NCPA - National Center for Policy Analysis


February 16, 2005

Governments and quasi-governmental entities in Canada and the United States exercise vast power by buying drugs in bulk. However, when Canada "bargains" with Pfizer or Eli Lilly it implicitly threatens to ignore the American companies' intellectual property rights, says John C. Goodman, president of the National Center for Policy Analysis.

For example:

  • If "negotiations" break down and the American company refuses to sell at the price Canada is asking, Canada reserves the right to ignore the drug patent and allow its domestic firms to produce a generic equivalent -- a procedure called "compulsory licensing."
  • In effect Canada says: Give us your drugs at a price we dictate or we'll ignore your patent and produce them ourselves.

In an ideal world, government would get out of the way and allow markets to work freely. Short of that we need an aggressive trade policy designed to level the playing field, says Goodman:

  • We should insist that other countries respect patent rights, including the right of the patent holder to refuse to sell.
  • We need to allow issues of resale to be settled by contract and let the pharmaceutical companies negotiate the terms of sale and the right to resell in the market place.
  • Finally, other countries need to open their markets to American producers of generic and over-the-counter drugs; we should not allow regulation to function as protectionism under another name.

Ironically, some members of Congress who have been the loudest critics of job outsourcing to other countries are now proposing to destroy one of America's most innovative, successful industries. Consumers and workers will pay the price, says Goodman.

Source: John C. Goodman, "Drug Reimportation: The Free Trade Solution," Brief Analysis No. 503, National Center for Policy Analysis, February 16, 2005.

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