmaceutical companies. With low input costs, these drugs of comparable quality, attracts lot of buyers to them. The profits of US Companies, therefore goes down.
Another interesting feature is that all these drugs are manufactured at the same facility, any raw materials and finished products are imported in to Canada.
Due to differential pricing system in the US to retail customers and to the bulk buyers like insurance companies, the real price of the drug is never known. Retail
users remain the worst sufferers.
In the long term, with Canadian drug prices also shooting. They may come on par with the US drug prices. Some indication to this effect are visible.
Right now Canadian companies are having a ball.