Friday, October 29, 2004

You Might Be Able to Fight City Hall but Can You Fight the Pharmaceutical Companies?

Summary Report
"Drug makers like Pfizer say they would reduce their shipments of drugs to distributors in Canada and other countries that re-export to the United States. ''We are not going to supply drugs to diverters, in Canada or elsewhere,'' said Hank McKinnell, chairman and chief executive of Pfizer. "

Importing Less Expensive Drugs Not Seen as Cure for U.S. Woes

A customer at the Concourse Drugs pharmacy in the Bronx will pay about $118 for a month's supply of 20-milligram Lipitor.

At, a Canadian online outlet, the same quantity of the drug, Pfizer's cholesterol-lowering medication, costs $79.

The difference has become a tempting political target.

Senator John Kerry, the Democratic presidential candidate, has made a campaign pledge to help cut Americans' prescription drug costs by allowing them to import drugs from Canada.

President Bush has conceded that the idea is worth a try ''if there's a safe way to do it.'' Bipartisan legislation in Congress would allow the reimportation of prescription drugs from Canada and other industrialized countries.

It may make political sense to point to Canada as a solution to high prescription drug prices in the United States.

But many economists and health care experts say that importing drugs from countries that control their prices would do little to solve the problem of expensive drugs in the United States, where companies are free to set their own prices.

Even the nonpartisan Congressional Budget Office estimated that allowing Canadian drug imports would have a ''negligible'' impact on drug spending.

To begin with, there are not enough Canadians, or drugs in Canada, to make much of a dent in the United States.

There are 16 million American patients on Lipitor, for instance -- more than half the entire Canadian population.

Drug makers like Pfizer say they would reduce their shipments of drugs to distributors in Canada and other countries that re-export to the United States.

''We are not going to supply drugs to diverters, in Canada or elsewhere,'' said Hank McKinnell, chairman and chief executive of Pfizer.

And Canadian health officials, fearing shortages and higher prices of their own, would probably clamp down on their own pharmacists and distributors to keep their drugs from leaking into the United States.

Canadian patient-advocacy groups have already complained about shortages from the exports to the United States that already occur, even though they violate American law.

Even the most vehement advocates of forcing big drug makers to lower prices in this country say that imports are a rather clumsy tool.

''It's a pretty crazy solution to a fairly simple problem,'' said James Love, director of the Consumer Project on Technology, a group advocating a lowering of drug costs.

''Reimportation is not the first thing that would come to my mind.''

But what comes to mind for people like Mr. Love is a political nonstarter: imposing Canadian-style price controls.

No Democrat or Republican will be likely to dare to propose such a thing during an election year, or perhaps anytime soon, having seen the political debacle of the Clinton administration's effort to devise a national health care system -- and knowing that the pharmaceutical industry is one of Washington's most powerful lobbying forces.

Price controls ''wouldn't have a ghost of a chance to pass in the Congress,'' said Senator Byron Dorgan, a Democrat from North Dakota who is the sponsor of the main drug reimportation bill in the Senate.

Because free-market pricing of drugs and other health care still seems to be so politically sacrosanct, the policy proposals tend to tinker around the margins.

''Is it sensible for the United States to have price controls?'' asked Jean O. Lanjouw, an economist at the University of California, Berkeley.

But we don't discuss the real questions.''

For all the shortcomings, the Kerry campaign argues that drug imports should be given a chance.

''If the impact is so negligible, why are the drug companies fighting it so much?'' said Sarah Bianchi, Senator Kerry's policy director.

Even if the overall bulk of imports were not that large, she added, ''they would apply some pressure on the drug industry and make them revisit their pricing policies.''

And some of the drug companies' defensive tactics could be barred by law.

The Senate legislation, for example, would bar pharmaceutical companies from denying supplies to distributors and pharmacies that export to the United States.

But the measures proposed so far would do little to change the fundamental economics of the drug industry as it exists today.

Prescription drugs cost a lot to invent, but once invented cost little to manufacture.

When Pfizer sells drugs in the United States it sets the price at a level intended to sell the most pills at the highest price the market will bear.

Now that it is the nation's best-selling drug, the price is 36 percent higher than it was in 1997 -- helping Lipitor achieve nearly $10 billion in sales last year.

Whatever one thinks of the pricing disparity, efforts to force down American prices to Canadian or European levels could radically change the economics of the pharmaceutical industry -- which effectively depends on United States profits for all of its activities, including a substantial portion of its spending on research and development.

They argue that drug companies are spending large sums in marketing to convince patients to demand expensive new medications even when older, cheaper drugs have the same effect.

Summarized by Copernic Summarizer


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