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Commentary

Seniors, Be Careful What You Wish For
Seattle Post-Intelligencer, 12-3-06

The Post–Intelligencer explains why drug importation is an attractive political policy, but one that would inevitably depress medical innovation.

The new Democratic congressional majority hasn't refined its health agenda yet, but getting more senior citizens access to cheaper drugs sold in Canada is sure to be right up there.

And, why shouldn't it? Prescription drugs cost less in Canada, even U.S.–made ones. Many of the big fans of importing drugs from Canada represent states that border on Canada—Sens. Byron Dorgan of North Dakota and Olympia Snowe of Maine. Others, such as House Democratic leader Nancy Pelosi, have merely heard about the deal the Canadians offer. Their constituents see that Canada's state–dominated system gets its citizens better prices.

These days, grandparents are like professional traders, regular arbitrageurs. They demand lease contracts tight enough to make car dealers squeal and hunt the Internet for the best prices on everything from mutual funds to condominiums.

It seems only right that this crowd should be able to add their Lipitor or Fosamax, to name two senior staples, to that list of savvy transactions.

In the longer term, this story of market transactions is not so benign. Grandparents who can order from Canada can also order from South Africa, Asia or Europe. In the end, the effect will be to force the companies to cut their prices in the U.S.

That would be just fine, except that drug companies need U.S. profits to fund new drug development. What U.S. politicians ought to be doing is helping those companies defend their rights overseas and in Canada so that other countries pay full price for a valuable product.

Without the cash, the drug companies will stop innovating. If you think this is so much pharmaceutical–industry spin, consider Europe, the original drug innovator.

Over the years, governments and insurers have forced companies to drop their prices below U.S. levels. Importing or re–importing from other European countries, Africa, or wherever is cheapest, has also put pressure on prices. European drug companies have moved much business to the U.S. Or they have stayed in Europe, and curtailed availability of drugs to European patients.

Fuzeon, a new anti–retroviral for HIV, is a good example. Fuzeon takes 106 steps to produce, and costs $20,000 per patient for a year in the U.S. In Europe, however, as Roger Bate of the American Enterprise Institute points out, government budget caps have limited the drug's availability, even though the maker, Roche Holding AG, is based in Basel, Switzerland.

Bate says the other drugs that are hard to get in Europe tend to be the costliest—anti–cancer drugs, for example. Europe spends relatively more on surgery or medical treatment because it caps drug spending.

"If you want to know what the U.S. will look like if the government prices down in the U.S., think worse than Europe," he says.

In other words, there is an additional contract at issue here, beyond the short–term one between the octogenarian and the Internet pharmacy. It is the intergenerational contract between senior citizens and their great–grandchildren. If cheaper drugs today mean no new drugs tomorrow, seniors may reconsider whether the Canada deal is one they want the Democrats to make.



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