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Reimportation ban should be lifted.

U.S. citizens pay far more than the rest of the world for American-made "miracle" drugs, yet laws prohibit buying those drugs abroad and reimporting them home. The ban should be lifted, contends a study by the Cato Institute, Washington, D.C., not to encourage reimportation but to allow incentives to surface that will force wider use of market practices worldwide. Free markets and competition, not price controls, ensure more and better drugs at lower prices, and a free market more adequately will distribute the huge research and development costs drug companies incur and pass on.

The reimportation ban shields drug companies from having to charge market prices to socialized medical systems abroad. Thus, the rest of the world rides free as Americans subsidize those systems--and that is politically unsustainable, as senior citizens and state and local officials have increasingly demonstrated.

With the ban lifted, drug companies still could try to maximize profits by segmenting markets and pricing differentially, but they would have to police those arrangements--not through an illegitimate statutory ban on reimportation but through no-resale contracts, limits on supplies, or export controls imposed by countries that bargain for lower prices, contends Roger Pilon, Cato's vice president for legal affairs, in "Drug Reimportation: The Free Market Solution."

If those measures proved inadequate for preserving such price discrimination schemes, however, drug companies "would have to raise prices abroad and/or reduce them here sufficiently to discourage the reimportation that would otherwise undercut their American profit-making market," writes Pilon. However, while lifting the ban, the U.S. government also must negotiate and police international trade agreements to ensure that patents are protected--ideally moving toward a world in which commercial and charitable undertakings are sharply separated, in particular, drug companies should not be viewed as charitable institutions.

All the drug reimportation legislation currently before Congress has difficulties, Pilon notes. Some proposed laws even would prohibit companies from taking legitimate measures to try to preserve market segmentation and likely would result in importing foreign price controls, thereby undercutting the profits needed for future R&D.

"The last thing we want," he points out, "is to move from a regime in which trade is restricted to one in which it is forced." A free market avoids those extremes. Let the market work, Pilon concludes, for "in an increasingly transparent world, free from political restraints, prices tend to move toward equality."
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Title Annotation:Pharmaceuticals
Publication:USA Today (Magazine)
Geographic Code:1USA
Date:Oct 1, 2004
Words:396
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