Dollars and Jens
Friday, November 21, 2003
drug reimportation
One Kevin Hassett of AEI writes that reimportation of prescription drugs is probably dead, and says
This is good news for Americans because the alternative — extensive reimportation — would likely have destroyed the incentives that U.S. firms have to develop new drugs. Cancer patients hoping for a new cure for their disease could abandon hope.
Indeed, it is true that the lack of patent profits outside the United States makes it unappealing to drug companies to develop drugs they should, and that this would be worsened by allowing reimportation, so that overall costs of such a policy presumably exceed the benefits of it. The benefits, however, accrue entirely to Americans; my intuition is that the costs to Americans are probably less than the benefits to Americans. I'd be inclined to play nice on this issue, except that
  1. We would merely be taking the same sort of rent-seeking actions that those other countries have already taken, and
  2. we would be doing so in such a way that, when they knock it off, we will automatically knock it off as well; reimporting from another country only underprices drugs if they're underpriced in the other country.
To be fair, there are a number of goods that are priced higher in the United States than in other countries, and an element of price discrimination is probably economically optimal, so I would make reimportation illegal again if other countries quit screwing with markets to try to fleece us. I'm willing for us to carry to world's burdens because we're willing to pay more, but not because we deal with drug companies fairly and others don't.

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