Paradoxically, lower drug prices in other countries may actually LOWER drug prices in the United States.
What the drug companies are doing is called “disciminatory pricing” (not 'discriminatory in a bad way, but in the sense of not treating your customers as one bloc).
Think of it this way: How do you price a product? Let’s say you have a new CD by Warren Zevon. At what price do you sell it? Well, there are a lot of very rich Warren Zevon fans who would pay $1000 for a collection of new songs from him. But then you lose the hundreds of thousands of sales from people who can’t afford that.
On the other hand, if you sold it for $1, you could probably make millions of sales, but you’d leave a lot of money on the table from the people who would have paid more but didn’t have to.
The ultimate pricing scheme would be one where, A) you could keep people from re-selling products amongst themselves, and B) you could set the price for each person based on what the product is actually worth to them. The poor could pay $1, and the rich $10.
But in a free market, you can’t do this. You can’t sell the same product to one person at one price and another at a different price. And even if you could, you’d be immediately undercut by the poor people re-selling the product.
Nevertheless, discriminatory pricing is so valuable that manufacturers do all kinds of things to achieve it. For example, this is why Toyota has a Lexus division, and most electtronics companies take the same basic electronics, improve the specs slightly, put a different faceplate on them, and sell them as premium brands. This allows them to set one price for the wealthy, and a lower price for the poor.
If you can’t discriminate on price, you have to compromise and set a price that maximizes profit. You lose some people on the bottom who now can’t afford it, and you leave money on the table by providing the product to the rich at a price lower than they are willing to pay. But you make up for it by volume in the middle class.
Back to pharmaceutical companies. Within the United States, they can’t engage in discriminatory pricing. The market is homogenous. But borders give them the ability to set different prices, and export restrictions prevent the cheap products from moving to the high-priced areas. So this allows them to charge more in the U.S., and less in Africa. The prices in both countries are set by supply and demand, which maximizes profit.
So, what happens if the barrier goes away? Well, the company will start to face competition from its own product being sold back into the country at a lower price. How does it prevent that? Well, it can either raise prices in the other country, or lower them at home. But if both prices are set by supply and demand, the company will lose profit either way. But my guess is that the domestic market is so large that the most effective thing to do will be to simply raise prices in other countries, which will cut demand and lower sales. That in turn lowers profits.
Now, the big thing here is that the demand for these drugs in the U.S. may be relatively inelastic, which means it doesn’t move much with price. In which case, the companies may seek to regain the lost profit by raising prices in the U.S. If they can’t do that without losing enough sales to lower overall profitability, then all they can do is leave prices where they are, but factor the lower profitability into their decisions for R&D and other new drug development plans.
Either way, I don’t see re-importation resulting in widespread availability of cheaper drugs.