The Folly of Drug ‘Re-importation’

We’re back to more legislative mistakes when it comes to healthcare.

First let’s address the dishonest rhetoric of drug “reimportation.”

Senator David Vitter (R, LA) is once again trying to fool his colleagues about drug importation. Let’s set the facts straight.

Brand-name pharmaceuticals found abroad tend to be significantly cheaper than they are in the States, largely because foreign governments impose stringent price controls on most drug sales.

Advocates claim that “re-importation” will allow American patients to benefit from this price disparity.

But “re-importation” doesn’t actually describe what will happen if foreign drug importation is legalized. Using the term is misleading. It’s not “re-importation;” it’s importation. The term doesn’t actually refer to medicines that have been inside U.S. borders to begin with.

Nor is this about denigrating the Canadian medicines regulatory system — it’s about reality.

Importing drugs from Canada is exceedingly dangerous for a number of reasons. For starters, many Internet pharmacies based up north are stocked with drugs from the European Union. And while many wouldn’t hesitate to take medicines purchased from countries like France and Great Britain, there’s plenty of risk involved.

The EU currently operates under a system of “parallel trade,” which allows products to be freely imported between member countries. This means that any drugs exported from the U.K. to Canada could have originated in an EU country with significantly less rigorous safety regulations like Greece, Portugal, Latvia or Malta.

Just last year, EU officials seized over 34 million fake pills in just two months. And in May, Irish drug enforcers confiscated over 1.7 million pounds of counterfeit and illegal drug packages. So if American customers start buying drugs over the Internet from Canadian pharmacies, they could easily wind up with tainted medicines of unknown European origin.

It’s also important to note that drugs from anywhere in Europe aren’t even legal for sale in Canada. So when politicians say we can get “the same drugs” that Canadians get, they’re just plain wrong.

Even more worrisome is outright fraud — many “Canadian” pharmacies are actually headquartered somewhere else.

A 2005 investigation by the Food and Drug Administration looked at 4,000 drug shipments coming into the U.S. Almost half of them claimed to be from Canada. Of those, a full 85 percent were actually from countries such as India, Vanuatu and Costa Rica.

As part of another investigation, FDA officials bought three popular drugs from two Internet pharmacies claiming to be “located in, and operated out of, Canada.” Both websites had Canadian flags on their websites. Yet neither the pharmacies nor the drugs were actually from Canada.

As an FDA official told Congress, “We determined there is no evidence that the dispensers of the drugs or the drugs themselves are Canadian. The registrants, technical contacts, and billing contacts for both web sites have addresses in China. The reordering website for both purchases and its registrant, technical contact, and billing contact have addresses in Belize. The drugs were shipped from Texas, with a customer service and return address in Florida.” And in laboratory analysis, every pill failed basic purity and potency tests.

The on-the-ground reality of state and local importation schemes has been dismal and politically embarrassing. Remember Illinois’ high profile “I-Save-RX” program? Over 19 months, only 3,689 Illinois residents used the program—that’s .02 percent of the population.

And what of Minnesota’s RxConnect? According to its latest statistics, Minnesota RxConnect fills about 138 prescriptions a month. That’s in a state with a population of 5,167,101.

Remember Springfield, Massachusetts and “the New Boston Tea Party?” Well, the city of Springfield has been out of the “drugs from Canada business” since August 2006.

And speaking of tea parties, according to a story in the Boston Globe, “Four years after Mayor Thomas M. Menino bucked federal regulators and made Boston the biggest city in the nation to offer low-cost Canadian prescription drugs to employees and retirees, the program has fizzled, never having attracted more than a few dozen participants.”

The Canadian supplier for the program, Winnipeg-based Total Care Pharmacy, sent a letter to city officials saying the firm was terminating its agreement because there were so few participants. In 2006, Boston saved $4,300 on a total of 73 prescriptions. When Total Care decided to end its relationship with the city, only 16 Boston retirees were still participating.

Programs like this wouldn’t do any better on a national basis. A study by the non-partisan federal Congressional Budget Office showed that importation would reduce our nation’s spending on prescription medicines a whopping 0.1 percent—and that’s not including the tens of millions of dollars the FDA would need to oversee drug safety for the dozen or so nations generally involved in foreign drug importation schemes.

Calling foreign drug importation “re-importation” is a clever way to sell the idea to the American people. But the term simply doesn’t fit with the facts. In reality, Americans would end up jeopardizing their health by purchasing unsafe drugs made in foreign countries – while not saving money.

Think again, Senator Vitter.

Next up, the enemies of the free market attack the Non-Interference Clause.

Senator Jack Reed (D, RI) wants to repeal the Non-Interference Clause. He thinks it will lower the government’s prescription drug bill. He’s wrong. Let’s look at the record.

While Medicare as a whole is a fiscal basket case due to run out of money in 2024, Part D has been the very model of a well functioning federal program since its implementation.

The Congressional Budget Office found that between 2004 and 2013, Part D will cost an extraordinary 45 percent less than what was initially estimated. Premiums for the program, meanwhile, are roughly half of the government’s original projections. Part D enrollees pay, on average, $30 a month — a rate that has remained essentially unchanged for years.

It’s no wonder that beneficiaries are so pleased with the program. In fact, 96 percent of those enrolled in Part D say that their coverage works well.

These unprecedented results are largely due to Part D’s market-based structure. Beneficiaries are free to choose from a slate of private drug coverage plans, forcing insurers to compete to offer the best options to American seniors. It’s hardly surprising that the program has led to low prices and satisfied customers.

Through their own negotiations with drugmakers, private insurance plans that operate under Part D have already had great success in keeping pharmaceutical prices down. In fact, the CBO has observed that Part D plans have “secured rebates somewhat larger than the average rebates observed in commercial health plans.”

What’s more, the CBO has said that doing away with the non-interference clause “would have a negligible effect on federal spending.” In a report from 2009, they reiterated this view, explaining that such a reform would “have little, if any, effect on [drug] prices.”

In fact, allowing the feds to negotiate drug prices under Part D would likely have a negative effect on the program. The CBO predicts that when HHS forces pharmaceutical firms to lower the cost of a particular drug, this tactic brings with it “the threat of not allowing that drug to be prescribed.”

Senator Reed is lost in the wilderness.

As another former legislator once said, “While the people retain their virtue and vigilance, no administration by any extreme of wickedness or folly, can very seriously injure the government in the short space of four years.”

Peter J. Pitts, a former FDA Associate Commissioner, is President of the Center for Medicine in the Public Interest