Security: Is the Industry Throwing Stones in a Glass House?

Drug reimportation and secure packaging would improve security and lower costs, says Dr. Peter Rost. A pharmaceutical executive with a dissenting view speaks out.

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By Dr. Peter Rost

There is little doubt that pharmaceuticals save millions of lives, yet the approval rating for pharmaceutical manufacturers is approaching that of the tobacco industry. Pharmaceutical Executive recently reported that only 13 percent of Americans believe the drug industry is generally honest and trustworthy and the percentage who said that pharma companies do a good job of serving their consumers fell 30 points, from 79 percent in 1997 to 49 in 2003.

The most contentious issue is that drug prices are much lower in Canada and Europe than they are in the U.S. In fact, the average price for patented medicines in the U.S. is 54 to 122 percent higher than it is in 25 other leading industrialized nations, according to a recent estimate by the Congressional Budget Office.

A few years back Americans simply didn’t know about reimportation and the large price difference between various countries. According to Pharmaceutical Executive, “one of the most dangerous trends in public opinion is the big increase in those who know that drugs cost much more in the United States than they do in other countries. Three years ago, only 41 percent of the public was aware of that. By April 2003, that awareness had risen to 63 percent, and it is almost certainly higher today.”

The response from the drug industry and PhRMA has been to try to link reimportation to terrorists and counterfeit drugs. According to The Washington Post, PhRMA even hired disgraced former New York police commissioner Bernard Kerrick to do its bidding.

Unfortunately, this approach also highlights the industry’s own shortcomings. Several of the largest U.S. pharmaceutical companies have been forced to sign FDA Consent Decrees, because they were not in compliance with good manufacturing practices, potentially resulting in unsafe drugs. The biggest fine was paid by Schering-Plough in 2002 when the company was forced to pay half a billion dollars, the highest settlement in FDA history. This affected 125 different drugs. The drug industry is quite literally throwing stones in a glass house; their own glass house and the flying shards will hurt all of us.

What makes the situation even worse is that legalized and regulated reimportation could create safety, most recently verified in the HHS task force on drug importation report; and safety is something we lack when we force our citizens to import their own drugs because they can’t afford the prices in our pharmacies.

It’s encouraging to see that the American Medical Association also recently came out in favor of a safe reimportation system, proposing that U.S. pharmacies and wholesalers should be permitted to reimport drugs directly from other countries, using a closed distribution chain. This would eliminate the need for U.S. consumers to go surfing on the Internet for affordable drugs. In fact, this system is exactly what Europe has had in place for more than 20 years. The European Association of Euro-Pharmaceutical Companies claims there has never been a confirmed case in Europe of a counterfeit medication reaching a patient as a result of reimportation. In Germany, this was verified last year by the Federal Ministry of Health.

Another problem, right here in the U.S., is that our drug supply system lends itself to counterfeiting and is open to terrorist attacks. Our drugs are shipped in big vats, and then poured into smaller, bulk-size containers, from which tablets are dispensed manually and put into a new bottle given to the patient.

In the U.S. there are a handful of reputable, high-volume wholesalers. But we also have thousands of secondary wholesalers that trade drugs. Some buy and sell overstocks, others repackage drugs. States license them, not the FDA. So it doesn’t take a terrorist in Canada with a mail-order pharmacy to compromise our drug supply. “With $1,000 and a driver's license, you can be a wholesaler,” says Aaron Graham, head of security for Purdue Pharma, according to the Providence Journal.

In Europe, drugs are sold in tamper-proof individual bottles or blisters, and no one touches a drug after it leaves the manufacturer. Surely with the world's highest drug prices, we could afford such a system. The FDA has looked at this for several years, but nothing has happened. And drug companies, recently so concerned about safety of reimported drugs, have been quoted in the press opposing a safer distribution system, because of cost.

One of the drug industry’s most closely guarded little secrets is what companies actually charge for drugs in the U.S. The reality is that the industry already sells its products at the same low prices charged in Canada and Europe. It’s done through rebates. These are given to those with enough power to negotiate drug prices, such as the Department of Veterans Affairs.

A 2001 study by the consumer advocacy group Public Citizen found that drug companies’ favorite customers paid just a little over half the retail price. This leaves the 67 million Americans without insurance to pay cash, with no rebates, at double the prices paid by the most favored customers. The fight against reimportation of drugs is a fight to continue to charge our uninsured full price, while giving everyone else a rebate.

As a drug company executive, I care about profits. When I was responsible for the Nordic region in Europe, I doubled sales in two years by lowering drug prices, and in the process increased my sales ranking from No. 19 to No. 7 in less than two years. I proved that it is possible to do good business with lower prices.

I know that in the next five years, branded drugs with annual sales of $72.9 billion are expected to lose patent protection, in a market with over $210 billion in sales, according to Merrill Lynch. I also know that many of these drugs may not be replaced with new ones. So we in the drug industry are fighting reimportation, because we’re worried about our jobs. But when we have to choose between jobs and the lives of those who can’t afford drugs, we have to choose life. I joined this industry to save lives. And that’s the reason I’ve chosen to speak out.

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