The United States has the dubious distinction of having the
highest prices and highest spending per person for prescription medications.
Spending for prescription drugs has shown double-digit increases in recent
years, greater than for any other health service. Meanwhile, prices for
brand-name prescription drugs are 35% to 55% lower in other industrialized
countries. The main reason for this disparity is direct regulation of
prescription medication prices in Canada and most European countries.
In the United States, people without insurance coverage pay
substantially more on average (15%) than people covered by insurance, as
insurance companies negotiate lower prices with drug manufacturers. More than
69 million (25.1%) Americans have no prescription drug insurance, while many
others lack adequate coverage.
In a recent survey, one-third of Americans admitted to having
difficulty paying for medications and a similar proportion did not fill a
prescription because of high out-of-pocket costs. These problems particularly
affect the elderly and people with chronic illnesses.
As a result, many patients are searching for less expensive
alternatives for their prescription drugs. They turn to Canada because of
significantly lower prices for many widely used brand medications.
Seven percent of American consumers have purchased medicines
recently from pharmacies in Canada or another country.
The number of unapproved prescription medications currently
entering the United States is significant. According to the Department of
Health and Human Services Task Force Report On Drug Reimportation, nearly
five million shipments, comprising about 12 million prescription drug products
with a value of approximately $700 million entered the United States from
Canada alone in 2003, via Internet sales and travel to Canada by American
consumers seeking lower-priced medications.
It is estimated that an equivalent amount of prescription drugs
are being imported from other sources in the world, mostly through mail and
The U.S. House of Representatives has responded to this activity
by passing legislation (H.R. 2427, or the Prescription Drug Reimportation Bill)
that would potentially allow drug wholesalers and pharmacists to reimport drugs
from a number of industrialized countries.
The FDA has consistently opposed the reimportation of drugs from
Canada and other countries because of safety concerns. Moreover, the FDA is
also concerned that consumers may be exposed to counterfeit drugs imported from
Monitoring, control and safety are the primary issues concerning
imported drugs. Specific concerns related to importation are controlled
substances, biologics, drugs requiring refrigeration or freezing, medications
with narrow therapeutic range, drugs requiring monitoring, intravenous
products, drugs that are highly susceptible to counterfeiting on the global
market, and those that have a less expensive alternative (ie, generics) in the
Medications purchased in Canadian pharmacies by Americans
traveling to Canada are generally regarded as complying with Canadian drug
safety standards. However, there is evidence to suggest that the same is not
always true of drugs purchased through Canadian Internet pharmacies, some of
which are not even located in Canada or regulated by the Canadian authorities.
Moreover, in an announced inspection of Canadian
Internet pharmacies in 2003, the Minnesota Board of Pharmacy found 32 unsafe or
questionable practices, including unsupervised pharmacy technicians, incomplete
patient profiles, returned products relabeled and resold, and unsafe storage
and shipping of temperature-sensitive drugs.
According to the Center for Pharmacoeconomic Studies at the
University of Texas at Austin, there has been a dramatic increase in
importation into Canada of medications from around the world. Since 1999,
Canadas total pharmaceutical imports have increased by 101.6%. Among the
countries exporting medications to Canada are Iran, Bulgaria, China, Pakistan,
Thailand and South Korea.
The World Health Organization concluded that about 10% to 20% of
drugs tested in developing countries fail the most basic quality tests, meaning
that the medicines are either counterfeit or that they have not been handled
according to the manufacturers specifications.
With growing technological sophistication, counterfeit medications
may often look almost identical to authentic ones. A great deal of indifference
exists concerning such counterfeit goods as Diesel jeans, OP sunglasses or Nike
The same cannot be said about prescription medications. Drug
counterfeiters not only defraud consumers, they also deny ill patients the
therapies that can alleviate suffering and save lives.
The high prices of prescription drugs in the United States are
said to be necessary to cover the costs of research and development for new and
The research of DiMasi et al found that the development of new
drugs is a long and costly process, with the estimated total R&D cost per
new drug of $802 million. Pharmaceutical executives point out that three out of
10 new drugs return the investment costs for development.
The aforementioned HHS report estimates that R&D
incentives would be reduced by legalized importation, resulting in roughly
between four and 18 fewer new drugs introduced per decade. Patents to
make and market particular products frequently last for 10 to 14 years
following FDA approval and are typically granted to drug makers as an
enticement to undertake R&D.
This purported link between drug prices and innovation may be
exaggerated. Profits from reformulations and new mechanisms of delivery of
existing drugs as well as taxpayer-funded research of new products are just two
factors that result in a significant reduction in overall R&D outlays.
Additionally, the profitability of the pharmaceutical industry
should not be threatened by drug reimportations, as large institutional
purchasers such as the state governments through Medicaid or the VA already
obtain large discounts from drug makers without any great negative impact on
profit or innovation.
It is apparent, however, that there are market forces at work that
argue against importation of drugs from Canada as a long-term strategy.
The HHS report states that official commercial drug reimportation
may not offer significant savings. A large portion of the potential price
savings will be taken by intermediaries (exporters/importers) through markups,
as indicated by experience with other countries that permit reimportation.
As the importable supply will be limited, demand for products
exported from Canada would thus increase the prices of these products. Drug
manufacturers would likely also work to hold down supplies of medications
Several large companies recently took steps to limit supplies to
Canadian clients, particularly Internet pharmacies, compelling these businesses
to look to sources such as Pakistan or Bulgaria for inventory. This could
potentially create a supply of substandard pseudo-Canadian drugs of
unknown origin. Additionally, Canada accounts for only 2% of worldwide
pharmaceutical sales, whereas the United States accounts for nearly 50%.
If wide-scale drug reimportation were permitted, it would appear
that Canada lacks the necessary quantity of pharmaceuticals to adequately
supply the U.S. market and provide medications for its own citizens. Also,
reimportation may cause the prices of pharmaceuticals in Canada to
Providing affordable medications to every patient that requires
them is the biggest challenge. Since patients will either not fill
prescriptions or search for cheaper alternatives if their out-of-pocket costs
are perceived as prohibitive, negotiation of price reductions may be the only
way for the government to accomplish this goal within existing resources.
Even with significant price reductions, some elderly patients may
still not gain access to affordable drugs.
One solution is extending Medicare coverage to seniors. The 2003
Medicare act extended the federal insurance program to begin covering most
outpatient purchases by seniors in 2006.
Since an estimated 12.2 million people lacking prescription drug
coverage are aged 65 and above, this means that extending prescription drug
insurance to all seniors through Medicare would only cover 20% of all people
lacking coverage for prescription drugs. Hence, the only solution may be a
prescription drug benefit that provides essential medications to all
Price controls would also be an alternative to personal or
official drug importation and would be necessary to ensure that all Americans
can obtain the medications they need.
Cutting brand name prescription drug makers prices an
average of 42% to Federal Supply Schedule levels would save about $35.5 billion
per year. The increased volume of prescriptions filled as a result of lower
prices would make up most of the revenue.
Sagers Prescription Drug Peace Treaty calls for cutting
manufacturers prices as well as lower spending for advertising, marketing
and administration, while ensuring higher volumes for drug makers as well as
more money for research.
In addition, generic medications tend to be significantly less
expensive (up to 50%) and more available in the United States than in other
countries. As a matter of fact, some generic drugs may be considerably more
expensive when imported from Canada.
According to the HHS report, drug spending could be reduced by
billions of dollars annually through greater use of U.S.-approved generic drugs
In summary, importation of drugs from other countries may not be
safe and may eliminate incentives for drug companies to develop new
As physicians whose primary focus is the health and welfare of our
patients, we must strive for balance between their need for access to
affordable medications and pharmaceutical innovation with development of new
and safe pharmacological therapies.
However, importing drugs from Canada is not a viable long-term
strategy to address Americas prescription drug problem. Rather,
developing mechanisms to provide lower cost medications to patients who need
them should be our goal.
Hanna Mieszczanska, MD and Bradford C. Berk, MD, PhD, are at
the Cardiovascular Research Institute and Department of Medicine (Cardiology
Unit), University of Rochester, Rochester, NY. Berk is a member of the
Cardiology Today Editorial Board on the Vascular Biology
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