Senate Should Say No to Importation of Price Controls in Reconciliation Vote-a-Rama
The Senate will this week take up a package of legislation to dismantle Obamacare under a procedure known as reconciliation. Among its provisions, this legislation will repeal hundreds of billions in Obamacare tax hikes and dismantle the burdensome individual and employee mandates.
During consideration of this legislation, it is expected the Senate will vote on an amendment that would allow importation of foreign price controls for prescription medicine. Senators should vote no on this amendment. It is bad public policy, degrades the free market, and restricts medical innovation.
The amendment in question will likely allow the purchase of prescription medication from Canada. On its face, this proposal probably does not seem all-too controversial. After all, why should Washington prevent people from buying goods or services outside of US borders?
The answer is that allowing importation of medicine will also result in the importation of the price control. This is important because the U.S. is one of the few countries that allows drug prices to mostly be set by the free market – just like the vast majority of other goods and services.
In other countries, price controls are used by politicians as a way to promise voters “cheap” medicine – but with a catch. Since drug manufacturers are left with little or no profits, there is virtually no money left to develop the next generation of medicines.
In the U.S. things are different. Because prices are set by supply and demand – not government bureaucrats – innovators are able to continue financing cutting edge medical research and development.
Already, research and development is expensive and time consuming. It costs innovators an average of $2.6 billion for each new drug on the market. Importing price controls will only make things worse because there will be less capital available for this R&D.
In a world of free trade without market distorting price controls, there would be nothing wrong with this amendment, because innovation would be protected and the free market could determine prices.
But this is not the world we live in. Free trade means transparent prices with no taxes on trade and no price controls, and this is not the case when it comes to prescription medicine.
ATR urges all Senators to vote no on any amendment that imports foreign price controls on drugs. It is bad policy and will put medical innovation into a nosedive.