Tuesday, February 03, 2004
No free lunch principle applies to Canadian drugs, as well
[Wayne T. Brough, Ph.D., "Good Medicine?," Citizens for a Sound Economy, 30 January 2004.]
Individuals and now states are advocating, and often going ahead with, the purchase of prescription drugs reimported from Canada and other countries. As Citizens for a Sound Economy Chief Economist Wayne Brough points out, though, some deals are just too good to be true:
Price caps threaten the ability to recoup these [research and development] costs, and drug re-importation policies simply import these price caps into the United States, effectively expanding the size of the regulated market. Alternatively, drug companies could refuse to sell drugs at lower prices in other nations. But this would reduce the size of the market, making some investments that previously made sense no longer feasible. Thus, while other nations may be free riding, Americans clearly benefit from the innovations available in the current system.
Health care remains an important issue for most Americans, but short-sighted policies to re-import cheaper drugs is a poor salve for a much bigger problem. Cost containment in the health care system requires significant reforms of Medicare and Medicaid, as well as improvements in private health care markets. Replacing the distorted incentives of the third-party payer system with a market-based health care system would go far in controlling costs. In addition, reforming the costly and inefficient drug approval process would reduce the costs of bringing a drug to market and ensure continued investments in life-saving therapies.
[Wayne T. Brough, Ph.D., "Good Medicine?," Citizens for a Sound Economy, 30 January 2004.]
Individuals and now states are advocating, and often going ahead with, the purchase of prescription drugs reimported from Canada and other countries. As Citizens for a Sound Economy Chief Economist Wayne Brough points out, though, some deals are just too good to be true:
Price caps threaten the ability to recoup these [research and development] costs, and drug re-importation policies simply import these price caps into the United States, effectively expanding the size of the regulated market. Alternatively, drug companies could refuse to sell drugs at lower prices in other nations. But this would reduce the size of the market, making some investments that previously made sense no longer feasible. Thus, while other nations may be free riding, Americans clearly benefit from the innovations available in the current system.
Health care remains an important issue for most Americans, but short-sighted policies to re-import cheaper drugs is a poor salve for a much bigger problem. Cost containment in the health care system requires significant reforms of Medicare and Medicaid, as well as improvements in private health care markets. Replacing the distorted incentives of the third-party payer system with a market-based health care system would go far in controlling costs. In addition, reforming the costly and inefficient drug approval process would reduce the costs of bringing a drug to market and ensure continued investments in life-saving therapies.
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