Today the Senate spent a lot of time discussing by far the most ridiculous perennial of health care politics, the idea of “reimporting” prescription drugs from Canada. Pharmaceuticals are patented, so the general idea of a pharmaceutical company is to charge a lot more than the marginal cost of producing a pill for each pill. That’s how they recoup their R&D expenses and provide profits for the company. But by the same token, if a country adopts a law that says “if you want to sell Drug X in this country, you can only charge $X for it” then $X can be quite low and it’s still worthwhile for drug companies to make the stuff available. This is what most countries, including Canada, do but we don’t do it hear in the United States.
Consequently, people who live in states near the Canadian border have tended to notice that drugs are much cheaper in Canada and sometimes want to go to Canada to buy cheap prescriptions. There are various legal rules against doing this in the United States and a lot of wrangling over the issue, including today’s effort to give the federal blessing to reimportation. Bizarrely, Senators like Olympia Snowe, David Vitter, Chuck Grassley, and John McCain who are firmly against the public option are favorably disposed to this kind of proxy socialism.
It’s bizarre and it’s actually pernicious. There are some very real questions to raise about whether our current patent-based system is the best way to incentivize pharmaceutical R&D. But to consider shifting to another system that would allow for cheaper pill sales at pharmacies without sacrificing innovation, congress would need to face up to what it’s doing, which is considering whether or not it wants to impose price controls. This Canada stuff is a weird distraction from the actual issue about patents, price controls, R&D, deadweight loss, etc.