For Immediate Release:
January 18, 2006

Contact: Susan Martin, Press Office
415-955-6120 or smartin@pacificresearch.org

PRI Urges Governor Schwarzenegger to Respect Medical Inventors’ Right to Compete Freely Across Borders

SAN FRANCISCO – Normalizing the diversion of prescription drugs from foreign countries could result in job losses of up to 100,000 for the state and cost the California economy as much as $3 billion according to a new study by the Pacific Research Institute (PRI), a California-based free-market think tank.

“The High Cost of Low-Priced Drugs to California” (available at www.pacificresearch.org), authored by Dr. Philip J. Romero, senior fellow of Business and Economic Studies at PRI and former chief economist to Governor Pete Wilson, weighs the economic benefits and costs to the state should California replace competition with government-imposed, Canadian-style price controls.

“Some politicians are considering laws that will force drug makers to sell their medicines at the low prices set by foreign governments. States without a significant biotech or pharmaceutical sector have nothing to lose,” said Dr. Romero. “But it’s hard to understand why any California politician would support such a move, given that the lion’s share of any economic losses will be borne by California. Six of the nation’s top twelve ‘clusters’ of biotech activity are located in the state – San Francisco, Oakland, San Jose, Los Angeles, Orange County, and San Diego.”

Dr. Romero adds that it is not just those industries that will suffer. “While allowing Californians to buy pirated medicines might result in lower prescription costs in the short term, the net overall effect to the California economy will be negative,” said Dr. Romero. He estimates that the overall effect would suppress economic activity by up to one month’s worth of state economic growth per year, or $296 to $1,332 per family of four. If parallel trade catches on nationally the effects would be nearly three times more severe, cutting California’s economic growth rate by one fourth (three months per year), and reducing the family’s income from $799 to $3,597 a year.

“Governor Schwarzenegger was right in 2004, when he vetoed several state bills that would have violated federal law by encouraging importation from Canada. And he is right now in believing that only international agreements, negotiated by the U.S. federal government, will achieve equitable treatment for both U.S. pharmaceutical companies and consumers. But California has the most to lose if Congress permits reimportation without such an agreement,” Dr. Romero noted.

Proposition 78 – A Better Model
John R. Graham, Director of Health Care Studies at PRI, urges the Governor and the legislature to instead cooperate on legislation modeled on the failed Proposition 78 from last November's election. “A good discount prescription drug program ensures that drug makers have the incentive to supply medicines to low-income people free of the threat of government harassment.” said Mr. Graham

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About PRI
For 27 years, the Pacific Research Institute (PRI) has championed freedom, opportunity, and individual responsibility through free-market policy solutions. PRI is a non-profit, non-partisan organization. For more information please visit our web site at http://www.pacificresearch.org//