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Eliminate Medicine Shortages with Imports


Pharmaceutical drugs are in scant supply in the United States relative to their demand — a “serious and growing threat to public health,” says President Obama’s latest executive order. The number of prescription-drug shortages, the order continues, has almost tripled in the past five years, and half of pharmacists and purchasing agents are utilizing “gray-market” dealers.

According to Obama’s order, Food and Drug Administration officials are to press drug manufacturers for advance notice of halts in production, expedite regulatory reviews of new supplies and suppliers, and get the Justice Department involved to prosecute stockpiling and “exorbitant prices.”

The order might as well be a campaign speech, and a shortsighted one at that. One truth to come out of it is an acknowledgement of the magnitude of the problem. But not one of these intended actions, even if they are carried out, would increase production. On the contrary, the order is politically targeted to give the appearance of action while not rubbing vested parties the wrong way. It doesn’t resolve any of the underlying impediments, nor does it change any legal authority or funding flows.

The request for advance notice of production stoppages from manufacturers, for example, is just another onerous paperwork requirement, and it’s not clear what FDA officials would do with the notices anyway. Manufacturers have no need for more paperwork, and it will hardly incentivize them to produce more.

Expedited regulatory reviews from the FDA “to avoid or mitigate existing or potential drug shortages” might sound prudent, but the order carries the proviso that these must be done in a manner “consistent with its [the FDA’s] statutory responsibility to ensure the safety and effectiveness of the drug supply.” In other words, the relevant officials will take as long as they deem necessary, just as they already do.

Finally, the attack against supposed price gougers is the most counterproductive of the three requests. Allowing prices to rise would induce greater production and thus bridge the gap with demand. As basic economics dictates, a shortage occurs when there are impediments to raising the price — in this case, the array of federal intrusions.

However, the prevailing, artificially constrained prices, at least in some markets, promote hoarding and already mean that many physicians reject Medicaid and Medicare patients. The widespread presence of gray-market vendors, much like scalpers at sporting events, further highlights the unsatisfied demand. So, rather than demagogue about those who would raise prices in the presence of a shortage, federal officials ought to look at themselves as the source of the problem.

Contrary to the executive order’s assertions that many factors contribute to shortages and that we need a multifaceted (government) response, the drug shortage is painlessly fixable. Even if Obama is unwilling to dismantle the unconstitutional and destructive FDA, all he needs to do is look back at his own 2008 campaign literature:

Some companies are exploiting Americans by dramatically overcharging U.S. consumers … selling the exact same drugs in Europe and Canada but charging Americans a 67 percent premium. Barack Obama and Joe Biden will allow Americans to buy their medicines from other developed countries if the drugs are safe and prices are lower outside the U.S. (p. 4, emphasis mine)

The actions of the many Americans who risk penalties to sneak pharmaceutical drugs in from Canada affirm that there are plenty of drugs available north of the border, and at 35–45 percent lower prices. The Canadian Medical Association has estimated this illegal trade to be in excess of $1 billion every year.

Unfortunately, Obama has been unwilling to threaten the drug providers with unimpeded foreign competition, and he dropped that component from the 2010 healthcare reform. So you can add the above promise to the list of those that have gone by the wayside.

The willingness to criminalize medical alternatives is not unique to Obama, though. Just last month the U.S. Senate voted down, 45 to 55, a bill legalizing the importation of small, personal-use quantities of safe, FDA-approved prescription drugs from Canada. “We could be importing death. I am not trying to [be] dramatic,” said Sen. Barbara Milkuski (D-MD).

I have a hard time gauging whether anyone believes the sincerity of such outlandish statements. Not only do these words assume that private individuals and their physicians aren’t mature enough to decide for themselves — as though they want to import death — they also play politics with the lack of drugs in America, which is causing premature deaths and could easily be resolved.

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    Fergus Hodgson is host, editor, and founder of The Stateless Man radio show and e-newsletter and a policy advisor with The Future of Freedom Foundation.