Research for this paper was supported by a summer research grant from the University of Maryland School of Law. Thanks are due to Daniel Goldberg and Greg Young for their comments on an earlier draft of this paper. Thanks are due too to Susan McCarty for her research assistance.

1 President George W. Bush & Senator John Kerry, Second Presidential Debate (Oct. 8, 2004) (transcript available at Commission on Presidential Debates, http://www.debates.org/pages/trans2004c.html (last visited April 10, 2006)) [hereinafter Second Bush-Kerry Debate]. The subject of importing drugs from Canada was revisited by Senator Kerry in the third presidential debate. See Senator John Kerry, Third Presidential Debate (Oct. 13, 2004) (transcript available at Commission on Presidential Debates, http://www.debates.org/pages/trans2004d.html (last visited April 10, 2006)) [hereinafter Third Bush-Kerry Debate]. To some extent, these positions run counter to partisan stereotypes. We see here, among other things, a liberal Democrat advocating for enabling Americans to opt out of certain putatively inefficient federal regulatory strictures while a conservative Republican President advocates regulatory caution before expanded market choices.

2 See, e.g., Pam Belluck, Boldly Crossing the Line for Cheaper Drugs, N.Y. TIMES, Dec. 11, 2003, at A38; Marc Kaufman, Illinois Governor Launching Program to Reimport Drugs: Move May Force FDA's Hand, WASH. POST, Aug. 17, 2004, at A13 (regarding state government engineered importation schemes). The ways in which such importation may run afoul of federal law are diverse and call, at least in certain instances, for substantial analysis. Briefly, drug products imported from Canada (or any other nation) are liable to run afoul of federal Food, Drug, and Cosmetic Act (FDCA) provisions regarding traffic in unapproved new drugs and/or traffic in drugs that are improperly labeled (“misbranded”). See also 21 U.S.C. § 355 (2000) and 21 U.S.C. §§ 352, 353 (2000), respectively. In addition, the FDCA provides that, generally, only a drug's original manufacturer may return a U.S. manufactured drug to U.S. soil once that drug has been shipped abroad. 21 U.S.C.A. § 381(d)(1) (West Supp. 2005).

3 See Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341, 348 (2001) (state-law fraud-on-the-FDA claims would conflict with FDA's performance of its statutory responsibilities and regulatory objectives); Fid. Fed. Sav. & Loan Ass’n v. de la Cuesta, 458 U.S. 141, 153 (1982) (preemption of state law that conflicts with the exercise of federal power, including regulatory power); Walsh v. U.S., 331 U.S. 432, 434 (1947) (the 1938 Federal Food, Drug, and Cosmetic Act “rests upon the constitutional power resident in Congress to regulate interstate commerce … [and] seeks to keep interstate channels free from deleterious, adulterated and misbranded articles of the specified types.”). This is, of course, the barest sketch of a federalism analysis, as it might be applied to the motley of State schemes at issue. Twenty-two states have considered importation or reimportation legislation in 2005. The National Conference of State Legislatures, 2005 Prescription Drug State Legislation, http://www.ncsl.org/programs/health/drugdisc05.htm (last visited April 10, 2006) (summarizing information on such legislation).

4 See, e.g., Joel Baglole, Getting the Gray Out: Canadian and U.S. Regulators Are Looking to Impose Order on the Sale of Cheap Online Drugs, WALL ST. J., Feb. 11, 2003, at R6; Belluck, supra note 2, at A38; Kaufman, supra note 2 at A13; Michael S. Rosenwald, Merck to Discount Drugs for Uninsured: Prices to Compare to Canadian Imports, WASH. POST, Apr. 20, 2005, at E2; Kelly K. Spors, Canadian Drugs Are Getting Cheaper: Online Pharmacies Catering to Americans Cut Costs by Finding New Suppliers, WALL. ST. J., July 22, 2004, at D1; Bob Tedeschi, E-Commerce; As the Debate Continues, Opinions Are Divided over the Merits of Allowing Online Drug Purchases from Canada, N.Y. TIMES, Mar. 8, 2004, at C4.

5 See, e.g., Second Bush-Kerry Debate, supra note 1; Third Bush-Kerry Debate, supra note 1.

6 See, e.g., Ceci Connolly, GOP Spars Over Drug Import Bill Some Senators Aim To Regulate Purchase, WASH. POST, Apr. 20, 2005, at A23 (debate within GOP regarding merits of importation legislation). See also 21 U.S.C.A. § 384(b) (West Supp. 2005) (authorizing the promulgation of regulations for the importation of drugs from Canada; 21 U.S.C.A. §384(l) (West Supp. 2005)(stipulating that the authorization is effective only if the Secretary of HHS certifies, e.g., that re-importation poses no additional risk to American consumers). The history of federal legislation regarding Canadian importation, together with attempts by certain States to import – or permit the importation of – prescription pharmaceuticals will be discussed more fully in Section II, infra. See also S.B. 410, §§ 36-43, 79th Leg. (Tex. 2005) (authorizing Texas State Board of Pharmacy to approve Canadian pharmacies for Texas drug importation and requiring information posted for State residents on web site); S. 49 2005-6 Gen. Aseem. (Vt. 2005) (authorizing Vermont to join multistate importation plan); National Conference of State Legislatures, supra note 3.

7 See infra text accompanying notes 46-47 (regarding the Medicare, Prescription Drug Improvement and Modernization Act of 2003).

8 Secretary Thompson explicitly rejected the prospect of such a certification in 2001 and current HHS Secretary Leavitt has not, thus far, suggested that he intends to reverse the course charted by his predecessor. See Robert Pear, In a Turnaround, White House Kills Drug-Import Plan, N.Y. TIMES, Dec. 27, 2000, at A1 (describing Dep't of Health and Human Serv. Sec. Donna Shalala's letter to President Clinton on Dec. 26, 2000); Letter from Tommy Thompson, Secretary, Dep't of Health and Human Serv., to Senator James Jeffords, (July 9, 2001), available at http://www.fda.gov/oc/po/thompson/medsact.html.

9 Canada, plainly, has been concerned that open trade with the United States might threaten the Canadian drug supply, Canadian pricing, or both. See, e.g., Reuters, Canada Seeks to Control Sales of Drugs to U.S.: Health Minister Aims to Protect Domestic Supply, MSNBC NEWS, June 29, 2005, http://msnbc.msn.com/id/8406928/ (reporting on draft legislation in the Canadian parliament aimed at protecting Canadian drug supplies by prohibiting bulk exportation to the U.S.).

10 See Second Bush-Kerry Debate, supra note 1; Third Bush-Kerry Debate, supra note 1.

11 International Prescription Drug Parity: Are Americans Being Protected or Gouged?: Hearing Before the Subcomm. on Human Rights & Wellness of the H. Comm. on Govt. Reform, 108th Cong. 1 (2003), available at http://frwebgate.access.gpo.gov/cgibin/getdoc.cgi?dbname=108_house_hearings&docid=f:87228.pdf.

12 See, e.g., PATRICIA M. DANZON, PRICE COMPARISONS FOR PHARMACEUTICALS: A REVIEW OF U.S. AND CROSS-NATIONAL STUDIES 28, 33-34 (1999), available at http://hc.wharton.upenn.edu/danzon/PDF%20Files/AEI%20Price%20Comparisons%20for%20Pharmaceuticals%201999.pdf; Patricia M. Danzon & Michael F. Furukawa, Prices and Availability of Pharmaceuticals: Evidence from Nine Countries, HEALTH AFFAIRS, at W3-521, Oct. 29, 2003, http://content.healthaffairs.org/cgi/reprint/hlthaff.w3.521v1. Drug products may be afforded significant Intellectual Property protections beyond those insured by patent and trademark rights. See infra text accompanying notes 65-68.

13 See, e.g., European Commission's Directorate-General for Competition, Glossary, http://europa.eu.int/comm/competition/general_info/p_en.html (last visited Aptr. 10, 2006).

14 See, e.g., Belinda Isaac, The Free Movement of Goods II: Pharmaceuticals, Trade Marks, and Parallel Imports in W.R. CORNISH ET AL., PHARMACEUTICAL MEDICINE, BIOTECHNOLOGY, AND EUROPEAN LAW 25, 29-32 (Richard Goldberg & Julian Lonbay eds., 2000).

15 Which products are less expensive, by how much, and under what conditions, is a more complex matter than the public debate has allowed. See, e.g., Danzon, supra note 12, at 2 (“[M]inority Staff Reports are based on flawed methodology that leads to seriously upward-biased estimates of the price differences between sectors within the United States and between the United States and Canada or Mexico.”); Danzon & Furukawa, supra note 12, at W3-522 (noting that U.S.- foreign price differentials are roughly in line with income and smaller for drugs than for other medical services.)

16 Although trade barriers between the U.S. and Canada under the terms of the North American Free Trade Agreement (NAFTA), are, generally speaking, few, provisions for trade in pharmaceuticals and biotech products have not, as of the time of this writing, been incorporated in that treaty. See North American Free Trade Agreement, U.S.-Can.-Mex., Dec. 17, 1992, 32 I.L.M. 289 (Parts 1-3), 32 I.L.M. 605 (Parts 4-8)..

17 See, e.g., ROGER PILON, DRUG REIMPORTATION: THE FREE MARKET SOLUTION: CATO INSTITUTE POLICY ANALYSIS 521 11 (2004), available at, http://www.cato.org/pub_display.php?pub_id=2305 (ban on reimportation should be lifted to discourage free-riding).

18 Generally speaking, parallel trade in pharmaceuticals is permitted within the European Union whereas parallel trade between member states and non-member states is not. See W.R. CORNISH ET AL., PHARMACEUTICAL MEDICINE, BIOTECHNOLOGY, AND EUROPEAN LAW (Richard Goldberg & Julian Lonbay eds., 2000) (providing a broad overview of European Union issues).

19 See, e.g., COMM. ON THE ECONOMICS OF ANTIMALARIAL DRUGS, BOARD ON GLOBAL HEALTH, INSTITUTE OF MEDICINE, SAVING LIVES, BUYING TIME: ECONOMICS OF MALARIA DRUGS IN AN AGE OF RESISTANCE (Kenneth J. Arrow et al. eds., 2004), available at http://www.nap.edu/books/0309092183/html; WORLD HEALTH ORG. COMM. ON MACROECONOMICS AND HEALTH, REPORT OF WORKING GRP. 4, HEALTH & THE INT’L. ECONOMY (2002); Maria Neira, Experience With Access to Essential Medicines for Tropical Diseases, World Health Organization, WHO-WTO Workshop in Differential Pricing and Financing of Essential Drugs, Høsbjør, Nor. (Apr. 2001), available at http://www.wto.org/english/tratop_e/trips_e/hosbjor_presentations_e/20a_neira_e.pdf; Dorothy Ochola et al., Uganda HIV/AIDS Drugs Access Initiative: Current Experience with Differential Pricing of HIV/AIDS related Drugs in Uganda, World Health Organization, WHO-WTO Workshop in Differential Pricing and Financing of Essential Drugs, Høsbjør, Nor. (Apr. 2001), available at http://www.wto.org/english/tratop_e/trips_e/hosbjor_presentations_e/19ochola_e.pdf.

20 See, e.g., W.R. Cornish, The Free Movement of Goods I: Pharmaceuticals, Patents and Parallel Trade, in PHARMACEUTICAL MEDICINE, BIOTECHNOLOGY, AND EUROPEAN LAW 11, 24 (Richard Goldberg & Julian Lonbay eds., 2000) (the effect of patents as incentives to innovate is enhanced if patentees can engage in international price discrimination); Danzon, Patricia M. & Towse, Adrian, Differential Pricing for Pharmaceuticals: Reconciling Access, R&D and Patents, 3 INT’L J. HEALTH CARE FIN. & ECON. 183 (2003)CrossRefGoogle Scholar (differential pricing, based on Ramsey pricing principles, is the second best efficient means of paying for the global joint costs of pharmaceutical R&D); Latham, Stephen, Pharmaceutical Costs: An Overview and Analysis of Legal and Policy Responses by the States, 24 J. LEGAL MED. 141, 173 (2003)CrossRefGoogle ScholarPubMed (our present goal of establishing or maintaining low drug prices is in fundamental tension with our long-term goal of developing new treatments and distributing them to a growing, and increasingly long-lived, population); WORLD HEALTH ORG. COMM. ON MACROECONOMICS AND HEALTH, supra note 19, at 41 (regarding “struggle” to balance static and dynamic efficiency in price differentiation). But c.f., Outterson, Kevin, Pharmaceutical Arbitrage: Balancing Access and Innovation in International Prescription Drug Markets, 5 YALE J. HEALTH POL’Y L. & ETHICS 193, 222 (2005)Google ScholarPubMed (arbitrage between high income markets may not damage innovation and the burden of proof for IP rights and barriers to parallel trade lies with the pharmaceuticals industry).

21 Danzon & Towse, supra note 20, at 184 (differential pricing, based on Ramsey pricing principles, is the second best efficient means of paying for the global joint costs of pharmaceutical R&D and would also be consistent with standard norms of equity); Gifford, Daniel J., How Do the Social Benefits and Costs of the Patent System Stack up in Pharmaceuticals?, 12 J. INTELL. PROP. L. 75, 112 (2004)Google Scholar (patent term may be supra-optimal for some pharmaceuticals); Outterson, supra note 20, at 196 (applying the “heuristic device of optimal pharmaceutical rents”) (emphasis added).

22 Daniel Gilman, Something Shy—Perhaps Far Shy—of Optimization: Reconciling Price, Property, Trade, and Trust for Medicines on a Global Stage (unpublished manuscript, on file with author). See also infra note 24, regarding some of the themes of that discussion.

23 See Kaplow, Louis, The Patent-Antitrust Intersection: A Reappraisal, 97 HARV. L. REV. 1813, 1815 (1984)CrossRefGoogle Scholar (expressing pessimism about the prospects of determining an optimal patent term and an optimal balance of patent and anti-trust policy).

24 See id. at 1848. Kaplow's skepticism about an optimal, joint patent-anti-trust policy is borne of what might be seen as theoretical, technical, and institutional concerns. Although an industry-specific focus may diminish a few of the problems he raises, it may just as easily amplify others. Here, we are concerned about an exploding complexity in the problem space when we seek to optimize across more, rather than fewer, bodies of law, and as we expand the types of institutions and legal systems implicated across these subjects on an international stage. Indeed, optimizing the fundamental tradeoff within IP policy itself is liable to be, to some extent, arbitrary. The value of any particular innovation is a highly contingent matter, of course, hanging on diverse properties of the market and the strategic action, or inaction, of competitors. At the same time, problem solving— within the domain of pharmaceutical development more generally—is not likely a natural kind and not likely to covary in any straightforward fashion with the resources placed at its disposal. If we suppose, further, that diverse economies may model diverse discount rates, we confound further the hope of a systematic balancing of the costs and benefits entailed by any particular IP policy.

25 Of course, not all risk management endeavors are efficient or even beneficial. The general argument, developed below, is that pharmaceuticals markets are especially good candidates for regulation. See generally Coase, R.H., The Problem of Social Cost, 3 J. L. & ECON. 1 (1960)CrossRefGoogle Scholar (regarding social costs amenable to administrative management).

26 Pessimism about the efficacy of parallel trade as a price management tool, independent of questions regarding its larger costs, has been expressed elsewhere. See, e.g., CONG. BUDGET OFFICE, WOULD PRESCRIPTION DRUG IMPORTATION REDUCE U.S. DRUG SPENDING?, ECONOMIC BUDGET ISSUES BRIEF passim (Apr. 29, 2004), available at http://www.cbo.gov/ftpdocs/54xx/doc5406/04-29-PrescriptionDrugs.pdf. We may also wonder about the extent to which we ought to manage those prices, since the legally protected market power that permits the pricing is the fundamental inducement to innovation in the industry.

27 For a general definition of agency costs, see, e.g., Michael C. Jensen & William H. Meckling, Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure, in FOUNDATIONS OF CORPORATE LAW 7, 7-12 (Roberta Romano ed., 1993).

28 The demarcation of the shared border between the United States and Canada has its roots in the Treaty of Paris of 1783, which, not incidentally, brought a formal end to the American Revolutionary War. See The Treaty of Paris, U.S.-U.K., art 2, Sept. 3, 1783, 8 Stat. 80. The International Boundary Commission, charged with surveying and mapping that boundary, was established by the Jay Treaty of 1794. International Boundary Commission, http://www.internationalboundarycommission.org/ibcpg2.htm (follow “Boundary History” hyperlink) (last visited Apr. 2, 2006) (containing information on the Commission and the border). Further refinements to the boundary have been recognized in the centuries since, and certain limited particulars remain contested. See id.

29 General Agreement on Tariffs and Trade (GATT), pt. 5, March 24, 1948, 61 Stat., 55 U.N.T.S. 194. Although GATT provided rules governing a considerable portion of world trade from its inception, it was, until 1995, essentially a provisional agreement. Most formal requirements related to the GATT arose from the World Trade Organization's (WTO’s) Uruguay Round negotiations, conducted from 1986-1994, and signed at the Marrakesh Ministerial Meeting in April 1994. Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, April 15, 1994, April 15, 1994, 1867 U.N.T.S. 14. The Uruguay Round's Agreement on Technical Barriers to Trade, for example, recognizes that countries have the right to establish protection, at levels they consider appropriate, for example for human, animal or plant life or health or the environment, and should not be prevented from taking measures necessary to ensure those levels of protection are met. Id. at 1868 U.N.T.S. 120. WTO legal texts and summaries are maintained at World Trade Organization, http://www.wto.org/english/docs_e/legal_e/legal_e.htm (last visited Dec. 2, 2005).

For a general discussion of the implication of NAFTA for pharmaceuticals, see Noah, Lars, NAFTA's Impact on the Trade in Pharmaceuticals, 33 HOUS. L. REV. 1293 (1997)Google Scholar.

31 There are, of course, economic costs associated with importation and exportation across a regulated (and policed) border that are the product of positive agreements regarding, e.g., customs operations at the border crossings themselves, which impose costs above transportation costs narrowly construed.

32 On the U.S. side, regulatory authority over different aspects of the border is distributed. Of central interest generally are the Department of Homeland Security, the Department of the Treasury, the Department of State, and the Office of the United States Trade Representative. The boundary itself is charted and maintained jointly, by the International Boundary Commission (the U.S. Commissioner of which reports to the Secretary of State, while the Canadian Commissioner is located within the Department of Natural Resources Canada). See International Boundary Commission, http://www.internationalboundarycommission.org/ibcpg2.htm (last visited Apr. 2, 2006). For our particular purposes, the role of the FDA in establishing the legal boundary for trade in prescription drugs is central.

33 See U.S. v. Walsh, 331 U.S. 432, 434 (1947) (the 1938 Federal Food, Drug, and Cosmetic Act “rests upon the constitutional power resident in Congress to regulate interstate commerce … [and] seeks to keep interstate channels free from deleterious, adulterated, and misbranded articles of the specified types.”)

34 See 21 U.S.C. § 371(a) (authority to promulgate regulations vested in the Secretary).

35 See 21 C.F.R. § 10.40(a) (2005).

36 See 21 U.S.C. § 381.

37 See 21 U.S.C. §§ 355 (a), 351, and 352, 353 (regarding new, adulterated, and misbranded drugs respectively), 21 U.S.C. § 355 (a) (prohibiting the introduction or delivery for introduction into interstate commerce of any unapproved new drug), and 21 U.S.C. § 331(a) (prohibiting “the introduction or delivery for introduction into interstate commerce of any … drug … that is adulterated or misbranded).

38 For example, a drug is adulterated if, among other things, it fails to have the safety, strength, quality, and purity it “purports or is represented to possess.” See 21 U.S.C. § 351(a)(2)(B) (emphasis added). A drug is “misbranded” if its labeling is “false or misleading in any particular.” See 21 U.S.C. § 352(a). A new drug is any drug not generally recognized “as safe and effective for use under the conditions prescribed, recommended, or suggested in the labeling thereof.” See 21 U.S.C. § 321(p).

39 New Drug and Antibiotic Regulations, 50 Fed. Reg. 7452, 7470 (Feb. 22, 1985) (“Drug labeling serves as the standard under which FDA determines whether a product is safe and effective.”) FDA regulates all such labeling, including “all written, printed, or graphic matter” marketing the drug. 21 C.F.R. § 1.3(a).

40 See 21 C.F.R. §§ 201.5, 201.56-7 (2005).

41 See New Drug and Antibiotic Regulations, supra note 39.

42 A drug may become adulterated should mishandling cause it to fail to have the strength, quality, or purity it purports to have in its labeling. See 21 U.S.C. § 351(a).

43 See 21 U.S.C. §§ 321(p), 351(a), 355(a).

44 See 21 U.S.C. §§ 351(a), 352(a).

45 See 21 U.S.C. § 381(d)(1).

46 See 21 U.S.C. § 384(b) (Supp. I 2005).

47 21 U.S.C. § 384(l).

48 The question posed in the Second Bush-Kerry debate seems to suggest that U.S.-approved and manufactured drugs are not only cheaper, once transported to Canada, but safer. See Second Bush Kerry Debate, supra note 1. That is dubious, if not incoherent. Drug products generally cannot become safer via increasingly complex distribution pathways and increasingly long time in transport, except to the extent that product degradation may serve to reduce both therapeutic efficacy and side effects. An argument has been made that certain importation schemes, by simplifying packaging options and possible distribution complexities in the U.S. market, will “dramatically” reduce medication errors and the risk of counterfeit drugs. See RAM KAMATH & SCOTT MCKIBBIN, ILL. DEP't OF CENT. MGMT. SERV., REPORT ON FEASIBILITY OF EMPLOYEES AND RETIREES PURCHASING PRESCRIPTION DRUGS FROM CANADIAN PHARMACIES 11 (2003), available at http://www.isaverx.net/assetsrx/canadian_rx_report.pdf. That argument is speculative at best, even on the assumption that the scheme will function, on implementation, precisely as designed.

49 See Thompson, supra note 8.

50 See Pear, supra note 8.

51 See, e.g., Letter from Randall W. Lutter, Acting Associate Commissioner for Policy Planning, Food and Drug Administration, to Honorable Greg Abbott, Attorney General of the State of Texas (Jul. 27, 2005), available at http://www.fda.gov/oc/opacom/hottopics/importdrugs/abbott072705.html (contemplated Texas program not permitted); Letter from Randall W. Lutter, Acting Associate Commissioner for Policy and Planning, U.S. Food and Drug Administration, to Douglas M. Duncan, County Executive, Montgomery County Maryland Office of the County Executive (Nov. 8, 2005), available at http://www.fda.gov/oc/opacom/hottopics/importdrugs/duncan110805.html (FDA cannot issue waiver for program liable to involve illegal imports);. Copies of these, and additional letters, may be found at http://www.fda.gov/importeddrugs (last visited May 9, 2006).

52 See, e.g., S.B. 410, §§ 36-43, 79^th Leg. (Tex. 2005); Susan Konig, Texas Postpones Drug Importation from Canada, HEALTH CARE NEWS, Oct. 1, 2005, http://www.heartland.org/Article.cfm?artId=17760 (implementation postponed by Texas Attorney General Greg Abbott); National Conference of State Legislatures, supra note 3 and accompanying text.

53 The term “49^th Parallel” is used here in its colloquial sense as descriptive of the US/Canada border, although in fact it describes merely a portion of that border, as Canada's two most populous cities lie south of the parallel and the largest of the United States lies north of it.

54 See CONG. BUDGET OFFICE, supra note 26, at 1; Heather Won Tesoriero, Drug Firms Raised Prices 5.5% in First Half of Year, WALL ST. J., Aug. 2, 2005, at D4 (observing a 5.5% increase in drug prices in the first half of 2005, roughly equivalent to the hike in the first half of 2004); KAISER FAMILY FOUND., PRESCRIPTION DRUG TRENDS 1 (2004) http://www.kff.org/rxdrugs/upload/Prescription-Drug-Trends-October-2004-UPDATE.pdf (doubledigit growth each of last eight years).

55 See Belluck, supra note 2 (regarding private sources of re-importation from Canada); Kathleen Doheny, Think Twice Before Buying Prescription Drugs in Mexico, L.A. TIMES, Aug. 8, 2004, at L3 (high percentage of counterfeit drugs and legal issues in importation).

56 See, e.g., International Prescription Drug Parity: Are Americans Being Protected or Gouged?, supra note 11.

57 See Belluck, supra note 2 (regarding private access to Canadian markets); Connolly, supra note 6 (regarding purchases from Canada, Mexico, and Europe); Doheny, supra note 55 (regarding purchases from Mexico); Kaufman, supra note 2 (regarding public access to Canadian markets). We note too, what will be explained more fully below; that is, that consumer perceptions of identity or similarity between goods may, as perceptions, be more or less accurate in any given case. More generally, both within and across borders, goods may be perceived as close or even perfect substitutes independent of any technical analysis of the goods in question.

58 For example, prohibited “price discrimination” under the Robinson-Patman Act has been read somewhat narrowly by the courts, with good reason. As a consequence, much of the price differentiation observed in diverse markets has not been held violative of Section 2(a) of the Robinson-Patman Act. See Robinson-Patman Act, 15 U.S.C. 13(a) (2000). For example, the Supreme Court has held that prohibited pricing under Robinson-Patman, “is of the same general character as the injury inflicted by predatory pricing schemes actionable under § 2 of the Sherman Act.” Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 221 (1993) (distinguishing anticompetitive below-cost pricing from mere price differentiation or competitive pricing).

59 Because competitive pricing entails no economic profits, it provides no incentives for the long-term and risky investments required for pharmaceuticals development. We confer patent rights (and other IP protection) because the promise of a degree of monopoly pricing power is incentive to the investment required to develop useful--indeed socially important--goods. Although monopolist pricing may implicate deadweight loss with regard to extant goods, such goods would not be developed in the first place without economically adequate incentives. This is the common rationale for patents generally, and one that may be especially applicable to drugs and biologics. See, e.g., Danzon & Towse, supra note 20, at 184-85 (patents offset high cost of pharmaceutical R&D); Philipson, Tomas J. et. al., IP & External Consumption Effects: Generalizations from Health Care Markets, (Nat’l Bureau of Econ. Research, Working Paper No. 11930, 2006)Google Scholar (combining problem of technological change for goods with external consumption effects with problem of generating adequate R&D for goods with private consumption effects). One might suppose that, if there is no general solution to the problem of optimizing IP policy, any set of protections is as good as any other. I think, however, on pragmatic grounds that developed economies would do well to avoid vitiating extant protections.

60 In brief, once we allocate some degree of market power to a manufacturer (or other seller), that manufacturer will seek to maximize profits by exploiting that market power, as constrained by market demand. In the pure case, any marginal increment in price from the monopolist's profit maximizing price will decrease net revenue. This basic principle holds true in each market, whether a manufacturer sells to one market or many. Hence, whatever else we might think of lower prices (via public constraints or otherwise) in markets separate and isolated from our own, we should not imagine that monopolists raise prices at home to “make up” for suppressed revenues abroad. See Danzon & Towse, supra note 20, at 189-90 (providing a succinct discussion of welfare effects and cost shifting issues).

61 Ramsey price discrimination (Ramsey Optimal Pricing or Ramsey Pricing) is a straightforward extension of Frank Ramsey's solution to the problem of designing a proportionate tax system so that it can raise a given revenue while imposing a minimum decrease in utility. Ramsey, F.P., A Contribution to the Theory of Taxation, 37 THE ECON. J. 47, 47 (1927)CrossRefGoogle Scholar. Ramsey pricing is formally isomorphic with monopolist price discrimination, but subject to a profit constraint; depending on the level of grain at which it can be implemented, it can, in the limit, serve to eliminate entirely the deadweight loss associated with monopoly pricing. See, e.g., Danzon & Towse, supra note 20, at 183 (differential pricing, based on Ramsey pricing principles, is the second best efficient means of paying for the global joint costs of pharmaceutical R&D); JAYASHREE WATAL, WORLD TRADE ORGANIZATION, WORKSHOP ON DIFFERENTIAL PRICING AND FINANCING OF ESSENTIAL DRUGS: BACKGROUND NOTE 11-15 (2001), available at http://www.wto.org/english/tratop_e/trips_e/wto_background_e.pdf (differential pricing allows large fixed research and development costs to be recovered with minimal distortions in resource allocation while allowing provision of lower cost drugs to low income nations; parallel trade can disturb favorable balance of Ramsey Optimal Pricing).

62 Compare STAFF OF H. COMM. ON GOVT. REFORM & OVERSIGHT, 105TH CONG., PRESCRIPTION DRUG PRICING IN THE 1ST CONGRESSIONAL DISTRICT IN MAINE: AN INTERNATIONAL PRICE COMPARISON 4-8 (1998) (comparing Maine retail prices for ten drugs with prices in Canada & Mexico), with DANZON, supra note 12, at 2 (concluding that “Minority Staff Reports are based on flawed methodology that leads to seriously upward biased estimates of the price differences between sectors in the US and between the US and Canada and Mexico”).

63 See Danzon & Furukawa, supra note 12, at 522.

64 See id. at 527-28 (reporting Canadian prices for on-patent originator products as 64% of U.S. prices), and at 525-26 (observing slightly lower Canadian prices for generics across data set); cf. OFFICE OF PLANNING, U.S. FOOD AND DRUG ADMIN., FDA WHITE PAPER: GENERIC DRUG PRICES IN THE U.S. ARE LOWER THAN DRUG PRICES IN CANADA (2003), available at http://www.fda.gov/oc/whitepapers/drugprices.html (most of largest selling chronic use generics less expensive in U.S.).

65 See Danzon & Furukawa, supra note 12, at 522.

66 See id.

67 See id. at 531-32.

68 See id. at 522.

69 See id. at 531-32.

70 Under the “noninterference” provision of the Act, “the Secretary--(1) may not interfere with the negotiations between drug manufacturers and pharmacies and PDP sponsors; and (2) may not require a particular formulary or institute a price structure for the reimbursement of covered part D drugs.” 42 U.S.C.A. § 1395w-111(i) (West Supp. 2005).

71 See 38 U.S.C. §8126 (2000) (Federal Supply Schedule for Department of Defense, Department of Veterans Affairs, Public Health Service, Coast Guard, and Indian Health Service purchases); U.S. DEP't OF HEALTH & HUMAN SERV., REPORT TO THE PRESIDENT, PRESCRIPTION DRUG COVERAGE, SPENDING, UTILIZATION, AND PRICES 108 (2000), available at http://aspe.hhs.gov/health/reports/drugstudy (regarding negotiation of prices).

72 See Pharm. Research & Mfrs. of Am. v. Walsh, 538 U.S. 644, 669-70 (2003) (upholding Maine formulary and pricing scheme).

73 See, e.g., U.S. DEPT. OF HEALTH & HUMAN SERV., supra note 71, at 96, 98 (uninsured consumers may pay 70-100% more than federal and other U.S. purchasers).

74 See id. at 106-107.

75 See id. at 10-20 (regarding different forms of coverage in population).

76 See generally Manning, Richard L., Products Liability and Prescription Drug Prices in Canada and the United States, 40 J.L. & ECON. 203 (1997)CrossRefGoogle Scholar (regarding effects of different tort regimes).

77 See supra note 62 (comparing Minority Staff Report and Danzon analyses of price disparities).

78 See supra note 12 (comparing Danzon & Furukawa estimate with FDA White Paper).

79 See Danzon & Furukawa, supra note 12, at 527-528.

80 See Aaron Smith, Generic Drug Flood Headed Our Way, CNNMONEY, Aug. 3, 2005, http://money.cnn.com/2005/08/03/news/fortune500/generic/index.htm (branded drugs going off-patent in next five years and spike in generic applications).

81 See Danzon & Furukawa, supra note 12, at 526.

82 See STAFF OF H. COMM. ON GOVERNMENT. REFORM & OVERSIGHT, supra note 62, at 11-15; Press Release, Public Citizen, State Drug Price Surveys Find Seniors Pay Double (Nov. 8, 1999), http://www.citizen.org/pressroom/release.cfm?ID=427.

83 See, e.g., Press Release, Public Citizen, supra note 82 (reporting double and near-double retail prices). DANZON, supra note 12, has sharp and sound criticism for the methodology employed in STAFF OF H. COMM. ON GOVERNMENT. REFORM & OVERSIGHT, supra note 62. That criticism does not impugn however, the underlying observations of extreme price disparities for some retail drug purchases.

84 Although there is some disagreement as to the particulars, depending on sample sets, generic prices appear roughly competitive on both sides of the border. Compare Danzon & Furukawa, supra note 12, at 525-526 (observing slightly lower Canadian prices for generics across data set); with OFFICE OF PLANNING, supra note 64

85 See Danzon & Furukawa, supra note 12, at 526.

86 That is, differential are not completely explained by differences in wealth and costs. See Danzon & Furukawa, supra note 12, at 527-530. Neither do we observe Ramsey discrimination within our borders, as demand is partitioned not just according to ability/willingness to pay, but according to regulation and varying degrees of market power to which consumers may be assigned by, among other things, public and private accident. For a brief summary of the notion of Ramsey price discrimination, see supra note 61.

87 See supra note 61.

88 Within the EU, price discrimination is further complicated by provisions for parallel trade amongst member states. See, e.g., Catriona Hatton and Wim Nauwelaerts, Parallel Justice?, Pharma Times 54-55 (Mar. 2004) (regarding policy issues behind Bayer-Adelat case) at www.pharmatimes.com. Although manufacturers may exert downstream control via, e.g., contractual provisions, the trade suspension of the regulatory borders between member states renders the partitions requisite for price discrimination all the more porous. Moreover, the extent to which the EU will permit such downstream controls remains unsettled. See Catriona Hatton and Wim Nauwelaerts, European Court Opens a Small Window of Opportunity for Pharmaceutical Companies to Restrict Parallel Imports of Medicines, European Pharmaceutical Contractor 30-31 (Aug. 1, 2004), available at http://www.hhlaw.com/files/Publication/937ed0df-08d0-4722-9cae-914d168747b8/Presentation/PublicationAttachment/1429ab35-1c2b-440f-a59adef47e41c464/1701_EPC_Summer_2004_p30-31.pdf.

89 See, e.g., S.B. 410, §§ 36-43 (Tex. 2005); Belluck, supra note 2 (regarding private sub rosa importation); Kaufman, supra note 2 (regarding a State government engineered importation scheme); National Conference of State Legislatures, supra note 3 (regarding National Conference of State Legislatures summary).

90 See Illinois Seeking More Prescription Imports, VT. GUARDIAN, Aug. 5, 2005, at x, available at http://www.i-saverx.net/assetsrx/080505_vermont.pdf. (fewer than 15,000 consumers registered across five states); Just How Does Governor Define Success in State's Program to Import Prescription Drugs?, HERALD & REVIEW (Decatur), Oct. 18, 2005, at x, available at http://www.herald-review.com/articles/2005/10/19/news/editorials/1010687.txt (roughly 14,000 prescriptions filled for roughly 27 million eligible persons in five states).

91 And, as remarked above, brackets the question whether we should wish to import foreign pricing schemes. See supra text accompanying notes 59-61.

92 For a brief catalogue of the limitations of parallel trade, as a means of price control, see CONG. BUDGET OFFICE, supra note 26, at 4-5.

93 See id. at 5 (regarding various manufacturer responses); Ceci Connolly, Pfizer Cuts Supplies to Canadian Drugstores; Sales are Halted to Reimporters of Bargain Drugs, WASH. POST, Feb. 19, 2004, at A10 (preliminary cutbacks by one major pharmaceutical manufacturer); Merck Shuts Off Canadian Pharmacies Selling to U.S., BLOOMBERG NEWS, Jan. 19, 2005, http://www.bloomberg.com/apps/news?pid=10000082&sid=ai9RdezyHWRE&refer=canada (regarding cutbacks by Merck, Pfizer Inc., AstraZeneca Plc, and Wyeth).

94 See Connolly, supra note 93; Merck Shuts Off Canadian Pharmacies Selling to U.S., supra note 93.

95 See CONG. BUDGET OFFICE, supra note 26, at 5.

96 See supra notes 90-91.

97 See, e.g., Reuters, supra note 9 (regarding legislative controls being suggested by Canada's Health Minister).

98 See World Trade Org., Agreement on the Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, http://www.wto.org/english/docs_e/legal_e/19-adp.pdf (regarding anti-dumping provisions); World Trade Org., Agreement on Subsidies and Countervailing Measures, http://www.wto.org/english/docs_e/legal_e/24-scm.pdf.

99 As of October 2005, the I-SaveRx web site reports sourcing in Canada, Ireland, and the U.K., while reporting separate Illinois feasibility studies regarding Canada, Australia/New Zealand, and the E.U. See Welcome to I-SaveRx, http://www.i-saverx.net / (last visited May 9, 2005). Illinois has announced that it intends to add Australia and New Zealand sourced drugs to the I-SaveRx program. See Press Release, The Democratic Party of Wisconsin, Governor Doyle, Illinois Governer Blagojevich, and Illinois Congressman Emmanuel Announce Expansion of I-SaveRx Prescription Drug Program (July 18, 2005), available at http://www.i-saverx.net/assetsrx/071905_dpw.pdf (report issued by Democratic Party of Wisconsin). Such broad sourcing has been sought despite the fact that, across five states, only about 14,000 consumers have even registered for the program. See Illinois Seeking More Prescription Imports, supra note 90.

100 FDA Seizes Drugs Imported Under States’ Program, Supplier Says, BLOOMBERG NEWS, Mar. 9, 2005, http://www.bloomberg.com/apps/news?pid=10000082&sid=atBleFFijT6E&refer=canada#.

101 For a summary comparison of economic indicators, including relative wealth, see ORGANISATION FOR ECONOMIC CO-OPERATION & DEVELOPMENT, OECD IN FIGURES 12-13 (Supp. 2005), available at http://213.253.134.29/oecd/pdfs/browseit/0105061E.PDF.

102 CONG. BUDGET OFFICE, supra note 26, at 5.

103 As above, this observation holds independent of the extent to which such controls may be otherwise undesirable.

104 See generally Coase, supra note 25 (regarding social costs amenable to administrative management).

105 The gap may be observed at various levels of regulation and compliance. For example, just as the administrative burdens of regulating foreign distributors may seem daunting to FDA, especially as we consider greatly expanding the pool of such distributors, so may the burdens of regulating exportation be seen as daunting by the Canadian government if they are to regard retail outlets at various scales as potential exporters. In fact, Health Canada has declined to assure the integrity of such expanded exports as a matter of its own enforcement discretion—it wishes to distribute its limited compliance resources otherwise. See, e.g., citing Health Canada, Letter from Diane C. Gorman, Assistant Deputy Minister, to Richard H. Carmona, Surgeon General of the U.S. Public Health Service (Jun. 1, 2004) available at http://www.fda.gov/ohrms/dockets/dockets/04n0115/04N-0115_emc-000018-01.pdf.

106 Less ambitiously, anyone might sensibly question the efficiency of particular regulatory endeavors. Coase himself was acutely aware of the possibility of regulatory inefficiency or failure. See generally Coase, supra note 25.

107 See Elias Mossialos et al., World Health Organization, Regulating Pharmaceuticals in Europe: An Overview, in REGULATING PHARMACEUTICALS IN EUROPE: STRIVING FOR EFFICIENCY, EQUITY, AND QUALITY 2 (Elias Mossialos et al. eds. 2004) (“The pharmaceutical market is unique with regard to the extent and depth of its failure to meet the criteria for a perfect market.”). Arguments on behalf of common law controls most typically advocate the importance of state tort law as an adjunct to federal regulation, not as its replacement. See, e.g., Feldman v. Lederle Laboratories, 625 A.2d 1066, 1079 (N.J. 1993).

108 Qualify with, e.g., patient advocacy groups concerned with access.

109 See Coase, supra note 25. Coase provides a useful, general approach that is applicable to our market or domain; other rationales for regulatory intervention are consistent with it, certainly so with regard to our application. E.g. RICHARD POSNER, ECONOMIC ANALYSIS OF LAW, 383-385 (6th ed. 2003) (regarding “optimal regulation”).

110 See Coase, supra note 25, at 15. That does not, of course, mean that there are no distributional consequences to the choice of initial allocation or that such consequences—and threshold effects—are not legitimate areas of social concern. Steven Cheung has defined “transaction costs” broadly, as “all those costs that cannot be conceived to exist in a Robinson Crusoe (one-man) economy.” Steven N.S. Cheung, On the New Institutional Economics, in CONTRACT ECONOMICS 48, 51 (Lars Werin & Hans Wijkander eds., 1992).

111 See Coase, supra note 25, at 16.

112 Id. at 16-17.

113 Id.

114 See id. at 17. Significant attention has been paid to the notion that problems of administration at the level of the firm may be observed in government administration too; Coase himself referred to the government as a “super firm.” Cheung, supra note 110, at 57.

115 See Coase, supra note 25, at 17. C.f. POSNER, supra note 109, at 385 (regarding regulatory intervention for causes of fatal injuries); OFFICE OF MGMT. & BUDGET, EXECUTIVE OFFICE OF THE PRESIDENT, ECONOMIC ANALYSIS OF FEDERAL REGULATIONS UNDER EXECUTIVE ORDER 12866 (Jan. 11, 1996), http://www.whitehouse.gov/omb/inforeg/riaguide.html (regarding intervention in cases of market failure, such as involving externalities, natural monopoly, market power, and inadequate or asymmetric information).

116 Coase, supra note 25, at 17. None of this should be taken to suggest that Coase was insensitive to the costs of government regulation or the possibility of its failure to provide an efficient result. C.f. OFFICE OF MGMT. & BUDGET, supra note 116 (regarding alternatives to federal regulation).

117 See, e.g., Mossialos et al., supra note 107, at 2 (“The pharmaceutical market is unique with regard to the extent and depth of its failure to meet the criteria for a perfect market.”); WORLD HEALTH ORG., THE WORLD MEDICINES SITUATION 75 (2004) (“Worldwide, it is estimated that half of all medicines are inappropriately prescribed, dispensed, or sold, and that half of all patients fail to take their medicines properly.”).

118 See generally CTR. FOR DRUG EVALUATION & RESEARCH, U.S. DEPT. OF HEALTH & HUMAN SERVICES, 2001 REPORT TO THE NATION 25-28 (2002), available at http://www.fda.gov/cder/reports/rtn/2001/rtn2001-3.htm.

119 See id.

120 A given drug product may present diverse risks. For example, FDA's Patient Information Sheet for Isotretinoin (a drug product indicated for the treatment of severe acne) warns against any use during pregnancy, as risks include birth defects, miscarriage, premature birth, and infant death; risks for the population more generally include, but are not limited to, serious mental health problems, serious brain problems, damage to internal organs, and death. U.S. FOOD & DRUG ADMINISTRATION, PATIENT INFORMATION SHEET: ISOTRETINOIN (MARKETED AS ACCUTANE) (Nov. 2005), available at http://www.fda.gov/cder/drug/InfoSheets/patient/isotretinoinPIS.pdf.

121 See, e.g., Press Release, U.S. Food & Drug Administration, Recent FDA/U.S. Customs Import Blitz Exams Continue to Reveal Potentially Dangerous Illegally Imported Drug Shipments (Jan. 27, 2004) (regarding variously nonconforming drugs seized at import mail facilities and courier hubs).

122 See, e.g., U.K. DEPT. OF HEALTH, EU HEADS OF MEDICINES AGENCIES (HUMAN & VETERINARY) MEETING (2005), available at http://www.dh.gov.uk/PolicyAndGuidance/International/EuropeanUnion/EUPresidency2005/EUPresidencyArticle/fs/en?CONTENT_ID=4117909&chk=aSYUR8; WORLD HEALTH ORG., FACT SHEET NO. 275, COUNTERFEIT MEDICINES (Feb. 2006), available at http://www.who.int/mediacentre/factsheets/fs275/en/print.html; Reuters, Fake Drugs Spreading Rapidly, Warns WHO, MSNBC, May 6, 2005, available at http://www.msnbc.msn.com/id/776125 (focusing on counterfeit drugs in Asia and developing countries).

123 See generally CTR. FOR DRUG EVALUATION & RESEARCH, supra note 119.

124 See 21 C.F.R. § 201.57(d)-(g) (2005) (regulations regarding “contraindications,” “warnings,” “precautions,” and “adverse events,” respectively); 21 C.F.R. § 201.57(f)(6) (2005) (regarding categories of teratogenic precautions).

125 See, e.g., CTR. FOR BIOLOGICS EVALUATION & RESEARCH, U.S. DEPT. OF HEALTH & HUMAN SERVICES, GUIDANCE FOR INDUSTRY: DEVELOPMENT AND USE OF RISK MINIMIZATION ACTION PLANS (2005), available at http://www.fda.gov/cder/guidance/6358fnl.pdf (regarding appropriate and updated labeling, among other action plans and including labels, practitioner letters, and patient medication guides among RiskMAP tools).

126 See supra text accompanying notes 103-108.

127 See CTR. FOR DRUG EVALUATION & RESEARCH, supra note 119, at 25 (“The practical size of premarketing clinical trials means that we cannot learn everything about the safety of a drug before we approve it. Therefore, a degree of uncertainty always exists about the risks of drugs.”)

128 See 21 C.F.R § 314.80 (2005) and 21 C.F.R § 600.80 (2005) (regulations regarding postmarketing reporting of adverse events for drugs and biological products, respectively); adverse events that are both “serious and unexpected” are subject to 15-day “Alert reports” requirements under 21 C.F.R § 314.80(c)(1)(i) (2005) and follow-up reporting requirements under 21 § C.F.R 314.80(c)(1)(ii) (2005). Biologics manufacturers are subject to analogous requirements for “Alert reports” and follow-ups under 21 C.F.R § 600.80(c)(1)(i)-(ii) (2005); Expedited Safety Reporting Requirements for Human Drug and Biological Products, 62 Fed. Reg. 52237 (Oct. 7, 1997) (to be codified at 21 C.F.R pt. 20, 310, 312, 314, and 600).

129 See 21 C.F.R § 312.85 (2005) (regarding post-marketing “phase 4” studies).

130 In Europe, pharmacovigilence is required of marketing authorization holders and the competent authorities of the member states under Council Regulation 2309/93, art. 19-26, 1993 O.J. (L 214) (EC); Council Directive 2001/83, 2001 O.J. (L 311) (EC), available at http://www.eudravigilance.org/human/docs/Directives/Consolidated2001-83EN.pdf; and Commission Regulation 540/95, 1995 O.J. (L 55) (EC), available at http://www.eudravigilance.org/human/docs/reg95-540en.pdf. The EMEA implemented “EudraVigilance,” an adverse event database, in 2001. Information on, and links to, the system, may be found at http://www.eudravigilance.org/human/index.asp.; Health Canada monitors adverse events for pharmaceutical and biological products, among others through its Canadian Adverse Drug Reaction Monitoring Program (CADRMP). Information regarding the system, and links to the database, may be found at http://www.hc-sc.gc.ca/dhpmps/medeff/databasdon/agreement_accord_e.html.

131 See JACK HIRSCHLEIFER, PRICE THEORY & APPLICATION 198 (1976); KEITH N. HYLTON, ANTITRUST LAW: ECONOMIC THEORY AND COMMON LAW EVOLUTION 4 (2003).

132 See HYLTON, supra note 132, at 8.

133 See id. at 5.

134 See id. at 6.

135 See id. at 7-8.

136 See 21 C.F.R. §316 (2004). Indeed the Orphan Drug Act contemplates that certain useful drugs are liable not to be developed at all under competitive conditions and the general regulatory scheme imposed on drug development. See Pub. L. 97-414 (Jan. 4, 1983) (Congressional Findings for the Orphan Drug Act). The Act's implementing regulations require the drug's sponsor to demonstrate, e.g., that “there is no reasonable expectation” that drug sales will offset development costs or that the target market for the drug is less than 200,000 persons. See 21 C.F.R. §316.21 (2006).

137 Louis Phlips, among others, makes this point about products more generally. See LOUIS PHLIPS, THE ECONOMICS OF PRICE DISCRIMINATION 1 (1983) (typical firms have some degree of market power). For a pharmaceutical example, we might consider that, although patent protection continues for certain formulations of Prozac (e.g., Patent Number 5910319, Capsule, Delayed Release Pellets), exclusivity regarding the active moiety itself, as indicated for the treatment of depression, has expired. Numerous generic manufacturers have thus entered the market for this popular drug. At the time of this writing, FDA's listing of Approved Drug Products with Therapeutic Equivalence Evaluations (Electronic Orange Book), current through June 2005, lists more than 22 manufacturers of more than 60 formulations of fluoxetine hydrochloride. U.S. Food & Drug Administration, Electronic Orange Book (2005), http://www.fda.gov/cder/ob/default.htm .

138 The requirements of marketing approval alone are among the most stringent in all of administrative law. See, e.g., 21 C.F.R. § 314 (2005)(U.S. regulations regarding applications to FDA for approval to market a new drug); Food and Drug Regulations (Food and Drugs Act), C.R.C. C.08.002 (regulations regarding sale or advertising of new drugs in Canada).

139 Noah, Lars, Rewarding Regulatory Compliance: the Pursuit of Symmetry in Products Liability, 88 GEO. L.J. 2147, 2153-57 (2000)Google ScholarPubMed (regarding agency as expert authority).

140 See id. Of course, this is not to say that the Agency's particular decisions have been universally correct or uncontroversial, and recent years have seen FDA at the center of various political and technical controversies.

141 See, e.g., Spies, Alan R. et al., Counterfeit Drugs: A Menace Keeps Growing, 28 U.S. PHARMACIST, Jan. 15, 2003, at xGoogle Scholar, available at http://www.uspharmacist.com/index.asp?show=article&page=8_1014.htm (regarding counterfeiting and IP limitations in India and elsewhere); Peggy B. Hu & Berta Gomez, Public Safety Jeopardized by Chinese Counterfeiters, Experts Say, U.S. DEPT. OF STATE, INTERNATIONAL INFORMATIONS PROGRAMS, May 20, 2005, http://usinfo.state.gov/eap/Archive/2005/May/20-45620.html.

142 See, e.g., WORLD HEALTH ORG., THE WORLD MEDICINES SITUATION 93, 98 (2004), available at http://w3.whosea.org/LinkFiles/Reports_World_Medicines_Situation.pdf (“Fewer than one in six WHO62 Member States have well-developed drug regulation and two in six have no or very little drug regulatory capacity.”)

143 Among others, Mexico, India, and China have been substantial sources of non-conforming prescription drugs imported into the U.S. See, e.g., Spies et al., supra note 142 (discussing counterfeiting around the globe).

144 See. e.g., WORLD HEALTH ORG, supra note 142, at 99 (differential regulations regarding exports and “pass through” drugs in developed countries, including Germany, Netherlands, Sweden, Finland, and Switzerland); From Test Tube to Patient, Imported Drugs Raise Safety Concerns, FDA CONSUMER, Jan. 2006, at x, available at http://www.fda.gov/fdac/special/testtubetopatient/imports.html (issues with Canadian importation); U.S. DEPT OF HEALTH AND HUMAN SERVICES TASK FORCE ON DRUG IMPORTATION, REPORT ON PRESCRIPTION DRUG IMPORTATION 60-61 (2004), available at http://www.hhs.gov/importtaskforce/Report1220.pdf (most countries impose lesser regulations on drugs intended for export and do not regulate drugs merely transshipped through their countries; most countries do not commit adequate resources to assure safety of exports). Canada, in particular is unprepared to assure integrity of exports to U.S. Id. at 62 (citing Letter from Diane C. Gorman, Assistant Deputy Minister, Health Canada, to Richard H. Carmona, Surgeon General, U.S. Public Health Service, (Jun. 1, 2004)).

145 See, e.g., Examining the Implications of Drug Importation: Hearing Before the S. Comm. on the Judiciary, 108th Cong. (2004) (statement of William K. Hubbard, Assoc. Commissioner for Pol’y and Planning, U.S. Food and Drug Admin.), available at http://judiciary.senate.gov/testimony.cfm?id=1264&wit_id=3700 (regarding internet and other importation problems, including regulatory and safety failings of State-sponsored importation programs).

146 Hence we might wish to subject to U.S. registration requirements and oversight not just a relatively small number of Canadian manufacturers, or large-scale distributors, but a very large number of smaller distributors and even retail outlets. We might wish to do so, the better to secure an adequate stock of arbitrageurs, but we might blanch at the cost.

147 See, e.g., Press Release, U.S. Food and Drug Administration, Recent FDA/U.S. Customs Import Blitz Exams Continue to Reveal Potentially Dangerous Illegally Imported Drug Shipments (Jan. 27, 2004), available at http://www.fda.gov/bbs/topics/NEWS/2004/NEW01011.html (regarding variously nonconforming drugs seized at import mail facilities and courier hubs); Press Release, U.S. Food and Drug Administration, FDA Test Results of Prescription Drugs from Bogus Canadian Website Show All Products are Fake and Substandard (Jul. 13, 2004), available at http://www.fda.gov/bbs/topics/news/2004/NEW01087.html; Hearing Before the Subcomm. on Investigations of the S. Comm. on Governmental Affairs, 108th Cong. (Jul. 22, 2004) (statement of John M. Taylor, III, Associate Commissioner for Regulatory Affairs, U.S. Food and Drug Administration), available at http://www.fda.gov/ola/2004/importeddrugs0722.html.

148 See, e.g., S.B. 410, §§ 36-43, Leg., 79th Sess. (Tex. 2005).

149 See generally KAMATH, ET AL., supra note 48.

150 See http://www.i-saverx.net/, welcoming the states into participation in the program.

151 See KAMATH, ET AL., supra note 48, at 11-12 (providing an overview of research findings).

152 See id. at 9.

153 See id. at 8-10 (research method and design) and 11-18 (consumer fraud and safety).

154 See id. at 16-18 (comparing Illinois pharmacy requirements with those of Ontario and Manitoba) and 38-40 (comparing text of U.S. and Canadian regulations regarding storage and warehousing of pharmaceuticals).

155 See id. at 8.

156 See id. at 11.

157 The argument is not that private incentives to self-regulation are trivial, merely that they are not, in and of themselves, sufficient. That States would place so much faith in such a limited number of contracts, on the basis of such limited history with the relevant parties, and in the absence of developed, systematic private-side regulation, suggests to this observer more carelessness about regulatory roles than a careful rejection of them.

158 There is a burgeoning literature regarding the application of concepts of heuristics and bounded search to legal problems. See, e.g., Jones, Owen D., The Evolution of Irrationality, 41 JURIMETRICS 289 (2001)Google Scholar, BEHAVIORAL LAW AND ECONOMICS (Cass Sunstein, ed., 2000). Empirical investigations of, e.g., bounded trust and bargaining games are discussed at Vernon Smith, Experimental Methods in Economics, in ENCYCLOPEDIA OF COGNITIVE SCIENCE 2003, at 1070-79 (2003), available at http://www.neuroeconomics.net/pdf/materials/455.pdf.

159 See KAMATH, ET AL., supra note 48, at 38 (regarding Good Manufacturing Practice regulations and quality control).

160 See id. at 40-44 and appendices A and B (comparing U.S. and Canadian regulatory requirements for warehousing and storage of pharmaceuticals).

161 Notions of functional decomposition and implementation across multiple levels of explanation have been explored more fully in the cognitive and biological sciences than they have in this domain.

162 See generally Becker, Gary S., Crime and Punishment: An Economic Approach, 76 J. POL. ECON. 169 (1968)CrossRefGoogle Scholar; ESSAYS IN THE ECONOMICS OF CRIME AND PUNISHMENT (Gary S. Becker & Willam M. Landes, eds. 1974).

163 KAMATH, ET AL., supra note 48, at 11.

164 See, e.g., Press Release. U.S. Food and Drug Administration, supra note 148; Press Release, U.S. Food and Drug Administration, supra note 148. Links to these and other pages available at http://www.fda.gov/importeddrugs (last visited Nov. 28, 2005).

165 See supra text accompanying note 143 (WHO regards drug regulation as systematically inadequate in most nations).

166 See supra text accompanying notes 107-141.

167 Diversity in regulatory requirements is not pointless either. To the extent that decisions regarding, e.g., drug safety and efficacy involve complex risk assessment and the balancing of risks and benefits, disparate administrative decisions—and, indeed, regulatory standards—may be equally defensible within or across markets. We may, in fact, expect significant variation in standards across nations presenting substantially different economic and health conditions.

168 For general background, see PAUL CRAIG & GRÁINNE DE BÚRCA, EU LAW: TEXT, CASES, AND MATERIALS (3rd ed. 2003), especially chapter 1, the Development of European Integration.

169 The scope of this project defies any single citation. For general background, see id. Important defining documents include, e.g., European Union Treaty (Maastricht) (1992); Treaty of Rome (1957) (seeds of EU providing for, e.g., competition and free movement of goods), Convention on Human Rights and Biomedicine (Council of Europe) (1996); Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters (1968); and the European Patent Convention (1973). Current EU legislation may be found http://dg3.eudra.org/eudralex/index.html.

170 For an overview of relevant issues, see REGULATING PHARMACEUTICALS IN EUROPE: STRIVING FOR EFFICIENCY, EQUITY, AND QUALITY (Elias Mossialos, et al. eds. 2004).

171 See Council Directive 2004/27, 2004 O.J. (L 136) 34 (EC) (amending Council Directive 2001/83/EC on the Community code relating to medicinal products for human use (Act of the EU regarding pharmaceutical products)). An overview of the European Medicines Agency (EMEA) may be found at European Medicines Agency, http://www.emea.eu.int/htms/aboutus/emeaoverview.htm.(last visited April 4, 2006).

172 See Case 15/74, Centrafarm v. Sterling Drug, 1974 E.C.R 1147. For a discussion of the emergence of the principle, see Cornish, supra note 20, at 17-19.

173 The EU may be traced to the creation of, among other things, the European Economic Community with the signing of the Treaty of Rome, by six nations, in 1957. Ten new member states were admitted in 2004. For a graphic representation of EU membership, which currently includes 25 member states and contemplates four “applicant states” (including Bulgaria, Croatia, Romania, and Turkey), see European Governments On-Line, European Union Member States, http://europa.eu.int/abc/governments/index_en.htm (last visited Nov. 27, 2005). For a brief overview of the history of the EU, see The History of the European Union, http://europa.eu.int/abc/history/index_en.htm (last visited, Nov. 27, 2005).

174 Contact EMEA for latest information on implementation.

175 See generally Antoine Culliver, The Role of the European Medicines Evaluation Agency in the Harmonisation of Pharmaceutical Regulation, in PHARMACEUTICAL MEDICINE, BIOTECHNOLOGY, AND EUROPEAN LAW (Richard Goldberg & Julian Lonbay eds., 2000); Silvio Garattini & Vittorio Bertelé, The Role of the EMEA in Regulating Pharmaceutical Products, in REGULATING PHARMACEUTICALS IN EUROPE: STRIVING FOR EFFICIENCY, EQUITY, AND QUALITY 2 (Elias Mossialos et al., eds. 2004)..

176 See Council Regulation 2309/93, Annex, 1993 O.J. (L214) 24 (EC). See generally Culliver, supra note 175.

177 See Council Regulation 2309/93, supra note 177, at 24.

178 See id.

179 See Culliver, supra note 175, at 143-144.

180 Most new pharmaceutical drugs approved within the EU are approved via the centralized procedure; all new biological drugs must be approved through the centralized procedure. Council Regulation 2309/93, supra note 177.

181 See Garattini & Bertelé, supra note 176, at 84-89.

182 Culliver, supra note 175, at 146 (“It is not a Food and Drug Administration for Europe, but rather it is a ‘virtual agency,” interfacing with its partners without dismantling their structures.”).

183 See Garattini & Bertelé, supra note 175, at 84-86 (regarding procedures for evaluating approval dossiers).

184 Garattini and Bertelé report that, of the two “rapporteurs” required under the centralized procedure one is typically suggested by the EU regulator (specifically, the Committee for Proprietary Medicinal Products) and one is typically suggested by the manufacturer. See id. at 84.

185 Indeed, EU approval depends more heavily on user fees than does the FDA. See id. at 87- 88 (reporting majority funding from user fees in EU versus only 15% in U.S., under the Prescription Drug User Fee Act). In the U.S., fees are required of each “human drug application” by statute. See 21 U.S.C. § 379g(1) (2006); U.S. FOOD AND DRUG ADMINISTRATION, CENTER FOR DRUG EVALUATION AND RESEARCH (CDER)/CENTER FOR BIOLOGICS EVALUATION AND RESEARCH (CBER), GUIDANCE FOR INDUSTRY: SUBMITTING SEPARATE MARKETING APPLICATIONS AND CLINICAL DATA FOR PURPOSES OF ASSESSING USER FEES 1, available at http://www.fda.gov/cber/gdlns/appsuf.pdf.

186 See Garattini & Bertelé, supra note 175, at 87-89; Elias Mossialos et al., supra note 107, at 8.

187 The International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH) is an ongoing public/private conference between regulatory agencies and pharmaceutical trade associations in the U.S., the E.U., and Japan. ICH projects include, the Common Technical Document (regarding a standard format for the submission of drug safety and efficacy information) and the Medical Dictionary for Regulatory Activities (MedRA). ICH documents and other information may be found at Welcome to The Official Website for ICH, http://www.ich.org/cache/compo/276-254-1.html (last visited April 5, 2006). For an overview of recent FDA-ICH activity, see FDA's Center for Drug Evaluation and Research, International Activities, http://www.fda.gov/cder/audiences/iact/iachome.htm#ICH (last visited April 5, 2006).

188 See Garattini & Bertelé, supra note 175, at 86-87 (discussing conflicts between health and industrial policy accentuated by institutional location of EMEA in European Commissions General Directorate of Enterprises rather than the Public Health Directorate).