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K. Lloyd Billingsley - Contributor
[Courtesty of Pacific Research Institute]

K. Lloyd 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]

San Francisco Drug Policy Ignores Facts
Sets Bad Example…
[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 pricing.

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 all welcome.

copyright 2004 Pacific Research Institute

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