The McGill Report
When it Comes
to Drugs, Trust the Grannies
Rochester, MN --
Granny knows best.
That's the real lesson of Gov. Pawlenty's bold plan to have Minnesota
help its citizens buy cheaper drugs in Canada than they can buy here
in the United States.
Defying the giant drug companies spending millions to spin the governor's
plan as anti-innovation and as a grave threat to Americans' health, the
caravans of grannies have continued driving straight up into Canada.
And thank God for that. Too wise to fall for "big pharma" spin,
citizens are insisting on their right as citizens to play
the role of consumer to its logical end. That is to seek the best possible
product at the lowest possible price. That's how our free market system
As a result, mass civil disobedience by our society's honored elders
is pushing America toward a decision on the truly fundamental question
underlying this and every free trade vs. protectionism debate.
That question is, do we want to be a society that erects ever-higher
barriers to free trade in the world? Or do we want to become a more open
society commercially, making it easier for products of foreign origin
to be sold in the United States and for products made in this country
to be sold in foreign lands?
By putting the free trade question starkly before the country, the state
of Minnesota, via the Pawlenty plan, is doing a great service.
Now that we Minnesotans have become the nation's de facto leaders in
the free trade movement as regards prescription meds, it's worth a little
time to think it through.
There are two levels to consider. First, whether we think free trade
in general is a good idea. Second, whether we think this is a good instance
of free trade or whether, due to its particularities, it merits exception,
in which case the drug giants should be granted protection from global
The classic case in favor of free trade is simple.
"The advantage of free trade is that you make more efficient use
of the world's resources," says G. Edward Schuh, professor of international
trade at the Hubert Humphrey Institute in Minneapolis. "You improve
the income of everybody." Under free trade, nations will produce
goods in which they have a "comparative advantage," and they
will trade with other nations where they do not. Everybody wins.
Few challenge this in theory, and arguments for protectionism,
the opposite of free trade, usually plead for exceptions. Common ones
are for national
security, the need to apply sanctions against political enemies, the
need to protect "infant industries" and so on. None of these
exceptions substantially apply in the case of reimported drugs from Canada.
Many moral arguments are also made for free trade. Among them are that
countries that trade with each other are less likely to make war against
each other; that a door opened by trade allows ideas like democracy to
pass through later; and that free trade, by broadly diffusing economic
decision-making, puts a safety check against the power of the state.
Opponents of the Pawlenty plan offer two main arguments.
First, they say that drug prices are low in Canada because
of state subsidies or price controls. By allowing reimportation of
the United States will therefore be "importing" price controls,
which is bad economics.
But wait. The U.S. drug companies are smart. If cheaper drugs started
pouring into this country en masse, they would probably tell the Canadians
to either raise prices or they would stop selling to Canada. Fearing
the latter, Canada would likely lift its price controls and thus prices,
at least partially.
It wouldn't make our seniors happy, but the drugs would probably still
be a bargain. Most important, the mechanism of the free market, extended
across national borders, would have moved overall prices to a level where
the efficient use of resources was maximized.
Second, Pawlenty's opponents say that if reimportation
became widespread, American drug companies would, in retaliation, stop
selling drugs to
Canada. This in turn might cause Canada to "seize patents" and
start making the patented drugs themselves, thus causing great loss to
But are we in America really going to adjust our present pricing policies
even one iota based on totally speculative projections of what would,
in any case, be a matter of massive international patent theft? To do
so would be like submitting to blackmail even before it happened.
Seeing no way to qualify this instance of free trade as deserving of
special protectionist care, we revert to the positive case for free trade.
Freer drug reimportation would make it tough for the drug companies
for a while. But they are big boys. They will survive and improve, too,
for having to make adjustments to the realities of global competition.
Most important, why shouldn't the rigors of market capitalism
-- which "big
pharma" so strongly recommends the Canadians adopt -- apply to them?
Free trade is good medicine for everyone in the world.
Let's thank our steadfast grannies for the reminder.
Copyright @ 2003 The McGill Report