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Bully Bargaining

By Sally Pipes

You don't have to be a salesman or a Wall Street power broker to know that for any negotiation to work, both parties must be able to walk away from a deal.

It's called bargaining. And if you've ever bought a used car or taken a walk through New York's Chinatown, you've probably done it a time or two. Bargaining is a basic, integral part of how fair business works.

But if certain lawmakers get their way, America's drug makers will lose that option and find their businesses subject to the unreasonable demands of foreign governments.

Today [May 3], the Senate is expected to vote on legislation that would allow the worldwide importation of prescription drugs. This importation measure is part of an amendment sponsored by Sen. Byron Dorgan (D-ND).

Such calls are nothing new, of course. Many legislators have long advocated the importation of pharmaceuticals from Canada and other Western nations. But inexplicably, the Dorgan amendment includes a "forced sale" provision that would require American companies to sell drugs to foreign exporters at rates determined by foreign governments.

Dorgan's amendment would force America's drug industry to do business with a proverbial gun to its back. No matter the price or quantity demanded by foreign governments, American businesses would have to give in. This notion is an affront to all American businesses, a violation of essential patent rights, and a threat to free trade.

It's not deal-making -- it's bully bargaining.

Imagine, for example, if you could walk into Best Buy and set your own low price for a 60-inch plasma television. This might sound great at first. But it wouldn't take long before the store, no longer able to ensure the stream of revenue it needed, would have to drastically reduce its offerings -- or possibly even shut down entirely.

Free trade and fair business dealings require consent from both parties; any law requiring forced sale would undermine the underlying principles of both.

U.S. pharmaceutical companies are no different from Best Buy - or even Ben & Jerry's. Every business must mark up its products to turn a profit. If politicians single out drug companies to deny them a return on their investments, those companies will simply stop investing in the development of new drugs.

On average, it takes $800 million to $1 billion to bring a new drug to market. Investors are willing to take that chance precisely because the rewards of developing a cure for lymphoma, AIDS, or diabetes are considerable. If the profit incentive is removed, the miracle cures that mark America's drug industry would vanish.

Dorgan's amendment is an unprecedented piece of anti-American legislation. It would force U.S. drug makers to sell to foreign exporters at prices dictated by outside governments. It's even worse than if Congress simply imposed price controls on the industry - which would, at least, be honest. Dorgan's amendment is an attempt to slip in price controls through the back door.

Further, according to a 2003 study from the London School of Economics, a forced-sale provision wouldn't even lead to lower prices at the drugstore. Instead, only the middlemen -- those foreign pharmacies that purchase the drugs in bulk and resell them -- would benefit.

Yet forced sale proponents push ahead.

The economics don't add up, it sets a dangerous precedent, and the threat to continued drug innovation is clear. Any legislation that includes this provision is an insult to businesses and consumers, and congressional legislators should know this.

No matter how you look at it, forced sale is a bad buy.

Sally C. Pipes is President & CEO of the Pacific Research Institute and author of "Miracle Cure: How to Solve America's Health-Care Crisis and Why Canada Isn't the Answer."

Pipes is president and CEO of the Pacific Research Institute and author of "Miracle Cure: How to Solve America's Health Care Crisis and Why Canada Isn't the Answer." E-mail:

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