NCPA - National Center for Policy Analysis

Drug Re-Importation's Bitter Pill

August 30, 2002

Lawmakers once again are talking about implementing a prescription drug plan for seniors. But with the economy stalled and increased military spending dominating the budget for the near future, it will be difficult to add such a huge expenditure to an already precarious Medicare system.

Instead, some members of Congress will once again call for the allowance of "drug re-importation" - enabling pharmaceutical wholesalers and retailers to purchase prescription drugs from other countries where pharmaceutical companies sell drugs to retailers at lower prices in exchange for guarantees that the drugs will not be resold abroad.

Although America's seniors can get their medications from abroad at prices as much as 50 percent less than those charged in U.S. pharmacies, some experts have concluded the re-importation of drugs would harm Americans because it would stifle technological progress and its attendant health benefits.

There are a number of reasons not to endorse drug re-importation.

  • It would eliminate profits, which are the driving force behind technological progress in the pharmaceutical industry -- because as the expectation of profits grows, more progress is made.
  • By charging less abroad, pharmaceutical companies spread the overall cost for prescription drugs in the United States where incomes and demand are higher.
  • Also, from the perspective of countries where pharmaceuticals are sold at lower prices, the discounts they receive from drug manufacturers represent a tremendous form of foreign aid.

Source: Jonathan Klick (The Mercatus Center), "Drug Re-importation's No-Win Solution," Regulation, Spring 2002, Vol. 25, No. 1.

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