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The Impact of Drug Reimportation and Price Controls: The U.S. and Massachusetts

October 21, 2004
By David G. Tuerck, John Barrett, Douglas Giuffre, and Zaur Rzakhanov

Motivated by the price difference between Canadian and U.S. pharmaceuticals, U.S. consumer groups and the media have been pressuring legislators both at the state and federal levels to lower domestic drug prices.

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Motivated by the price difference between Canadian and U.S. pharmaceuticals, U.S. consumer groups and the media have been pressuring legislators both at the state and federal levels to lower domestic drug prices.

The most politically appealing approach so far has been some form of drug reimportation policy, in which brand name prescription drugs that are made in the United States and sold and shipped to other countries—usually at lower prices than U.S. citizens pay—are then sold and shipped (i.e., reimported) back to U.S. consumers.

Since reimportation is simply a way to import price controls from other countries without explicitly adopting them in the United States, the economic consequences of reimportation are roughly the same as directly imposing price controls.

Reimportation or price controls, while yielding lower drug prices in the short run, could have a significant negative impact on drug development and innovation, as well as on the regional economies in which the pharmaceutical and biotechnology industries play an important role, such as Massachusetts.

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