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Supply and demand would dictate that a sufficient supply at a higher volume should be cheaper. Hence the cost should be lower in the US, which undoubtedly is the pill-happy volume center.

Here is the crux of the matter for pharma in the US. Demand is high for pharmaceuticals in the US. There is no clamor for Lexapro (psych drug) or Ambien CR (sleep drug) or Viagra (erectile dysfunction) in Mexico (in the big picture). Those are viewed as luxury items for the wealthy. We view them as part of our Constitutional rights and consume them at high rates (as you point out). That doesn't give us a volume discount. It means our demand is higher. Higher demand --> higher price. And when we have more people privately insured than other companies (where private insurance will pay more to provide customer-sensitive care), the cost will be higher as well.

Secondly, our regulatory system (for all its faults) pretty much guarantees that if you take a script to a Walgreens for Lexapro, you're going to get Lexapro. In Mexico, you might get salt dipped in horse urine covered with a gel coating.

Finally, the average cost to bring ONE drug to market in the US is $1 BILLION (with a "b"). Not counting the 15 drugs that failed in phase 2, the 10 drugs that failed in phase 3, and the 2 that the FDA got skittish about and rejected.

Good response. You could add that the cost of making a pill is often nothing, the real cost is in the research and development.

So the company HAS to charge a high fee in the United states, where all the demand and money is, to recoup their investment.

But having set up such a system, the pills only cost a few pennies to make. If they can get another million dollars in sales by offering the pill in Mexico for a buck, they will do that, stipulating that the mexican pills CAN’T be brought back into the United States.

And if Canada requires a cut-rate deal to open the market, since the company makes money on every pill sold even at cheap prices, the company offers the lower price there, again hoping nobody can bring the drugs back into this country.

They could never offer the pills at that price to everybody — because they wouldn’t recoup their research and development costs.

And they have to do that, or they can’t make new drugs. And they only have so many years, because eventually they lose patent protection. Generics are cheap because the generic company only has to cover the cost of manufacturing the pill, NOT the cost of developing it.