Latest Drugwonks' Blog
Why do people think it unacceptable for research-based drug makers to charge different prices in different countries? Even in the absence of price controls (which most countries impose on medicines), this is a common practice.
As a San Franciscan with a serious addiction to skiing, I make the trek almost every weekend to Lake Tahoe. I just got back from two days skiing at Northstar-at-Tahoe, where a single day pass costs $63 if you buy it at the base of the mountain. Fortunately, I had a voucher that gave me a lower price of $41: a 35% discount! Imagine my surprise when I learned that people in Reno had been able to buy tickets for just $20, only for January 8. So, people skiing the same mountain, the same day, payed very different prices.
Sure, I was upset that some people from Reno paid less than I had, but I did not ask the government to force the ski resort to charge me the same price. If I had succeeded in doing so, the ski resort would have responded not by reducing the price to me, but increasing the price to the skiers from Reno.
I hear you say: “Hey, your scampering off to ski is not the same as seniors who cannot afford life-saving drugs,” which is true. Nevertheless, the behavior of the suppliers would be exactly the same. Legalizing the international piracy of prescription drugs will cause drug makers to raise prices abroad, not cut them in the U.S.
Policymakers who advocate this piracy need to explain why the law should uniquely forbid drug makers from engaging in this normal business practice.
Here’s a news item that should scare every citizen of the Empire State. (And that includes me.)
New York State is preparing to ask drug companies to pay to get on a “preferred drug list.” To get their drugs on the list, companies would have to subsidize the state with heavy rebates. The state Health Department estimates the legislation could save $200 million in its first year of operation. Most drug companies will likely pay to get on the list, said Craig Burridge, executive director of the Pharmacists Society of the State of New York.
Is this how the folks in Albany want to determine what medicines are best for its citizens? By a pay-for-play formulary?
First the Giants and now this. Yikes.
Drug maker Pfizer has begun attaching high-tech radio identification tags to packages of its anti-impotence drug Viagra in an attempt to thwart counterfeiters. The tags send out a signal that pharmacists in the United States will be able to pick up on specially-designed electronic scanners to verify that packages of Viagra are authentic. The product code detected by the scanner is sent over the Internet to a secure Pfizer Web site to confirm its authenticity. Pfizer joins Purdue Pharma LP, the maker of pain reliever OxyContin, which has been using RFID tags since November 2004 to combat counterfeiting.
I was proud to serve on the FDA’s Counterfeiting Taskforce. One of our main conclusions was that RFID is a viable tool to fight the insidious growth of counterfeiting both here at home and around the world. It’s good to see theory put into practice as we all gear up to battle what is nothing less than international health care terrorism.
Bob Goldberg runs us through a timely tutorial on the fuzzy math of Canadian drug importation …
The Canadian internet pharmacies … otherwise known as the companies that divert products from it’s citizens and pay doctors to sign off on prescriptions from patients they never see for huge profits while also setting up off-shore warehouses where they repackage counterfeit pills from Iran and re-sell them to American seniors, wants Medicare to know that they, not the new prescription drug benefit is the cheaper source of drugs for older Americans. Now, setting aside the counterfeiting and the diversion and the illegality of the scrip writing enterprise in Canada, let’s do the math one more time. Canada is a country of 25 million citizens.
The Medicare program serves 42 million seniors and people with disabilities. Canadian internet drug sales to America now total $700 million. Canada’s total domestic drug expenditure is about $11 billion. Medicare expects to provide about $25 billion worth of drugs to seniors under the new benefit. The fastest growing segment of the Canadian drug business is … the importation of drugs from centers of drug manufacturing excellence such as Pakistan, Iran and Russia … information that neither the Canadian internet pharmacies or its boosters in our Congress such as Anne Northrup, Gil (I will impose tariffs on Canadian cheese) Gutknecht or the media.
In yesterday’s State of the State speech, Governor Schwarzenegger made a remarkably ill-informed statement:
“I believe in the free market. I believe in free trade. I mean we buy food from overseas. We buy cars from overseas. Why not prescription drugs? So I call upon the federal government to permit the safe importation of prescription drugs. I say, let the free market work.”
The Governor is talking about the currently (and rightly) illegal piracy of low-priced drugs from countries like Canada into the United States.
Foreign drug makers are perfectly free to compete in the U.S under the same terms that govern American drug makers. Yesterday, I blogged about a medicine manufactured by a Japanese company and marketed by a Germany company in the U.S. They are investing a lot in selling their medicine in the U.S. In fact, they paid for a 5 sided advertising supplement in the latest issue of Forbes!
Foreign drug makers are just as opposed to the international piracy of prescription drugs as American ones are. Given his success in the movies, I’m surprised the Governor doesn’t understand this. If I picked up a few thousand black market videos of The Terminator on the sidewalk in Bangkok, without paying a royalty, and brought them back to the U.S., I’m sure he would agree that that was not free trade.
International piracy of prescription drugs will not reduce Californian drug prices. Failed programs in states like Minnesota and Illinois have demonstrated that. Instead, thre state needs legislation modeled on the unsuccessful Proposition 78 from last November’s election. A good discount prescription drug program ensures that drug makers have the incentive to supply medicines to low income people free of the threat of government harassment, which means abandoning destructive notions like international pharmaceutical piracy, which strips drug makers of property rights.
Maybe it’s just age, but I’m starting to pay attention to the pharmaceutical ads I read. In the latest Forbes (January 9), there’s a supplement of 5 sides that addresses benign prostatic hyperplasia (BPH). Like most men of a certain age, one of the things that spooks me is prostate cancer, but I’ve never heard of BPH. Basically, it effects urination: in extreme cases, you can’t control it. One of the 5 sides has a patient questionnaire from the American Urological Association to help men determine whether they should seek a diagnosis. (No, I’m not in the risk zone. If I was, do you think I’d be blogging about it for the world to see?)
Yes, there is a pill: it’s called Flomax® (tamsulosin HCI) and it’s made by Astellas Pharma, a Japanese firm, and marketed in the U.S. by Boerhringer Ingelheim. And, yes, the companies paid for the ad. However, the pill is not mentioned until the third side, and only in a box taking up less than a quarter of the page. The fifth side, of course, is taken up with the reams of small print that the government requires: too small, detailed, and technical for most laypeople to follow, and a waste of resources by government diktat that could have been invested elsewhere.
The rest of the supplement consists of the urologists’ patient questionnaire and a sober description of symptoms, diagnosis, and a variety of treatments ranging from “watchful waiting” to surgery.
So, the chances of my taking this pill are zero, but I know a heck of a lot more about this ailment than I did before. Boehringer Ingelheim helped me become better informed even though it does the company no good. Of course, that’s not what it wanted to achieve, but it’s what economists call a “positive externality”. For a classical economist, this implies that direct-to-consumer pharmaceutical advertising should not be banned; it should be subsidized!
I wouldn’t go that far, but I am more determined than ever to resist government control of communication between drug makers and patients.
Comments from Grace-Marie Turner …
The AARP started the New Year with a big surprise, issuing a study that concluded the new Medicare drug benefit provides a better deal for most seniors than importing drugs from Canada, which the organization has long supported.
“How is this possible? Everybody knows that Canadian drug prices are usually far lower than American ones,” the AARP Bulletin asks. “That remains true. But Medicare drug coverage is insurance, so enrollees are charged copayments instead of full price … And the private plans that provide it have been scrambling to win over customers with good deals for 2006.”
It’s important to remember that the AARP did support enactment of the drug benefit — amidst much criticism from its liberal friends — and it does offer Medicare drug plans in partnership with UnitedHealth. So they do have a bias.
But the AARP used a variety of examples, from seniors with plans that have low monthly premiums/a $250 deductible/and no coverage in the doughnut hole, to those with higher premiums/no deductibles/and full coverage in the gap. In all but one instance, seniors did better with the Medicare plan than with drugs imported from Canada. (In that one example, the senior needed a low-cost maintenance drug that didn’t reach the deductible.)
Further, the AARP study didn’t include seniors with low incomes and those who have selected integrated Medicare Advantage plans, both of whom would certainly do better than with Canadian imports. The AARP study concluded: “Nearly all of our interviewees would be better off financially, by varying amounts, under a Medicare plan, with those using the most drugs potentially reaping the greatest savings over the year.”
The Canadian Internet drug industry is fighting back, saying their drugs are still cheaper than Medicare’s. But they are missing a key point that the AARP emphasized: The new Medicare drug benefit provides insurance coverage against the risk of high drug expenses, which the Canadian pharmacies can’t offer. (And BTW, does it need to be said again, that importing drugs from Canada is dangerous and illegal?)
A story on the story that appears in the 1/06 AARP Bulletin.
AARP edges away from drug imports
Kelly McCormack and Bob Cusack, The Hill, January 4, 2006
In a move that is already attracting criticism from some lawmakers, AARP last week softened its support of drug reimportation legislation by saying that the new Medicare drug benefit saves senior citizens more than buying pharmaceuticals from Canada.
The powerful consumer group has previously endorsed reimportating drugs, but its revised position could severely damage momentum for legislation pending in Congress.
It could also alleviate political pressure on the White House and the
pharmaceutical industry, which have opposed reimportation even though it is supported by a majority of members of Congress.
The group has enormous clout on Capitol Hill, playing a crucial role in passing the Medicare drug bill in 2003 and thwarting the GOP effort to reform Social Security last year.
AARP’s press release on the matter, released over the holidays, did not get much attention last week. But the ramifications of it could be
significant in the debate on the affordability of prescription drugs.
The new analysis, titled “The New Math” Cheaper than Canada? The drug
benefit may be the better deal,” used the government’s Medicare plan
finder to compare “stand alone” plans that cover all of a senior’s
prescription needs to the cost of acquiring drugs across the border. It concluded that seniors who enroll in a low-cost Medicare
prescription-drug plan would save more in drug costs this year than if
they were to buy the same drugs in Canada.
While Canadian drug prices are still cheaper than prices in the United
States, AARP found that when a senior includes all out-of-pocket costs — premiums, deductibles and payments for medications — the price is lower.
AARP stressed that it continues to support reimportation legislation.
“The bottom line is drug prices are too high,” said AARP spokesman Mark Kitchens. “The two ideas [reimportation and the Medicare drug benefit] are not mutually exclusive. Many Americans that are not on Medicare would benefit from reimportation. Medicare Part D is a tool that would make prescriptions more affordable.”
But AARP CEO Bill Novelli adopted a different tone in the group’s Dec.
29 release, saying, “Jan. 1 is truly a watershed day for many Americans who face the high cost of presciption drugs. Millions of Americans who have never had drug coverage can now save more money through Medicare Part D rather than turning to Canada to get their prescriptions.”
Some congressional Democrats are still upset with Novelli for his role
in AARP’s backing of the GOP drug bill more than two years ago.
The AARP release added, “In conversations with potential enrollees, AARP is hearing that the focus has shifted from the legislation to choosing the best plan to suit their needs.”
These statements triggered strong reactions from both sides of the
aisle.
“AARP is selling Medicare drug coverage, so it’s not surprising that
they’re pushing their own product,” said Rep. Sherrod Brown (D-Ohio).
“Now they are making an apples-to-oranges comparison between Medicare
drug coverage and Canadian drug prices. Seniors deserve decent drug
coverage, and every American deserves lower-priced drugs. That’s the
bottom line.”
AARP is working with the insurance company UnitedHealth Group to offer
prescription-drug coverage. More than two million seniors have signed up for drug plans offered by the AARP-backed insurer.
Senate Finance Committee Chairman Chuck Grassley (R-Iowa) said that the AARP study “drives home the point that the new Medicare
prescription-drug benefit can help beneficiaries save some serious money on their prescription-drug bills.” But he emphasized that the savings will not be realized by all beneficiaries.
“We need to continue to work on other ways to lower prescription drugs
costs for all Americans,” said Grassley. “We can’t let up on making
prescription drugs more affordable.”
“Saying that Medicare drug plans ‘cost less’ than buying prescription
drugs from other countries is misleading,” said Jon Yarian, a spokesman for Rep. Gil Gutknecht’s (R-Minn.). “The cost of the prescription drugs hasn’t changed. The only difference is who bears the burden of the expense. American taxpayers will be paying for these savings.”
Rep. Jo Ann Emerson (R-Mo.) said, “The fact remains that we still lack a comprehensive policy to address high prescription-drug prices in America when identical, safe and affordable medicines are readily available to Americans just over our borders.”
The pharmaceutical industry was more optimistic about the potential
savings in the Medicare prescription-drug benefit.
“Seniors shouldn’t have to gamble with their lives by importing
potentially dangerous, counterfeit prescription medicines,” said the
Pharmaceutical Research and Manufacturers of America Senior Vice
President Ken Johnson. “Instead they should opt for a safer, more
affordable option offered by Medicare.”
The New Math
Cheaper than Canada? The drug benefit may be the better deal.
By Patricia Barry
January 2006
AARP Bulletin
Full story can be found at http://www.aarp.org/bulletin/medicare/new_math.html
If you were looking for a very last minute Christmas gift a couple of weeks ago, a full page ad in the December 25 issue of the New York Times Review of Books might have prompted you to check out The Karasik Conspiracy. According to the blurb, this is “the novel the pharmaceutical industry tried to commission, then control, and finally kill.” Good heavens: what have they done this time?
An employee of the Pharmaceutical Manufacturers of America (PhRMA), the trade association representing the research-based drug makers, at the prompting of an external consultant, offered a couple of authors $300,000 to write a book about a terrorist plot against America that uses unsafe, counterfeit drugs to poison and kill Americans who order lower priced medicines from overseas.
Unfortunately, PhRMA and related folks did not like the first draft. Because they believe that most Americans ordering overseas prescriptions via the Internet are women, they wanted more of a love story to attract female readers, whom the novel would scare off buying those meds.
The whole project crashed on the rocks of literary freedom and PhRMA withdrew its (secret) sponsorship. Piqued, the authors secured the publisher’s commitment and did two things to punish the research-based pharmaceutical industry. First, they re-wrote the novel so that the terrorists were acually financed and managed by a pharmaceutical company. Second, they published their e-mail correspondence with PhRMA and its consultant on their website, www.karasikconspiracy.com.
The easy way to blog about this is to marvel at PhRMA’a misstep in funding this venture - but that’s already been done at Arianna Huffington’s website, amongst others.
Nevertheless, this bizarre episode invites consideration of at least two issues.
1) The pharmaceutical industry’s influence is not as great as we thought. It failed to kill this book, and its public relations now look more absurd than evil.
2) The pharmaceutical industry’s almost exclusive focus on the safety angle of the parallel trade issue has led it far down the wrong track, even into sensationalism. There are exactly zero good arguments in favor of parallel trade: it is a theft of intellectual property; will not reduce prices in the U.S. but increase prices overseas; will reduce scentific R&D in the U.S., etc.
Nevertheless, polls indicate that Americans strongly want the ability to buy cheaper drugs from overseas. However, when pollsters frame the question to suggest that the so-called “Canadian” drugs are actually from Pellucidar, or Azkaban, or somewhere else, support drops significantly.
This has caused the pharmaceutical industry to focus its opposition to parallel trade on the safety element almost to the exclusion of everything else, perhaps to the point of obsession.
Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.
