On the CBC Saint John radio morning show, AIMS President Brian Lee Crowley challenged the idea that Canadian price controls and patent protections are the chief reasons for “cheap drugs” on this side of the Canada-US border.

As Crowley explains, our supposed price advantage on patented drugs comes primarily from two fundamental differences between Canada and the United States – our lower standard of living and the litigious nature of Americans.

Because of the lower relative purchasing power of Canadians, drug companies have to lower their price in order to maximize their sales, and profits – a basic rule of economics. At the same time, American prices have to be higher than the market normally would require because companies have to build in huge insurance reserves to cover the expected costs of frequently spurious litigation.

On the other hand, Canadian price controls and the “dominant buyer behaviour” of provinces actually limit innovation and slow research investment in new pharmaceuticals.

To hear the full interview, click here.