Here is just one among many, many, others:
In the New Hampshire debate, McCain asserted that corruption is the reason drugs currently cannot be reimported from Canada. The reason is “the power of the pharmaceutical companies.” When Mitt Romney interjected, “Don’t turn the pharmaceutical companies into the big bad guys,” McCain replied, “Well, they are.”
There is a place in American politics for moralizers who think in such Manichaean simplicities. That place is in the Democratic Party, where people who talk like McCain are considered not mavericks but mainstream.
Republicans are supposed to eschew demagogic aspersions concerning complicated economic matters. But applause greets faux “straight talk” that brands as “bad” the industry responsible for the facts that polio is no longer a scourge, that childhood leukemia is no longer a death sentence, that depression and other mental illnesses are treatable diseases, that the rate of heart attacks and heart failures has been cut more than in half in 50 years.
The full article can be found here.
McCain is for McCain, and no one else. The reason’s republicans like myself dislike him is cause he’s a political opportunist of the worst kind.
Speaking for myself his illegal immigration bill was to sanction human trafficking of which several Latino’s bought into it hook line, and sinker.
It was to boost his own political power, and nothing more.
He along with Kennedy corrupted the process of which bush put into action, which was equality for ALL Latino’s “Not just one group with in the Latino Community”.
So these days if you are about having the government set up laws that prevent you from importing products, that means you are a Republican, and if you support free trade you are a Democrat? When did this come about?
Wal-Mart does the same thing. They might have one price for a product in Michigan and another, lower price in California. What if I have a friend in California buy me that product and ship it to me for less than what I would pay in Michigan. Is that wrong? What if Wal-Mart lobbies Washington to prevent that? Do you think the free market thing to do is to give in to the lobbyist and make laws that restrict my abilities? I thought you supported free trade, HP. I’m with McCain on this one.
If you have the strongest proponents (Republicans, economists, and general right wing groups) of free trade suddenly argue against free trade in one specific instance there is a high possibility that there is more to the details than meets the eye.
And a further look at this reveals just that. Those against ‘free trade’ in pharmaceutical drugs (which is, btw, a majority of economists - the very people who believe near unanimously in the benefits of free trade) are not against free trade per se, they are against pharmaceutical trade with countries that have price controls on pharmaceutical drugs.
Under the current system we have now, the United States is the only remaining developed country that allows the price of pharmaceutical drugs to reach market prices. This is very important to pharmaceutical companies as it allows them to recoup the very expensive cost of R&D (estimated around 600 million/drug). However, most other countries do not - they set stringent price controls on what price is allowed to be paid for a certain drug (yet another drawback of Single-Pay healthcare). And as is usually the case with any price control, it is set far below the market value (though above manufacturing cost), resulting in significant loss to pharmaceutical drugs. But since pharmaceutical drugs can recoup most of their costs in the United States, they sell their drugs to these countries anyway - deciding that a tiny profit is better than no profit at all.
But what do you think would happen if these drugs were now allowed to be re-imported into the United States legally? You could make a profit by buying drug X in Canada and selling it at a fraction of its price in the United States…thereby undercutting the pharmaceutical drug price. This would result in less innovation and drug R&D.
This is not free trade in the traditional sense, this does not increase efficiency, on the contrary, it increases corruption and ‘rent seeking’, reducing efficiency and in the long run, innovation and cures for dangerous diseases.
McCain knows this. He has enough political knowledge and economic contacts to know what the ramifications of his decision are. But instead of taking the right road, he decides to take the more political advantageous one…and in the process, reduce the quality of pharmaceutical drugs, which, in the long term can reduce the quality of living of us all….but hey, atleast it increases the chances of his electability, right?
You make a good point on the fact that free traders would take your position. I could certainly be wrong here. But I draw conclusions based on the merits, not nose counts, so I need to be convinced.
What I’m thinking is this. Let’s suppose we allow the re-importation of drugs. Suddenly the pharmaceuticals would probably say forget it. We’re not sending drugs to Canada. Otherwise we won’t be making profits in the U.S. This would put pressure on the Canadian health care system. They would have to pay something closer to market prices to attract the drugs.
As it stands Canada reaps the rewards of development funded by U.S. health care participants without having to shoulder any of the burden. This drives up our costs further than they would otherwise be. We shoulder the worldwide burden. Why not change the system to encourage other countries to bear the brunt as well? Once again it seems to me that getting government out of the way would be the best solution.
I’ll tell you my honest position. I actually think that many drugs don’t do people a whole lot of good. Drug companies, like lobbyists, pay doctors and government officials, and this leads doctors to prescribe drugs that are really unnecessary (note how in Stossel’s program the free market doctor was quick to prescribe generic drugs as opposed to the “brand new” extremely expensive drug). That’s based on a lot of reasearch I’ve done, and I’m not here to argue the merits of this point, but to make a different point. Let’s suppose I’m right. Let’s suppose Lipitor (which is extremely expensive) is actually useless (this is honestly my view.) Now let’s suppose we allow free trade with Canada. That is, cheap importation. Canada is now pressured to pay market prices. This encourages them to look into the effectiveness of the drug. I suspect they would conclude that it wasn’t effective, so they wouldn’t pay market price. This is great, because it gets more information to the public, and perhaps Americans would stop spending billions on this product.
Now, if I’m right, then you can understand why pharmeceutical lobbyist hand over large amounts of cash to politicians to pass laws disallowing importation. If these drugs don’t work, then big pharm would be obligated to spend additional billions buying off Canadian politicians and the Canadian equivalent of the FDA. Otherwise the whole thing would be exposed for the sham that it is, and they wouldn’t make any money on this horrible drug that does more harm than good.
My position is still getting government out of the way is the best option. Allow free trade, and watch what happens to the market.
The problem with this is that you are somewhat correct, pharmaceutical drugs are rarely the bombshell people make them out to be, especially when you compare them to alternative - non-name brand generic drugs, and/or the drugs already available. But this is the way it is with all innovation. The latest Lexus is not that much better than the Lexus of last year, but still represents progress in the right direction.
But you cut this “marginally better” line of progress and with time you will notice a significant difference (like say, comparing a 1980 Lexus to a 2000 Lexus). And since this deals with human life, and life saving drugs, the cost of this is infinite.
You argue that allowing re-importation of drugs might put pressure on the Canadian (and all other governments that do the same thing) government causing them to adopt market prices instead, but this is unlikely considering the nature of pharmaceutical drugs and the political incentives behind government healthcare. Since the drugs are only “marginally” better and market prices are much higher than price controls currently in effect, it would be easier (or, I should say, more politically advantageous) for Canadian politicians to stop buying drugs all together since the victims of such a decision are invisible (or a small minority, and one could argue only marginally worse off) while the victims of paying a higher cost for healthcare (higher taxes) are more widespread and THE political killer for any politician. In other words, politicians, forced to choose, would likely choose lower taxes to new drugs, resulting in less innovation (btw, this is another reason why single-pay is so dangerous, putting the funding of healthcare in the hands of politicians gives them a great incentive to cut down on healthcare costs - which again, is why single-pay healthcare systems ration much more stringently than the USA and have inefficient price controls). For more on this topic read this and this from the Economist.
The latest Lexus is not that much better than the Lexus of last year, but still represents progress in the right direction.
But the 2008 model costs 50 times more than a 2007 with zero miles. The U.S. is being asked to pay 50 times more so that Canadians can enjoy the progress that occurs year after year. That’s not a system that I think should be encouraged by passing legislation restricting trade.
In other words, politicians, forced to choose, would likely choose lower taxes to new drugs, resulting in less innovation
That’s called freedom, HP. If they as a government decide they don’t want to pay, that’s their choice. Do you think people should be obligated to pay more for blenders so there is more blender innovation, or more printers so there is more printer innovation? Why not just get the government out of the way and see what happens. It usually works out better.
The key to me is incentives. Is there still a profit motive if importation is permitted? Absolutely. It may mean they won’t export to Canada until they are willing to pay market prices, but they can still profit on those that are willing to pay.
Forget borders for a moment. Imagine that McDonalds sold burgers to white people for $1 and to hispanics for $2. You say fine. You’re liberterian, so you want them to be free to charge whatever they want to whoever they want. But that system works both ways. Freedom for them is freedom for you, so you decided to have a white person buy your burger for you and sell it to you for $1.25. But then the McDonalds lobby bought off some politicians and disallowed this. You’d be ticked. They operate according to a free market, but they won’t let you. Is that OK in your world?
I am not arguing that politicians shouldn’t do what the voters ask. I am not arguing that the current system with Canada is fair. What I am arguing is that legalizing the re-importation of drugs would work against healthcare innovation. That’s it.
You write,But the 2008 model costs 50 times more than a 2007 with zero miles. The U.S. is being asked to pay 50 times more so that Canadians can enjoy the progress that occurs year after year.
On the contrary, I could make a stronger argument (see my previous post) that if re-importation of drugs were legalized the costs would be higher than your figurative amount of “50 times”, significantly higher. Again, because politicians would choose lower taxes to greater innovation pharmaceutical companies will no longer sell to Canada and other price control governments (or sell them less than they do now, in a more controlled environment), leaving them with a smaller pool to recoup their costs…resulting in higher prices for drugs and/or lower innovation. In other words, “free trade” in this case would likely result in the very opposite outcome of what free trade usually leads to - that is higher prices.
Your analogy ignores a very important distinction here - and that is the much deserved patent protection pharmaceutical drugs deserve for their product. Your argument, taken to its logical level, is tantamount to arguing that government protected patents should be abolished because they reduce freedom and there would still be some incentive left to innovate. If you want more freedom fine, but don’t say that it wont reduce innovation.
Listen, Mr. Central Planner, you don’t know how the incentives would shake out. You assert that they wouldn’t be willing to pay more for drugs. You don’t know that. People suffering from illness can form a pretty powerful special interest group with real pull with the public, and hence with politicians. This means increased resources for big pharm and even greater innovation. But who knows. Let’s try a free market system and see where it takes us.
Remember that Canada is really participating freely here. They can’t force drug companies to sell them drugs. They decide if they think the drugs are a value to their customers and they purchase on that basis. If the price isn’t high enough the drug companies don’t have to sell. It’s no different from a group of people, say Catholics for instance, approaching Honda and saying they all want an Accord, but they won’t pay more than $15K. Honda is free to sell or not. Then the Catholic should be free to re-sell to a non-Catholic, even if the non-Catholic doesn’t get the same deal from Honda.
I think your point on patents is irrelevant. Replace the hamburger with an iPod or an Accord and the point is the same. I’m of course fine with patent rights, and nobody else has the right to create and sell an iPod other than Apple. But if they have one price for Mexicans and another for white people, and they buy off politicians to prevent white people from selling at a reduced rate to Mexicans, that’s clearly wrong, and a violation of the principles of free markets. If I buy it it is my property, and I should be allowed to do what I want with it. I can’t duplicate it and sell tons of them, because I violate their design efforts, but I can pass it to the next person, just as I can sell a DVD to a friend.
Listen, Mr. Central Planner, you don’t know how the incentives would shake out.
You are right, I don’t know for certain…but neither do you. I’ve laid out exactly why I believe it will lead to less revenue (which translates to less innovation) to pharmaceutical companies. Let me recap on my assumptions:
1. Pharmaceutical innovation (like all innovation) tends to progress only at the margin…when you consider the alternative drugs available.
2. Politicians hate raising taxes.
3. Politicians control the limit of the price control.
4. Because of 1, 2, and 3 above, governments, forced to choose, would likely choose lower taxes to new drugs (resulting in less innovation and more expensive drugs in the U.S.)
5. As a rebuttal to your ‘possible scenario’, I pointed to this link, which writes,
In other words, pharmaceutical companies are unable to negotiate higher prices right now with the same incentives they would have if the U.S. allowed the re-importation of drugs, so it seems unlikely that everything would suddenly change.
6. I am comforted to know that the majority of those who make it their sole purpose to study incentives (economists) agree with me.
In conclusion, you are right, neither of us knows for certain what will happen but a betting man would take my scenario over yours in a heart beat.