NCPA - National Center for Policy Analysis


January 31, 2005

There is a free trade solution to the question of importing prescription drugs, says economist John Goodman, president of the National Center for Policy Analysis.

Currently, Canada and other developed countries violate free trade principles:

  • The Canadian government imposes strict price controls on brand-name drugs -- which are principally produced by foreign manufacturers -- and implicitly threatens American companies' intellectual property rights by "compulsory licensing," under which it reserves the right to ignore drug patents and allow domestic firms to produce generic equivalents.
  • In the generic market, however, prices aren't controlled, and two Canadian companies (Apotex and Novopharm) account for more than half of the total Canadian generic market.
  • As a result, the consulting firm Palmer D'Angelo found Canadians pay more than twice as much as Americans for their 27 top-selling generic drugs -- consistent with Food and Drug Administration research which found that for five of seven generic drugs studied, Canadians pay more than Americans, in some cases 2 to 3 times more.

This is also true of other developed countries. In fact, American consumers pay some of the lowest prices for generic drugs among all developed countries, even as we pay the highest prices for brand-names.

With free trade, drug producers in one country would be free to sell (or refuse to sell) to consumers in any other country, with resale conditions negotiated by contract. Governments would be obligated to honor contracts and patent rights. And prices would tend to be equalized everywhere, at least for similarly situated consumers.

Source: John C. Goodman (National Center for Policy Analysis), "Free Trade Tack for Drug Imports," Washington Times, January 31, 2005.


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