Price Discrimination

Why on Earth is this so hard for media pundits to get? I was listening to Air America (I know, I know), and this guy was chastising the pharmaceutical companies for charging Americans more than foreigners for the same drugs. He correctly pointed out the safety argument is bunk, but failed to recognize there is a very good reason other than greed. Or, at least, not greed in the sense he thinks of it.

If the U.S. allows consumers to import their drugs from Canada or Nigeria, what is going to happen? The drug companies are going to stop selling their products at a discount in Canada and Nigeria. Which means Joe American stops getting to buy cheap drugs, and must go back to the domestic prices. Fine. But what happens to Joe Canada or Joe Nigeria? Joe Canada and Joe Nigeria must start buying drugs at or closer to the American price. Neither cannot afford the higher price. Both now die sooner, because they cannot afford the drugs they need. And here's the kicker. Because the drug companies are forced to drastically reduce their sales base--because only countries with residents with enough money to purchase at American prices will actually buy--the American price will actually go up. So everybody loses.

I'm no economist. I don't know whether, if we start allowing drugs to get shipped over international borders, this will actually happen. But it isn't as stupid or as simple as some pundits are making it out to be.