The Globe and Mail reports that,
Once this policy goes into effect, there will be more shortages of certain types of generic drugs. Worse, you'll end up paying more on average for those drugs that suffer shortages. If provinces let generic drug prices fluctuate, the price of drugs that suffer shortages will rise consistent with increased demand. If provinces fix the prices of generics, then you will have to pay for the more expensive brand names when generics experience shortages. This, however, is better than our provincial health insurance plans for doctor and hospital services. Because provinces ban private delivery, when shortages occur (i.e. waiting-lists), your only option is to wait.
The reason there will be shortages of certain types of generics is that monopsonies are a form of central-planning and therefore suffer from the knowledge-problem. When there is one purchaser in a market, they need to know what everyone will need in the future. This is impossible because they cannot gather knowledge of 'time-and-place' -- i.e. the circumstantial knowledge of particular people in the economy. In healthcare, this would be a patient's knowledge of his or her particular ailments and the doctor's knowledge of how different kinds of people react to different treatments. This type of information can only be transmitted through prices that arise from a market with multiple buyers and sellers. One buyer can drive down the price, but they do so at the expense of the efficient aggregation of information.
There are market-failures in health-care, which I have addressed elsewhere, but ceteris paribus, the allocation of prescription drugs in Canada is about to get worse.
Provinces will begin bulk-buying several different generic drugs as part of the first steps Canada’s premiers are taking to make health care less costly and more efficient for Canadians.This means that the monopsony model used for provincial health insurance plans will now be used for generic drug purchases. It's unclear whether provinces will be providing the drugs through provincial insurance plans or simply re-selling them to pharmacies.
Once this policy goes into effect, there will be more shortages of certain types of generic drugs. Worse, you'll end up paying more on average for those drugs that suffer shortages. If provinces let generic drug prices fluctuate, the price of drugs that suffer shortages will rise consistent with increased demand. If provinces fix the prices of generics, then you will have to pay for the more expensive brand names when generics experience shortages. This, however, is better than our provincial health insurance plans for doctor and hospital services. Because provinces ban private delivery, when shortages occur (i.e. waiting-lists), your only option is to wait.
The reason there will be shortages of certain types of generics is that monopsonies are a form of central-planning and therefore suffer from the knowledge-problem. When there is one purchaser in a market, they need to know what everyone will need in the future. This is impossible because they cannot gather knowledge of 'time-and-place' -- i.e. the circumstantial knowledge of particular people in the economy. In healthcare, this would be a patient's knowledge of his or her particular ailments and the doctor's knowledge of how different kinds of people react to different treatments. This type of information can only be transmitted through prices that arise from a market with multiple buyers and sellers. One buyer can drive down the price, but they do so at the expense of the efficient aggregation of information.
There are market-failures in health-care, which I have addressed elsewhere, but ceteris paribus, the allocation of prescription drugs in Canada is about to get worse.
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