SAN FRANCISCO -- Reimportation of foreign drugs is both illegal and ineffective, says a new Pacific Research Institute primer on healthcare reform.

There are several reasons why reimportation will not achieve its expected outcomes, according to a primer chapter titled "Prescription Piracy: The Black Market in Foreign Drugs Will Not Reduce U.S. Health Care Costs."

Written by Brett Skinner, director of health, pharmaceutical and insurance policy research for the Toronto-based Fraser Institute, the chapter concludes: "Canadian-based Internet pharmacies are trading in stolen goods. The cross-border drug trade simply cannot be justified using free market arguments, unless one uses Tony Soprano's definition of free trade."

Skinner contends that other countries will not allow United Statespoliticians to allow the importation of drugs their own citizens need and that doing so amounts to stealing intellectual property from innovator drug companies in America. It is impossible to meet the demands of patients in the U.S. through importation without limiting foreigners' access to medications in their own countries, he says.

Moreover, importation depends on unfair trade practices that often violate international law, he adds. Many imported drugs are unauthorized copies of compounds still under patent in the U.S., notes Skinner.

"Foreign cross-border drug retailers," he says, "are copy-piratingthe latest drug inventions. This violation of the property rights of global drug makers could potentially reduce economic growth in the U.S. pharmaceutical industry, resulting in job loss. The violation also might discourage investment in the development of new medicines, which means that patients in the United States and around the world will not realize the benefits of future pharmaceutical improvements."

What drives the drug trade from Canada to the U.S. is the price difference in products in the two countries. Skinner says it is important to recognize that lower prices on Canadian branded drugs are "the normal result of market economics," namely differences in the two countries' wealth and income distribution.

Cross-border trade, however, undermines the separation of the American and Canadian markets and threatens to inflate prices north of the border, he notes. Price controls prevent that, but U.S. drug makers have responded by restricting shipments of drugs to Canada to "normal domestic consumption levels," says Skinner. Indeed, as of June 2005 at least 10 of the largest pharmaceutical companies had instituted such restrictions.

In fact, drug shortages are already occurring north of the border, prompting the Canadian government to signal its intent to ban the export of the domestic drug supply to Americans, he points out.