Drug Reimportation is Bad Policy Medicine

In a clear example of the “cure being worse than the disease,” the House of Representatives recently passed legislation that gives the impression members believe that cheap prescription drugs are more important than safe drugs and that cheap drugs today are more important than new drugs tomorrow. Just before leaving for the August recess, the House approved by a vote of 243 to 186 the Pharmaceutical Market Access Act of 2003--a bill that allows consumers to import prescription drugs from 26 countries, including Canada and Europe. The lawmakers rejected a more sweeping proposal that would have also opened the door for the reimportation of such drugs by drug wholesalers and pharmacies.

The bill must now be reconciled with a slightly more responsible drug importation provision passed in late June by the Senate as part of its overall Medicare and prescription drug bill.

The proposed legislation, also known as H.R. 2427, would allow Americans access to price-controlled drugs from Canada, Europe, South Africa, and other countries with only minimal oversight by the Food and Drug Administration, the U.S. agency charged with protecting the nation’s drug supply. FDA Commissioner Mark McClellan warned the legislation “creates a wide channel for large volumes of unapproved drugs and other products to enter the United States that are potentially injurious to public health and pose a threat to the security of our Nation’s drug supply.” To add, the White House called the bill “dangerous,” potentially allowing “counterfeit, adulterated, inactive, and unapproved drugs to enter the country.”

Yet members on both sides of the aisle on Capitol Hill delighted during the House debate in hypocritically blasting the same pharmaceutical industry that, no doubt, many a Republican and Democrat received sizable campaign contributions from in the past. Legislators painted the drug companies no less than infamous robber barons and cast themselves as heroes fighting on behalf of defenseless seniors, in particular. Those congresspersons nodding in favor of the measure said the outcome of the vote was one of the most satisfying of their careers.

But, instead of taking pot-shots at the “greedy” and “profit-hungry” pharmaceutical manufacturers in the United States, legislators and consumers alike should be cautious not to jump to a rushed prognosis of the situation or agree on a quick-fix, band-aid approach to the problem of escalating drug costs. Rather than playing politics and lambasting drug companies to win points with voters, our elected officials should seriously consider the long-term ramifications of a country where drug reimportation might become the norm. After all, America’s giant drug makers are, indeed, easy targets for public distrust; however, to attack these corporations in this case as powerful entities only looking out for their own selfish interests is the proverbial “straw-man” defense--neglecting the potential dangers associated with the misguided, though partially honorable, intentions of this specific legislation.

There are sound reasons why we are asked to dole out good money for the medication we receive from doctors, hospitals, clinics, etc. The old adage is, “You get what you pay for.” In the debate surrounding the Pharmaceutical Market Access Act of 2003, this axiom rings true, and we have to be honest with ourselves and admit that price-gouging goes on, to one degree or another, in just about any industry these days. But, the costs of pharmaceuticals in the U.S. contain much more than just greenbacks and stock increases for drug companies.

Drug prices are often higher in the United States because we are the last remaining major nation where the majority of prescription drugs command market prices and are not under government controls. Congress attempted in 2000 to legalize reimportation, but met a firestorm of opposition from former FDA commissioners and Health and Human Services secretaries. They warned that imported drugs raise serious safety concerns since they could be counterfeit, contaminated, expired or mislabeled. Black market rings inevitably spring up with swindlers and imposters entering the market.

The charade of heroism on the part of politicians to fight for consumers and patients is only a smoke screen to disguise their real desire to tap into price controls already forced upon foreign drug makers. What they fail to share with the folks back home, though, are the likely consequences of opening up an international “Pandora’s box” of foreign drug imports that our own Food and Drug Administration could not possibly keep up with.

The FDA does not have the jurisdiction in Canada and doesn’t begin to have the personnel to monitor every package of pills coming in to the United States. Then, our neighbors to the north also tell us that drugs imported into Canada, but not intended for sale in Canada, do not have to meet the same safety inspection standards if the drugs are simply moving through the country for consumers elsewhere. How’s that for a hard pill to swallow?

If a U.S. citizen were to be injured by reimported drugs, pharmaceutical companies have no doubt that trial lawyers would quickly file a class action suit against them, saying they (the drug companies) knew their drugs were being sold back to the United States illegally and they are therefore responsible. Deaths already have occurred with reimported drugs from Mexico, and it is only a matter of time for Canada and elsewhere if H.R. 2427 becomes law.

And, virtually all of the countries from importation would be allowed provide for “compulsory licensing” of patented products. This means that the governments can confiscate a company’s patent if the drug company refuses to sell its products at the price the government demands, paying only a token royalty, if that. This is hardly a choice for companies whose most valuable asset is their intellectual property.

Europeans have virtually destroyed their pharmaceutical research sector by demanding prices so low that companies can’t recoup their research investment. The House bill puts Americans on a similar path of destruction. Why? Because if the U.S. goes the route of price controls--either imposed directly or imported from other countries--research into tomorrow’s cures is sure to dry up. Consumers don’t insist that Microsoft start selling Windows at the cost of the disk because they know this would halt the next generation of computer programs. The same principle is true for all the research and development that goes into producing new medicines--it’s not the pill or elixir itself that you’re paying for, but all the lab work and testing, plus FDA approval, that goes into guaranteeing the medicine makes the grade before it hits the shelves or your doctor’s office.

Other countries want our drugs, but they are seldom willing to pay the full price for research and development costs. FDA requirements cost drug companies an average of $800 million per drug, and then, according to a Tufts University study, only three in 10 drugs produce sales sufficient to allow the companies to recoup their development and FDA costs.

Drug reimportation is not the answer to high drug costs. What consumers--and seniors, in particular--need is a modernized Medicare plan that includes prescription drug coverage, in addition to ongoing education on how to avoid overpaying for medicine. Citizens shouldn’t have to pay more in dollars, bureaucracy and confusion than they already do. On the contrary, smart buying behavior can significantly reduce the cost of drugs, as well as unnecesary headaches, even within our borders.

If Congress enacts laws preventing pharmaceutical price discrimination, foreigners and Americans will both lose because it will reduce the profitability of drug manufacturers and hence drug development incentives. I ask you which is preferable: a life-saving drug at a high cost or no life-saving drug at all? Americans would be much better served by trying to do something about the FDA’s costly approval process, than to cripple with bad policy medicine the only legitimate drug R&D industry in the world.

hypocritically blasting the same pharmaceutical industry that, no doubt, many a Republican and Democrat received sizable campaign contributions from in the past.

I didn't know it was up to candidates to decide which contributions to accept and which to reject. When I make a campaign contribution, I make it because I agree with the candidates stand on most positions. I've never had a candidate return my contribution based on the fact that he was going to vote against something I favored.

If accepting campaign contributions is, in effect, a promise to vote in a particular manner, then campaign contributions are bribery and should be illegal.

hypocritically blasting the same pharmaceutical industry that, no doubt, many a Republican and Democrat received sizable campaign contributions from in the past.

If accepting campaign contributions is, in effect, a promise to vote in a particular manner, then campaign contributions are bribery and should be illegal.

If you are not confused by the heated debate over whether or not Americans have the right to buy their prescription drugs in countries where prices are 50 to 80% cheaper, you have not been paying attention. There is a great deal of anti-prescription drug reimportation spin these days from special interest groups committed to keeping the US market closed so that our Rx prices remain the highest in the world by a wide margin.

Much of the spin attempts to explain the dramatically lower prices in other countries as the result of "socialists" not allowing drug makers to earn a profit on sales.

However, a simple examination of the facts reveals that "the emperor has no clothes" when it comes to this claim.

European Union countries do allow profits to be made but use two simple common sense mechanisms to stimulate price competition in the market.

First, their national health systems spend taypayers' money wisely by setting a reimbursement cap (not a price cap!) on what a member can receive on their prescription drug purchase. This cap takes into account the cost of developing and producing the drug, a profit for the maker and other middlemen, and finally the cost of equivalent generic substitutes. The aim is to promote the use of equivalent generics in place of expensive brand name alternatives whenever both are equally effective. However, the consumer still has the freedom to pick the more expensive alternative so long as they pay the difference out of pocket. Finally, the drug companies have the freedom to set prices at levels higher than the reimbursement cap.

Second, European Union members promote and enjoy the benefits of "parallel trade" for prescription drugs. This means that a pharmacy in Germany is free to buy Rx supplies from Italy or Spain if the prices there are cheaper on a given day. Parallel trade means "free trade" which in turn results in lower prices for consumers.

These two mechanisms provide the necessary countervailing force a free market needs in order to have effective price competition. Unfortunately, the US market has nothing to counter Big Pharma's immense pricing power. The results are the world's highest prices.

The movement for prescription drug reimportation is simply a call for free trade to be finally introduced to the US market. The Pharmaceutical Market Access Act of 2003 identified 26 countries deemed to be safe sources of prescription drugs. Right now the only party with any freedom in the closed US market is Big Pharma which is free to charge whatever it wants to the rest of us.

Imagine what would happen to domestic prices if Americans were finally free to source the best possible prices for their medicines in the same way that they can source the best possible deals on sneakers and DVD players.

With 29% of prescriptions going unfilled in America due to their inaffordability, according to the Kaiser Family Foundation, it's time to stop paying lip service to free markets and actually open up our market.

More info can be found at www.rxsanity.org

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