An Open Letter to Bernie Sanders

Dear Senator Sanders:

In a recent Facebook video, you deride trade barriers that prevent cheaper Canadian drugs from entering the US market.  You conclude that “that is why Americans are paying the highest prices in the world for their medications.”

You are absolutely right in this assessment.  Economics 101 teaches us that trade barriers raise the costs of goods sold domestically.  By opening trade with Canada (and other nations), the US could go a long way to reducing prescription drug costs here at home.

However, I wonder how you square this with recent pronouncements during your presidential run that free trade and imports (such as trade with China and NAFTA) are harming Americans?  If what you said during the campaign is true, then importing Canadian drugs will only harm Americans: it’d cost American jobs and only serve to line the pockets of drug companies who opt to have drugs made in Canada.  If, as you argued during your campaign, America is made stronger by limiting imports and that paying higher prices for consumer goods is a good thing, then it must also be true for drugs.  Likewise, if paying lower prices for drugs imported from elsewhere is a good thing, then it must also hold true for other goods imported from other places.

I hope you can see where the confusion lies with your contradictory positions.  I look forward to an explanation from you.

Sincerely,

Jon Murphy
George Mason University
Fairfax, VA

4 thoughts on “An Open Letter to Bernie Sanders

  1. Jon

    You should be aware that most name brand drugs sold in Canada are made by US companies. In fact there are very few major drugs made anywhere else.

    Here’s the Deal: The US is the largest and richest market for pharmaceuticals in the world, and most manufacturers target that market first and foremost. Due to FDA requirements, many major drugs cost over $2 billion and take up to 10 years to bring to market. To ensure a return on this major investment, US drug companies are offered monopoly patent protection for their products, and the ability to sell at essentially any price they choose.to US consumers. The recent Epipen fiasco is one manifestation of this system.

    Canada (among others) with a socialized healthcare system can not only negotiate lower prices due to the enormous volumes involved, but can and do threaten to not honer US patent protection unless they get US name brand drugs at low prices. US manufacturers may agree to these lower prices if they can at least cover their manufacturing costs in Canada, while US consumers pay most of the cost of development, which is most of the cost involved.

    For those reasons, re-importing brand name drugs from Canada would mean loss of revenue from US sales, and hence little or no investment in new drugs by US manufacturers.

    There are generic drugs made in Canada by Canadian manufacturers, but it’s not clear whether importing those would provide any savings over similar US made generics.

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    • Ron,

      OK, those are interesting and relevant points. As always in healthcare, nothing is simple.

      I know you think this (and everything else) would all improve a lot under an-cap but wouldn’t patent protection be absent everywhere under an-cap? That would certainly be expected to make the most popular and expensive prescription drugs much cheaper. I get that part.

      But shouldn’t we expect everyone to then be a lot less interested in R& D for any new drug they would have no hope of protecting with a patent? Yes, I know development would be cheaper and you would have the added profit of being able to sell more drugs that didn’t work. Even so, who would want to spend a lot developing new products ideas that anyone else could also use to compete with them.

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      • Greg

        Good questions, and I don’t have pat answers because as you say, “nothing is simple”. I don’t think that saying is any more true of healthcare than any other vital good or service, but that’s a side issue.

        As a bigtime Bastiat fan, I believe in these wise words to live by: “Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race.” as a bigtime free market fan, I believe the free market is the best possible system for following that guideline.

        Patent protection creates a virtual cartel of large pharmas by preventing new entrants into the market, and ensuring profits to those few, thus promoting the interests of producers, and not consumers. Some people believe medical care is too important to leave to the market, and must instead be directed from above by bureaucrats and regulators. This may be your view as well, but I disagree.

        But shouldn’t we expect everyone to then be a lot less interested in R& D …

        Well, we would certainly expect Big Pharma to be much less interested, but much R&D is supported outside of Big Pharma by non-profit organizations funded by private donations – a much more market oriented method in which consumers choose by directing their donations to what they believe is the most important medical issue, as opposed to Big Pharma’s directing efforts to the potentially highest revenue source.

        Yes, I know development would be cheaper …

        Development would be cheaper without the incredible testing and validation requirements (read “cost” in time and money imposed by the FDA). In addition there is a significant cost in lives imposed when major lifesaving drugs take 10 years or more to bring to market. If a drug saves 1400 lives a year, some large number out of 14,000 lives lost could have been prevented by earlier release. A goal of absolute safety for any drug isn’t possible and shouldn’t be pursued.

        …and you would have the added profit of being able to sell more drugs that didn’t work.

        It’s not clear why you believe that would be a major issue for medicine any more than it is for food, clothing, housing, education, or transportation. – other important goods and services that come to market pretty quickly after innovation without a decade of mandatory testing. I’m not aware of major problems with food that is poisonous, cars that won’t run, or clothing that doesn’t fit or that falls apart immediately. The market mostly regulates these things, and would do so without state control. . We DO see that highly regulated, government monopoly education provides an inferior product. It seems certain that a free market in education would be a vast improvement.

        Even so, who would want to spend a lot developing new products ideas that anyone else could also use to compete with them.

        There have been many important drugs that provided the developer with little in the way of monetary compensation. Jonas Salk is one example. His motivation was something other than personal profit. Since ideas are not scarce, I believe multiple innovations from numerous sources would improve the human condition much better and faster than patent protection for a handful of large corporations currently does.

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