Drugs from Canada (2006 Aug)

by Barry A. Liebling

Several years ago large American pharmaceutical companies negotiated with the Canadian health-care system and agreed to sell some prescription drugs less expensively to Canadian distributors than to those in the United States. The result – consumers pay more for prescription medications in the United States than they do in Canada. Responding to the price disparity, large numbers of Americans have been purchasing their drugs from Canada. While obtaining most prescriptions this way is “technically illegal” for Americans, the United States government has not interfered with consumer purchases – until recently. In July 2006 The Wall Street Journal reported the United States Customs and Border Protection has begun to confiscate significant numbers of mail-order American-bound prescriptions.

Of course, American consumers who are being prevented from purchasing bargain-priced pharmaceuticals from Canada are frustrated and loathe that their government is thwarting them. At the same time, some pharmaceutical companies – concerned about a drop in American sales – are urging the government to enforce the prohibition on Canadian drug imports.

How this will sort out legally is uncertain. While laws should be written to protect each individual’s natural rights, laws do not always do this. Still, in principle, this apparent conflict can be resolved since ethics and profits should always work together.

Consider the key issues facing the three main players – consumers, the government, and the pharmaceutical companies.

In a free society consumers have the right to shop around and get the best legitimate deal they can for their medications. It is natural for consumers to look for ways to save money on prescription drugs and to hunt for bargain prices – which may be available at different drug stores where they live, at drug retailers in a different city or state, or even at establishments in Canada. There is no justification for proscribing consumers from buying drugs from vendors who legitimately own them.

The government’s proper role in this arena is to prohibit force and fraud. In this context “force” usually refers to theft. Villains who sell pharmaceuticals that “fell off of a truck” cannot be tolerated. Similarly, consumers who knowingly buy stolen drugs are reprehensible, and should be stopped.
From the beginning of the Canadian drug controversy the possibility of fraud has been used as a rationale for government involvement. There are counterfeiters all over the world who are selling phony prescription drugs disguised as brand-name pharmaceuticals. There is no question that this is a serious crime, and the law should intervene to apprehend miscreants. It is noteworthy, however, that counterfeit pharmaceuticals is not a problem that is special to Canada. Fake drugs might originate from anywhere – including from within the United States – and government action should protect against this crime regardless of its origin.

The plight of pharmaceutical companies is tricky. A wide range of critics have lambasted them for trying to preserve their United States revenues by urging the government to stop Canadian imports. Furthermore, interventionists who are hostile to free enterprise believe that pursuing profits is inherently suspect and that pharmaceutical firms ought to be compelled to reduce the price of drugs to all customers.

Take note that in a free society pharmaceutical companies have every right to seek and optimize their profits. They have to be careful, however, to employ tactics that do not violate anyone’s rights.

In fact there are many paths pharmaceutical companies can take where their actions are both ethical and effective in promoting their business. Two obvious examples come to mind.

First, without infringing on American consumers’ freedom, pharmaceutical firms could require Canadian distributors to agree to sell drugs only within Canada. Packaged drugs could be marked by the manufacturer to identify individual Canadian distributors. If these marked packages turn up in the United States the manufacturer will know which company has not lived up to its agreement – and future business with this distributor will be in jeopardy. Notice it is the distributor – not the American bargain-hunter – who is on the hook.

Second, a more radical solution to the pharmaceutical companies’ conundrum is to develop a single worldwide price for a prescription drug. This would require a tough stance on the part of the pharmaceutical firm that announces that everyone is getting exactly the same deal – regardless of where the purchaser resides. The worldwide price would probably be somewhere between the existing American high price and the Canadian low price. If the wholesale price of a drug is the same everywhere there is little incentive for consumers to seek bargains outside of the United States – and little reason for pharmaceutical executives to care where consumers buy their drugs.

While these two examples are not exhaustive, they illustrate that pharmaceutical companies can solve the problem ethically. There is no conflict between respecting everyone’s rights and commercial success.

*** See other entries at AlertMindPublishing.com in “Monthly Columns.” ***

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