In a new editorial, Importing Bad Ideas on Drug Prices, The Wall Street Journal criticizes legislation in Florida that would require the state to set up a program to import drugs from Canada.
The importation of drugs from countries with socialized medicine is a policy that has long been supported by U.S. Senator Bernie Sanders and opposed by proponents of free markets and limited government. Yet in Florida, importation has been advancing with Republican support. The WSJ editorial concludes:
“Democrats once pushed importation as disguised price controls, but Republicans who understand markets helped to stop it. With Republicans now aping Democrats, this is a dangerous moment for the world’s most productive and dynamic market for medicine.”
Indeed, the importation of drugs from Canada is a highly misguided idea. While importation may sound like a reasonable free market solution, it is actually a clever ploy to trick proponents of limited government into supporting socialist policies that would jeopardize the development of the next generation of life-saving, life-improving medicines.
Despite the lengthy, complex, and costly process for developing prescription medication in the United States, it is still the world’s freest market for medicine, as all other countries have price controls and other regulations in place that are designed to forcefully reduce drug costs. Since those pricing policies make it hard for manufacturers to recover the cost of making medication, they ultimately suppress innovation and result in the rest of the world freeloading off of U.S. investment in research and development.
The importation of price-controlled medication from other countries would come with the importation of foreign price controls into the U.S. In the end, the importation of foreign price controls would result in the same negative consequences as outright price controls – fewer resources available to invest in the research and development needed for future medications.
Adding insult to injury, it is also highly unlikely that importation would actually lower costs for patients. In their editorial, the WSJ raises skepticism about the practicality of importation and whether or not it would actually result in savings:
“One question is why Canada would allow the U.S. to siphon its drug stocks. Canada’s drug supply for 37 million residents isn’t brimming with extra products to sell to 21 million Floridians, even on a limited scale.
U.S. manufacturers sell drugs for Canadians to Canadian wholesalers. Companies are not going to sell Canadians more drugs so the product can be exported to the U.S. via price arbitrage, and such secondary sales can be prohibited in contracts. Canada could also ban such sales lest it risk losing deals on drugs for their own people.
Savings may also be elusive. When federal importation was floated in the early 2000s, an FDA analysis found that five of seven of America’s best-selling generic drugs for chronic conditions were cheaper than Canadian generics. One product didn’t have a generic available in Canada. This analysis is outdated but the basics are still relevant: Nine in 10 prescriptions in the U.S. are generic, versus roughly 70% in Canada, which means the U.S. enjoys much higher savings from generics.”
Despite the good intentions behind the importation proposals in Florida, they are still bad policy. The house importation bill — House Bill 19 — passed the full house last week, and the senate version — Senate Bill 1528 — which is different than what was approved by the house, will be considered by the Appropriations Committee on Thursday.