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Wednesday, October 07, 2009

Small Biz Health Care Daily: Reimporting Drugs?

The Senate Finance Committee avoided taking the misguided step of allowing for prescription drug reimportation. But when it gets to the Senate floor, Senator Byron Dorgan (D-ND) reportedly will bring up his drug reimportation bill as an early amendment to the health reform measure.

According to a statement from Dorgan’s office, his bill “will bring consumers immediate relief and will ultimately force the pharmaceutical industry to lower drug prices in the United States.”


There are three major problems with such a proposal. First, there are the safety risks, including counterfeit drugs (a growing problem in Europe, for example), and expiration, contamination and proper storage issues.

Second, just because drugs are purchased at a lower price and reimported does not mean that consumers will experience savings. A January 2004 study from the London School of Economics on parallel importing among various European nations found that traders benefited, but consumers did not.

Third, the reality is that reimportation is an attempt to import prescription drug price controls from other nations. The key reason why the U.S. leads the world in producing medicines that improve and save lives is because we do not impose price controls. After all, the economics of price controls are no mystery, i.e., the incentives to undertake the enormous risks and costs of research, developing and bringing new drugs to market are vastly diminished if the government limits prices, and therefore, returns.

Reimportation is no bargain for anyone -- especially if the U.S. wants to maintain a robust, innovative pharmaceuticals industry.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

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