Friday, May 04, 2007

More Economic Populism

Fire of Liberty

Sally Pipes, president and CEO of the Pacific Research Institute, has a good piece over at RealClearPolitics which points out how Senator Dorgan(D-ND) and fellow Democrats are so fired up to promote populist notions like which include the importation of cheaper drugs from places like Canada(Which are American drugs adjusted by Canadian price caps) that they are willing to push through legislation that forces US pharmaceutical companies to sell drugs at a price that these foreign countries determine. Here's a sample of Pipes' wonderful piece:

It's not deal-making -- it's bully bargaining.

Imagine, for example, if you could walk into Best Buy and set your own low price for a 60-inch plasma television. This might sound great at first. But it wouldn't take long before the store, no longer able to ensure the stream of revenue it needed, would have to drastically reduce its offerings -- or possibly even shut down entirely.

Free trade and fair business dealings require consent from both parties; any law requiring forced sale would undermine the underlying principles of both.

U.S. pharmaceutical companies are no different from Best Buy - or even Ben & Jerry's. Every business must mark up its products to turn a profit. If politicians single out drug companies to deny them a return on their investments, those companies will simply stop investing in the development of new drugs.

On average, it takes $800 million to $1 billion to bring a new drug to market. Investors are willing to take that chance precisely because the rewards of developing a cure for lymphoma, AIDS, or diabetes are considerable. If the profit incentive is removed, the miracle cures that mark America's drug industry would vanish.

Dorgan's amendment is an unprecedented piece of anti-American legislation. It would force U.S. drug makers to sell to foreign exporters at prices dictated by outside governments. It's even worse than if Congress simply imposed price controls on the industry - which would, at least, be honest. Dorgan's amendment is an attempt to slip in price controls through the back door.

Further, according to a 2003 study from the London School of Economics, a forced-sale provision wouldn't even lead to lower prices at the drugstore. Instead, only the middlemen -- those foreign pharmacies that purchase the drugs in bulk and resell them -- would benefit.

Yet forced sale proponents push ahead.

So in an effort to promote their agenda, Dorgan and his friends will impose stealth price caps on the drug companies that will cause the supply to go down thus pushing up the cost of medicine which will be passed on to the consumer. I'd say that this nation could do better than this.

No comments: