Pay Tomorrow for Cheap Drugs Today

The House of Representatives has passed legislation that signals members believe that cheap prescription drugs are more important than safe drugs and that cheap drugs today are more important than new drugs tomorrow.

Just before leaving for the August recess, the House approved by a vote of 243 to 186 a bill sponsored by Rep. Gil Gutknecht, R-MN, that allows consumers, wholesalers, and pharmacists to import prescription drugs from 26 countries.

It would allow Americans access to price-controlled drugs from Canada, Europe, South Africa, and other countries with only minimal oversight by the Food and Drug Administration, the U.S. agency charged with protecting the nation’s drug supply.

FDA Commissioner Mark McClellan warned the legislation “creates a wide channel for large volumes of unapproved drugs and other products to enter the United States that are potentially injurious to public health and pose a threat to the security of our Nation’s drug supply.”

The White House called the bill “dangerous,” potentially allowing “counterfeit, adulterated, inactive, and unapproved drugs to enter the country.”

Yet members on both sides of the aisle delighted during the House debate in blasting the pharmaceutical industry – painting the companies as enemies and casting themselves as heroes fighting on behalf of defenseless seniors.

Support for the measure spanned party lines – with 87 Republicans and 155 Democrats voting for the bill. Some members said the outcome of the vote was one of the most satisfying of their legislative careers.

Drug prices are often higher in the United States because we are the last remaining major nation where the majority of prescription drugs command market prices and are not under government controls.

It is no coincidence, of course, that the United States is the epicenter of prescription drug research for the planet, producing more new drugs than all other countries combined.

Other countries want our drugs, but they seldom are willing to pay the full price for research and development costs. Tufts University researchers estimate it costs more than $800 million to produce a single new drug.

Congressional leaders, and many Americans, have become angry in realizing that Americans are paying a disproportionate share of these R&D costs, and many have demanded that the drug companies simply stop selling their products in those countries that refuse to pay a fair price.

But the options for drug companies are limited.

Virtually all of the countries from which importation would be allowed provide for “compulsory licensing” of patented products. This means that the governments can confiscate a company’s patent if the drug company refuses to sell its products at the price the government demands, paying only a token royalty, if that.

This is hardly a choice for companies whose most valuable asset is their intellectual property.

Medicines are a lot like computer software in that millions of person-hours and hundreds of millions of dollars can go into creating and developing a new product. Yet stamping out a computer disk – or a pill – may only cost a few cents.

Consumers don’t insist that Microsoft start selling Windows at the cost of the disk because they know this would halt the next generation of computer programs. And the same thing is true for new medicines. The intellectual property protected by the patent is the most valuable asset. Most drug companies conclude it is better to sell at a tiny profit than to lose their property rights.

If the U.S. goes the route of price controls – either imposed directly or imported from other countries – research into tomorrow’s cures is sure to dry up.

Europeans have virtually destroyed their pharmaceutical research sector by demanding prices that are so low that companies can’t recoup their research investment. The House bill puts Americans on a similar path.

The bill now must be reconciled with a slightly-better drug importation provision passed in late June by the Senate as part of its overall Medicare and prescription drug bill.

The bill’s fate in conference is uncertain. What is certain is that we have not heard the last of this issue.

The focus should be on getting prescription drug insurance for the 25 percent of seniors who lack it, not opening our borders to potentially unsafe drugs and destroying research for tomorrow’s cures.

Grace-Marie Turner is president of the Galen Institute, a not-for-profit research organization that focuses on consumer-directed ideas for health reform. She can be reached at P.O. Box 19080, Alexandria, VA 22320 or galen@galen.org.

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The House of Representatives has passed legislation that signals members believe that cheap prescription drugs are more important than safe drugs and that cheap drugs today are more important than new drugs tomorrow.

Just before leaving for the August recess, the House approved by a vote of 243 to 186 a bill sponsored by Rep. Gil Gutknecht, R-MN, that allows consumers, wholesalers, and pharmacists to import prescription drugs from 26 countries.

It would allow Americans access to price-controlled drugs from Canada, Europe, South Africa, and other countries with only minimal oversight by the Food and Drug Administration, the U.S. agency charged with protecting the nation’s drug supply.

FDA Commissioner Mark McClellan warned the legislation “creates a wide channel for large volumes of unapproved drugs and other products to enter the United States that are potentially injurious to public health and pose a threat to the security of our Nation’s drug supply.”

The White House called the bill “dangerous,” potentially allowing “counterfeit, adulterated, inactive, and unapproved drugs to enter the country.”

Yet members on both sides of the aisle delighted during the House debate in blasting the pharmaceutical industry – painting the companies as enemies and casting themselves as heroes fighting on behalf of defenseless seniors.

Support for the measure spanned party lines – with 87 Republicans and 155 Democrats voting for the bill. Some members said the outcome of the vote was one of the most satisfying of their legislative careers.

Drug prices are often higher in the United States because we are the last remaining major nation where the majority of prescription drugs command market prices and are not under government controls.

It is no coincidence, of course, that the United States is the epicenter of prescription drug research for the planet, producing more new drugs than all other countries combined.

Other countries want our drugs, but they seldom are willing to pay the full price for research and development costs. Tufts University researchers estimate it costs more than $800 million to produce a single new drug.

Congressional leaders, and many Americans, have become angry in realizing that Americans are paying a disproportionate share of these R&D costs, and many have demanded that the drug companies simply stop selling their products in those countries that refuse to pay a fair price.

But the options for drug companies are limited.

Virtually all of the countries from which importation would be allowed provide for “compulsory licensing” of patented products. This means that the governments can confiscate a company’s patent if the drug company refuses to sell its products at the price the government demands, paying only a token royalty, if that.

This is hardly a choice for companies whose most valuable asset is their intellectual property.

Medicines are a lot like computer software in that millions of person-hours and hundreds of millions of dollars can go into creating and developing a new product. Yet stamping out a computer disk – or a pill – may only cost a few cents.

Consumers don’t insist that Microsoft start selling Windows at the cost of the disk because they know this would halt the next generation of computer programs. And the same thing is true for new medicines. The intellectual property protected by the patent is the most valuable asset. Most drug companies conclude it is better to sell at a tiny profit than to lose their property rights.

If the U.S. goes the route of price controls – either imposed directly or imported from other countries – research into tomorrow’s cures is sure to dry up.

Europeans have virtually destroyed their pharmaceutical research sector by demanding prices that are so low that companies can’t recoup their research investment. The House bill puts Americans on a similar path.

The bill now must be reconciled with a slightly-better drug importation provision passed in late June by the Senate as part of its overall Medicare and prescription drug bill.

The bill’s fate in conference is uncertain. What is certain is that we have not heard the last of this issue.

The focus should be on getting prescription drug insurance for the 25 percent of seniors who lack it, not opening our borders to potentially unsafe drugs and destroying research for tomorrow’s cures.

Grace-Marie Turner is president of the Galen Institute, a not-for-profit research organization that focuses on consumer-directed ideas for health reform. She can be reached at P.O. Box 19080, Alexandria, VA 22320 or galen@galen.org.

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About the author