Most Favored Drug Pricing

John Robb’s WeblogHere’s a BIG problem that if corrected can help our trade deficit and slow offshoring. Health insurance costs are expensive in the US. It makes US workers much more expensive relative to competitors globally (which in turn drives our trade deficit and offshoring). So why do we allow US pharms to charge us twice as much as they charge international customers? Drug costs are a HUGE part of healthcare costs. We need some drug price arbitrage fast (!) or some legislation that says that US prices for patented drugs (as a prerequisite for the patent protection)must be the same as the lowest price charged globally. [ John Robb ]

This seems like a great idea to me. It even seems to have a legalistic model in the “Most Favored Nation”:http://www.itds.treas.gov/mfn.html trading status. Why not apply a similar standard to patented items? Patent holders rights could be protected as long as the price of their governmentally guaranteed US monopoly match the lowest price they charge anyone anywhere in the world?

Free trade advocates notions of comparative advantage hinge in many respect on equal pricing in all markets. Increasingly however for IP related goods (a growing portion of the US economy) we are seeing vastly different prices in the US. All varieties of goods such as Music, DVDs, textbooks, books, etc. are priced dramatically differently. Industries such as Hollywood and publishers have even petitioned for laws preventing importing/exporting of versions from other countries.

Since the US government is granting a temporary monopoly to the providers, why not insist that they not use American protections to milk our consumers? We’d also end grey market importing in one fell swoop if items were priced the same everywhere.

We wouldn’t even have to implement price controls or any other item. The market could set the price, and would automatically adjust itself. The lack of political involvement in pricesetting would even help prevent more capitol hill influence on part of corporations lobbying for preferential regulation.

What do you think?