By Elizabeth M. Whelan, Sc.D., M.P.H.
Posted: Friday, July 9, 2004

EDITORIAL
Publication Date: July 9, 2004

In a prime example of election-year demagoguery, the Senate is considering legislation, already approved by the House, to legalize the importation of pharmaceuticals from dozens of countries around the world.

Like some pharmaceutical bill from hell, the measure would undermine the two pillars of our country's modern pharmaceutical supply -- safety and efficacy.  Further, it would stifle innovation and deprive us of the next generation of life-saving drugs.

The purported goal of this legislation is to remove legal barriers faced by private American importers so that 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 that refuses to comply with another country's pharmaceutical price controls by selling drugs at greatly reduced prices risks losing its patent protection.

This clause -- which only applies to pharmaceuticals -- allows the purchaser to say, in essence, "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 re-sell the drugs to Americans.  But purchasing countries like Canada are illegally re-selling anyway, aware that the law is rarely enforced.

Understandably, the pharmaceutical companies are not happy about this and are now limiting the supply of pharmaceuticals they sell so that there is enough for Canadians to use -- but not enough to re-sell back to America.  As U.S. manufacturers limit drug supplies sold to Canada, there will be market disequilibrium there -- huge demand from the United States, but a dwindling supply of drugs for Canada to sell back to us.

While in the past few years it could be argued that imported drugs from Canada posed little or no known health risks, as the Canadian markets have less product from the United States, 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 that there is no system in place for determining the safety and efficacy of these imported items.

The pharmaceutical bill, which basically legalizes importation and sale of drugs from numerous countries -- not just Canada -- makes an already bad situation worse: First, it jeopardizes the safety of our nation's medicine supply by allowing drugs to come in from a couple of dozen "approved" countries, without adequate standards for quality control, as long as the drugs are "the same" as Food and Drug Administration-approved American drugs.  But what does "the same" mean?  Among other things, manufacturing processes, dosage, and labeling are different 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 drug shipments from around the world into the United States.

Second, the pending bill seeks to require U.S. pharmaceutical companies to supply foreign countries with 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 re-invest in creating new products, in this case blockbuster drugs of the future that would prolong lives and promote health.  The bottom line here is that the 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 over 90% 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 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.

Elizabeth M. Whelan, Sc.D., M.P.H., is president of the American Council on Science and Health.

A version of this argument was made in Dr. Whelan's related piece on TechCentralStation.com.  Click here to see a response to this piece.