The High Price of Cheap Drugs | National Center for Policy Analysis | NCPA

The High Price of Cheap Drugs

Many Americans are buying prescription drugs from Canada over the Internet or in person at lower prices than in the U.S. - a shopping trend that has spurred some senators to craft a bipartisan bill legalizing what currently is an illegal activity.
One proposal would allow importation of drugs not just from Canada, but a host of other nations.  This, despite objections by the U.S. Food and Drug Administration and top-level health officials from the Bush Administrations - all of whom say that it's virtually impossible to verify the safety of drugs whose production they do not regulate.
        Countries such as Canada basically refuse to pay their share of research and development costs for the drugs they use.  Consequently, a number of U.S. drug companies have responded reasonably by banning shipments to some online pharmacies and restricting their exports to Canada to actual patient needs. 

Healthcare Canada, which oversees a system of socialized medicine, also points out that the sudden gushing of pills across its southern border would jeopardize the health of Canadians by creating artificial shortages of key drugs. 

With a population of 34 million, Canada's potential drug market is so small that if Americans were to import all their drugs from that country, Canadian pharmacy shelves would be emptied in about a month. The shortages, which already are occurring in some areas, have the potential to wipe out the discounts Canadian Internet-based pharmacies offer by mail.

Unfortunately, most American consumers have turned a deaf ear to frequent government warnings that prescription drugs sold on Canadian drug sites do not come with FDA-type certification.  In fact, many enter Canada from Third World nations with few manufacturing safeguards and are then shipped to unsuspecting patients in the United States.

Marv Shepherd, director of the Center for Pharmacoeconomic Studies at the University of Texas at Austin, notes that Canada obtains drugs "from over 100 countries including Ecuador, Mexico, Brazil, and China."  

Foreign-made copies of American drugs often lack the quality controls of their U.S. counterparts.  A recent article in the medical journal Science, notes that when Zocor, a powerful cholesterol-lowering drug manufactured in the U.S., was compared to generic Simvastatin copies purchased over the Internet from Mexico, Thailand, India and Brazil, researchers found that active ingredients in the imported generics were not uniformly mixed - an error that could dilute their effect.

Developing nations like India frequently violate U.S. patents by producing low-priced copies and then undercut the American original by exporting them en masse to nations around the globe.

In the process, those nations reduce the incentive for U.S. drug makers to develop new drugs simply because nobody is willing to pay any of the costs for research and development if they can legally avoid it. 

And no wonder!  A recent analysis by Tufts Center for the Study of Drug Development, developing a successful new drug in the United States now costs almost $802 million and takes up to 15 years before gaining FDA approval. 

Of course, the best solution to the problems caused by importation and re-importation of prescription drugs is free trade.  Under free trade pacts, U.S. drug manufacturers could insist that other countries respect patent rights, including the right of the patent holder to refuse to sell.  The economic purpose of a patent, after all, is to create a monopoly right for enough years to allow inventors to recoup the costs of research and development and return a reasonable profit to their shareholders.

If Congress truly wants to lower drug prices it should end a situation that allows politicians in other countries to seize the benefits of American creativity without contributing to the extraordinary costs of research and development. 

It also should pass legislation allowing issues of resale to be settled by contracts that permit pharmaceutical companies to negotiate terms with foreign governments pertaining to initials sales as well as the right to resell in the other market places.  Aside from regulating efficacy and safety, the proper role of government is to enforce contracts - not dictate their contents.

And finally, our trade negotiators ought to demand that other countries fully open their markets to American producers of brand-name, generic and over-the-counter drugs.  Although Americans frequently pay higher prices for brand-name drugs, they often pay much lower prices than in other countries for generics and OTC drugs. 

All of those legislative initiatives, if enacted, could speed the stream of reasonably-priced, high-quality drugs to American patients.  

Allowing wholesale importation of drugs from abroad would be a highway to disaster.  Not only would it have little impact on the price Americans pay for drugs, it would reduce the flow of innovative new drugs in the future.