K. Lloyd Billingsley - Contributor
[Courtesty of Pacific Research
Billingsley is Editorial Director for the Pacific
Research Institute and has been widely published on topics
including on popular culture, defense policy, education reform,
and many other current policy issues. [go to Billingsley index]
Francisco Drug Policy Ignores Facts
[K. Lloyd Billingsley] 1/23/04
The San Francisco supervisors have enlisted their city in the
quest to reimport cheap prescription drugs from Canada. They
thereby provide a lesson in bad government and poor economics.
Other cities, as well as California's state government, would
be wise not to follow their misguided example.
Thanks to the Internet, Americans can already purchase drugs
manufactured in the United States at Canadian prices. Canadian
Internet pharmacists are making a killing supplying the U.S.
market one consumer at a time. But the pharmacists are concerned
that group buyers will increase demand while causing pharmaceutical
companies, who after all invent and supply the product, to further
restrict the supplies they send north.
When demand increases
and supply constricts, the result is shortages, higher prices,
or both. The increased prices and scarcity would
be in Canada, not in American cities. David MacKay, head of the
Canadian International Pharmacy Association, says the firms he
represents don't want to build their business on the "backs
of Canadians." But someone has to bear the burden of below-market
Until now, it's been the U.S. consumer who supplies the revenues
necessary for companies to invest in the next generation of breakthrough
drugs. Given the economic structure of the pharmaceutical industry
- high up-front research costs followed by relatively low marginal
production costs - firms can offer many consumers discount prices
and remain profitable.
But everybody cannot get a discount. It would hardly be a victory
for the consumer if governments force the sale of pharmaceuticals
at prices below levels necessary to ensure revenues to develop
the next generation of life saving and enhancing drugs.
New research by the FDA shows that Americans who buy drugs in
Canada in hopes of saving money could pay much more for certain
medicines than if they had stayed home and bought generic versions.
A 2001 Canadian study showed that a full 75 percent of the 27
best-selling generics cost less in America. In a recent price
check, generic Prozac was $13.19 for 100 20-mg pills, a bargain
compared to $49.78, the next-cheapest price in other countries.
Facts and realities, however, have seldom impeded crusading
politicians from posing as champions of the masses. That is particularly
true in San Francisco where, as The Economist recently pointed
out, a candidate for mayor can be described as a right-wing exploiter
on the grounds that he operates a business.
What the supervisors really want is to import Canadian price
controls - a bad idea. California already imitates Canada too
much, with rampant political correctness and the quest for government
control of health care. The supervisors are apparently unaware
that as crusading American politicians go north, embattled Canadians
travel south to get advanced drugs that are unavailable in Canada.
Instead of launching misguided and counterproductive drug schemes,
city and state officials should concentrate on the job they were
elected to do - running their respective cities and departments.
Prescription drug policy should be based on facts, not posturing
and wish lists.
The issue deserves a full debate, and PRI will host just such
an event on January 27 in San Francisco. Journalists, politicians,
consumers, state officials, and San Francisco supervisors are
2004 Pacific Research Institute