No Price Controls for the Sunshine State!

A Note From Americans For Tax Reform

From our recent blog on ATR.org:

In a new editorial, Importing Bad Ideas on Drug Prices, The Wall Street Journal criticizes legislation in Florida that would require the state to set up a program to import drugs from Canada.

The importation of drugs from countries with socialized medicine is a policy that has long been supported by U.S. Senator Bernie Sanders and opposed by proponents of free markets and limited government. Yet in Florida, importation has been advancing with Republican support. The WSJ editorial concludes:

“Democrats once pushed importation as disguised price controls, but Republicans who understand markets helped to stop it. With Republicans now aping Democrats, this is a dangerous moment for the world’s most productive and dynamic market for medicine.”

Indeed, the importation of drugs from Canada is a highly misguided idea. While importation may sound like a reasonable free market solution, it is actually a clever ploy to trick proponents of limited government into supporting socialist policies that would jeopardize the development of the next generation of life-saving, life-improving medicines.

Despite the lengthy, complex, and costly process for developing prescription medication in the United States, it is still the world’s freest market for medicine, as all other countries have price controls and other regulations in place that are designed to forcefully reduce drug costs. Since those pricing policies make it hard for manufacturers to recover the cost of making medication, they ultimately suppress innovation and result in the rest of the world freeloading off of U.S. investment in research and development.

The importation of price-controlled medication from other countries would come with the importation of foreign price controls into the U.S. In the end, the importation of foreign price controls would result in the same negative consequences as outright price controls – fewer resources available to invest in the research and development needed for future medications.

Adding insult to injury, it is also highly unlikely that importation would actually lower costs for patients. In their editorial, the WSJ raises skepticism about the practicality of importation and whether or not it would actually result in savings:

“One question is why Canada would allow the U.S. to siphon its drug stocks. Canada’s drug supply for 37 million residents isn’t brimming with extra products to sell to 21 million Floridians, even on a limited scale.

U.S. manufacturers sell drugs for Canadians to Canadian wholesalers. Companies are not going to sell Canadians more drugs so the product can be exported to the U.S. via price arbitrage, and such secondary sales can be prohibited in contracts. Canada could also ban such sales lest it risk losing deals on drugs for their own people.

Savings may also be elusive. When federal importation was floated in the early 2000s, an FDA analysis found that five of seven of America’s best-selling generic drugs for chronic conditions were cheaper than Canadian generics. One product didn’t have a generic available in Canada. This analysis is outdated but the basics are still relevant: Nine in 10 prescriptions in the U.S. are generic, versus roughly 70% in Canada, which means the U.S. enjoys much higher savings from generics.”

Despite the good intentions behind the importation proposals in Florida, they are still bad policy. The house importation bill — House Bill 19 — passed the full house last week, and the senate version — Senate Bill 1528 — which is different than what was approved by the house, will be considered by the Appropriations Committee on Thursday.

Read the Recent WSJ Editorial Criticizing Florida's Proposal

WSJ: Importing Bad Ideas on Drug Prices
Florida Republicans decide to imitate Vermont Democrats

“One feature of the political moment is that ideas that first appeared on the left (tariffs) are gaining support on the populist right. The latest example is a GOP plan in Florida to import prescription drugs from Canada, which is impractical, unsafe and unlikely to reduce prices at the pharmacy.”

Read the full WSJ Editorial at WSJ.com

Read Our Letter to Members of the Florida Senate

Dear Senator,

On behalf of Americans for Tax Reform (ATR) and our supporters across Florida, I urge you to oppose House Bill 19 and Senate Bill 1528, misguided pieces of legislation that would impose foreign price controls on prescription medication. Despite the good intentions behind these bills, if implemented, they would jeopardize the development of new medication and result in a number of other devastating consequences, while doing nothing to actually lower costs for patients.

HB 19 and SB 1528 would establish drug re-importation programs in Florida, allowing for the importation of drugs from Canada. On its face, drug re-importation schemes may sound like a reasonable free market solution, but in reality, they are a clever ploy designed to trick proponents of limited government and free markets into supporting socialist policies.

Despite the lengthy, complex, and costly process for developing prescription medication in the United States, it is still the world’s freest market for medicine, as all other countries have price controls and other regulations in place that are designed to forcefully reduce drug costs. Since those pricing policies make it hard for companies to recover the cost of manufacturing medication, they ultimately suppress innovation there and result in the rest of the world freeloading off of US investment in research and development.

In light of this, HB 19 and SB 1528 are very shortsighted “solutions.” The importation of price controlled medication from other countries would come with the importation of foreign price controls into the United States. In the end, the importation of foreign price controls would result in the same negative consequences as outright price controls – fewer resources available to invest in the next generation of life-saving and life-improving medicine.

The best thing state lawmakers can do to lower the price of prescription drugs and health care is to embrace free market solutions, which promote the competition that spurs innovation, improves quality, increases the number of available options, and naturally keeps prices low. As such, ATR opposes HB 19 and SB 1528, and urges lawmakers to vote NO.

ATR will be educating Florida taxpayers and consumers as to how state legislators vote on this and other important tax, regulatory, and economic matters during the 2019 legislative session. If you have any questions, or if ATR can be of assistance, please call 202-785-0266 or email info@atr.org

Sincerely,

Americans for Tax Reform