When a specific industry comes and puts itself forward as a special exception, the alarms bells should ring. Most industries - if they thought they could get away with it - would put the case for corporate welfare.

One industry claiming to be a special exception is the drug industry. They acknowledge that grey imports are good in general. It's just that in the drug industry, free trade is a bad idea. They have R&D costs, don't you know, and they wouldn't be able to develop new drugs if, for example, Americans could buy drugs from Canada. For good measure, they say that drug reimportation is a bad idea because of safety. This argument is mere scaremongering.

Drug companies do invest a good amount of money on R&D, about 10% of their turnover. Then again, Microsoft invests 17.3% of its turnover on R&D. Drug companies enjoy the highest profit margins of any industry in the US, nearly four times the Fortune 500 average. The fact is that drug reimportation would not hinder drug companies' ability to invest in new drugs. Its effect would be to push drug companies to ensure they sell to rich countries at a price that happily covers R&D.

Being against drug reimportation is the easy option for drug companies. In reality, it lets them charge consumers in each market as much as they can get away with. Free trade threatens their market power. Here, the interests of drug companies are directly opposite the interests of the sick. Blocking drug reimportation is corporate welfare at its worst.

Readers may be interested in a Cato Institute report: Drug Reimportation: The Free Market Solution.