But the free-market perspective does not yield an easy answer here. Free-market economists believe the government should enforce private contracts. Imagine that drug companies sold inexpensive drugs to Canada with the contract provision that they not be resold to the United States. One could then argue that the government should help the drug companies enforce that contract. But isn't that in effect what the ban on reimportation does? So perhaps one can justify it as a part of the governmental job of enforcing private contracts. (That is the essentially the argument made by legal scholar Richard Epstein.)
Suppose we weren't talking about Canada (which has low drug prices largely because of price controls) but instead we were talking about Africa. Suppose a drug company offered an AIDS drug to a poor African country at slightly above marginal cost. (This is much below the US price, which includes a markup due to the monopoly power granted by the patent). Should American AIDS patients be allowed to buy the drug in Africa and bring it back to the United States? Jeff would say yes. But if policymakers followed this advice, arbitrage would prevent the drug company from price discriminating. A single price (or approximately so) would have to prevail worldwide. The result: The drug company wouldn't offer the low-cost drug to the poor African country.
Remember what we learned in the fall in ec 10: Price discrimination can sometimes make goods available to more consumers and increase the efficiency of market allocations. Nonetheless, those consumers who end up paying more than average can easily see the situation as unfair, which is what is happening with the issue of drug reimportation.
Question to think about: Should the U.S. government set up legal institutions that facilitate or impede international price discrimination?
Conflict-of-interest alert: Like drugs, textbooks are sold for different prices in different countries, and publishers make great effort to avoid the natural arbitrage. So, perhaps, I am not completely objective about this issue.