The TSX Gives a Short Course in Health Economics: It's the Prices, Stupid!

The fall in Shoppers Drug Mart shares last April 8 gave a crystal-clear demonstration of the link between health expenditures and health incomes. Reacting (finally) to the excessive retail prices of generic drugs, the Ontario government effectively halved the rate of reimbursement of ingredient costs and banned the "professional allowances" (kickbacks) paid to pharmacies by generic manufacturers. Taxpayers and private payers will save hundreds of millions of dollars, and pharmacy revenues will fall by an equivalent amount. Patients will still get their drugs, with no loss of quantity, quality or even convenience; no one's health is threatened. But investor profits will fall. There are similar savings opportunities throughout the health system. Health costs are primarily a political, not an economic, problem.