Evaluating the Pros and Cons of Importation

Published February 1, 2004

Managing Editor’s note: On October 23, 2003, The Heartland Institute hosted a National Symposium on Drug Importation featuring elected officials from Illinois and policy experts from Canada and major U.S. think tanks. Joseph Bast, president of The Heartland Institute (publisher of Health Care News), delivered concluding remarks, from which this essay is drawn.

Whether or not to allow drugs to be imported from Canada is not a simple issue. Over the course of the conference, I heard seven good reasons why we should import drugs from Canada, and eight good reasons why we should not.

The Case for Importation

(1) Many people are paying too much for their prescription drugs or can’t afford to buy them at all. The state of Illinois can’t afford the 10 percent and 12 percent annual increases in the amount they are spending on drugs. We know that drugs in Canada are cheaper, so it’s an obvious opportunity to cut costs and possibly, for some of these people, save lives.

(2) Canadian drugs are safe. Critics cannot point to people who have died from drugs that were imported from Canada. They say, “well, just wait until the next news cycle,” but that hasn’t happened yet. Right now, a strong case can be made that current levels of importation are safe.

(3) Consumers should be free to buy a legal product from a willing seller. As a libertarian myself, I think that should be true in a wide array of areas. Why should we make an exception in this case?

(4) International trade is a source of tremendous consumer benefit. Any argument for trade restrictions has to overcome the strong presumption in favor of free trade. How is this product so different from nearly all other products that it justifies a ban on international trade?

(5) There is nothing in the U.S. Constitution that says the federal government should protect me from Canadian drugs. If it’s not in the Constitution, it’s not within the power of the federal government to do it. It should be delegated to state and local governments. They should be able to make their own choices on this issue.

(6) Senator Chris Lauzen pointed out what he thought were excessive profits on the part of prescription drug companies, which he thought indicated there was a lack of competition in this market. If that’s true, what we’ve got now is not really a free market. Companies that want to engage in price discrimination ought to be required to enforce resale contracts themselves.

(7) Senator Lauzen and some of our audience members said repeatedly that price discrimination is simply unfair. Lauzen said it is wrong that some people are being charged twice or three times as much as other people. People are right to be angry about it, and elected officials are being called on to do something about it.

The Case Against Importation

(1) Consumer safety trumps consumer choice in this case. Why? Because “let the buyer beware” doesn’t work when you’re dealing with prescription drugs. Even an expert can’t distinguish a safe and effective pill from a counterfeit pill or a substitute, contaminated, or expired pill. And once they have entered the country, tracking and removing these poisons would be extremely costly.

(2) Cheap imports mean drug companies are going to have to cut their prices; they’re going to have less money to put into research and development. That would dry up the funds that make a very innovative, productive industry possible. The result would be lost jobs and fewer new lifesaving drugs.

(3) Importation means importing Canada’s price controls. Throughout history governments have tried to put price controls on various products. It has never worked. It’s led to distortions, evasions, black markets, waste, and inefficiency. The same thing will happen if we attempt to impose price controls on drugs.

(4) Drug importation is the first step toward greater government control over the prescription drug industry. Right now the government exercises massive control and interference in other parts of the health care system. The drug industry is probably the freest part of the health care industry. Importation would be the first step toward bringing the drug industry into the same kind of restrictions, regulations, and price controls that have made a mess out of the rest of the health industry.

(5) Importation violates intellectual property rights, patents in particular. Importation says that if a patent has expired or isn’t honored in any country, it doesn’t have to be honored in the United States. This vitiates any patent protection. Without strong patent protection, you will see less innovation and fewer lives saved by new drugs.

(6) Importation is not a long-term solution. Companies will simply export fewer drugs to Canada. Since Canada’s market is very tiny compared to the U.S. market and since it imports most of the drugs it needs for its own residents, within a year or two the price differential would disappear, much to the disadvantage of Canadians, and we will have gained very little.

(7) There are alternatives. Right now, 5.5 million patients get free medicine from discount cards provided by major pharmaceutical manufacturers. All of the major drug companies have discount card programs that give drugs at very low prices or even for free to people who are senior citizens and low-income. They also give substantial discounts to Medicaid programs and to state employees.

(8) Litigation looms. If you work for the state of Illinois or are a retired state employee or if you’re on Medicaid, under Governor Blagojevich’s plan, you would be receiving drugs imported from Canada and not inspected by either Health Canada or the FDA. If one of those drugs is found to be counterfeit or contaminated or expired or in some other way a threat to your health, who do you hold accountable? Do you sue the guy who sold it to the state? Do you sue the state for allowing these drugs to be provided to you? Do you sue the original manufacturer for failing to prevent the fraud? It becomes very confusing, and in confusing situations, I have noticed that lawyers make tons and tons of money and the victims typically get very little.

Joseph L. Bast is president of The Heartland Institute. His email address is [email protected].