International Comparisons
Prescription Drug Affordability: Importation and Safety
Speech
June 2005
June 22, 2005
Prescription
Drug Importation: Can it Help America's Seniors?
William Novelli
AARP CEO
Rx drugs can be more affordable, and there are several ways of making this happen.
- As you know, Medicare now holds out the promise of lower drug costs for beneficiaries. We and many other organizations are working with CMS, SSA and others to help Medicare beneficiaries understand the new law, decide whether it will help them, and enroll in Medicare Part D.
- We need to influence pharmaceutical companies and distributors to limit price increases to no more than the core rate of inflation. For the last three years, total drug spending has been rising at 11 percent a year, while inflation has been under three percent. With our Rx Watchdog Reports, we are keeping an eye on manufacturers’ prices of particular drugs and letting our members, the public and policy makers know what the industry is doing.
- Another way of making Rx drugs more affordable is through comparative price information. For example, AARP volunteers in New York state are working with Attorney General Eliot Spitzer, to gather price information on prescription drugs from pharmacies throughout the state. These are reported back to the Attorney General’s office where they are posted on a website. Since there is price variability among pharmacies, this enables consumers to shop on line for the best prices in their area for the prescription drugs they take.
- We want to see drug manufacturers spend less—and be more transparent—in their marketing. This includes detailing and attracting patients with splashy advertising. It was good to hear recently that Bristol-Myers Squibb said it would not advertise new drugs in their first year.
- Evidence-based drug research, comparing the effectiveness of drugs of different classes used to treat the same conditions, will also help make Rx drugs more affordable. This is in the MMA, but needs to be better funded and expanded.
- And finally, we believe that we should legalize the importation of Rx drugs abroad beginning with Canada, with strict controls to ensure that individuals are ordering only from reputable and certified pharmacies or distributors.
This last point is our subject today. Right now, it is illegal in almost all situations to import drugs from Canada, though millions of Americans, including our members, are doing so, and so are many state and local governments.
No one wants to break the law. But the power of economics is hard to resist — especially when some medications can be had from a Canadian pharmacy for a third of their domestic price. And especially when these savings can help those with lower and fixed incomes to avoid having to skip doses or choosing between food and medicine.
But when the practice — however economically sound — is illegal, there are dangers, including lack of adequate regulation. Consequently, consumers cannot be completely confident that they are getting the genuine article.
It’s no longer a question of whether we should allow the importation of drugs from abroad. It’s already happening, in a very big way. We need to legalize this and make sure that a system is in place to guarantee safety.
That is why we support the bipartisan bill sponsored by Senators Byron Dorgan (D-ND) and Olympia Snowe (R-ME) and 29 others, that would legalize the safe importation of prescription drugs, beginning with Canada.
It includes important safety standards that we advocated for. It will ensure that drugs imported from abroad are safe and will give FDA the authority and resources it needs to do the job.
The bill also seeks to prevent the pharmaceutical industry from limiting supplies of drugs to countries and companies willing to export lower-cost pharmaceuticals to the U.S. It would do no good to legalize importation if the drug companies could just choke off the supply.
We believe this bill meets the challenges of designing a prescription drug importation program that protects the integrity of pharmaceuticals and provides a streamlined process that enables consumers to get lower priced prescription drugs.
And, we also believe that we can learn a lot from the experiences of other countries. That is why today we are rolling out a report called “Parallel Trading in Medicines: Europe’s Experience and its Implications for Commercial Drug Importation in the United States.”
It was written by Panos Kanovos of the London School of Economics, David Gross of AARP’s Public Policy Institute, and David Taylor of The School of Pharmacy at the University of London. The report examines what is called “parallel importing” of pharmaceuticals in the European Union.
The report is substantial, full of information. Let me point out a few of their important findings, which I think you will find thought- provoking.
The EU allows importation of specific branded drugs from one country to another only by licensed distributors. It is not a free-for-all in which anyone can buy any drug from anyone anywhere. Moreover, a licensed distributor may, with authorization, import any drug from any other member state provided it is identical to the locally sourced form of the drug.
That means it must be chemically identical and made by the same manufacturer. This has raised some issues of intellectual property rights and some technical questions about packaging, inventory management and so forth, but these objections do not appear to be disabling.
Importers have to abide by the regulations of the country’s—or the EU’s— equivalent of the FDA. The result has been that the safety of imported drugs in Europe has not been a public policy issue or a threat to public health.
When something is legal — not to say desired —it can be regulated and all parties can be protected. Thus, there have been no documented reports of counterfeit drugs attributed to parallel trade in pharmaceuticals. There have been a few problems with repackaging and labeling, but these have not raised serious concerns.
The authors point out that there is no information available on the extent to which such problems may or may not have resulted in health problems.
It’s important to keep in mind that European health insurance is quite different than that in the U.S. Many European health care systems offer consumers few, if any, incentives to seek lower priced prescription drug alternatives. Moreover, drugs in those countries are already regulated.
The report concludes that parallel importing in countries with price controls already in place may not have as great an effect on lowering consumer prices because consumers already pay low prices.
The authors argue that consumers must have confidence that what they are getting is the genuine article, must see meaningful price differences for the same drug, and be confident — through regulation and oversight — that slightly different packaging or even pill color do not affect the medication. And there have to be enough parallel imported drugs to make a sustainable market.
These are all good points, but the key is legalization. Given the demand of millions of people already, the supply will be there. We also believe, given the good safety record in Europe, that the confidence will be there — and that will increase demand. It’s up to us at AARP and many other organizations to inform and educate our various publics about what is really involved in using a drug imported from Canada or any other country.
Ideally, of course, we should not even be talking about this. Ideally, American drug manufacturers would be selling their drugs for less. And that’s not wishful thinking. Their marketing budgets are exceptionally high.
Yes, their R&D costs are also high, about 25% of revenues, some twice the rate of other high-tech industries. Some of these costs are unavoidable, but new technologies hold the promise of saving millions in avoiding blind alleys. Other technologies can also help.
And the sooner drug companies restrain costs for consumers, the better. But until that happens, we should do everything in our power to reduce the costs of Rx drugs for individuals and third-party payers. And one step we can take — right now — is to legalize the importation of Rx drugs from abroad beginning with Canada.
Once we make importation legal, we can it safe. Once we make it legal, we make drugs more affordable. And this will help to provide better health care to all Americans. Importation is only one part of the answer to high drug costs, and we must continue to attack this problem on all fronts.
Importation is not a panacea, but it’s a big step. And what we learn from this report and our discussion here today will help us to do it right.