IPI Publication Press Release
IPI Ideas - # 21
Related Publication Title:
Reimportation: Trojan Horse, not Free Trade
Released by Sonia Hoffman on 10/21/2003
IPI Ideas - # 21
Related Publication Title:
Reimportation: Trojan Horse, not Free Trade
Released by Sonia Hoffman on 10/21/2003
Full Text
Press Release (10/21/2003)
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For Immediate Release.
Contact: Sonia Hoffman, shoffman@ipi.org or (703) 912-5742
Dallas, TX: Because many drugs are cheaper in other countries, most famously Canada and Mexico, some policy makers think pharmaceutical companies are price-gouging Americans. As a result, politicians and other supporters want to allow Americans to purchase their drugs abroad or to allow foreign countries to resell drugs here in the U.S. (a process known as “reimportation”).
What could be better than lowering pharmaceutical costs by promoting “free trade,” right?
According to a report by the Institute for Policy Innovation (IPI), however, reimportation is a Trojan Horse scheme to apply foreign price controls on the American market.
“Reimportation is not the answer to rising pharmaceutical costs,” says Doug Bandow, Senior Fellow at the Cato Institute and author of the IPI report. “Reimportation also does not reflect free trade; it is the antithesis of free trade.”
Understanding the Drug Market:
- U.S. citizens are not paying higher prices to subsidize foreign consumers because national markets operate independently of one another.
- Pharmaceutical companies base their prices on local supply and demand. As long as they can cover the marginal cost of marketing an additional pill overseas, they will do so; they will not sell at a loss no matter how profitable the domestic market.
True Cost:
- Forcing drug firms to choose between sales in the U.S. and foreign nations would result in loss of sales overseas rather than lower prices in America.
- Oversea customers would have access to fewer medicines and Americans would pay more for products because they would bear the burden of global research and development costs.
“If reimportation is accepted, Washington would join other countries in confiscating the wealth of drug makers,” continues Mr. Bandow. “Companies might have little choice but to continue providing drugs for less, but firms would not, however, have the same incentive to make new medicines.”
Ultimately, cutting off drug development ultimately means future Americans would live shorter, more sickly lives.
