Prescription Drug Imports Are a Good Start

By Mark Weisbrot

This article was published in the following news outlets:

Fresno Bee - Nov. 23, 2003
Lexington Herald-Leader - Nov. 23, 2003
Post-Standard (Syracuse, NY) - Nov. 23, 2003
Columbian (Vancouver, WA) - Nov. 23, 2003

"There's nothing that can stop an idea whose time has come," said Illinois governor Rod Blagojevich, who is lobbying the federal government to allow the import of pharmaceuticals. It would save the state tens of millions of dollars each year.

He has been joined by the governors of Wisconsin, Minnesota, and Iowa. And by millions of Americans who cross the border to Canada or Mexico each year to buy their prescription drugs.

The United States is the only high-income country that allows pharmaceutical companies to fully exploit their patent monopolies, and charge whatever prices they choose. This means that Americans often pay twice what Canadians and Europeans pay for prescription drugs.

Some of these are medicines desperately needed by senior citizens, who can't afford them at U.S. prices and don't have coverage from Medicare. As a result, our federal government has been reluctant to prosecute people or confiscate their medicines at the border.

But "re-importation" has spread, and now the question is whether to legalize it. Polls show large majorities in favor, but in Congress money talks, and the big pharmaceutical companies have one of the most powerful lobbies on Earth. It only makes sense that they would: if some tens of millions of dollars of political contributions can net profits in the billions, politicians are a bargain at any price.

The drug companies have argued, with the U.S Food and Drug Administration at their side, that imports are unsafe. But this is a spurious argument. Current problems with verifying the safety and quality of imported drugs are a result of their illegal status, which limits regulation. If imports were legalized, it would be no more difficult to assure their quality than it is currently for imported food.

The companies also argue that competition from imported drugs would reduce the profits that finance their research and development of new drugs. This part of their argument is true, but not very compelling. First, much of this research and development spending is wasted -- as much as 70 percent of it goes to "copycat drugs." These are drugs developed to perform the same function as already existing medicines. The purpose of the research is to claim a new patent.

The pharmaceutical companies employ nearly twice as many people in marketing and sales as are employed in research and development. They lobby doctors to prescribe drugs for uses that are not approved by the FDA, and can even be harmful. They spend billions on litigation.

All this is exactly the kind of waste, inefficiency, and abuse that economists would predict for a huge industry based on monopolies enforced by the government. And we can no longer afford the monopoly prices. Exhibit A: our Congress is currently finding it impossible to finance a Medicare prescription drug benefit, because of the industry's patent monopoly prices.

There is a relatively simple solution, and we are about half-way there: about half of all bio-medical research is already financed by the non-profit sector, including the federal National Institutes of Health.

If the government financed the rest of the research and let the resulting products be sold as generics, the research and development spending would pay for itself just through lower federal spending on Medicare and Medicaid. And the rest of the population -- non-elderly and non-poor -- would enjoy huge savings on cheap generic medicines.

Re-importing drugs from Canada or Europe, many of which were originally exported there by U.S. companies, may seem like flying to Paris by way of Argentina. But if that's what it takes to bring competition into our pharmaceutical markets, the roundabout routing will be more than worth it.