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NYTimes: Canadian drug importation is a red herring

Old 10-16-04, 04:48 AM
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NYTimes: Canadian drug importation is a red herring

I was going to put this in the Kerry's heath plan thread, but I don't think it will generate any good discussion there because the thread is too partisan already.

Bolded the important parts.
Underlined specific parts I want to comment on.

Importing Less Expensive Drugs Not Seen as Cure for U.S. Woes

A customer at the Concourse Drugs pharmacy in the Bronx will pay about $118 to get a month's supply of 20-milligram Lipitor pills. At PharmacyinCanada.com, a Canadian online outlet, the same quantity of the drug, Pfizer's cholesterol-lowering medication, costs $79.

The difference has become a tempting political target. Senator John Kerry, the Democratic presidential candidate, has made a campaign pledge to help cut Americans' prescription drug costs by allowing them to import drugs from Canada. President Bush has conceded that the idea is worth a try "if there's a safe way to do it." Bipartisan legislation in Congress would allow the reimportation of prescription drugs from Canada and other industrialized countries.

It may make political sense to point to Canada as a solution to high prescription drug prices in the United States. But many economists and health care experts say that importing drugs from countries that control their prices would do little to solve the problem of expensive drugs in the United States, where companies are free to set their own prices. Even the nonpartisan Congressional Budget Office estimated that allowing Canadian drug imports would have a "negligible" impact on drug spending.

To begin with, there are not enough Canadians, or drugs in Canada, to make much of a dent in the United States. There are 16 million American patients on Lipitor, for instance - more than half the entire Canadian population.

Drug makers like Pfizer say they would reduce their shipments of drugs to distributors in Canada and other countries that re-export to the United States. "We are not going to supply drugs to diverters, in Canada or elsewhere," said Hank McKinnell, chairman and chief executive of Pfizer.


And Canadian health officials, fearing shortages and higher prices of their own, would probably clamp down on their own pharmacists and distributors to keep their drugs from leaking into the United States. Canadian patient-advocacy groups have already complained about shortages from the exports to the United States that already occur, even though they violate American law.

Even the most vehement advocates of forcing big drug makers to lower prices in this country say that imports are a rather clumsy tool. "It's a pretty crazy solution to a fairly simple problem," said James Love, director of the Consumer Project on Technology, a group advocating a lowering of drug costs. "Reimportation is not the first thing that would come to my mind."

But what comes to mind for people like Mr. Love is a political nonstarter: imposing Canadian-style price controls. No Democrat or Republican will be likely to dare to propose such a thing during an election year, or perhaps anytime soon, having seen the political debacle of the Clinton administration's effort to devise a national health care system - and knowing that the pharmaceutical industry is one of Washington's most powerful lobbying forces.

Price controls "wouldn't have a ghost of a chance to pass in the Congress," said Senator Byron Dorgan, the Democrat from North Dakota who is the sponsor of the main drug reimportation bill in the Senate.

Because free-market pricing of drugs and other health care still seems to be so politically sacrosanct, the policy proposals tend to tinker around the margins.

"Is it sensible for the United States to have price controls?" asked Jean O. Lanjouw, an economist at the University of California, Berkeley. "It is a real question. But we don't discuss the real questions."

For all the shortcomings, the Kerry campaign argues that drug imports should be given a chance. "If the impact is so negligible, why are the drug companies fighting it so much?" said Sarah Bianchi, Senator Kerry's policy director. Even if the overall bulk of imports were not that large, she added, "they would apply some pressure on the drug industry and make them revisit their pricing policies."

And some of the drug companies' defensive tactics could be barred by law. The Senate legislation, for example, would bar pharmaceutical companies from denying supplies to distributors and pharmacies that export to the United States.

But the measures proposed so far would do little to change the fundamental economics of the drug industry as it exists today. Prescription drugs cost a lot to invent, but once invented cost little to manufacture. That is why patents are granted to drug companies - to prevent other companies from copying their inventions long enough for the inventors to set prices high enough to recover their investment and make a profit. But price controls short-circuit this system.

When Pfizer sells drugs in the United States it sets the price at a level intended to sell the most pills at the highest price the market will bear. In Canada, instead, the provincial and federal governments determine how much the drug maker can charge.

Take Lipitor, which Pfizer makes at a factory in Ireland for distribution to the United States, Canada and other markets. When Pfizer introduced it in 1997, the company priced it below Merck's Zocor, the leading cholesterol treatment at the time, to get Lipitor onto the approved drug lists of the health maintenance organizations that are among this country's biggest buyers.

Now that it is the nation's best-selling drug, the price is 36 percent higher than it was in 1997 - helping Lipitor achieve nearly $10 billion in sales last year.

Currently, Pfizer charges an American wholesaler an average of $2.07 for a 10-milligram pill, and some 15 percent less to an H.M.O. In Canada, by contrast, the health care system run by Ontario's provincial government will reimburse only 1.60 Canadian dollars (about $1.28) for the same pill - the same price as in 1997.

"They hold all the cards," a Pfizer Canada spokeswoman, Teresa Firestone, said of the Canadian government. "Our hands are tied."

Such policies have kept Canada's prescription drug prices 30 to 80 percent cheaper than in the United States.

Because most other industrial countries maintain some kind of price controls on prescription drugs, the United States has a similar drug price gap with the rest of the world. The Congressional Budget Office estimated that average prices for patented drugs in 25 other top industrialized nations were 35 percent to 55 percent lower than in the United States.

But the United States market is hard to compare with any other. It represented more than half of the global drug industry's sales of $410 billion last year and was the country in which drug companies make the bulk of their profits. Whatever one thinks of the pricing disparity, efforts to force down American prices to Canadian or European levels could radically change the economics of the pharmaceutical industry - which effectively depends on United States profits for all of its activities, including a substantial portion of its spending on research and development.

American consumers are "subsidizing everyone's R&D,'' said Mr. Love, the consumer advocate. "We're paying way more than everyone else. Others should pay more.''

In testimony before Congress last May, John Vernon, an economist at the University of Connecticut, estimated that dropping drug prices in the United States to the levels in the rest of the world would cut drug companies' investment in research and development by 25 to 30 percent.

Critics of pharmaceutical companies dispute many of their cost estimates, noting that much research spending is squandered on the development of "me too" drugs that are not truly innovative. They argue that drug companies are spending large sums in marketing to persuade patients to demand expensive new medications even when older, cheaper drugs have the same effect.

That is why the critics say the entire drug industry needs to be shaken up. Maybe the United States should pressure other rich countries to raise the prices of their drugs, so they shoulder a higher share of the global research burden. Or maybe, the critics say, the United States needs to join the rest of the world in setting price controls.

The debate over reimporting drugs from Canada does not address any of those issues. "Reimportation is a false promise,'' said Mr. McKinnell, Pfizer's chief executive. "If we want to import price controls, we should have that discussion. Let's have that debate.''


--------------------------------------------------

1. "If the impact is so negligible, why are the drug companies fighting it so much?" said Sarah Bianchi, Senator Kerry's policy director

Because it could seriously impact Canada's drug distribution and cause a bureaucratic/legal mess everywhere. Obviously the dug companies want to avoid any economic impact drug importation will have too, regardless of how small it is.

2. "Reimportation is a false promise,'' said Mr. McKinnell, Pfizer's chief executive. "If we want to import price controls, we should have that discussion. Let's have that debate."

Of course he's right, but the only reason he wants to drop drug importation discussion and focus on price controls is because he knows the pharm. industry can win that debate in congress.


This roundabout method of implementing price controls for the US is very depressing. Not anything about the proposal itself, but the fact that it is needed because of our corrupt congress.
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Old 10-16-04, 10:15 AM
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I have always thought it was a short lived win if Canadian exports were allowed. There is no way drug companies would continue to supply them so they would lose money.

If the US wants to lower drug prices for Americans, they should simply institute minimum export drug prices for other countries. That is, instead of allowing other countries to dictate what they will pay, give them a take-it-or-leave-it offer. If the cost of US R&D were spread the world over, US cost of drugs would go down.
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Old 10-16-04, 10:30 AM
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Re: NYTimes: Canadian drug importation is a red herring

There are 16 million American patients on Lipitor, for instance - more than half the entire Canadian population.
Wow. That kind of explains why Canadians act the way they do toward us. They're afraid we're gonna eat them.
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Old 10-16-04, 11:30 AM
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the 16 million figure explains why health care is so expensive. if that much people can't be bothered to change their lifestyle a little, then people just want free drugs.
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Old 10-16-04, 11:43 AM
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Did anybody ever really think any thing differently?
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Old 10-16-04, 11:45 AM
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That is, instead of allowing other countries to dictate what they will pay, give them a take-it-or-leave-it offer.
Then those countries would allow their own pharmaceutical industries to ignore the U.S. patents and produce generic copies.
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Old 10-16-04, 01:00 PM
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the 16 million figure explains why health care is so expensive. if that much people can't be bothered to change their lifestyle a little, then people just want free drugs.
Lifestyle can only reduce cholesterol levels a certain amount. The people that are on lipitor are the ones that need to have it reduced much more than lifestyle could ever possibly reduce. The human body can make one gram of cholesterol per day and 200 milligrams is supposed to be the upper limit of normal so you can see that if you are genetically inclined to have a high cholesterol level you will have it even if you eat a 0 cholesterol diet and exercise.
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Old 10-16-04, 01:02 PM
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Then those countries would allow their own pharmaceutical industries to ignore the U.S. patents and produce generic copies.
No one in 3rd world countries honors medical patents anyways. Besides, it is probably easier to produce a counterfeit pill than to bother with ignoring a patent and producing an active generic pill.
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Old 10-16-04, 01:56 PM
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I was referring to G8 countries, not the Third World.
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Old 10-17-04, 11:18 AM
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I was referring to G8 countries, not the Third World.
If you import medication for 50% discount from G8 countries there will be clamoring for importation of medication for 80-90% discount from 3rd world countries.
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Old 11-03-04, 11:45 PM
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here's a thought I had on importing the drugs
won't the drug companies just raise the price that they charge to the other countries?
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Old 11-03-04, 11:50 PM
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There are laws in said countries that don't allow the drug companies to "gouge" in their drug prices. This is because the countries are the ones paying for a lot of them, and it's in their best interest to keep them cheap.
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Old 11-04-04, 12:26 AM
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Originally posted by BizRodian
There are laws in said countries that don't allow the drug companies to "gouge" in their drug prices. This is because the countries are the ones paying for a lot of them, and it's in their best interest to keep them cheap.
Yes, and the drug companies are content to receive lower prices when they're supplying only a nation of 20 million. The US is over 10x larger, they're not going to provide 10x the drugs for that low cost.

If importation of "canadian" drugs is allowed, prices in Canada WILL rise.

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Old 11-04-04, 12:28 AM
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Originally posted by Birrman54
If importation of "canadian" drugs is allowed, prices in Canada WILL rise.
Or the drug companies won't sell the drugs to them. They'll get more overall profit by eliminating that sales channel.
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Old 11-04-04, 12:34 AM
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So, the problem still goes back to the drug companies.
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Old 11-04-04, 12:37 AM
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Originally posted by X
Or the drug companies won't sell the drugs to them. They'll get more overall profit by eliminating that sales channel.
Well the drug companies will say, either we raise prices or we will stop selling.

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Old 11-04-04, 12:40 AM
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Originally posted by DVD Polizei
So, the problem still goes back to the drug companies.
What problem? That they want to make a profit?

Like the problem of the cost of gasoline still goes back to the oil companies or the problem of cost of electricity still goes back to the energy producers or the problem of the cost of food still goes back to the food manufacturers?
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Old 11-04-04, 12:40 AM
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For all the shortcomings, the Kerry campaign argues that drug imports should be given a chance. "If the impact is so negligible, why are the drug companies fighting it so much?"

I have thought the same about ANWAR
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Old 11-04-04, 02:28 AM
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It's not just that the drug companies 'don't mind' being forced to sell drugs cheaply in small countries. They are blackmailed. If they refuse to sell a drug then Canada will revoke their patent and just let other companies make 'generic' versions.

So far US drug companies have played ball because they are still making money. If Canada re-imported to the US the drug companies would realize it would be devastating to their #1 source of profits, the US market. They would stop selling to Canada (even though that's illegal, they would find a way) and Canada would get generics. That would be fine for Canada, but those generics would be illegal to import because they violate US patent laws.

So in the end we will be right back where we started. Except Canada's drug distribution system would go thru a nightmare for perhaps years and there would be a ton of litigation.
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Old 11-04-04, 02:31 AM
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Originally posted by wmansir
It's not just that the drug companies 'don't mind' being forced to sell drugs cheaply in small countries. They are blackmailed. If they refuse to sell a drug then Canada will revoke their patent and just let other companies make 'generic' versions.

So far US drug companies have played ball because they are still making money. If Canada re-imported to the US the drug companies would realize it would be devastating to their #1 source of profits, the US market. They would stop selling to Canada (even though that's illegal, they would find a way) and Canada would get generics. That would be fine for Canada, but those generics would be illegal to import because they violate US patent laws.

So in the end we will be right back where we started. Except Canada's drug distribution system would go thru a nightmare for perhaps years and there would be a ton of litigation.
Good post. I think you are right on. Doesn't help me figure out a workable answer though.
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Old 11-04-04, 02:41 AM
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Yeah, you don't like expensive drugs, you guys do something about it. Leave us out of it, maybe you can import drugs from Iraq
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Old 11-22-04, 05:17 PM
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even the drug companies are outsourcing

story today in the wall street journal


Shanghai -- LONG KNOWN AS a place to produce clothes and toys cheaply, China now is providing the West with another opportunity: developing drugs at lower cost.

Opening a new frontier in outsourcing, pharmaceutical companies overwhelmed by the rising cost of creating drugs are turning to China to conduct research and development. They are finding highly educated scientists who work for a fraction of what their Western counterparts are paid, as well as vibrant and growing biotechnology businesses. And they are beginning to sink significant amounts of money into deals that will further boost China's capabilities.

"We see the rapid emergence of a Chinese biotech industry," says Daniel Vasella, chief executive of Novartis AG, a Swiss drug maker that recently formed a partnership with the government-run Shanghai Institute for Materia Medica. Scientists there will identify compounds derived from traditional Chinese medicine that Novartis scientists may be able to develop into new drugs.

This month, Roche Ltd. of Switzerland unveiled a research-and- development center on the outskirts of Shanghai, where the drug giant will employ 40 local scientists. Pfizer Inc. of New York is spending $175 million on establishing a new regional headquarters in Shanghai. Although the office will oversee existing manufacturing and marketing operations, Pfizer said last month it also is considering building its own R&D center in China.

With the expense of bringing a new drug to market now sometimes topping $1 billion, big pharmaceutical companies are increasingly searching for a low-cost edge. Drug companies have found that China, where doctorate-level scientists command $25,000 a year, compared with nearly 10 times that in the West, makes a good place to test drug compounds and their efficacy. While some other highly complex R&D -- such as intricate biological testing -- still is mainly performed in the West, China can save companies money, since about 80% of their total R&D costs go toward scientists' salaries.

The savings for the drug-industry giants comes amid increasing pressure on them to expand their pipeline of potential blockbusters. "Doing research in a low-cost setting should allow drug companies to deploy the dollars" they spend in the U.S. and Europe more effectively, says Drew Senyei, a health-care venture capitalist at Enterprise Partners. Despite lower research-and-development costs, however, companies so far aren't planning any corresponding drug price cuts.

At Roche's new Shanghai operation, scientists will


focus on "medical chemistry," screening various compounds that have shown promise as possible antiviral or cancer treatments. The group will have access to research conducted at the drug giant's other research centers in Basel, Switzerland, and Nutley, N.J., and it will share its findings with scientists in those laboratories.

Roche executives say they didn't build their $11 million facility simply to save money. "There is very good chemistry done in China," says Jonathan Knowles, the company's global head of research, with many Chinese scientists on the same educational footing as their U.S. counterparts. The laboratory also should help Roche establish strong ties with Chinese authorities, something that could prove valuable as the company seeks to expand operations in China, as well as explore new market opportunities there.

Yet conducting research and development start to finish in China remains years away for the industry's big players. Lingering discomfort with the country's level of protection of intellectual property remains a problem, drug industry executives say. Also, scientists still require training in the West to gain understanding of cutting-edge techniques and equipment. In the past, Novartis has trained Chinese scientists at the company's Basel, Switzerland, headquarters and then transferred them back to China to continue research efforts.

The labor-intensive screening process for potential new drugs involves testing how a biological target, such as a protein or gene, responds to certain compounds and repeating the process hundreds of times to make sure it is a uniform response. Some companies have broadened their R&D operations to include clinical trials in China, where patient enrollment is easier and associated hospital fees much lower.

It isn't just the industry's giants that are being lured to China; Western start-up businesses are moving here as well. The lower costs buy them more time to prove the viability of their drug prospects between rounds of funding from Western venture capitalists. Germany's Mologen Inc., for example, is collaborating with Starvax Inc. of Beijing on a colon cancer drug now undergoing clinical trials in Europe. Rather than spending on expanded research and development in Europe, Mologen is having Starvax carry out R&D to determine whether the compound might be effective in treating other types of cancer.

TargeGen of San Diego, for instance, is developing small-molecule drugs for treating cardiovascular disease, but it has shifted chemical screening of various compounds to Shanghai's WuXi PharmaTech Co. "We pay WuXi to do research on our compounds and then use the results for further development" in the U.S., says Enterprise Partners' Drew Senyei, a venture-capitalist investor in TargeGen. Mr. Senyei says he would like to replicate that arrangement at some point with another U.S. biotechnology company trying to develop cancer treatments.

Through companies such as WuXi, Western drug companies soon will be able to conduct complex animal testing in China, another vital research tool that is used to find out whether a compound is safe, not just whether it fights disease. WuXi, for instance, has an empty building it plans to use for animal testing on a contract basis by mid-2005.

For biotechnology companies whose research projects have stalled or whose cash has run dry, showing positive results in China can persuade venture capitalists to give them more capital.

Starvax is typical of a new breed of Chinese biotechnology companies run by entrepreneurial Chinese returnees. It was started in July by two former classmates at Peking University, Yiyou Chen, 33 years old, and Justin Chen, 34. The like-named friends both spent more than a decade in the U.S. earning graduate degrees and working, respectively, as a scientist and a patent lawyer.

Yiyou Chen previously worked on developing vaccines for viruses that cause cervical cancer and hepatitis B at Genencor International Inc. of Palo Alto, Calif. Now Starvax is working on discovering vaccines in the same areas.

Another Chinese upstart is moving beyond simply offering research for hire. Crimson Pharmaceutical in Shanghai plans to license Asian sales rights from its Western partners and conduct its own development studies to create proprietary products. Chinese drug companies are eager to secure such exclusive deals.

Patent protection, of course, remains an issue. But with China now a member of the World Trade Organization, some of those concerns are abating. Kenneth Chien, director of the Institute of Molecular Medicine at the University of California, San Diego, believes a homegrown biotechnology industry in China will spur progress in intellectual-property protection. Scientists trained in the U.S. generally should have greater understanding of patent rights, he says, and local companies will begin to demand regulatory cover for their breakthroughs. "Without IP [intellectual property] protection, you have no industry," Mr. Chien says.

So far, Crimson has purchased the rights to four compounds aimed at treating HIV developed by Octamer Inc. of Tiburon, Calif. Chief scientist Sam Lou says Crimson hopes to gain regulatory approval for the drugs and then re-license them to a Chinese pharmaceutical company with sales and marketing muscle. Both Crimson and Starvax got off the ground with just $2 million in seed financing, a pittance compared with the tens of millions of dollars often needed in the U.S.

Although it remains unclear which Chinese start-up businesses will hit the jackpot and which will go under, Western scientists see the burgeoning industry as a positive for drug development. Johnson & Johnson and Pfizer, for instance, recently visited the "incubator building" in Beijing's Life Sciences Park, where Starvax is located, to find out what the new biotechnology companies are doing.

Mr. Vasella, Novartis' chief executive, observes that Chinese biotechnology companies are rapidly adopting Western research standards and knowledge. "It is only a matter of time before China catches up," he says.
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Old 11-22-04, 05:29 PM
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Originally posted by X
Or the drug companies won't sell the drugs to them. They'll get more overall profit by eliminating that sales channel.

Well no shit sherlock. Who could have *ever* foreseen this happening? Canada has virtually zero pharmaceutical industry, so who would you expect to see them get their drugs from, France?
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Old 11-25-04, 12:06 AM
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Originally posted by weargle
Canada has virtually zero pharmaceutical industry
That statement is bullshit. Medication I take is invariably a Canadian generic.
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Old 11-25-04, 09:17 AM
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keyword here is generic

have canadian companies actually discovered new drugs like US companies seem to very often?
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