Let’s Let Market Forces Lower Drug Prices
The Trump Administration on July 31 announced steps that could lead to the importation of prescription drugs from Canada, where prices are lower. This strategy is favored by President Trump but has long been opposed by many Republicans. Health and Human Services Secretary Alex Azar said that the policy would enable Americans to “get the benefit of the deals that pharma themselves are striking with other countries.”
The fate of this initiative is uncertain after the failure of the administration’s last two proposals to lower drug prices—linking the prices of certain drugs to an international pricing index and requiring transparency by revealing the price on a drug’s advertising, respectively. Critics note that in 2003, the Congressional Budget Office determined that permitting importation only from Canada would produce a negligible reduction in drug spending.
Overall, we are reminded of (and agree with) law professor Rachel Sachs, who said that President Trump’s May 2018 speech on his hyped 39-page “American Patients First“ plan “was deeply underwhelming.”
“There is very little new in the administration’s plan, and little if anything that will make a difference in the near future, as the president has promised,” she added. The new plan is deja vu all over again.
Proposals to import lower-priced drugs from Canada are not new, and they have not been successful. Congress in 2003 authorized HHS to promulgate regulations to permit the importation of prescription drugs from Canada but only after the secretary certified to Congress that it would “pose no additional risk to the public’s health and safety,” and would “result in a significant reduction in the cost of covered products to the American consumer.” No secretary has made this certification.
While federal legislators and several states have made various other proposals for drug importation from Canada, expectations should be guarded. Canadian officials have warned against it repeatedly, citing concerns about shortages.
“Canada cannot be a drug store for the United States of America; 280 million people cannot expect us to supply drugs to them on a continuous, uncontrolled basis,” health minister Ujjal Dosanjh told a news conference in 2005.
Instead of such piecemeal and uncertain baby-steps, the United States should adopt a more stable policy, by instituting reciprocity of drug approvals based on approval by foreign regulatory agencies that have evaluation regimes comparable to the FDA’s. That would lower direct regulatory costs and increase competition and access to a greater number of drugs on the market in the United States. It would also benefit patients directly because the detrimental effects of FDA delays in approving certain new drugs already available in other industrialized countries are well documented.
How would it work? Reciprocity of drug approvals with certain of the FDA’s foreign counterparts with comparable drug evaluation regimes would cause an approval in one such country to trigger approval automatically in the United States, upon application by the drug manufacturer or licensee (subject to the creation of approved labeling in the appropriate format, etc.). That would make more drugs available sooner in the United States, increase competition, and put downward pressure on prices. This approach would enlist market forces in fulfilling President Trump’s repeated promises to lower drug prices.
Proposals for reciprocity also are not new. In 2003, the House of Representatives (but not the Senate) passed the Pharmaceutical Market Access Act, which would have required the HHS secretary to issue regulations permitting pharmacists, wholesalers, and individuals (for personal use) to import prescription drugs into the United States from 25 countries, including Australia, Canada, the European Economic Area, Israel, Japan, New Zealand, and South Africa. According to the Congressional Budget Office, the Act would have saved $40 billion over 10 years.
Senator Ted Cruz (R-Texas) and then-Rep. Ron DeSantis (R-Fla.) in 2015 and 2106 introduced a bill to establish a reciprocal marketing approval process that would have allowed the sale in the U.S. of a medical product not approved by the FDA if it had been approved in select other countries with drug approval requirements comparable to the United States. Twenty senators introduced a similar bill in 2017, led by Senator Bernie Sanders (I-Vt.).
The National Academy of Sciences, Engineering, and Medicine in its 2018 report, “Making Medicines Affordable: A National Priority,” included a recommendation that Congress should give the FDA the authority to seek reciprocal drug approval arrangements for generic drugs and biosimilars with the regulatory agencies of the United States, the EU, and such countries as Australia, Canada, Japan, and New Zealand.
Speeding Up Approvals
A second reform—or “revision of policy” might be a more accurate term—would be more aggressive movement by the FDA of new drugs through its “accelerated approval pathway.” That would permit the FDA to issue what amounts to an earlier, limited, or “conditional approval” of a new drug that is intended for a “serious or life-threatening disease” and for which there is an “unmet medical need.”
Such approvals can be achieved more rapidly because they are based on clinical trials that show improvement in “surrogate endpoints” that are believed to correlate with clinical benefit but without demonstrated efficacy on a “definitive” health endpoint such as increased longevity or reduction in the incidence of heart attacks. Examples of surrogate endpoints are the shrinking of a tumor, or improvement in a laboratory value such as blood urea nitrogen, a measure of kidney function.
Following accelerated approval, the drug sponsor (company) must perform confirmatory trials to prove to the FDA that the medicine is effective in meeting a definitive clinical endpoint (such as greater longevity), at which time the approval is converted to a standard, unconditional approval. If the studies are not done or fail to provide such confirmation, the FDA can withdraw the drug from the market.
Both the introduction of reciprocity of foreign approvals and more accelerated approvals would also help to alleviate the pressing problem in the United States of shortages of certain critical drugs, many of which have been essential in medical practice for decades. The majority are generic injectable medications commonly used by EMTs and in hospitals, including analgesics, cancer drugs, anesthetics, antipsychotics for psychiatric emergencies, and electrolytes needed for patients on IV supplementation.
Hospitals are scrambling to assure adequate supplies of drugs that are in short supply or to find substitutes for them. The FDA is severely limited in what it can do to address shortages. The agency’s app to enable health-care providers to keep current on shortages informs regulators about the problem but doesn’t actually remedy it. Reciprocity of approvals could make numerous needed alternative drugs available, obviating the need for medical practitioners to resort to their second or third choice for medications.
The White House Domestic Policy Council’s Katy Talento said in May about the administration’s effort to control drug prices, “This is a fearless president and he doesn’t know or care why things have always been done . . .” If that’s true, reciprocity of medical-product regulatory decisions and more liberal use of the accelerated approval pathway would be good ways to show it.
Henry I. Miller, a physician and molecular biologist, is a senior fellow at the Pacific Research Institute. He was the founding director of the FDA’s Office of Biotechnology. John J. Cohrssen is an attorney who has served in a number of government posts in the executive and legislative branches of the federal government, including as associate director of the President’s Council on Competitiveness (Bush 41), and counsel for the House Energy and Commerce Committee.