Wednesday, February 25, 2004
The positive unintended consequences of allowing reimportation
[David R. Henderson and Charley Hooper, "Hidden drug-reimport potential," The Washington Times, 24 February 2004.]
The authors of this column raise an interesting point about the drug importation argument. If importation is allowed, the result will not be "the silver bullet that will dramatically reduce prescription drug prices in the United States," but rather an end to unsustainable price controls in Canada:
Just as Turkey's price controls on imported oil in 1980 lasted less than a month when the Turks saw those price controls lead to zero imports, so a vocal constituency would develop in Canada for getting rid of, or at least relaxing, the Canadian price controls.
And that's all to the good. Why? Because relaxing Canada's price controls would cause Canadians to start paying their pro-rated share of the research and development costs that drug companies need to recoup to develop drugs in the first place.
Ironically, then, allowing imports for Americans who want a deal will end up eliminating that deal but will create a better deal for all Americans; it will spread the cost of research and development, which is currently borne disproportionately by us.
[David R. Henderson and Charley Hooper, "Hidden drug-reimport potential," The Washington Times, 24 February 2004.]
The authors of this column raise an interesting point about the drug importation argument. If importation is allowed, the result will not be "the silver bullet that will dramatically reduce prescription drug prices in the United States," but rather an end to unsustainable price controls in Canada:
Just as Turkey's price controls on imported oil in 1980 lasted less than a month when the Turks saw those price controls lead to zero imports, so a vocal constituency would develop in Canada for getting rid of, or at least relaxing, the Canadian price controls.
And that's all to the good. Why? Because relaxing Canada's price controls would cause Canadians to start paying their pro-rated share of the research and development costs that drug companies need to recoup to develop drugs in the first place.
Ironically, then, allowing imports for Americans who want a deal will end up eliminating that deal but will create a better deal for all Americans; it will spread the cost of research and development, which is currently borne disproportionately by us.
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