On July 21, 2004, the Rocky Mountain News (“RMN”) printed an editorial opposing the importation of prescription drugs from Canada and other countries
(“A Shortsighted Path to Cheaper Drugs”). However, International Meds USA (“IMUSA”) believes that it is the opposition to importation that is shortsighted. From time to time over the past year, other editorials, “op-ed” pieces, etc. have appeared in newspapers around the U.S. that attempt to explain why prescription drug importation from Canada and other countries is a bad idea. While opinion letters and editorials in favor of importation have also been printed, the space that is typically allocated by the media for these editorials and letters is much too small to allow the writer to fully present his or her argument. Obviously, International Meds USA is biased in favor of allowing importation. Nevertheless, the RMN editorial and similar pieces often appear to blindly accept the argument by the pharmaceutical companies that the disproportionately high prices paid by U.S. citizens for prescription drugs (compared to the prices paid by citizens of other countries) are necessary to maintain an adequate level of research and development. Such defenses of what the vast majority of Americans view as price gouging by drug companies in the U.S. should not and cannot go unchallenged.
This issue is much deeper and more complex than a group of poll-oriented politicians
catering to seniors who want to save money on their prescription drugs. On one point, we can all agree. The root of the problem is the fact that the United States is the only “first-world” country that doesn’t control the price of drugs in one way or another. Price controls, however, are not the answer.
A far better solution, in the eyes of many, is a fundamental concept that lies at the heart of a healthy, free-market economy – competition. The pharmaceutical companies, who themselves are global enterprises with subsidiaries and manufacturing plants in many different countries, argue that we should protect their U.S. pricing structure from the reality of the “global economy”. They sell their drugs all over the world and benefit from our free market by charging whatever the U.S. market will bear, while at the same time working furiously to deny individual U.S. citizens the right to take advantage of those same free-market economic principles by purchasing prescription drugs from safe sources outside the U.S. Something indeed is terribly wrong with this picture.
Some additional facts need to be noted in order to properly “frame” this debate:
- It is no longer a question of whether we should “allow” the importation of prescription drugs from other countries. The reality is that it’s already happening on a massive scale, with over one million U.S. citizens buying drugs from Canada in 2003. A workable system needs to be implemented now to insure the safety of the drugs being ordered.
- Contrary to the continuing claims of the FDA and the pharmaceutical industry, safety and quality have never been a legitimate issue in the case of prescription drugs obtained from licensed Canadian pharmacies. To date, not one single instance of harm to an American citizen has been documented. The truth is that there is no difference.
- The pharmaceutical companies in question, e.g., Pfizer, GlaxoSmithKline, Merck, etc. are global enterprises – not separate “American companies” subject to simplistic comparisons with “those [companies] based in countries with price controls”.
- While it is true that enormous sums of money are spent on R&D (research and development), even the pharmaceutical companies now acknowledge that they spend more on marketing, advertising and administration than they do on R&D. In 2002, the 13 largest U.S. drug-makers devoted only 14 percent of revenues to R&D, while marketing and administration costs equaled 33 percent of revenues.
- Almost without exception, the major pharmaceutical companies continue to report substantial increases in both revenues and net profits over previous years. Pfizer, for example, just reported that its 2nd quarter 2004 earnings grew 24% to $12.27 billion over the same quarter in 2003, generating a quarterly net profit of $2.86 billion. The sales of Lipitor alone were up 17% with sales of $2.36 billion.
- The major pharmaceutical companies earn more than 50% of their worldwide profits on their sales within the U.S., which only account for about 25% of their worldwide sales.
- On average, total prescription drug spending in the U.S. grew by 13% per year between 1993 and 2000. It is expected to grow by approximately 12% per year through 2011.
- The truth is that Canada is capable of supplying only a small fraction of the U.S. market –
less than 5%. Notwithstanding this fact, the major pharmaceutical companies, including Pfizer, Glaxo and Merck, are waging an all-out “war” against the Canadian internet pharmacies in an attempt to cut off the supply of drugs in Canada.
- The Canadian government, as with governments in other countries (including the U.S.), has
nothing to do with the supply of prescription drugs within Canada. It is the pharmaceutical companies who control the supply.
Accordingly, if there are shortages of particular drugs in Canada, it is the pharmaceutical companies who are creating those shortages.
So where do these facts lead us in our quest to find a long-term solution to high drug prices in the U.S.? The position of people who are opposed to importation often appears to be that we should simply maintain the “status quo” in the U.S., while berating other countries to raise their drug prices. The complaint is registered loud and clear that it is unfair for American citizens to have to pay the lion’s share of drug research and development costs that benefit the world’s population, yet no real solution is offered, other than for us to continue doing so. The argument that allowing importation would result in U.S. prices being reduced to the same artificially low, government-dictated prices for drugs” that exist in other countries like Canada, thereby crippling R&D spending and innovation by the pharmaceutical industry, is bogus. No one in a position of responsibility who favors importation has proposed that it should be completely unregulated and allowed on a wholesale basis.
Moreover, importation opponents appear to be in denial as to the obvious fact that the train on U.S. drug prices has left the station. The American public, and in particular the senior citizens of this country, are increasingly better informed and simply won’t allow this situation to continue.
Reasonable drug patents should recognized and enforced on a global basis. Drug companies must be allowed to make a fair profit, after R&D, just like any other company. The question of course is what is reasonable and fair. Just as drug prices in the U.S. must be reduced, the prices of drugs in other countries must also be allowed to move higher – so that the burden of paying for research and development is more evenly distributed. This does not mean that the prices between countries need to be equalized, nor are they ever likely to be. However, the
fundamental truth is that only entities that can make this shift in the pricing of drugs in other countries happen are the pharmaceutical companies themselves, by using their leverage as manufacturers and suppliers.
Clearly, other countries are not going to agree to increase the prices of their drugs unilaterally, simply because we ask them to. What will motivate the drug companies to undertake such difficult task? It’s spelled c-o-m-p-e-t-i-t-i-o-n. The pharmaceutical industry, of course, would prefer to not to do this. From their perspective, this is solving the problem the hard way. The easier solution for them, by far, is to continue the status quo in the United States, with U.S. citizens continuing to pay far more for their drugs than the rest of the world. However, increases in drug prices abroad, alone, will not solve the problem. Why should we assume that, simply by forcing people in other countries to pay more for drugs, this would result in lower prices in the U.S.?
The importation of prescription drugs should be regulated and controlled by the FDA. Foreign, licensed pharmacies that are allowed to sell to U.S. customers should be registered, and websites that are affiliated with these registered pharmacies should be certified. The pharmaceutical plants in foreign countries that produce the drugs being sold by approved pharmacies should be inspected by the FDA, just as the FDA already does for many drug-manufacturing plants outside the U.S., to ensure that these plants conform to rigorous U.S. safety requirements.
The bottom line is that a reasonably regulated prescription drug importation program can be created that will allow importation on a limited basis, while adequately protecting the safety of U.S. citizens. Senate bill S.2328, sponsored by Senators Byron Dorgan (D-ND) and Olympia Snowe (R-Maine), is currently the best proposal for implementing such a system.
Don Bozarth
President
International Meds USA
www.internationalmedsusa.com
Denver, Colorado |
