Drug importation: Window dressing, band-aid, and illegal.

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Screen Shot 2013-10-30 at 2.12.57 PMToday we give a big shoutout to Paul Howard over at the Manhattan Institute. Howard is the director of Manhattan Institute's Center for Medical Progress where they write about key issues (mostly economic) facing the healthcare industry, and how misguided policies will affect you personally.

Howard s October 29th op-ed in Forbes.com entitled Maine's Dangerous Drug Scheme addresses the fallacy of the benefit of drug importation as well as explaning why, although it may be appealing to some consumers, it is simply a bad idea. And illegal.

He says, Earlier this year, Maine passed a law allowing residents and businesses to import drugs from approved overseas pharmacies in Canada, the U.K., New Zealand and Australia and the law went into effect October 9th. This is a bad law, unlikely to survive, and unwise in any case.

Why is this so? It is well known that drug prices in Canada and Europe, among others, are set by the government in other words, price controls. Pharmaceutical companies have long counted on the business model that allows them to sell deeply discounted drugs to other countries and make up the revenue by charging higher prices in the U.S.

But there are, of course, unintended consequences of this policy. For example, wealthier countries in Europe can now charge higher prices (although still far less than the U.S.). But in less affluent countries, such as Greece, where prices are lower, drug companies supply just enough medicine for Greece. These cheap drugs are often resold by pharmacists for a profit to wealthier countries where the drugs command a higher price. The result is obvious: Greece suffers from shortages.

And given this development, drug companies are rightfully reluctant to keep supplying poorer countries with their discounted products, since this is simply undercutting the pricing structure for the rest of the world rather than serving the people of Greece.

And there are even bigger consequences.

ACSH s Dr. Josh Bloom comments, Although people in the U.S. are clearly unhappy with the high costs of drugs here, they fail to realize that without this pricing structure even though some may find it unfair these drugs would not exist in the first place. And many of them are providing cures or revolutionary treatments in areas such as cancer, HIV, and hepatitis C. It is so difficult and expensive to discover and develop new drugs that companies have to make a profit someplace. And that place is the U.S., like it or not.

Howard also covers other issues, such as effective loss of patent protection, counterfeit drugs, the domination of generic drugs in the U.S., and how drug companies are increasingly facing a take it or leave it offer from many countries.

While Maine s policy may be politically appealing, it is short-sighted, poorly thought out and will do virtually nothing to help anyone.

We strongly suggest that you read Paul s op-ed in its entirety. It is very enlightening, as well as a little scary.