The U.S. Senate is moving closer this week to passing legislation that will lift restrictions on the importation of cheap drugs from countries like Canada to the United States.
As reported in The Hill, Sen. David Vitter (R-LA) has proposed an amendment to the agricultural spending bill that would forbid the Food and Drug Administration (FDA) to block prescription drug imports. The House passed a bill virtually identical to the Vitter measure during the last Congress, but the Senate never took up the legislation. Senators Byron Dorgan (D-ND) and Olympia Snowe (R-ME) are the chief sponsors of another bill to ease importation.
Drug importation bills have in the past received significant support in Congress for one simple reason: legislators know that their constituents want cheaper drugs and don't want to hear any arguments that would prevent this from becoming a reality.
What consumers do not know -- but should -- is that if Congress approves importation of drugs from countries with price controls, and if the bill also requires U.S. companies to provide unlimited supplies at the resulting reduced prices, the U.S. will be in effect importing price control policies here, under the guise of drug importation. Such imported drug price controls will have extremely negative effects not only on pharmaceutical companies but also on all American consumers. It is troubling that the Senate may move ahead with such legislation with full confidence that, precisely because the American public does not understand the underlying issues, their bills can count on widespread support.
The vast majority of Americans have no understanding of the reason pharmaceuticals cost less in other countries, nor do they comprehend how mass imports will chill the pharmaceutical industry's incentive to develop the blockbuster drugs of tomorrow.
Most people think it is because Canadian pharmaceutical companies are simply more efficient in developing and producing drugs -- and thus are able to pass on the savings to consumers. The reality is starkly different.
Almost all of today's new lifesaving, life-enhancing pharmaceuticals are developed and produced in the U.S. The drugs are cheaper in Canada because international law treats prescription drugs differently than other consumer products. U.S. pharmaceutical companies are required under a 1994 treaty to sell their drugs at drastically cut prices to countries with drug price controls. Any pharmaceutical company that fails to comply risks losing its patent protection -- its drugs can be stolen and copied.
To comply with this treaty, pharmaceutical companies slash prices for countries with price controls, which includes most countries in the developed world. The purchasing countries in this "deal" have agreed not to turn around and resell the drugs to Americans. Technically, drug importation is now illegal, but the law is almost never enforced.
As the American demand for "Canadian" drugs has increased, the Canadian supply has dwindled because U.S. companies, to stem their losses, sell just enough drugs to meet the purchasing countries' needs, and so avoid having the excess resold to America at cut-rate foreign prices. As a result, Americans' demand for "Canadian" drugs increasingly cannot be met. And that dissatisfies both American bargain-seekers and Canadian consumers.
The various Senate bills seek to increase American drugs sold to Canada so more can be re-imported here. Some versions of these bills not only officially legalize drug importation but include a breathtaking provision that would make it "an unfair and discriminatory" act for drug companies to limit their sales. U.S. drug companies would thus be legally required (under threat of significant financial penalties) to meet Canada's demands for artificially cheap drugs, no matter how much Canadians demand and though the drugs will often merely take a round-trip back to the U.S.
To envision the absurdity (and probable unconstitutionality) of this proposal, consider requiring General Motors to sell unlimited numbers of automobiles at deeply discounted prices to Canadians, who then can sell them back to Americans at below-market cost.
In defending the legislation, sponsors argue it would not import price controls into the United States (though it would, in a Trojan horse promising cheap drugs), will not cut into revenue needed to fund research on new drugs (though it will), will not chill innovation efforts (though price-controlled countries produce few new drugs), and is justified because the industry spends too much on marketing and advertising anyway (though other industries are not asked to justify their marketing strategies).
We should all hope there is at least one senator -- representing the interests of American consumers -- who makes the case that importing price controls by sleight-of-hand and other quick fixes will only kill the pharmaceutical geese that lay today's (and hopefully tomorrow's) prescription-medicine golden eggs.
Dr. Elizabeth M. Whelan is president of the American Council on Science and Health (ACSH.org, HealthFactsAndFears.com).