February 2, 2005
By Nina Owcharenko and Andrew Grossman
Could this be the beginning of the end of the debate over drug
re-importation? Advocates of the practice argue that American
consumers, particularly seniors, could benefit from legal
re-importation of prescription drugs from abroad, which in some
instances are sold at lower prices than in the United States.
Opponents contend these lower prices result from price controls and
that allowing price controls into one of the world's few remaining
free markets for pharmaceuticals would deter investment in
developing new drugs.
To date, there's been an impasse. Re-importation is technically
illegal, though many Americans buy prescription drugs from Canada
and other countries. Their savings have made re-importation a
rallying issue for some groups, especially senior groups who argue
that the lack of an "adequate" drug benefit in Medicare has forced
many seniors to look elsewhere for their medications.
But are the tides already changing? The Associated Press reports
that Americans buying drugs from abroad aren't saving what they
used to. The average price of drugs purchased in Canada rose 23
percent over the past year and a half, compared to an increase of
only 8 percent at U.S. pharmacies.
One small part of the problem is the weakening U.S. dollar.
Also, it turns out the land of the Maple Leaf is subject to market
forces, too. "Higher acquisition costs" are wrecking Canadian
pharmacies' margins, and many have responded by raising prices for
foreign buyers or curtailing sales abroad altogether.
While American drug companies cannot determine what their drugs
will sell for in Canada, they can control the amount of drugs they
ship across the border. Many have chosen to send less to reduce
available surplus that could be diverted to U.S. consumers. Fewer
surplus drugs in Canada means Internet pharmacies -- major
international sellers -- have to purchase drugs from
bricks-and-mortar pharmacies, at prices well above wholesale, or
re-import drug supplies from other countries, further increasing
their costs and exposing U.S. consumers to safety risks.
Already, according to recent reports, Canadian health officials
have begun to take steps to protect supplies north of the
Furthermore, the recent Health and Human Services Task Force on
Drug Importation revealed that not only would savings from
legalization be dwarfed by the costs of implementing a safe
comprehensive re-importation program but also that bargains are
available at home for those who shop around and substitute generics
So how does this affect the future of re-importation? Economists,
both liberal and conservative, agree that, under re-importation,
prices inevitably will rise abroad until they are at or near prices
here, which would eliminate any advantage for Americans to shop
elsewhere for their drugs.
International trade still could lead the way to cheaper drugs,
according to a recent Commerce Department study on pharmaceutical
price controls. The study shows that price controls in other
countries raise drug prices in the U.S. and also retard future drug
development. In other words, when other countries shirk their duty
to pay for new drugs, U.S consumers end up bearing the
That analysis points the way to better policy. Instead of banking
on re-importation, which would produce only short-lived gains and
offer a backhanded endorsement of price controls to boot, the U.S.
should work to encourage a more competitive international market,
where countries pay their fair share and relieve U.S. consumers of
the heavy load of paying for the whole world's drug development
Countries such as France, Germany, and Switzerland -- all of which
currently regulate pharmaceutical prices -- certainly can afford to
start paying some of those research costs.
The reality is that re-importation is not the silver bullet many
believe it to be. And it shouldn't be the last word in the debate
over how the U.S. can use trade policy to lower the cost of
Nina Owcharenko is
senior health policy analyst in the Center for Health Policy
Studies and Andrew Grossman
is Senior Web Editor at The Heritage Foundation.
First Appeared on FoxNews.com
Could this be the beginning of the end of the debate over drug re-importation? Advocates of the practice argue that American consumers, particularly seniors...
Director, Center for Health Policy Studies and Preston A. Wells, Jr. Fellow
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