Brand name pharmaceutical manufacturers are constantly berated by activists for not doing enough to help poor countries get essential medicines.
The charges are false: Drug companies provide billions of dollars worth of drugs at greatly discounted prices or free.
The real scandal, however, is what the critics fail to mention: Many of those developing countries asking for drugs impose import duties or taxes on them, which raises the price of medicines to the poor in those countries.
Just so you’re clear—because it’s hard to believe anyone would do this—poor countries say to drug companies give us your medicines, and then many of them impose an import duty which raises the cost to the poor people the drug companies are trying to help.
America, Switzerland and the nation-state of Singapore, working through the structure of the World Trade Organization, are insisting that developing countries eliminate those tariffs and duties on imported medications, which can be as high as 38 percent.
“Despite growing foreign-exchange surpluses and the highest rates of HIV infections in the region, India, China and Thailand in particular continue to impose inexcusable trade barriers to the importation of life-saving medications, including the drugs needed to treat AIDS sufferers,” Jim Driscoll and Roger Bate recently wrote in the Wall Street Journal.
Income from such tariffs, they say, “would fund less than 0.1% of the national health-care budget. Yet they inflate the cost of many medical products by more than 10% in China.”
In addition to eliminating tariffs and duties on medicine and medical devices, Driscoll and Bate also suggest countries “abolish the sales taxes that pose a further obstacle to the affordable distribution of medical products.”
Again China is a serious offender, slapping a 17 percent sales tax medical products.
But raising revenue isn’t the only reason some developing countries impose duties on imported drugs. They have generic manufacturers in the country, which want to be protected from any competition.
So the next time someone complains that drugs are too expensive for many poor people in developing countries. You might want to agree, point out the negative impact of the import duties and explain: charity begins at home.