Jason Shafrin at Healthcare Economist links to a study that attempts to quantify the relationship between drug importation and pharmaceutical innovation. The study’s author, Frank R. Lichtenberg, concludes that importation would bring about short term price reductions but that innovation would suffer:
In the long run, a 10% decline in drug prices would … be likely to cause at least a 5-6% decline in pharmaceutical innovation.
Shafrin is dubious about the use of market size as a proxy “for what will happen if pharmaceutical trade barriers are destroyed,” but Lichtenberg’s conclusions are consistent with those of other analysts and common sense. If the potential ROI associated with new drugs declines, there will obviously be less incentive for “Big Pharma” to invest in R&D.
Ironically, Shafrin seems perfectly comfortable with Lichenberg’s least defensible claim–that drug importation will reduce domestic pharamceutical prices. This conflicts with the assessment of the CBO, which offers the following on the subject:
On the basis of its evaluation of recent proposals, the Congressional Budget Office (CBO) has concluded that the reduction in drug spending from importation would be small.
So, Lichtenberg and common sense suggest that drug importation would stifle innovation, while the CBO tells us that it wouldn’t save us much money. I wish someone would point this out to John McCain, Ron Paul, and the other politicians who promote this bad idea.
Comments 4
Agree, drug importation will likely have no long term effect on cost, however I donot see how importation will change R&D or innovation (psuedo innovation really) as the pharmacuetical industry is in if for the $$$$, they cant get the cashola without comming up with new stuff as thier patents run out on thier old new stuff. Maybe the effect would be that they stop researching and develping “me too” drugs which is how they make most of thier money, let’s face it how many proton pump inhibitors do we need? These are standard market forces, they see a drug that is making greenbacks and they develop one that does the same thing because they know there is a market for it, no risk really, but not really innovation either.
Posted 14 Dec 2007 at 8:34 am ¶I wonder if drug importation would decrease the likelihood/willingness of pharma to submit NDAs in the US, or change the timing of the submission in the US or the equivalent abroad.
Assuming that the R&D costs for a US NDA exceed those for a Canadian equivalent, where is the pont of diminishing returns to pharma?
Posted 14 Dec 2007 at 11:31 am ¶Funny how the land of the free has some of the most restrictive free trade policies on the planet.
Posted 14 Dec 2007 at 11:43 am ¶Marc, the “progressive” position on drug-reimportation is utterly incoherent. You guys are always caterwalling about NAFTA and CAFTA. But, when it comes to importing Canadian price controls, you’re suddenly free traders. Now that’s “funny.”
Posted 14 Dec 2007 at 12:54 pm ¶Post a Comment