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January 7, 2004
Good Sense Wins a Round
Regular readers will know that I often rant about pharmaceutical price controls. The issue of Canadian drug reimportation is what usually sets me off, but that's far from the only border where pharmaceuticals can be profitably arbitraged. Take the countries of the EU, for example. There's no central EU health plan (not yet, anyway - can you imagine what an empire-sized bureaucracy that would be?) Each country's national health plan negotiates its own price. And some of them are indeed lower than others (Spain, for example.)
So, what happens is just what you'd expect would happen. People try to buy in the cheap places and sell in the more expensive ones, which activity has probably been going on since the goods involved were spear points and mastadon tusks. The middlemen are happy; the drug companies aren't. The only way they've been able to do anything about it is to try to restrict the amount of wholesale stock that makes it to the lower-priced markets, which is the same thing that we now see happening here with the Canadian pharmacies.
Bayer got dragged into court a few years ago for doing just that, and they lost their case on antitrust grounds. Fines ensued, and Bayer appealed to a higher court, which ruled in their favor in 2000. But another appeal went through to the European Court of Justice, which has just ruled in Bayer's favor again, to the delight of the pharma industry. Bayer's comment was particularly pithy: they expressed relief that they "are under no obligation to supply the entire European market from the member state with the lowest state-regulated prices." Just so.
It's not not just the pharma industry that applauded this news - car prices are just as out of whack across Europe, for example, and the same sort of games are played. As you'd expect, I agree with the court's decision, too. I'd much rather live in a world without price controls at all, but if we're going to let governments restrict the price of goods, then I think we should give the producers the option to restrict their supply. Trying to have it otherwise is like legislating sunny weather and free ice cream, which would be vote-getters, too, come to think of it.
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