Elizabeth M. Whelan at National Review Online writes about the likely result if Congress endorses the importation of drugs from countries with price controls (like Canada).
The reason that Rx drugs cost less in countries like Canada is that international laws on commerce treat prescription drugs differently from other consumer products. U.S. pharmaceutical companies are required under a 1994 treaty to sell their drugs at drastically cut prices to countries with drug price controls. Any pharmaceutical company that fails to comply can be punished by having its patent protection taken away. It is as if you were selling books in the United States for $10 and when you offered them to Canada, officials there told you that they would either give you $4 or violate your intellectual property rights and make copies of the book without your permission, in the name of educating Canadians.
The United States, which does not currently have price controls, produces nearly 90 percent of the world's supply of new pharmaceuticals. Countries with price controls do not produce any significant supplies of new drugs — instead, the innovators have fled to the U.S., where they have the protection of the free-market system and protection for intellectual property they create.
If companies can sell their drugs only at cost — and cannot recoup more than the approximate $800 million it costs to bring a drug to market — companies will stop making new drugs, just as they have in other countries with price controls.
Americans’ pharmaceutical companies are launching drugs that dramatically reduce cholesterol and blood pressure...drugs that not only significantly reduce the recurrence of breast cancer but show promise for preventing such malignancies in the first place.
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