Why Canadian Drugs Cost Less Than the U.S.

Canadian online pharmacies are plentiful and Americans frequently make trips across the border to buy cheaper drugs in Canada. Many Americans and even Canadians wonder why drugs manufactured in the United States are less expensive in Canada. The short answer is that Canada, which has a national health care system, has implemented a series of government price controls.

Canada's Review Board

• In 1987, Canada established the Patented Medicine Prices Review Board. The board invests in research and development, sets limits on prescription drug costs and allows earlier introduction of generic drugs into the market than the United States, according to "Psychiatric News." This has resulted in lower drug prices in Canada, and in most cases kept them lower than many western countries.

Discriminatory Pricing

• Slate.com's John Buntin argues that drug companies practice discriminatory pricing. He suggests that drug companies offer better prices outside of the United States because the United States does not having pricing controls. According to Buntin, if price controls were implemented in the United States, prices would decrease only slightly and increase in countries like Canada. He believes that U.S. consumers subsidize lower drug prices elsewhere.

Generic Drugs

• At least one study by the Food and Drug Administration suggests that many generic drugs are less expensive in the United States than they are in Canada. According to the report, five of seven generic drugs studied sold for less in the United States than in Canada and one of the remaining two was not available in Canada. The report suggests that increased competition frequently results in lower prices in the United States.

Bulk Sales

• In 2006, the United States relaxed the rules for importing cheaper Canadian drugs. Meanwhile, in Canada, fears of shortages caused by bulk exports have led some Canadian politicians to consider banning bulk exports to the United States, according to the "Buffalo News." Many U.S. state and local governments currently import or are seeking to import drugs from Canada in bulk to lower their costs.

Warning

• Cheap prices also might relate to fraud. In 2005, the Food and Drug Administration conducted operation "bait and switch." The FDA seized packages coming from "Canadian" pharmacies and found that 85 percent came from 27 countries other than Canada. According to the FDA, "a number of these products also were found to be counterfeit."