NCPA - National Center for Policy Analysis


January 17, 2005

Legalizing drug reimportation may not free up world drug markets, but instead impose price controls on Americans and drastically reduce drug innovation, says John Lott Jr. of the American Enterprise Institute.

Today, Americans bear most of the financial burden of expensive pharmaceutical research and development, with foreign consumers enjoying lower costs under price controls while enjoying the same drug benefits.

  • On average it costs $802 million to develop a new drug and overcome the regulatory hurdles to bring it to market.
  • Even then, just three in 10 market drugs match or exceed the average costs of research and development.

Some believe that by legalizing drug importation, pressure will be put on manufacturers to spread R&D costs to other countries. Lott, however, believes that Canada and Europe will not be willing to pay market prices. Thus when American spending falls -- as a result of reimportation -- pharmaceutical companies will simply stop making new drugs:

U.S. consumers, however, are unhappy with the status quo. They ask plaintively why they have to pay $270 for the same dosage of Lipitor that's sold in Canada for $180. But if Americans paid less, the system that has helped the entire world live longer and healthier would come crashing down. The irony is that Canada and Europe - by opposing the folly of reimportation - will ultimately improve their health and ours at the same time, says Lott.

Source: John R. Lott Jr., "Folly of Re-Importing Drugs Has Dawned on Free Riders," American Enterprise Institute, January 11, 2004.


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