Document Type

Article

Disciplines

International Law

Abstract

There are likely to be many economic consequences to the legalization and enforcement of pharmaceutical reimportation from such price-regulated markets as Canada and the European Union (EU). However, in most public policy debates, the focus remains on the short-run benefits to Americans of the potentially lower drug prices importation may bring. In earlier studies we utilized our published econometric results on the effect reimportation may have on research and development ("R&D") investment within the context of an infinite time-horizon R&D model. This allowed us to approximate the long-run economic costs in terms of foregone life expectancy such a policy might impose on Americans, and the U.S. economy more generally (Vernon, 2004a; Golec and Vernon, 2004, 2005). In this research, which was at best a first approximation to the long-run costs of reimportation (resulting from reduced levels of future innovation), we demonstrated that the dollar value of these costs are likely to be considerable and in the trillions.

In the current analyses, however, we analyze a question that is easier to model because it is less broad and does not require the consideration of an infinite time horizon. It also does not require us to rely on as many assumptions as our previous analyses. Specifically, in this brief, we model the potential short-run employment effects that legalized (and enforced) reimportation may have on the pharmaceutical and biotechnology industries in the United States.

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