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In the famous television drama, Thread, the character of Omar Little, played by the late Michael K. Williams, steals from drug dealers – a profession he considers virtuous, compared to stealing from mere civilians at least. On the international scene, Canada considers itself somewhat like an Omar in its relations with the major pharmaceutical companies. His self-serving morality is more ambiguous, however. He robs corporations involved in the legal and honest pharmaceutical business whose only sins are being big, successful and unpopular.

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Because revenues are necessary to stay in business, companies whose profits are stolen by Canada must recover them elsewhere, which they do from the only honest payers, the Americans. This is how sick American consumers subsidize Canadian health care, paying prices for patented drugs that are on average three and a half times higher than controlled Canadian prices. Canada is not the only Omar, however. High prices in the United States offset revenue shortfalls in the rest of the world.

Unlike Omar, Canadian Victims are highly regulated and innovative companies that save Canadian lives and reduce health care costs. Canada’s pretense is that pharmaceutical companies abuse their patents with excessive prices, a pretext that fosters hostility towards industry and has cratered Canadian investment in life science industries, leaving us dangerously unprepared for the recent pandemic.

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Everyone would be better off if the pharmaceutical industry was more profitable, including pharmaceutical customers. More profit means more investment in R&D, which translates into more medicines that both save and improve lives. Considering the vital importance, enormous complexity and high risks of the pharmaceutical industry, the return on capital invested in it is much lower than that of businesses such as automotive, electronics and technology. information and financial services. But because of our profit-sapping price controls, Canada often misses out on drugs that are readily available elsewhere. For obvious reasons, companies will not export drugs to a jurisdiction where profits are minimal or non-existent.

If pharmaceuticals were sold below market price in Canada, a dumping complaint to the World Trade Organization (WTO) could well ensue. But when our government confiscates value by forcing prices down, no WTO rules are broken. This reflects the imbalance of trade negotiations, in which innovative economies negotiate to protect their producers – whose research benefits the whole world – while other nations try to grab what they can on the cheap.

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Canada relies on the United States to innovate because we choose not to. Second, we rely on American consumers to subsidize our access to American innovations. However, price controls do not make the costs of creating and supplying pharmaceuticals disappear: someone somewhere has to bear the real costs. Thank you, Americans! It is not surprising that Americans are reluctant and consider controlling prices themselves, which could brutally cripple the global engine of pharmaceutical development.

However, just because the United States has no grounds to file a complaint with the WTO does not mean that it has no recourse. This could make price reductions for the US consumer a misunderstanding to allow other nations to import its innovative pharmaceutical products. It could impose export royalties equivalent to a portion of the wholesale price loss due to price controls. If so, Canada could either pay unacceptable levels of market subsidies or allow prices to rise to the extent of the US export royalty. To bring prices down, the world should find a fair share of price increases through the abolition of price controls. He would finally be motivated to do the right thing.

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The United States could persuade foreign drug producers to support local price reform by implementing a rule requiring that no drug sell for more in the United States than it sells for in its export jurisdiction. . Thus, companies that sell at a profit in the United States to compensate for the confiscation of income by their home jurisdictions would suffer the same losses as American companies abroad. (Because trade agreements affecting intellectual property rights grant “national treatment” in access to patent systems, foreign producers benefit more from marketing in the United States than they or American producers only do so in the confiscatory countries of origin of these exporters.)

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It has been estimated that if OECD countries lift their price controls, the number of new pharmaceuticals developed could increase by 9-12% by 2030, beyond what we would otherwise have by then. A price increase of just 20% in European price-controlled countries would lead to welfare gains of $10 trillion for the United States and $7.5 trillion for Europe over the next 50 years . If Canada also increased its prices, these numbers would be even higher. Patients would be the greatest beneficiaries of greater economic equity.

Canada should mend its ways and help the OECD emerge from the deadly spiral of drug price controls, remembering that — spoiler alert — Omar’s pretense of innocence is savagely stripped by his death at the hands of a real innocent, a child.

Richard C. Owens, a Toronto lawyer, is a senior Munk researcher at the Macdonald Laurier Institute, where you can find two articles he recently co-authored on this topic.

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