The High Price of Essential Drugs in Canada: An Abuse of Market Power

This report examines the issue of high essential drug prices in Canada, focusing on the abuse of market power by pharmaceutical companies. The analysis draws on articles that highlight the lack of competition in the drug market, the resulting high costs, and the impact on healthcare access. The rep...Read More

Running Head: Abuse of Market Power
The High Price of Essential Drugs in Canada and its Impact on Health
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Abuse of Market Power 2
The High Price of Essential Drugs in Canada and its Impact on Health
Executive Summary
The article ‘Terence Corcoran: If you like Canada's liquor, transit and electricity
monopolies, you'll love the medicine cartel’ by Corcoran (2017) tells us that the price of
essential drugs is very high and that drugs suppliers have market powers of which they have
been noted to abuse. The article also notes that completion in this market is lower and if it was
increased, the problem will be narrowed. The article finally suggest the importance of
government intervention in this market to help in lowering prices for essential drugs. The
second article ‘The serious flaw in Canada's healthcare system: prescription drugs aren't free’ by
Kassam (2017) tells us of the importance of medical care in Canada and the lack of universal
coverage in the Canadian medical care. The article noted that some people take pills every day
or after days or even a week and are greatly constrained by the high drug costs. Some people
skip doctors’ prescriptions to avoid high costs.
Analysis
The prices of essential drugs in Canada is very high. This is resulting in a reduction in the
living standards for most people especially those that are in the low income bracket. Given that
drugs are important in restoring the health status of the sick people of which is untimely and
unavoidable, drugs can therefore be considered to be a necessity. Thus, patients are forced to
purchase the drugs at the prices offered in the market. The price elasticity of demand for drugs
is inelastic and thus demand is not affected by the price changes. There are many hospitals in
Canada both public and private; in addition, there are many pharmaceuticals selling drugs in all
parts of the country. The players in the drugs market are not in a competitive market given the
fact that there is patents for drugs that prevents entrance in this market. Some drugs providers
operates in monopoly and oligopolistic markets. This clearly means that drug prices are not
given as an interaction of demand and supply forces as is the case for competitive markets.
Rather, the prices are set by the players who possess market powers over the same.
Many people die every year in Canada from lack of proper health services because they
have become expensive and unaffordable for many. The players are in constant abuse of
market power and are hiking their prices. These players have various arguments to justify their

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increased costs of producing the drugs such as the testing costs. This calls for government
intervention in the provision of health services.
Opinion and Conclusion
The price for drugs needed for the treatment of common diseases should be maintained
at a lower level to increase the affordability to many citizens and thus lower the health costs.
Due to the high costs of imperative drugs, some people are overlooking the consumption of
drugs and thus they suffer for long with diseases which at extreme case results in death. Most
families are struggling in poverty due to health costs. The government should come up with a
good strategy to control the negative externalities in the drugs market.

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References
Corcoran, T. (2017). Terence Corcoran: If you like Canada’s liquor, transit and electricity
monopolies, you’ll love the medicine cartel. Financial Post. Retrieved 19 November 2017,
from http://business.financialpost.com/opinion/terence-corcoran-if-you-like-canadas-
liquor-transit-and-electricity-monopolies-youll-love-the-medicine-cartel.
Kassam, A. (2017). The serious flaw in Canada's healthcare system: prescription drugs aren't
free. The Guardian. Retrieved 19 November 2017, from
https://www.theguardian.com/world/2017/oct/20/canada-national-pharmacare-
prescription-drugs.