Friday, July 01, 2005


Prescription drugs manufactured by American companies in America are more expensive here than they are almost anywhere else in the world. Why? Because almost everywhere else, national governments act as the buyer for all prescription drugs consumed by the populations of those countries, and these state buyers have enormous market power and so force manufacturers to sell to them at lower prices or risk losing access to that market entirely. Also, if I understand correctly, various governments threaten to violate intellectual property law and manufacture the drugs themselves royalty-free, if the drug company refuses to cooperate. The lost revenues caused by these schemes has to be made up somewhere if the drug companies are going to remain profitable and able to invest in developing new drugs. Increasingly, that entire burden falls on Americans alone. Essentially, we subsidize research and development of new drugs for the entire world with the increased cost we pay for drugs in this country.

Americans forced to pay these higher prices for the prescription drugs they need naturally seek to reduce or eliminate this unfair pricing scheme with re-importation. If drugs are cheaper in Canada, they reason, they'll buy Canadian drugs! Simple, right? Of course not. Government functionaries understand that the rent-seeking behavior they are paid to enable or commit would be threatened if massive re-importation reduced drug company profits in America, since that would force drug companies to reduce the delta between American and Canadian pricing. Mon dieu! The whole evil scheme would falter! Something must be done!

The functionaries are right, but the something that needs doing isn't what they think. What we need is a federal law which would force drug manufacturers to sell into the top tier wholesale market in America at prices equal to or less than they what they sell to these national health-care buyers abroad. If Pfizer or whomever will sell a pill to Canada or England or South Africa for fifty cents, they would have to sell that same pill to the largest wholesale buyers in America for fifty cents. That's only fair. The costs of drug development, manufacture and delivery should fall equally on all who benefit from them. Americans should not bear this burden alone - that's not fair to anyone, even the supposed beneficiaries of this unfair system.


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