Understanding the Perils of Drug Reimportation

Washington, D.C., December 21, 2004—Today, as the Department of Health and Human Services is poised to release its pending report on drug reimportation, the Competitive Enterprise Institute is releasing a study on the perils posed by such a strategy.

In recent months, some public health advocates and officials have endorsed the strategy of reimporting American-made pharmaceuticals from countries where they are sold under price control as a way to lower costs to patients in the U.S. In a new paper, The Drug Reimportation Ban: A Less-Than-Perfect Solution That Beats All the Rest, authors Fred L. Smith, Jr., Sam Kazman, and Braden Cox of the Competitive Enterprise Institute explain how such a process would lead to fewer new drugs and treatments and jeopardize the future existence of the U.S. pharmaceutical industry.

When drugs are imported to the U.S. from foreign countries, we in effect import those nations’ price control schemes as well. “The drug reimportation debate is similar to many other price control debates. Price controls have largely disappeared from this country, but they are a way of life in totalitarian countries and they are frequently imposed in many developing and post-Communist nations,” write Smith, Kazman, and Cox. “Yet price controls are, historically, a dismal failure. In the short-term they may produce a drop in prices, but they also destroy the incentives to produce more goods.”

Undermining drug companies’ incentive to invest the hundreds of millions of dollars necessary to develop new products will inevitable mean fewer new drugs, treatments, and medical devices. The short-term monetary advantage to current prescription drug purchasers will be paid by future patients in lives lost.

To read The Drug Reimportation Ban: A Less-Than-Perfect Solution That Beats All the Rest, please click here.