Yesterday, I noted that Barack Obama and John McCain are both right on health insurance mandates. Unfortunately, the same cannot be said about their positions on drug reimportation. Both are for it—which means they are for importing the price controls of Canada and other countries.
As I discuss here, drug reimportation would stifle innovation while producing insignificant reductions in pharmaceutical spending. So, why has such a bad idea been embraced by the leading Presidential candidates? James Antle explains in the American Spectator:
Unlike raising taxes, railing against drug manufacturers is a win-win proposition at the ballot box. “Big Pharma” isn’t a sympathetic character in political morality tales, where companies like Merck are portrayed as heartless profiteers.
And explanations of the profoundly bad economics of drug reimportation often fall on deaf ears:
Enumerating the downsides of price controls merely makes one look like a defender of a flawed health care system.
Antle nonetheless does his duty, laying out the inevitable effect of such controls:
Bringing each new drug to market costs an average of $800 million and may take between a dozen and fifteen years to complete … Without the prospect of reaping a windfall, companies won’t tie up so much capital in a process where successes are rare.
Unfortunately, the probable nominees of both parties are determined to ignore such realities. So, regardless of who wins in November, it is likely that this flawed policy idea will find its way into law.
Comments 8
This policy, though flawed, is not one that will completely subvert market forces. No one makes the pharma companies sell to Canada. If they sell to Canada at price x, why shouldn’t US consumers be allowed to buy from Canada at price x+margin whether than the price here in the US?
If the profits of the drug companies drop, they’ll raise the price to NHS-Canada and either it won’t get sold at that price (Candians no longer get that drug) or the price in Canada goes up. Either way, the market levels the issue without it.
Making it illegal for me to buy something from Canada that the company sold them of their own free will at a price they took is silly. And if the drug company does that they need to count the cost, not get welfare in the form of government regulation making it illegal to buy that drug from another country.
Of course eliminating the FDA might solve the problem better long term, but no presidential candidate except Ron Paul wants to do that.
Posted 14 Feb 2008 at 11:33 am ¶Problem is that Canada engages in price fixing with the Pharma companies. This keep their prices artificially low and keep ours artifically high. It really is the proof that “Big Pharma” really isn’t all that powerful. If they didn’t agree to the deflated rates, you know a state sponsored company would produce outside of their patents. I mean, it’s for the children!
Posted 14 Feb 2008 at 1:10 pm ¶If you read this, James, it should knock the scales from your eyes.
And here’s a post I did some time back discussing an experiment with reimportation that failed.
Posted 14 Feb 2008 at 1:17 pm ¶That is a very nice link, but i see no data within it to support any of the claims.
Posted 14 Feb 2008 at 1:34 pm ¶Catron:
I read it. And don’t agree with the assessment of the policy.
I quote Nina, “Pharmaceutical manufacturers would limit or cease to sell their products to Canada.”
That part is certainly true.
But see, that’s the way the market is supposed to work. I see this as a choice that we protect free trade or we purposefully subsidize Canadian Health Care. We already purposefully subsidize other things in Canada (e.g. defense)–why would we want to make sure we do it with health care?
Again, no one forces the pharma companies to sell at the fixed prices. And if Canada NHS starts failling because no one in the US will sell them drugs, how is that a bad thing for us? It will give more information to help stop the foolhardy arguments of Ezra Klein et al.
Posted 14 Feb 2008 at 5:18 pm ¶James, you don’t think the other countries would just pirate the patent on the needed drugs for the “common good?”
Posted 15 Feb 2008 at 9:15 am ¶I get sick of listening to BIG PHARM whine about free market- They only want free market when it benefits them, but denying Americans to buy drugs outside the USA is trampling on capitalism. Either drug prices should be regulated by the govt if we cannot buy anywhere but the US, or let the market become completely open allowing competition and capitalism to flourish. Big Pharm’s anti-capitalist ways are costing every american business dearly. Why should Big Pharm be allowed to increase the costs to the rest of the business community, indeed the entire economy, via thier abomination of capitalism. Don’t ever let pharmaceutical companies ever use capitalism as an excuse to mame free market ideals. The hypocrisy of pharm companies using capitalism as a excuse to trample capitalism is so ironic it almost brings me to laughter. I know that Bush could barely contain his laughter when on a televised debate told us that he is keeping us from buying medications elsewhere to protect the citizens. His tongue was rolling around in his cheeks so fast it was obvious that even Bush doenst believe what he said and can’t believe that the American people bought it. Shame on us.
Posted 18 Feb 2008 at 10:23 am ¶John, you are aware that Canada has a fixed cost arrangement for most drugs, right?
Posted 18 Feb 2008 at 2:22 pm ¶Post a Comment