February 22, 2012

The pharmaceutical industry utilizes its immense lobbying operation to win various protections and subsidies from the federal government. One of these protections is a federal prohibition on allowing Americans to freely buy pharmaceuticals re-imported from countries like Canada, where drugs are much cheaper. Thanks to this protectionist barrier, the pharmaceutical industry effectively stifles competition, which helps keep prices high here in the United States. It is estimated that Americans could save an average of 20 percent to 80 percent of the $2000 they spend annually on drugs if reimportation was allowed.

During the debate over the Affordable Care Act, the industry’s primary lobbying group, the Pharmaceutical Research & Manufacturers of America (PhRMA), successfully coerced Congress and the president to continue to restrict the free trade of pharmaceutical drugs between the United States and Canada.

In late 2011, Sen. David Vitter (R-LA), a leading conservative voice in the U.S. Senate, introduced an amendment to an agriculture bill to once again push for ending this protectionist barrier and allow the re-importation of drugs from Canada. Shockingly, one of Washington D.C.’s most powerful groups supposedly committed to free markets — Americans for Tax Reform (ATR), the group lead by activist Grover Norquist which says on its website that “free trade is essential to American growth” — blasted Vitter’s proposal, arguing that Americans should not be able to use their own money to buy drugs from our neighbor to the north because the government there enacts certain policies to keep drug prices low. (ATR makes no such argument that Americans should not be able to purchase pharmaceutical drugs here in the United States, despite how much government interference in the market affects their price.)

In doing so, ATR set itself apart from many in the free trade and conservative movements. The libertarian Cato Institute has passionately argued for lifting the ban, asking, “Given that people generally want to buy where prices are low, relatively speaking, why are Americans being told by their government that they cannot look abroad to buy those lower-priced drugs?” When the Senate voted on the issue in 2010, the majority of Republican lawmakers supported lifting the ban on re-importation.

So then why is ATR abandoning conservative, free market principles to help protect the drug industry? One possible answer lies in the money. PhRMA’s publicly available financial disclosure forms that it filed with the IRS show that in 2009 the group gave $65,000 to ATR. The following year, PhRMA gave ATR an additional $75,000 — meaning that PhRMA gave ATR a whopping $140,000 from 2009-2010.

Donating to nonprofits allows PhRMA to gain wide influence in Washington, and provides an avenue for continuing to shape government policy in ways that are far too often hidden.