Drug Reimportation Measure Passes House

Published September 1, 2003

On July 25, the House of Representatives passed H.R. 2427, the Pharmaceutical Market Access Act of 2003, by a vote of 243 to 186. Eighty-seven Republicans joined 155 Democrats and one independent in supporting the measure.

The legislation, introduced in mid-June by Rep. Gil Gutknecht (R-Minnesota), would allow U.S. consumers, pharmacists, and wholesalers to reimport prescription drugs from 26 countries with minimal oversight by the Food and Drug Administration (FDA).

While the measure’s supporters say it will give U.S. consumers easier access to low-cost prescription drugs, experts say the legislation will flood the country with dangerous counterfeits and import foreign price controls, killing research and development in new life-saving medications.

Interests Mobilized

The debate proved to be one of the most contentious of the year, dividing conservatives and mobilizing such varied interests as the Traditional Values Coalition and the Leukemia and Lymphoma Society.

On the day of the vote, the National Association of Manufacturers, U.S. Chamber of Commerce, and National Medical Association ran full-page ads in the Capitol Hill newspaper Roll Call opposing reimportation.

The White House and FDA also weighed in, opposing the measure. They warn it endangers patients by allowing potentially counterfeit, adulterated, and unapproved drugs to enter the country.

FDA Commissioner Mark McClellan said the anti-counterfeiting measures in the Gutknecht legislation would raise the cost of prescription drugs by $2 billion. The Congressional Budget Office concluded, in a July 22 report on the projected costs of a prescription drug benefit for Medicare, that reimportation would not reduce drug costs for American consumers. (See the Galen Report for a summary of this CBO report and how to find it on the Internet.)

Nevertheless, House lawmakers passed the legislation. Many said they did not believe the safety risk was a legitimate concern. “The safety issue absolutely will hold no water anywhere, and they know it,” said Rep. Louise Slaughter (D-New York).

Rep. John Dingell (D-Michigan) disagreed. “[The Gutknecht bill] will allow this country to be flooded with unsafe, counterfeit drugs; drugs that will not do what they should; drugs that are unsafe; drugs that will kill the American people.”

Preserving Profits

Other observers said the key issue in the reimportation debate had to do with preserving the profits of pharmaceutical companies.

“They say it is about safety. It is not about safety; it is about money. They say it is about the health of seniors who might be taken in by counterfeit drugs. It is not about that. It is about money, the money that the pharmaceutical companies are making on the backs of the American people,” said Rep. Dan Burton (R-Indiana).

Opponents of the measure did not disagree that profits–which make possible the research and development efforts of U.S. pharmaceutical companies–are an important aspect of the debate. “I want to lower drug costs for the seniors in my district, but not at the risk of stifling the very innovation that creates the drugs in the first place,” said Rep. Phil Crane (R-Illinois).

Unlike Crane, many Americans appear not to understand the economics of the drug industry. During a C-SPAN broadcast of debate over the Gutknecht measure, viewers were encouraged to call in with their comments. Those whose thoughts were aired grumbled about the “outrageous” profits the pharmaceutical industry must be making if the same pill cost $3.25 in the United States and $1.30 in Germany.

What those callers fail to understand is that the price differential is a creature of governments. Many foreign countries keep prescription drug prices artificially low with government-imposed price controls. Because consumers in price-controlling nations don’t pay much toward research and development costs, Americans pay more.

Conservatives Divided

Some conservatives supported reimportation on the basis of free trade. They argued drug prices in other countries would rise with reimportation, easing the burden on American consumers who subsidize the research and development costs for countries with price controls.

“American policy has always been based on the principle that our economy is strengthened by free trade. … There is no good reason why pharmaceuticals should be an exception to the rule,” said Rep. Ron Paul (R-Texas).

Others say buying drugs in a foreign country with price controls has little in common with free trade.

Said Rep. Jim McCrery (R-Louisiana), “Americans pay an unfair share of the research and development costs for pharmaceuticals in the world; but the proper way to address that is not by abandoning our free market principles and importing price controls, and that is what this bill would do.”

What Happens Next

The Gutknecht bill now moves to the Senate. Fifty-three Senators have said they would oppose any measure that bypasses the authority of the Secretary of the Department of Health and Human Services to implement the law based on safety and cost-effectiveness considerations.

While Senate passage of the legislation as a free-standing measure appears unlikely, supporters will lobby for its inclusion in the Medicare conference committee report. By virtue of its passage in the House, it becomes the official stance of the House on the reimportation issue in negotiations with the Senate on the Medicare bill.

Joe Moser is a health policy analyst at the Galen Institute, a nonprofit public policy research organization based in Alexandria, Virginia. The views expressed are the opinions of the author and do not necessarily reflect the views of the Galen Institute.