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Byron Dorgan, Pharmacist

The New York Times (rr) reports:

A bipartisan group of senators announced Wednesday that they had reached agreement on a bill to allow imports of lower-cost prescription drugs from Canada and some other countries.

Dorgan is the principle sponsor of the bill. Others waving it about include Kennedy, Snowe, McCain, Lott and Stabenow.

The Times article does not mention the possibility that easy imports from Canada may change the price American pharmaceutical companies charge Canadians. The Toronto Globe and Mail uses the story from the Associated Press which also ignores any possible ramifications for Canadians. Allowing drug re-importation is treated as a public service on the part of Canadians, something akin to selling Americans cheap wheat or lumber.

But Canadian drug prices aren’t lower because Canadians are better at producing low-cost drugs. They are lower because the Canadian government negotiates a single price for Canadian consumers. If Americans are allowed to import drugs from Canada, American companies will change the price they charge Canada or the Canadian government will have to get very involved in how drugs are distributed in Canada.

I’m in favor of allowing drug re-importation. Not in the name of cheaper drugs, which I suspect will turn out to be a phantom. I don’t think the US government should be in the business of enforcing the Canadian government’s drug purchasing system or price discrimination by US manufacturers.

There’s an interesting political economy challenge if the price differentials persist and if drug re-importation is not allowed. Lower Canadian prices will encourage the US government to become the single buyer here for American citizens and that is the road to ruining the US pharmaceutical industry.