Not so fast

0 Comments | Gazette, The (Colorado Springs), Oct 18, 2004

There are probably few Americans who don't know someone -- a parent, grandparent, child or friend -- who is laying out a lot of money for prescription medicine. As the population ages and researchers find new treatments for once-deadly diseases, the pharmaceutical industry gains prominence in our lives. That's what's behind one of the key campaign issues in this election -- reimporting medicine at cheaper prices than Americans are paying.

During the second presidential debate, when President Bush was asked about his resistance to reimportation, he missed the chance to put this issue to rest. He answered that he supported the idea, as long as the safety of the drugs could be guaranteed. Although it's possible for unscrupulous merchants to package placebos and pass them off as the real thing, that's not the biggest hitch in plans to reimport medicine U.S. companies have sold to overseas customers.

Reimportation supporters point to low prices in other countries to boost their claim that U.S. pharmaceutical companies are gouging Americans. What they ignore is that those nations' governments use price controls to limit what manufacturers can charge. The price often is unrelated to the cost of producing the medicine. For now that's acceptable to U.S. drug makers because the United States is their largest market. Higher U.S. prices pay for research and development of new medicines, advertising and other costs involved in producing and marketing their wares. Foreign consumers pay a lower price for their medicines by not shouldering any research and development costs while Americans pick up the slack. Reimportation would change that balance, but not necessarily for the good of Americans.

The global market for prescription drugs is more complex than those favoring reimportation are letting on. In their simple formula, drug makers sell medicines to foreign companies who then resell them to Americans at cheaper than U.S. prices. Reimportation assumes manufacturers would continue to sell the same or greater volume of drugs overseas while their U.S. profits plummeted. That's not likely to happen. Manufacturers would probably limit overseas sales to what they believe is the true market volume. If that were to happen, the whole reimportation plan would fall apart.

A more market-friendly approach would be for the U.S. government to drop the reimportation ban and foreign governments to allow a global market to determine the true price of medicine, according to the Cato Institute's Roger Pilon, writing in The Wall Street Journal. That should lower prices for U.S. consumers as foreign consumers pick up their fair share of the costs of bringing drugs to market. Pilon says producers could discourage "parallel markets," such as reimportation, by using no-resale contracts, limiting exports or raising prices overseas. Many European markets bar no-resale contracts, so American manufacturers would likely use either or both of the latter practices to ensure profits, says Pilon. That would lead the market to equality, he notes, which would render the safety question and reimportation arguments moot.

Pilon concluded by pointing out that a healthy dose of market principles is the right prescription for the high price of prescription drugs. That's a treatment plan we'll sign onto.

Agency goes wild honoring workers

Someone once said that the most frightening words in the English language are, "We're from the government and we're here to help you." A recent story from the nation's capital indicates that government employees might be more frightening when they help themselves. To the federal Treasury, that is.

The Associated Press reported last week that the Transportation Safety Administration held an awards ceremony last year that cost taxpayers nearly half a million dollars. The AP story, based on a TSA inspector general's investigation, noted that the event was held at one of Washington, D.C.'s swankiest hotels. TSA officials say it was the only venue available on Nov. 19, 2003, the agency's second anniversary. We wonder how much extra that empty symbolism boosted the cost of the event.

We're not against recognizing government employees for a job well done; they're human and appreciate the occasional pat on the back. However, we do object to forking over $200,000 to fly 600 awardees and guests to Washington and put them up at a luxurious hotel. It would be a far better use of taxpayers' money to recognize good work at the employees' home airports and maybe fly in a TSA executive or two for the presentations.

Those executives, by the way, weren't overlooked by TSA bosses. They received cash bonuses at a higher rate than officials at other government agencies. The inspector general's report noted that 76 percent of TSA executives received bonuses in 2003, while other agencies gave bonuses to 49 percent of their executives. Worse still, there are no objective criteria for awarding bonuses at TSA. Investigators found no supporting documentation for bonuses in 38 percent of the cases they examined.