The Finch Formerly Known As Gold

8 October 2003

Flow control

Today the Department of Justice is seeking an injunction against Tulsa-based Rx Depot, a company used by thousands of consumers to import prescription drugs from Canada and elsewhere. Rx Depot's Oklahoma locations were closed by an earlier action; DOJ wants the remaining 77 stores in 26 states to shut down.

Inasmuch as the FDA does not inspect Canadian drugs, the DOJ's request is likely to rely heavily on safety concerns. Rx Depot counsel Fred Stoops scoffs: "It's not like we're buying these drugs from Afghanistan."

Even if the DOJ prevails, there will still be sources for Canadian drugs. Can the process be stopped at all? Robert Prather takes the long view:

I'm somewhat surprised — and pleased — to see drug companies such as GlaxoSmithKline hold their drugs off the Canadian market rather than see their U.S. market get lacerated. This behavior may help put an end to the free-rider problem that's caused Americans to pay inflated prices for drugs.

It proves that the drug companies do have some pricing power and it also, regrettably, proves that reimportation is a threat to R&D. If it were not they would go ahead and sell in these countries just to get the marginal profit from the sale of additional pills. It bodes ill for the long-term prospects of other countries that have benefitted from high American drug prices because the companies have shown they are capable of holding the drugs off the market. This may force other countries to drop price controls or risk losing the newest medicines until patent protection expires.

The best possible outcome?

The silver lining in this cloud would be if other countries actually begin to pick up a fair share of the R&D cost of drugs. They've been free-riders too long.

A push toward freer markets in those other countries? Certainly a boon, but probably not a likely prospect.

Posted at 8:07 AM to Soonerland

TrackBack: 6:30 PM, 1 January 2005
» Booting a few billion freeloaders from Pyrojection
Robert Prather reports that drug companies are beginning to hold their drugs off the Canadian market rather than see them bought up under our northern neighbors' ridiculous price controls and get reimported here at the same too-low price. It proves......[read more]