Texas Policy Analyst Questions Economic Impact and Safety of Drug Importation
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The Austin American Statesman published this editorial by Russell Withers on September 20, 2017. Withers is general counsel at the Texas Conservative Coalition Research Institute in Austin, Texas.
Commentary: Sanders’ drug plan puts Texas patients, companies in peril
U.S. Sen. Bernie Sanders and some of his fellow lawmakers are attempting to pass a bill that would make it legal to import prescription drugs. They claim doing so would expand the free market – an interesting claim from a band of lawmakers led by a self-declared socialist.
The bill is a veiled attempt to import price controls into the United States, which would undermine the free market, hurt U.S. companies and ultimately put patients at risk.
In 2003, the Medicare Modernization Act included a provision that would have made it legal to import drugs from Canada — as long as the Health and Human Services Secretary could certify that importation would pose no additional risk to public health and safety and generate cost-savings for American consumers. To date, not a single HHS secretary has been willing to make either certification. Importation remains tightly restricted.
The Sanders bill would lift these restrictions and allow Americans to order medicines from foreign pharmacies. Supporters of the bill contend that this would expand access to cheaper drugs. They further argue that if we can trade clothing and timber with Canada and other advanced nations, we should be able to trade prescription drugs.
But prescription drugs are a unique product. Many governments, including Canada’s, impose price controls on medicines. These controls artificially deflate the prices of drugs.
If U.S. companies sell their products to Canada, and Canadian regulators impose price caps on the medicines and then sell them back to U.S. consumers, Americans effectively would be reimporting price-controlled medicines. That’s precisely the type of trade arrangement that would undercut U.S. drug manufacturers.
U.S. companies might try to avoid such price controls by only selling Canadian pharmacies enough medicines to meet the needs of Canadians. But Sen. Sanders’ bill outlaws this strategy. It contains a “forced sale” provision that would require American drug manufacturers to sell to foreign governments at the price and quantity they demand. This provision would undercut businesses’ ability to control their most basic functions: setting prices, product quantities and contract terms. Under that scenario, the market would not be “free.”
A recent Congressional Budget Office report estimates that importing foreign drugs would decrease drug spending by only 1 percent over 10 years.
Drug research is high risk. It takes scientists years of research and billions of dollars to bring a drug to market. If pharmaceutical companies don’t have a chance to recoup costs by selling medicines at market prices, they might stop investing in the development of new drugs.
Texas companies would suffer immensely. Texas is home to dozens of pharmaceutical and related companies. These companies support more than 190,000 jobs and generate more than $50 billion in economic output each year. Drug importation would undercut these businesses and put their solvency and workers at risk.
Over the past decade, most of the new medicines introduced throughout the world have been developed in America. To remain the top medical innovator in the world, the United States must continue to reward researchers and safeguard their intellectual property.
Drug importation also poses a safety threat. There’s no way to guarantee that patients ordering drugs from Canada would receive U.S.-manufactured or even Canadian-manufactured drugs.
The FDA and Canada’s corresponding agency have said that they cannot monitor the safety of drugs that enter the United States from Canada. Canadian authorities don’t check the content of packages brought into Canada but routed on to the United States.
Counterfeit drugs abound in other countries. These drugs are made with incorrect or contaminated ingredients and can lead to serious complications or even death. There are limited safety and enforcement mechanisms in Sen. Sanders’ bill to stop foreign pharmacies from selling fake drugs to online Canadian pharmacies that then resell the medicines to unsuspecting Americans.
The bottom line is Sen. Sanders’ proposed Affordable and Safe Prescription Drug Importation Act is neither affordable nor safe. It would hurt U.S. and Texas businesses, workers and patients. The Texas Congressional delegation should oppose this ill-conceived proposal.