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Drug Pricing in Canada (Essay Sample)


RESEARCH ESSAY: evaluate and address the problems with the current policies regarding the pharma care program in Canada.If pharmacies were allowed to import less costly drugs from abroad, should regulations be put into effect to pass on some/all cost savings to consumers? If so, what should they be?


Drug Pricing in Canada
The pharmaceutical industry is characterized by high fixed costs for research and development of new drugs. The company that successfully develops drugs has the upper-hand in setting the prices that is ideal. Such monopolistic behavior by drug manufacturers forces countries like Canada and her people to high drug prices. The citizens of Canada are at the mercy of pharmaceutical companies in terms of pricing. The way Canadian drug prices are currently regulated subject people to some of the highest prescription drug prices in the world. Canada is one of the countries with universal healthcare but lacks a cover for prescription drugs. This reality is piling pressure on the national pharmacare program to cover the costs of drugs for Canadians. As such, it is necessary to evaluate and address the problems with the current policies regarding the pharmacare program in Canada. [Andrew Boozary, and David Naylor. 2019. The Strange, Costly World of Drug Pricing in Canada.” Toronto Star.]
           The financial profitability of pharmaceutical companies is very uncertain, and the costs of developing drugs can be high. The risk of investing in research and development for a new drug is high in the pharmaceutical industry. A handful of people realize that it takes about twelve years and approximately USD 230 million to develop a new drug. Furthermore, about 7 out of 10 drugs in development that reach the market do not generate the average cost for development. Drug manufacturers undertake an enormous risk before commencing research. After developing a drug, companies must seek approvals from the relevant authorities in the government. The Health Products and Food Branch (HPFB) of Health Canada evaluates the safety, efficacy, and quality of the drugs before approval if the drugs satisfy all the requirements. There is no guarantee that a new drug would be approved by HPFB, which is also another risk for pharmaceutical companies. The next huddle is getting the patent and releasing the drug to the market. If the pharmaceutical companies are left to the competitive market forces, they would incur a large expenditure of research and development, while other companies take advantage by producing generic drugs for a fraction of the cost for production. As a result, companies would be put out of business. In the long-run, companies would underinvest in the innovation of new drugs if there is no protection for their work. Countries opt to protect pharmaceutical companies with laws to encourage them to undertake risky investments in research and development of drugs. Also, the government ensures that generic drug producers do not undercut the profits of pharmaceutical companies. The downside of the protection for pharmaceutical companies’ work with patents is that it gives them the power to set unreasonably high prices. The drug manufacturers charge a premium for their drugs to cover the costs of development and the associated risks in research and development. Furthermore, pharmaceutical companies argue that steps to reduce prices would not give them an incentive to continue with innovation in the future.[Gelijns and Halm. 1991. The Changing Economics of Medical Technology.] [Ibid]
R&D refers to the cost of research and development of the drug and pharmaceutical industry. In Canada, there is a high level of innovation that attracts high expenditure for R&D in drug manufacturing. An appropriate patent is important for pharmaceutical companies to exploit the market with their innovations. The unique role of patents is to protect new products- this plays an important role in the pharmaceuticals R&D process. Hence, protecting the competitive advantages of companies with newly developed pharmaceuticals. The large investments in producing new drugs and other uncertainties in 

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