Economist: FDA at Fault for High Drug Prices

January 29, 2004 ( - At a time when an ever-lengthening line of state and local government officials sign onto the Canadian prescription drug reimportation bandwagon, a famous economist blames the government for high US medicine prices.

US Nobel laureate Milton Friedman told a San Francisco forum on US reimportation of Canadian drugs – a controversial if not increasingly popular notion – that the costly and time-consuming drug approval process by the US Food and Drug Administration (FDA) unnecessarily drives up US drug prices, Reuters reported.

“The FDA is the most serious situation regarding the high costs of prescription drugs in this country,” Friedman told the West Coast group. “Their (the FDA’s) whole incentive is to be ultra-careful, to not make a mistake … but that’s where the problem starts.”

Drug-reimport supporters say medicines from countries like Canada can be as much as two-thirds cheaper than US drugs because of the role many governments play in setting prices. Some of those supporters – who believe the FDA should err on the side of caution in approving new drugs – believe US drug prices are overpriced by the pharmaceutical industry.

The forum, held by free-market think-tank Pacific Research Institute, coincides with a growing number of proposals by states from California to Massachusetts to make it easier to buy Canadian drugs (See Golden State Ponders Canadian Drug Move , Iowa Latest State on Canada Drug Bandwagon ).

Friedman opposes Canadian drug imports – after originally being sympathetic to the idea – because of the damage he believes it poses to patent rights.

US-produced drugs sold to markets abroad are often sent back to the United States from places such as Canada at cheaper prices, a practice that drug companies say undercuts drug patents and domestic sales of the same drugs. Friedman said he believed higher US prices allowed more access to new medicines because drug companies – supported by strictly applied patent laws – could make better returns on investments.

But drug-import supporters said there was no reason why cheaper medicines should not flow between Canada and the United States, as is already case for many other goods covered under the North American Free Trade Agreement between Canada, the United States, and Mexico.