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Sunday, July 11, 2004

Kill the goose that lays Rx eggs? - The Washington Times: Commentary - July 11, 2004

Kill the goose that lays Rx eggs? - The Washington Times: Commentary - July 11, 2004
In a prime example of election year demagoguery, the Senate is considering legislation, already approved by the House, to legalize importing to the U.S. pharmaceuticals from dozens of countries around the world.
Like some pharmaceutical bill from hell, the "Dorgan bill" proposed by Sen. Byron Dorgan, North Dakota Democrat, would undermine the two pillars of our country's modern pharmaceutical supply — safety and efficacy. (The bill may sneak by as part of a compromise class action lawsuit reform.)

Further, it would stifle innovation and deprive us of the next generation of lifesaving drugs.
The bill's purported goal is removing legal barriers facing private American importers so they can purchase drugs at lower cost outside our borders . This may sound like healthy, international competition, but it isn't.
Regular market forces are not in play when U.S. companies sell drugs to a country such as Canada. A world trade agreement passed in 1994, dictates that any U.S. company refusing to comply with another country's pharmaceutical price controls and sell drugs at greatly reduced prices risks losing its patent protection. This clause — which only applies to pharmaceuticals — allows a purchaser to say, essentially, "We'll pay you half the cost of your drugs and if you don't agree, we will violate your patent and make knock-off versions."
Part of this "deal," of course, is that the purchasing country will not turn around and resell the drugs to Americans. But purchasing countries like Canada, aware the law is rarely enforced, resell illegally anyway.
Understandably, the pharmaceutical companies are unhappy about this and are now limiting the supply of pharmaceuticals they sell so there is enough for, for example, Canadians to use — but not enough to resell back to America. As U.S. manufacturers limit drug supplies sold to Canada, there will be market disequilibrium there — huge demand from the U.S., but a dwindling supply of drugs for Canada to sell back to us.
While in the past few years it could be argued imported drugs from Canada posed little or no known health risks, as the Canadian markets have less product from the U.S., they will turn to other countries for supplies — Mexico, Bangladesh, Slovenia and others. The probability that these drugs will be adulterated or just plain bogus is significant, and both Canadian and U.S. officials acknowledge there is no system for determining the safety and efficacy of such imports.
The Dorgan bill, which basically legalizes importation and sale of drugs from numerous countries — not just Canada — makes an already bad situation worse:
(1) It jeopardizes the safety of the U.S. medicine supply by allowing drugs to come in from a couple dozen "approved" countries — without adequate quality control standards, so long as the drugs are "the same" as U.S. drugs approved by our Food and Drug Administration. But what does "the same" mean? Among other things, manufacturing processes, dosage and labeling differ from country to country. How would you know if the pharmaceutical was adulterated by the manufacturer — or by some intermediary along the shipping route? Certainly the FDA is not equipped to test and clear hundreds of thousands of shipments from around the world.
(2) The pending bill seeks to require U.S. pharmaceutical companies to supply foreign countries unlimited supplies of drugs — once again, at reduced prices in keeping with each country's price controls.
Obviously, with constantly replenished supplies beyond the needs of the importing country, the excess will be sold to the one place where they fetch the highest price, the nation without price controls: the United States. Clearly, an industry forced to sell its products at minimal or no profit will have less revenue to reinvest in new products, in this case future blockbuster drugs that would prolong lives and promote health.
The bottom line is the Dorgan bill would import price controls to the United States, with all their negative effects on incentives for new drug development.
Research-based pharmaceutical and biotech companies in the United States produce more than 90 percent of the world's new drug discoveries each year. Patent protections — and profits — provide incentives for innovation. (How many new drugs do you know of being launched from Canada and other countries with price controls? Virtually none.)
Advocates of the Dorgan bill and others clamoring for imports of cheap drugs are myopic and reckless. Their efforts, if successful, will choke off the flow of innovative pharmaceuticals — and, in the interim — will leave Americans at risk of illness and perhaps death as ineffective, diluted, toxic, bogus pharmaceuticals find their way into our pharmacies.
Instead of killing the geese laying the pharmaceutical golden eggs, we should give companies every possible incentive to come up with new drugs. And we should do so while making regulatory revisions, including accelerating approval time for drugs and reforming the litigation system to prevent frivolous lawsuits against drug companies. These measures would lower prices modestly and responsibly,while preserving our pharmaceutical supply line — which is the envy of the world.

Elizabeth M. Whelan, M.D., is president of the American Council on Science and Health in New York City.

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