Bloomberg's Cynicism
Just when you thought Mayor Bloomberg had run out of ways to put the squeeze on commercial enterprise in New York, hizzoner fetches up on the bandwagon of those seeking to buy prescription drugs in Canada. The scheme — first reported by our Dina Temple-Raston — would involve joining with Illinois and some other states in petitioning the Food and Drug Administration to allow states and cities to buy prescription drugs north of the border. The philosophical underpinnings of the idea are straight out of Hillary Clinton's presidential campaign.
It is true that at first blush the idea appears to harness market forces in the name of the public welfare, an irresistible combo to political types. Drugs in New York are expensive, after all, and, with Canada imposing a price control regime, they are cheaper just across the Niagara. So, the argument goes, why not engage in a little bit of opportunistic price arbitrage? What's good for our senior citizens is good for New York. But in choosing to buy drugs in a price-control regime, what Mr. Bloomberg is really doing is striking at the property rights of the innovators, including New York's own Pfizer.
America is the last big important free market for drugs in the world. Companies here don't have to labor under price controls and so are free to collect on the enormous investments it takes to develop new drugs. This means drugs cost a lot. But it has also meant that we have been able to enjoy use of so many life-prolonging drugs that otherwise might never have been invented. To pull drugs out of Canada, instead of buying them here, is to erode that investment fund.
There is an argument — William Safire made it in his wonderful fashion in the New YorkTimes on Monday — that the big drug companies, or "Phanny Pharma" as the columnist calls them, are only getting what they deserve for willingly cutting prices to sell into regimes like those that obtain in Canada or Europe. Not only has this practice "invited Americans to go where the bargains are," Mr. Safire says, "but it has also invited U.S. politicians to call for foreign prices on products bought by U.S. state and local governments. And there go billions in private capital and earnings needed for costly new research into new cures and treatments."
Mr. Safire argues that no new laws are needed to stop what he calls "our subsidy to foreigners that cannibalizes our home market." Our drug marketers, he asserts, can just apply the irrevocable law of supply and demand by raising overseas sales prices to include the cost of research, thereby enabling them, he says, to lower prices here somewhat. Or they could restrict supply to markets like Canada to make it harder for outlets there to provide for both their own markets and ours.
In any event, the mayor's cynicism — he's scheduled to announce this stunt with the governor of Illinois at City Hall today — is fraught with dangers for our own economy. It gets people used to the idea of an entitled price. It advances the arguments of the socialists at home. As these ideas spread, the drug companies will take fewer risks and have less capital to invest in new products. Eventually companies like Pfizer will be feeling the pinch. Surely the mayor is smart enough to realize this. It may be that he figures this process will take a while, well past the date when term limits will have him back in the private sector.
