A coalition of 14 self-described “conservative, free-market organizations,” including The Heartland Institute, which publishes Health Care News, is urging Congress to oppose any proposals to allow the importation of foreign-made prescription medicines.
The importation of prescription drugs would essentially import other countries’ “market-distorting” price controls, disrupt innovation by U.S. drug makers, and ultimately increase the cost of health care, according to a letter the coalition sent to Congress on March 27.
“[A]lmost every country in the world has excessive price controls that hinder medical innovation,” the letter states. “In these countries, prices are often determined by politicians offering voters seemingly cheap medicines. In reality, the world rides on U.S. research and taxpayers.”
Despite sounding laissez-faire, importing foreign drugs would hinder free trade by imposing tariffs, barriers to innovation, and price controls, according to the letter. In addition, the U.S. Food and Drug Administration would have no way to verify the safety, authenticity, effectiveness, or national origin of imported drugs, the coalition wrote.
A “Healthcare Reform” paper distributed by President Donald Trump’s campaign in 2016 listed foreign-drug importation as a prospective administration policy objective.
Proof of Purchase
Sam Kazman, general counsel at the Competitive Enterprise Institute, which signed the letter, says drug importation would essentially impose price controls on U.S. drug makers.
“In practice, the importation of prescription drugs amounts to the importation of other countries’ price controls into the United States,” Kazman said. “Drugs are often cheaper in other countries because pharmaceutical manufacturers face various government threats, such as having their patents busted, if they don’t comply.”
Unable to compete with coerced low prices, U.S. drug companies would stop or reduce pharmaceutical research, resulting in fewer new drugs for patients, Kazman says.
“The end result of drug importation would be similar to what all price-control regimes produce: initially lower prices, followed by shortages,” Kazman said. “You’d see serious declines in drug research and development. The results—a lack of new drugs—might be invisible to consumers, but it would be deadly nonetheless.”
U.S. Innovation Crucial
Rea Hederman, executive vice president and chief operating officer at The Buckeye Institute, which also signed the letter, says the United States leads the world in new drug development because its pharmaceutical companies are allowed to buy and sell at market prices.
“Unlike other countries, the United States does not place price controls on drugs,” Hederman said. “As a result, research has found that Americans get access to new drugs faster than the rest of the world. Changing this policy would mean that Americans would have to wait longer for new drugs that could delay the onset of Alzheimer’s or help fight cancer.”
Price controls hurt everyone in the health care market, Hederman says.
“Whether it is a state legislator, a statewide referendum, or the federal fight over allowing the importation of prescription drugs, the main issue is a government-set price that discourages innovation and drug availability,” Hederman said.
Federal and State Concerns
Kazman says foreign-drug importation should concern state officials, not just members of Congress.
“States are an important battleground in the fight against government cost control of prescriptions drugs,” Kazman said.
The Ohio-based Buckeye Institute was the only letter-signer focused on free-market policy solutions for a single state.
Hederman says price controls imposed at the state level would reduce the supply of treatments for patients.
“This is not just a federal issue,” Hederman said. “States that implement price controls will see fewer drugs offered in that state market.”
The U.S. Department of Veterans Affairs (VA) prescription-drug system offers a cautionary tale for states that allow price controls to diminish drug supply, Hederman says.
“While many on the left point to drug costs for VA hospitals, the VA drug list is much smaller than comparable federal drug formulary lists like Medicare,” Hederman said. “The VA cost controls mean that there are fewer drugs available for veterans, and this pattern will be repeated if a state like Ohio duplicates the VA price control model.”
Prescription: FDA Reform
More than half of the world’s pharmaceutical and biotechnology research is done in the United States, where bringing a new drug to market costs an average of $2.6 billion and 11 years, the letter states.
Hederman says reducing FDA’s regulation of new drugs would help manufacturers provide medicines more quickly and less expensively.
“The creation and pricing of drugs are indeed a problem,” Hederman says. “Much of the problem stems from a slow, cumbersome FDA and problems with drug intellectual property rights.”
Instead of imposing new burdens, government officials should find ways to reduce restrictions on drug companies, Hederman says.
“The answer to drug prices is not more government control, but less, which will reduce drug costs by allowing for more competition from generics and will reduce the FDA approval time for new drugs,” Hederman said.
Jordan Finney ([email protected]) writes from Boise, Idaho.
“Coalition Letter Urging Congress to Oppose Importation of Prescription Drugs,” The Heartland Institute, et al., March 27, 2017: https://heartland.org/publications-resources/publications/coalition-letter-urging-congress-to-oppose-importation-of-prescription-drugs
Jordan Finney, “Former FDA Commissioners Ask Trump to Resist Drug Importation,” Health Care News, The Heartland Institute, May 2016: https://heartland.org/news-opinion/news/former-fda-commissioners-ask-trump-to-resist-drug-importation
Joseph and Diane Bast, What’s Wrong with Importing Drugs from Canada? The Heartland Institute, 2003: https://heartland.org/publications-resources/publications/whats-wrong-with-importing-drugs-from-canada