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Just Say No

Republicans and Democrats in Congress are considering drug reimportation to lower prescription drug costs. It sounds good, but it's a bad idea.

11:40 AM, Jul 22, 2003 • By FRED BARNES
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ONE OF THE TASKS of conservatism, perhaps the chief one, is to oppose ideas that would provide an attractive payoff now but would be harmful in the long run. For example, yes, giving a lot more money to the poor would be nice, but over time it creates welfare dependency and the pathologies that go with it. So conservatives oppose anything more than subsistence welfare. Of course they're attacked for being cruel and hard-hearted. But that comes with being a conservative. The criticism is too much for some conservatives and they're constantly in search of ways to show how kind and generous they are.

Which brings us to the subject of drug reimportation, set for a vote in the House of Representatives this week. It would allow American drugs that sell for less in foreign countries to be reimported and sold here. The idea certainly has superficial appeal. It would provide at least some cheaper drugs now and might even drive down the overall level of drug prices in America--for a time. The long-term impact, however, would not be benign. Quite the contrary, it would lead to fewer wonder drugs--for cancer and Alzheimer's and other diseases--emerging from the research and development pipeline of pharmaceutical companies. That is why reimportation is not a savior but a menace, why it is too high a price to pay for quick relief on drug prices.

The issue was bound to bring out the faintheartedness of some conservatives, and it has. A Republican congresswoman from Missouri, Jo Ann Emerson, insisted on a House floor vote on reimportation, with no weakening amendments allowed, in exchange for her support in June for the Medicare reform bill that includes a prescription drug benefit for seniors. House speaker Denny Hastert agreed and the Medicare bill passed by one vote. The reimportation measure is sponsored by two Republicans, Gil Gutknecht of Minnesota and Dan Burton of Indiana, and backed by other conservatives. It has a good chance of winning approval, despite the opposition of the entire House Republican leadership.

The argument for reimportation is that it promotes free trade. This is not exactly true. American drugs are less expensive in Canada and other countries because their governments impose price controls. Do we normally allow foreign governments to export their price controls to the United States at the expense of American companies? No. "All U.S. trade treaties, without exception, permit restrictions on foreign imports that are traded unfairly," wrote Stuart Eizenstat, a lobbyist for the pharmaceutical industry, in a letter to Hastert. It would be one thing if, say, Canadians exported cheaper drugs produced in Canada. That would be free trade. Reimportation is dumping.

The pressure for reimportation stems partly from the current unpopularity of corporate America. Pharmaceutical firms are especially loathed because they make large profits and, often but not always, charge high prices. But it's the big profits that prompt entrepreneurs to go into the drug field in the first place and risk billions on research and development in hopes of creating wonder drugs on which they can recoup their losses and then some. Their record of producing innovative new drugs is astonishing. Sure, government research helps. But it plays a minor role. Of anti-AIDS drugs presently on the market, 57 of 64 are the product of private research alone.

That Americans are upset by high drug prices is hardly surprising. Few credit the pharmaceutical industry with reducing their doctor's visits and prolonging their lives. And when they hear foreigners get the same drugs for less, they become madder still. For politicians, the natural response is to give their constituents what they want--lower drug prices. Liberals, contemptuous of the profit motive anyway, regularly step forward with proposals for direct price controls and they've long favored reimportation's indirect controls. Many Americans, maybe even most, will cheer them and their conservative allies on. It's left to sturdier conservatives to consider the downside.

As luck would have it, we've seen the downside. It's Europe. Price controls have strangled Europe's once innovative pharmaceutical manufacturers. Today wonder drugs come almost entirely from American companies. Reimportation will trim their profits and, more important, stifle their zeal to produce life-saving and lifestyle-improving new drugs. And the world will be worse off--in the long run. It's the thankless job of conservatives to remember that.

Fred Barnes is executive editor of The Weekly Standard.