Government meddling causes high drug costs
Published: Thursday, March 16th, 2006
Our southern border isn’t the only one where drugs come into this country illegally. Thousands of Americans buy prescription medications on the Internet and have them shipped from Canada. They spend less money and most likely get medicine identical to what’s available at the corner pharmacy. Everyone’s a winner. Not exactly. Reimporting medicine into this country is a federal crime and U.S. Customs and Border Protection officials have stepped up enforcement of the law in recent years. In November, the agency added non-prescription medications to the list of items to be seized. According to an Associated Press report, Florida Sen. Bill Nelson examined Customs data and said nearly 13,000 packages of medicine have been seized since then. That’s a lot of folks either doing without or paying twice for their medicine. The root of the problem of high prices for medicine isn’t greed on the part of pharmaceutical companies; it’s government meddling in the marketplace. Canada and many European nations limit the price companies can charge for medicine sold within their borders. They’re not doing anyone any favors. Pharmaceutical companies rely on profits to fund research and development of new medicines and stay in business. Price caps limit those profits and shift the burden of R & D costs to those countries that allow the free market to set prices. That shift boosts prices in those markets, meaning those consumers subsidize the medicine costs in markets with price caps. Rising medical costs tempt some to call for laws that allow cheaper medicines from overseas or price caps in the United States. Both are bad ideas. Allowing Americans to purchase medicine from foreign stockpiles would limit the medicine available in those countries. Canada and other nations aren’t going to allow their citizens to go without medicine, so they’ll likely pass laws banning such exports. And the pharmaceutical companies aren’t fools; if they see U.S. sales dip as foreign sales rise — and the resulting profit loss — they’ll cut back on the amount of medicine sold overseas. After all that, Americans will be right back where we are now. A better solution would be to get the rest of the world to pay its share of R & D costs by eliminating price caps. Then the market could set prices, rather than government. Price caps don’t limit profits; they simply shift them to other consumers.
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