The U.S. Congress recently approved a bill to allow the re-importation of U.S.-made prescription drugs from Europe and Canada. Though this plan may save consumers money, it will also reduce the incentives for drug companies to develop expensive but potentially life-saving new drugs, says Stephen Entin of the Institute for Research on the Economics of Taxation.
Drug affordability is a major issue for poor Americans, but the problem is one of welfare, not price. The solution is to help the poor buy their medications, not to reduce revenues for drug companies by re-importation.
Drug companies face costs unlike those of other industries:
Countries with socialised medicine whose drug prices are set by their governments contribute little or nothing to the fixed costs of medical research; drug companies can only recover the costs of expensive testing and research in the United States, where price controls do not exist.
Allowing the re-importation of U.S.-made drugs from other countries at artificially fixed prices will only serve to discourage important research and development and hurt consumers in the long run. High drug costs irritate Americans, but the alternative is not having new drugs.
Source: Stephen J. Entin, Snatching Disease From the Jaws of Victory? IRET Congressional Advisory No. 158, July 22, 2003, Institute for Research on the Economics of Taxation.
For text ftp://ftp.iret.org/pub/ADVS-158.PDF
For more on Drug Reimportation http://www.ncpa.org/iss/hea/
FMF Policy Bulletin\30 September 2003
