Congress
is soon expected to consider whether U.S. consumers should be able to
purchase medicines from abroad. The legislation to allow drug
re-importation is expected to include a provision that represents one
of the most destructive government interventions into free markets
since the New Deal.
Called "forced sale," the provision would compel American companies to sell drugs to any foreign re-seller planning to re-import them back into the United States, and they will be required to sell them at a price and in quantities dictated by the United States government.
Proponents of drug re-importation comprise an odd mix of ideological bedfellows. On the left, advocates of nationalized health care believe it's unfair for Americans to pay higher prices for brand-name prescription drugs than Europeans and Canadians do in their price-controlled systems. On the right, avid free-traders argue that the ban is an unjustified barrier to free trade, which keeps prices high.
Pharmaceutical companies argue that although the ban is imperfect, it is essential to lessen the damage caused by the World Trade Organization's Trade-Related Aspects of Intellectual Property Rights (TRIPS). This international agreement permits countries to revoke patents in "circumstances of extreme urgency" or for "public non-commercial use."
What this so-called "public interest" loophole means in countries with price controls is that foreign governments have enormous bargaining power when it comes to "negotiating" prices with U.S. pharmaceutical manufacturers. TRIPS empowers these countries to make U.S. companies "offers" they can't refuse.
In our market economy, businesses have the right not to sell a product or to sell it only on acceptable terms. Forced-sale provisions revoke this integral principle. Through forced sale, the U.S. government would decide to whom a company will sell its goods, how much of those goods it will sell, on what terms, and for what price.
Proponents argue that it's the only way to bring lower prices into the United States. But forced-sale provisions won't result in significantly lower prices; they simply will create a market for foreign re-sellers that can buy U.S. drugs at extortionately low prices, export them back into the American market, and then sell them for considerably more.
That's not free trade, either. It's government-managed trade through a particularly obnoxious government regulation. Whatever one's opinion on the current re-importation ban, no real free-trader could possibly support coupling its repeal with a forced-sale mandate.
If, as free-traders contend, the point of lifting the importation ban is to remove an artificial government barrier to trade that keeps prices "artificially high," then coupling that repeal with a new forced-sale provision is unnecessary. If drug re-importation won't lower prices without some new onerous government intervention, then it is clear the motivation for lifting the ban goes far beyond removing an impediment to free trade; it includes importing foreign price controls into the United States via the back door.
Since when do free traders support Congress setting prices?
If foreign buyers are to have the right to re-import prescription drugs back into the United States, then certainly domestic sellers should be free to determine the terms upon which they will export those drugs to begin with.
It would be ironic - but no less tragic - if price controls were smuggled into the United States through a forced-sale mandate cloaked in the rhetoric of free trade.
Lawrence A. Hunter is a senior fellow at the Institute for Policy Innovation and the former staff director of the congressional Joint Economic Committee.
