NCPA - National Center for Policy Analysis

Reimporting Drugs

July 21, 2003

Brand-name prescription drugs sell in Canada for one-half of the U.S. price while AIDS drugs in South Africa sell for a tenth of the U.S. price. Legislation before Congress would allow the reimportation of drugs originally produced here in the hope that consumers would benefit from other countries' lower prices. Is that a good idea?

Some of the arguments against reimportation verge on the hysterical, says John Goodman of the National Center for Policy Analysis. Some conservative opponents of drug reimportation are acting more like industry apologists rather than independent thinkers. Still, there are valid arguments to be made against the idea.

Reimportation sounds like a free market idea, but it's not. The markets for drugs in other countries are smothered in price controls and other regulations. Context matters. In deregulation, the order in which laws are repealed matters a lot.

  • Even with no government involvement, we would not have a uniform world price for each drug; nor would that be desirable.
  • Companies with patents will try to segment markets and charge different prices to different buyers.
  • Consumers may view these price differences as unfair, but even the ones who pay top dollar gain from the practice.

For example, the business traveler has more options to fly to more cities precisely because discount fares to vacation travelers expands the size of the market. Similarly, lower prices charged to marginal buyers around the world, increases the return to Research and Development, and leads to more drugs available for U.S. patients.

This doesn't mean patients are obliged to overpay. To the contrary, smart buying behavior can significantly reduce the cost of drugs even within our borders, says Goodman.

Source: Adapted from John Goodman (National Center for Policy Analysis), "Drugs From Canada: A Price Too High?" Washington Times, July 21, 2003.

 

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