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Drug Importation is a ‘Reform’ We Can Do Without – Pacific Research Institute

Drug Importation is a ‘Reform’ We Can Do Without

Last month, both presidential candidates announced that they were reconsidering their long-standing support for the importation of prescription drugs from abroad.

Their timing couldn’t have been better. Days later, Belgian authorities seized over two million counterfeit drugs on their way from India to Africa. This incident serves as a chilling reminder that purchasing drugs from places outside the United States is a dangerous enterprise. Tack on the fact that drug importation won’t actually lower overall healthcare costs, and the verdict is clear — foreign drug importation is not worth the risk.

It’s easy to see why legalized drug importation has enjoyed a great deal of popularity. Brand-name drugs are often cheaper overseas. In Canada, for example, prices can be up to 70 percent lower than in the United States.

Many Americans therefore believe that the importation of cheaper foreign drugs is an elegant solution to rising healthcare costs. Removing the legal roadblock would bring cheap foreign pills to the American market, significantly reducing drug spending without sacrificing healthcare quality, right?

Not exactly. For starters, some drugs are less expensive in nations like Canada because governments impose price controls on meds in order to sustain their systems of socialized medicine.

This leads to shortages, rationing, and even complete unavailability.

To save money, for example, Canadian health officials routinely delay the introduction of new and more expensive drugs. Of the one hundred new drugs that were launched in the United States from 1997 through 1999, only 43 made it to market in Canada during the same period.

I’m Canadian by birth, so I’ve seen how such delays work firsthand. In 2003, my uncle was diagnosed with non-Hodgkin’s lymphoma. If he’d lived in America, the miracle drug Rituxan might have saved his life. But Rituxan wasn’t approved for use in Canada, and he lost his battle with cancer.

Such stories are the grim reality of price controls. Similar tragedies have played out over and over again in Britain, France, Italy, and virtually every other country that imposes price controls on drugs.

It’s no surprise, then, that Canadians and Europeans have been coming to the United States for years in order to get the critical medicines they can’t obtain in their own countries. And they’re willing to pay top-dollar for these drugs out of their own pockets.

Price controls offer a host of other side effects. Because they constrict the revenues of drugmakers, price controls lead to diminished investment in research and development. The average drug costs $1.3 billion to invent and usher through the regulatory process. Price controls would guarantee that fewer drugs make it from the initial development stages to the marketplace.

Foreign price controls are also the reason that 80 percent of new drugs are invented in America. Americans effectively subsidize patients in other countries, who get a free ride off American ingenuity.

So some drugs aren’t available abroad. But Americans can still save money on the ones that are available in other countries, right?

Not necessarily. While it’s true that brand-name drugs are usually cheaper, the majority of drugs are actually more expensive overseas. Americans pay considerably less than foreigners for generic drugs, which constitute around 65 percent of the drugs consumed in the United States.

Generics are cheap in the United States because there’s a flourishing free market for them, which drives prices down. In Europe and Canada, however, where the government pays for almost all drugs, there’s considerably less competition among manufacturers to deliver the lowest possible price. That’s why you can walk into a Wal-Mart or a Target today and pay $4 for a 30-day supply of generics. You can’t do that in France, Britain, or Canada.

So when people say “drugs are cheaper in other countries,” they’re making an enormous generalization. What they really should say is that certain brand-name drugs are cheaper. They’re not referring to generics. And they’re ignoring all the cutting-edge drugs that often aren’t available in other countries.

Advocates of legalizing drug importation also fail to mention that drug importation has already been tried in the United States. And it has failed miserably. A number of states and cities have shirked federal law and established their own local drug importation programs. Not one has been popular.

Take Illinois. In 2004, Governor Rod Blagojevich implemented the “I-SaveRX” program which, in conjunction with neighboring Wisconsin, allowed state residents to buy meds from Canadian pharmacies.

The program cost taxpayers $1 million, requiring input from 500 public employees and two dozen state agencies. After 19 months of operation, only 3,689 Illinois residents — 0.02 percent of the population — had used the I-SaveRX program.

It’s a similar story with other importation programs. The one in Missouri has attracted all of 460 customers; Wisconsin’s has 321; Kansas, 267; and Vermont, 217.

So even when they’ve had the opportunity, Americans have roundly rejected importation. But what’s the harm in opening our borders to foreign drugs, even if the savings are minuscule?

Bluntly speaking, there’s quite a bit of harm. The safety concerns associated with foreign drugs far outweigh any potential savings, as the recent Belgian drug seizure makes apparent. A quick examination of the world pharmaceuticals’ market shows that the counterfeit drug trade is thriving.

According to the World Health Organization, about 10 percent of the world’s pharmaceuticals are counterfeit. And while many believe that buying drugs from internet pharmacies in developed nations like Canada and the United Kingdom lowers the risk of encountering lethal fake drugs, that’s simply not true.

Drugs exported from Canada don’t have to meet the same safety requirements as those sold within Canada and are most likely manufactured not in Canada but in India, China, or Pakistan. And in the U.K., a policy of “parallel trade” among all EU countries means that drugs sold in Britain could easily have originated in EU nations with spottier records of regulation, like Cyprus or Lithuania.

The threat of counterfeit drugs isn’t the only problem with importation. In fact, just last month the Food and Drug Administration (FDA) banned the importation of at least 30 generic drugs made by Ranbaxy Laboratories, an Indian drug manufacturer, because of poor production practices.

Consumers are lucky the FDA caught the problems at Ranbaxy, as the agency’s resources are stretched frighteningly thin. Earlier this year, tainted Chinese shipments of the blood thinner Heparin caused the deaths of 81 people. The FDA had never inspected the factory that manufactured the contaminated Heparin. Countless other factories avoid FDA screenings as well; a hearing in the House of Representatives last year found that foreign factories are inspected once every 13 to 30 years.

Legalizing drug importation would cause drugs to flood the American market from all over the world, putting even more strain on a regulatory body woefully unequipped to handle it. In short, the benefits of legalized drug importation have been much exaggerated, while the real dangers associated with such a policy have been understated.

It is my hope that the presidential candidates’ recent reconsideration of drug importation is a sign that the political consensus on the issue is shifting. If not, the quality of health care in the United States could be in serious trouble.

Sally C. Pipes is president and CEO of the Pacific Research Institute. Her next book, “The Top Ten Myths of American Health Care,” will be released this fall.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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