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Wednesday, December 09, 2009

Small Biz Health Care Daily: Importing Price Controls

OK, let’s see if I have this straight. is reporting today that President Obama still supports the reimportation of prescription drugs. However, Obama’s own Food and Drug Administration opposes reimportation.

As a senator, on the campaign trail and in his budget, Obama has supported reimporting drugs. The House included reimportation in the health care bill it narrowly passed.

But the FDA letter regarding a reimportation amendment from Senator Byron Dorgan (D-ND) declared that “as currently written, the resulting structure would be logistically challenging to implement and resource intensive. In addition, there are significant safety concerns.”

That most certainly is a key issue. Even more daunting, however, is the fact that allowing for reimportation means importing price controls imposed by other nations.

Price controls, in turn, mean limiting potential returns. And given the high costs and high risks of researching and developing new medicines, this all adds up to less investment and less innovation. That is, the development of fewer life-enhancing and life-saving drugs.

For good measure, it is important to be reminded that this will impact small-to-mid-size entrepreneurial firms in the pharmaceutical business, and they turn out to be most of the firms in the drug business. As noted previously, in 2006, according to the latest Census Bureau data, 90% of pharmaceutical and medicine manufacturers had fewer than 500 employees. In fact, 56% had fewer than 20 employees.

Importing price controls is dangerous for business, and dangerous for consumers in a variety of ways. Let's hope the U.S. Senate has the good sense to reject such a reckless measure.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

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