The libertarian Cato Institute, in direct conflict with its allies in the Bush administration, will argue in a report to be released today that Congress ought to lift the ban on prescription drug imports and let the global marketplace sort out imbalances that leave Americans paying the highest prices in the world.
With nearly 2 million Americans already purchasing lower-cost drugs from countries such as Canada and Mexico, Cato's vice president for legal affairs, Roger Pilon, argues that it is politically and economically "unsustainable" for federal regulators to stop the flow of legal medications across the border.
In both the Clinton and Bush administrations, officials of the Food and Drug Administration said it is illegal and risky to import prescription medications. But a diverse array of dissenters -- from Republican governors to Democratic presidential nominee John F. Kerry (D-Mass.) -- has scored political points challenging those objections.
The pharmaceutical lobby has vehemently opposed efforts to legalize drug importation, and Pilon is not unsympathetic to industry concerns. In the 20-page analysis, he endorses the need for drugmakers to earn hefty profits as a way to guarantee investment in new therapies.
But he disagrees with the current system in which high prices in the United States underwrite the bulk of research and development for medications that eventually benefit the world.
Drug firms "would be 'forced,' in a word, to shift some of the true costs of modern medicines to those who have avoided paying them for years, thanks to the reimportation ban, and off the shoulders of Americans," he wrote. "Removing the reimportation ban should not be seen, therefore, as tantamount to reimporting foreign price controls."
Russell Roberts, an economist at George Mason University, agreed with Pilon's analysis of "free rider" countries that pay less than their fair share but take advantage of the latest pharmaceutical discoveries. But he said it would be a mistake for Americans to view free trade as a panacea.
Under Pilon's approach, "Americans will get a better deal," Roberts said. "But it won't be so much in lower prices. It allows Americans to share the burden of future drug discoveries with a wider pool of payers."
Instead of relying on the reimportation ban to boost profits, the pharmaceutical industry should take a tougher stance in negotiating prices with foreign purchasers, Pilon said.
"The better approach would be for companies to go to a country and say, 'We're going to give you a discount, but you have to police your borders and prevent exports,' " he said. "You have the incentive because you are getting the cheap drugs."
Despite overwhelming support in the House, the effort to lift the importation ban has stalled in the Senate. But Pilon foresees political trouble for President Bush if the restrictions stay in place.
"Senior citizens are a big voting bloc and a growing voting bloc," he said. "This is an issue of great concern to them."