Thursday, November 23, 2006

Patents and Drug Imports

According to this article:

Members of the House and Senate are gearing up for a renewed push to change federal law and permit broader imports of prescription drugs from Canada and elsewhere, where certain medicines can cost less than two-thirds what they do in the United States. Their hope is the imports will drive down prices at home.

So, let me get this straight. The government grants 20 year patent monopolies to drug firms (and others, of course). Then, when the drug companies charge high prices, the government expresses shock, and takes action to undermine the monopolies they granted.

There has to be a better approach to this issue.

One thing that is not clear to me is why the foreign prices are lower. If it is because of price regulation in the foreign country, my sympathies lie with the drug companies, who are now seeing the effects of foreign regulation exported to the U.S. market. On the other hand, if the low prices are because the drug companies simply charge less abroad (e.g. if incomes in a particular country are lower), I'm not as sympathetic. I'm not convinced that governments should be acting to provide drug companies with separate markets in which they can price discriminate.

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