There is a great deal of misinformation surrounding the economics of pharmaceutical importation and price regulation. Among economists, the principles governing the relationships between prices, innovation, and pharmaceutical research and development (R&D) investment are incontrovertible. Unfortunately, faulty, non-economic analyses abound on these fundamental relationships, reinforcing economic illiteracy and leading to unfounded U.S. public policy.
Effective public policy debate requires that all parties to the debate be informed and aware of the potential costs and benefits associated with new policies, or changes in existing policies. This has not yet occurred for pharmaceutical importation and price regulation policy. Therefore, the purpose of this paper is to provide a positive (in contrast to a normative) economic analysis of pharmaceutical importation and price regulation.