The U.S. Chamber of Commerce is opposed to drug importation. However, I understand the position Governor Blagojevich is in. I understand the position that an 85-year-old woman or man is in, who depends on prescription drugs and needs access to affordable drugs, because my members have problems providing drug coverage to their employees. They have problems, for that matter, providing health care of any kind to their employees.
So, I consider myself to be in the same boat as those folks who are trying to lower the costs of health care. I would suggest that we could change the name of this forum to the “National Symposium on Health Care Cost Control.” This week we’re talking about prescription drugs. Next week we might be talking about medical malpractice. The week after we might be talking about association health plans.
The Real Issue
The underlying problem is health care costs are skyrocketing in America. I was asked to speak about safety, but I’m going to tell you, safety is a red herring in this argument. Safety is a legitimate concern, but it is not the issue that is actually driving the drug importation debate.
I challenge Congress to stand up and instead of passing an importation bill, as they did with the Gutknecht legislation, to vote on whether we, as a country, should have price controls. They did not do that. And my question to all members of Congress who supported the Gutknecht legislation, regardless of party, is why are you trying to get price controls in the United States through the back door? Why not have the courage to stand up and have an honest debate about whether or not price controls are the right approach?
We as a nation have a real problem when it comes to health care. We decided long ago that health care is an entitlement. You and I and everyone in this room are entitled to health care. If you are part of Medicare or Medicaid, you get health care. If you’re uninsured, every nonprofit hospital in the state of Illinois and every other state in the union is required by law to provide health care. If you’re not in one of those two categories that means you’re covered by insurance. Most of that insurance comes from your employer.
So at the end of the day, everybody is entitled to health care. The decision we are struggling with today is how much health care you are entitled to. Today we’re talking about prescription drugs and managing the cost associated with that, but we could just as easily be talking about reducing medical malpractice lawsuits or allowing association health plans, or enabling small businesses to pool their risks and get access to affordable health insurance the way bigger companies do because they’re able to self-insure.
It’s difficult for companies to grow and expand when they cannot use dollars and resources toward capital improvement and expansion and have to put it towards the cost of health care instead. There’s plenty of anecdotal evidence as well as statistical evidence that would show that rising health care costs are hurting U.S. companies. Each company has only so many dollars and they can do only so many things with those dollars. They can either put it towards the human and physical capital they need to remain competitive with competitors in other countries, and to continue to innovate and meet consumers’ needs, or they have to spend it on the ever-rising cost of health care for their employees and retirees. It’s a choice employers have to make every single day.
Drug importation doesn’t solve this problem for employers. We’re just working around the margins of the problem because we have not answered this question: how much health care are we entitled to?
The Safety Issue
My economics professor—I started an MBA program about a month ago—would say less safety is the unintended consequence associated with this well-intended legislation. The intention is not to create a safety problem, but to help control health care costs. Safety is a legitimate issue, and those people who’ve suggested that we could design a program that would eliminate the hazards associated with bringing in counterfeit drugs should be required to prove they can do it.
The INS can’t police our borders to keep illegal immigrants out of the United States. The FDA, which was not designed to do that, is now going to have to patrol our borders to keep out dangerous drugs? Do you think they’re going to be effective at that? You’re fooling yourself if you do.
Counterfeiting isn’t unique to drugs, of course, but it may be uniquely dangerous. Consider Major League Baseball, for example. You can get a jersey for a player with the Chicago Cubs, and there should be a tag on it that says “licensed by Major League Baseball” with a little fancy hologram. Now, if you sit down with the intellectual property attorneys for Major League Baseball, they will tell you that counterfeit jerseys are coming by the thousands from China and aren’t licensed by Major League Baseball.
Now, when somebody buys that jersey, is anybody harmed? The companies that are paying big fees for the license may be, but not consumers. The jersey probably looks the same, feels the same, they can wear it to the Cubs game, they’re not any less of a Cubs fan because they have it. But things are a lot different when you’re talking about lifesaving medication. The consequences of buying a fake are much, much worse for the consumer, possibly fatal. And often, nobody, even an expert, can tell the difference between a “real” pill and a fake one without conducting sophisticated tests. So it’s easy to counterfeit drugs, and the consequences are worse than in other cases.
What happens when a dangerous fake drug gets through? Somebody’s going to sue. They’re not going to be able to sue the federal government or the state of Illinois, so they’re going to want to sue the drug manufacturer who had nothing to do with the injury. Litigation is one of the reasons why importation would be difficult to do in a cost-effective manner. When the process goes wrong and a consumer dies, we are a nation that wants to point the finger at somebody and say somebody’s accountable and has to pay. I’ve never seen the federal government pay out a $1 billion settlement to anybody or the state of Illinois pay out a $1 billion settlement. When they write legislation, they carve themselves out a liability exemption. It’s the private sector that ends up paying.
But let’s say the advocates of importation can design a counterfeit-proof importation system. The cost associated with designing that system would probably remove the entire amount of money we would be saving by importation. So, savings become a mute point. Even if we dedicate the amount of resources needed to get the job done, economically we can’t solve the equation, because we’ll spend more money trying to assure that the drug you get from Canada—that may have been imported from Iran to Canada and then passed through to the United States—is more than the difference in price between Canadian and U.S. drugs.
Do we want to put price controls on this marketplace? Historically, we’ve been a capitalist society. Pharmaceuticals are traded on the stock exchange. We all own mutual funds. Every mutual fund out there, I am sure, has a percentage of it invested in Advit, Pfizer, Merck, you go on down the line.
We have a real decision to make here: whether or not we want to, for the first time in a very severe way, inhibit the capitalist system. No one has mentioned that last week, Business Week ran an interesting article on this subject. Business Week’s reporters went to Europe and talked to some of the European commissioners and guess what? Europe is deciding, as we speak, to go back to a market-based system!
Why is that? Because, in the 20 years or so since they put price caps in place, they have watched the pharmaceutical industry in Europe dry up. About 20 years ago, a third of the pharmaceutical industry was based in Europe, a third in the United States, and a third elsewhere. Now, 50 percent of the pharmaceutical research that goes on is done in the United States, and we reap the jobs associated with that. The Europeans have seen the economic impact of that and don’t want to be where they are currently at.
Price controls are bad. Governments here in the U.S. should be working to end price controls in Europe, eliminate price controls in Canada, instead of adopting their system and methodology here in the U.S.
The issue of whether you’re entitled to health care, I think, has been settled. But the issue of how much you are entitled to is of the greatest interest to the U.S. Chamber of Commerce, because my members are stuck in the middle. My employers are trying to find a way to provide health care to their employees because they want to do the right thing.
We recognize that today the most effective medicine is often delivered in the form of a pill rather than through hospitals and surgery. We’ve discovered that you can save money in the long run by encouraging the use of prescription drugs to prevent the much more painful and costly consequences of illnesses going untreated. So, it is in our interest to be significantly engaged in this debate.
The system needs reform, but importation is the wrong way to do it. The problem isn’t safety—safety is a red herring—it’s cost. Importation isn’t the way to control costs. It’s just a way to import price controls in the U.S., and the threat to our safety is an unintended consequence of that flawed approach.
Members of Congress decided to vote for importation, not because they were interested in or worried about safety. They were interested in and worrying about controlling costs. I encourage them to stand up and start the debate about whether or not we should impose price controls on this industry. The U.S. Chamber would not be in favor of such a thing, but that is where the debate should be and not, I think, over whether and how we can safely import drugs from Canada.
Sean Heather is executive director of Congressional public affairs for the U.S. Chamber of Commerce, and executive director for the Chamber’s Great Lakes Regional Office, which serves Illinois, Indiana, Michigan, Ohio, Kentucky and Pennsylvania. His email address is [email protected].