Free-market opinions on drug reimportation

By Alex Singleton | 12 July 2005

The Cato Institute takes an interesting line in its report Drug Reimportation: the Free-market Solution which says that drug reimportation should be allowed. The analysis argues that letting overseas drugs into the US will lead overseas governments to place less downward pressure on drug prices in order to keep on being supplied. The result: the cost of developing new drugs will be more fairly distributed between countries. This is an important argument but perhaps it does not go far enough. Given that drug companies currently enjoy monopoly profits, three to four times the average profit level of Fortune 500 companies, there would be no problem from the point of view of R&D;, even if the only effect was that the US prices dropped to European levels.

Prof. Tyler Cowen at George Mason University says that drug reimportation might be a good way of reducing the power of the FDA, America's drug regulator:

So, if we allow reimportation, the FDA will either have to become much stronger, and more intrusive (in conjunction with other governmental agencies, such as customs perhaps), or the FDA will cede much of its effective power, while likely keeping its nominal powers. But in the long run it is hard to see how to enforce restrictions on drug importation, especially once reimportation is legal. Drugs don't take up much space, and the exact nature of their content is not easily tested. You can have a customs dog sniff for pot, but that same dog cannot tell whether a drug is of pure quality of adulterated, or is something else altogether. If libertarians think that the FDA does more harm than good, perhaps they should welcome reimportation as moving us toward a greater reliance on markets.

Finally, Lew Rockwell at the Mises Institute says:

The issue is very simple from the point of view of free trade. Should Americans be able to buy American-made prescription drugs from other countries at cheaper prices than they would have to pay in the US? Of course, the answer is yes. All that free traders are asking is that US firms be willing to let Americans buy US drugs at market prices when they are imported from other countries. The only possible reason to pay more would be if you want to dump vast sums of money on the US drug industry for no good reason. Consumers might want to - they can send Eli Lilly a fat check - but they shouldn't be forced to.