HHS and Commerce Dept. Reports Oppose Drug Importation

Published February 1, 2005

In late December, the U.S. Department of Health and Human Services released a long-awaited report on the importation of prescription drugs to the United States. The findings of the report were summed up by an AP wire service headline that read, “Drug imports can be safe or cheap, but not both.”

In a December 21, 2004 cover letter to congressional leaders, HHS Secretary Tommy G. Thompson and Commerce Secretary Donald L. Evans noted the HHS report offered a comprehensive inventory of the complexity and risks that would be involved in implementing drug importation from Canada and abroad.

According to the report, “The public expectation that most imported drugs are less expensive than American drugs is not generally true. Generic drugs account for most prescription drugs used in the U.S. and are usually less expensive in the U.S. than abroad.

“Shopping around for price comparisons,” the report continues, “asking a doctor or pharmacist for a generic alternative to a prescribed brand name drug, or using a Medicare or other prescription drug discount card is a proven method to save American consumers money on domestic prescription drugs while retaining the protections of a comprehensive safety regime.”

The report concludes, “it would be extraordinarily difficult to ensure that drugs personally imported by individual consumers could meet the necessary standards for a certification of safety to be made, especially if consumers continue to import prescription drugs in the same or increased numbers.”

The HHS task force acknowledges the feasibility of a commercial drug importation program, but finds such a program “would require new legal authorities, substantial additional resources and significant restrictions on the type of drugs that could be imported, which could increase the costs of imported drugs.”

At the same time, the U.S. Commerce Department issued its own report, “Pharmaceutical Price Controls in OECD Countries: Implications for U.S. Consumers, Pricing, Research and Development, and Innovation.”

The Commerce study warns, “[l]egalized importation will likely adversely affect the future development of new drugs for American consumers. This report estimates that R&D incentives will be lowered by legalized importation, resulting in roughly between four and eighteen fewer new drugs introduced per decade.

“As OECD countries individually seek to reduce spending on drugs through price controls,” the study continues, “their collective actions reduce R&D that would provide substantial health benefits to all.”

Current federal law prohibits the importation of prescription drugs without the approval of the Department of Health and Human Services. Several states have ignored the law, attempting to set up access to less-expensive drugs for their residents. The federal government maintains that without proper monitoring, imported drugs may be counterfeit or unsafe.

Both Sides React Quickly

Opponents of drug importation were quick to applaud the two reports. “The Task Force did the investigative work and came up with the same conclusion that everyone who knows anything about the problem has come to,” said Merrill Matthews, Jr., Ph.D., director of the Council for Affordable Health Insurance. “Importing prescription drugs from outside the country and bypassing the FDA’s oversight and quality controls would endanger patients, save little or no money, undermine innovation, and create a legal liability morass.

“Maybe now that the Task Force has spoken, those politicians who have openly encouraged or helped U.S. citizens to break federal law will get back to the business of looking for safe and effective ways for Americans to have access to affordable prescription drugs,” Matthews said.

Advocates of drug importation expressed disappointment at the reports’ conclusions. Characterizing it as a predictable outcome of the current administration acting in concert with the pharmaceutical industry, U.S. Representatives Rahm Emanuel (D-IL), Gil Gutknecht (R-MN), Bernie Sanders (I-VT), Dan Burton (R-IN), Jo Ann Emerson (R-MO), Rosa DeLauro (D-CT), Anne Northup (R-KY), and Sherrod Brown (D-OH), issued a joint statement on December 21 regarding the HHS report.

“By convening this task force,” they wrote, “HHS had an opportunity to take an innovative step forward to give American families access to world-class prescription drugs at affordable prices. Unfortunately, this one-sided report indicates no willingness to find solutions, instead dismissing importation using the same scare tactics employed by the pharmaceutical companies themselves.”

Experts Reiterate Importation Dangers

Supporters of the task force findings emphasized the importance of persistent vigilance. “Allowing drugs to be legally imported from Canada and other countries with price controls remains a bad idea for several reasons,” said Heartland Institute President Joseph L. Bast. “First, the lower prices at which drugs are sold in other countries are not the result of their superior manufacturers or of market competition, but are due to threats by national governments to violate the intellectual property rights of drug companies that refuse to sell at government-determined prices. Importing drugs legitimizes this blackmail, encourages it to continue, and undermines intellectual property rights here in the United States.

“At a more practical level,” said Bast, “it is impossible for the FDA to guarantee the quality of drugs coming from Canada and other countries. We know that many of the drugs entering the country from Canada are actually produced elsewhere–sometimes in Third World countries or countries known to be hostile to the United States–and ‘trans-shipped’ to American consumers. An alarming proportion of those drugs are counterfeit, adulterated, or mislabeled. To inspect every package entering the United States that might contain these drugs, and then to run tests on anything more than a small fraction of the drugs found, to see if they actually are what they claim to be, would cost hundreds of millions of dollars, perhaps billions of dollars, every year. This would cancel out any savings that might be had from importing cheaper drugs.”

Robert Goldberg, director of the Manhattan Institute’s Center for Medical Progress, elaborated on the evidence of drug importation failures, commenting in National Review Online:

“In the past five years, Canadian Internet pharmacies have made a bundle arbitraging between the Canadian government’s set price on the handful (about 35-50) of drugs that are profitable and plentiful enough to sell back to the United States (plus a hefty handling fee). As this business has grown, American companies have responded by holding Canadian supplies constant. As a result, shortages have occurred and prices in Canada are climbing as wholesalers charge a premium for the most popular medicines. As a result, Canadian authorities have started to crack down on the cross-border sales.

“Canada’s reaction is not isolated,” wrote Goldberg. “When Illinois tried to set up a program to have people buy drugs from Ireland, which has many drug-manufacturing plants, the Irish Pharmaceutical Healthcare Association called the Illinois program ‘totally unworkable and impractical.’ It raised concerns about the effect of the proposal on the Irish prescription-drug supply. The association’s spokesman said that it ‘would cause enormous problems for us to meet our local obligations here.’

“Again, just as in Canada, there is only enough of the most popular medicines in the European market to meet domestic demand at price-controlled levels, and not one pill more,” according to Goldberg. “European leaders would not allow U.S. consumers to siphon off drugs and drive up prices any more than the Canadians would.”

Potential Legal Morass Noted

Bast predicted what would quickly happen if importing drugs were legalized. “Some U.S. consumers will buy counterfeit or adulterated imported drugs and be injured. Some will even be killed. Victims and their families will sue Web site hosts (only to discover they are phantom legal entities without assets), drug companies, and state and federal governments for failing to protect them from the dangerous products. More millions or billions of dollars will be spent on legal fees, drug companies (with the deepest pockets) will be punished for ‘allowing’ something they in fact vigorously oppose, and the drums will beat for more regulation to ‘protect’ American consumers.

“Does this advance the cause of safe and affordable drugs for American consumers?” Bast asked. “Does it advance long-needed FDA reform, or help finance research and development for the next generation of life-saving drugs? Does it resemble, in any way, free trade? The answer to every one of these questions is ‘no.'”

Susan Konig ([email protected]) is managing editor of Health Care News.

For more information …

The 144-page report of the HHS Task Force on Drug Importation is available online, along with materials from “listening sessions” conducted with stakeholder groups, at the task force’s Web site, http://www.hhs.gov/importtaskforce/.

The 125-page Commerce Department report, “Pharmaceutical Price Controls in OECD Countries,” is available online in Adobe’s PDF format at http://trade.gov/td/chemicals/drugpricingstudy.pdf.

The joint statement by U.S. Representative Gil Gutknecht and others is available on Gutknecht’s Web site at http://www.gil.house.gov/newsroom/statements/stateDEC/122104pd2.htm.