Three percent of the 152 leading global drugs were developed in France between 1975 and 1994. The United States produced 45 percent. Price controls artificially lower prices and consequently encourage greater consumption, boosting total expenditures. In response to the greater demand, governments may ration, as in Canada, to manage a shortage. The examples of Canada and France illustrate the tradeoff that price controls present to governments.
Price controls swap lower prices for sales revenue.
Canada produces considerably fewer drugs than the United States, and price controls have failed to make drug prices lower than in the United States. Price Controls Increase Spending. Despite lower prices, the French spend more per capita on pharmaceuticals than Americans. History repeated itself in Japan. The Japanese government cut drug prices 50 percent.