A primer on the economics of re-importation of prescription drugs

Using the basic tools of intermediate microeconomic theory (such as taught at the level of undergraduate or first-year MBA courses), in this primer I present a framework that helps the reader gain an understanding of economic issues underlying the current political economy debates concerning the impacts on consumers (both US and ex-US) and on prescription pharmaceutical manufacturers of moving to a world with more uniform pricing across countries than is currently the case. The impact on global revenues and profitability of moving from differential to uniform global pricing is relatively modest if confined to the North American (US and Canadian) market, with only Canadians bearing the brunt of higher prices, a most unlikely political economy outcome. The impacts on global revenues and profitability from global uniform prices become considerably larger, however, when one incorporates the much larger entire ex-US market, including not only Canada, but also Europe, Asia and other countries. I conclude with some observations on likely longer term outcomes. Copyright © 2007 John Wiley & Sons, Ltd.