March 30, 2004

Voting to Kill Canadians VII

National Review has a good article drug reimportation that goes into a lot of the political ins and outs of the issue. John Graham is absolutely correct when he describes the issue as a stalking horse for those who would want drug price fixing in US law.

One thing I hadn't noticed that I found intriguing is that lawmakers could quickly, and successfully establish the same effect on drug pricing that would occur by reimportation by making provisions that prevent domestic price arbitrage. Hospitals and other large pharmaceutical buyers have lower prices than retail pharmacists can get. Contractually, it is illegal for wholesalers to leverage that price difference and arbitrage away the price difference.

So why don't the politicians do it? Well, because if they did, the hospitals would find drug shortages and rising prices on their menu as volume based price tiering disappeared. It would quickly become very expensive to be hospitalized as hospital costs soared. The wrath of the voters would be upon any politician who would be stupid enough to try reimportation style legislation when everybody involved could vote in his reelection. If this were not true, it would be much easier to do this without an international border and treaties to get in the way and it would already have happened.

Invalidating certain contract clauses is not a violation of interstate commerce. Some states, for example, allow companies to disclaim implied warrenties. Others make such contractual language inoperative in those states. It would be no different for, let's say Rod Blagojevich to propose a bill to do just that for Illinois hospital contracts. The little guy who doesn't have the big negotiating power of Cook County, could simply go through a wholesaler instead of a retail pharmacy and bam! problem solved.

There would be a Republican Governor and Legislature after the next election.

Problem solved indeed.

Posted by TMLutas at March 30, 2004 08:59 AM