The structural dynamics of the pharmaceutical industry An analysis of prescription drug costs in the United States & Canadian Markets
It is axiomatic that prescription drug prices are higher in the United States than Canada. While many politicians and consumer advocates consider this prima facie evidence of drug company greed, economists are less quick to judge. The monopoly offered by patents generates the profits that are necessary to motivate innovation. Still, the evidence is rather overwhelming that drug prices vastly exceed their marginal production costs. The existence of price controls in many nations creates an exaggerated version of price discrimination in the pharmaceutical industry and this, in turn, offers a unique ability to directly measure the loss in efficiency that results from the market structure of this industry.