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July 24, 2003, 1:15 p.m. Oy Canada! Meet Emerson/Pelosi. By Robert M. Goldberg

his week, supporters of a bill that would import price-controlled drugs from around the world — and bar the Food and Drug Administration (FDA) from testing or inspecting for their safety or quality — have trimmed their sails a bit. Take Rep. Jo Ann Emerson (R., Mo.), who sold her vote in favor of Medicare reform in exchange for a promise from Republican leadership in the House to get immediate action on Gil Gutknecht's Pharmaceutical Market Access Act of 2003. In the face of criticism that the legislation would lead to counterfeit and tainted drugs — fixed at below market prices, or under threat of patent seizure or blacklisting — flooding into America, Ms. Emerson has a compromise designed to reassure those worried about the bill's impact on safety and future pharmaceutical research: Confine the bill to Canada but force drug companies to sell drugs at the lowest prices on the world market.

Ms. Emerson's substitute which apparently has the backing of House Democratic Leader Nancy Pelosi, has more of the price controls of the Gutknecht bill with all of its health hazards. Her bill would still ban the FDA from inspecting or testing drugs. So what difference does it make that she confines imports to Canada at first? Indeed, Emerson requires companies to sell their drugs at the lowest prices in the world because Canada can reship medicines into America from other countries and the FDA can't test or inspect those products either.

The FDA has said that HealthCanada, its counterpart north of the border, has made clear that it doesn't have the manpower, time, or inspection system to determine what happens to drugs that are sent out of Canada, or handled by companies in the business of sending drugs out of Canada. That includes the growing number of Canadian firms that are illegally importing and exporting commercial quantities of drugs from major sources of counterfeit products, such as India and Pakistan. It also includes the companies that are making Canada, in the words of one organized-crime expert, "the world's free-trade zone for counterfeit and illegally sold prescription drugs."

Thus, organized crime and profiteers should like the Emerson/Pelosi compromise. So too will trial attorneys. With the FDA out of the picture, companies and participants in the pharmaceutical distribution and delivery system will carry — so tort lawyers will seek to argue — more of the responsibility for product "defects" or adverse events. Since the Gutknecht bill and Emerson/Pelosi will allow for a flow of drugs from wholesalers to pharmacists to doctors to patients without FDA scrutiny, every party involved — from drug company to doctor — would be liable if the product sold was counterfeit or tainted and led to an injury.

Last year, Eli Lilly and Bristol Myers-Squibb settled in a case involving more than 300 lawsuits alleging that they had negligently failed to prevent former Kansas City pharmacist Robert Courtney from diluting cancer medications. The lawyer for Lilly said its "decision to settle was based primarily upon the fact that under Missouri law, even if a jury were to find us just 1 percent at fault in this matter, we could potentially be required to pay 100 percent of the damages awarded by the jury." Indeed, the plaintiff's attorney even said "we never claimed that Eli Lilly or Bristol-Myers Squibb intentionally ignored Courtney's criminal conduct."

Multiple those 300 lawsuits by hundreds of thousands if the Gutknecht or Emerson/Pelosi becomes law. And it won't just be drug companies: It will be pharmacies, managed-care companies, and hospitals sued for failing to detect counterfeit or tainted drugs. Again, because the FDA will have been sidelined and the legislation imposes a higher burden on the distribution system to protect the public, the strict liability obligations would be greater. So would the obligations to detect any wrongdoing.

Over the next few years, the FDA estimates consumers would have to pay $2 billion for the cost of tracking and distribution system that could otherwise be spent on developing new drugs or on holding down the cost of medicines. Billions more would go to lawyers and legal settlements and "victim" compensation funds. That doesn't include the billions that would flow to the gangsters and terrorists that profit off the sale of prescription drugs. Nor, finally, does it include the billions more Americans would pay in higher Canadian prices that the Congressional Budget Office predicts would result from importation.

Emerson and others who support importation call it free trade. But free trade is supposed make America more competitive and stronger. Under Gutknecht or Emerson/Pelosi, trial attorneys and organized crime win, and patients and future research lose. Where's the free trade in that?

— Robert Goldberg is a senior fellow at the Manhattan Institute.