The second edition of the Pharmopoly campaign's Critical Commentary on Pharma & Politics is now available to download.

This month's commentary examines testimony given last month to the Senate HELP committee investigating drug importation.

It deals with the myths put out by Big Pharma’s lobbyists in Washington for domestic consumption – particularly about Europe’s “free ride”. Dr Peter Rost's testimony regarding his experience on the inside of Pfizer Inc. is contrasted with Stephen Pollard's surprising testimony in favour of Big Pharma's interests. Whereas Dr Rost says the industry is opposed to free trade because it will reduce profits, Pollard, author of many industry friendly and industry sponsored reports, says lower cost drugs will harm patients by reducing Pharma profitability. This despite Pharma being the most profitable industry sector in the world, enjoying margins four times higher than the Fortune 500 average.

The Medicare Prescription Drug, Improvement and Modernization Act (MMA) of 2003 will mean that by 2006, the federal government will be purchasing or paying for nearly 60% of all prescription drugs in the United States according to research carried out for the Manhattan Institute.

Are Drug Price Controls Good for Your Health? Center for Healthcare and Insurance Studies University of Connecticut, School of Business, published by the Manhattan Institute.

Dr Peter Rost has spent 20 years marketing pharmaceuticals. On Feb 16, 2005, he testified before a senate committee on health, education, labor and pensions, in support of the reimportation of cheaper drugs from other countries

Currently, Rost is a Vice President with the pharmaceutical giant, Pfizer. He explained to the committee that the views expressed were his own and did not reflect those of Pfizer. At one point during his career, Rost was responsible for an entire region in Europe where he gained personal experience with reimportation. He observed first-hand how the free market works and thinks the industry is making a huge mistake in opposing drug importation.

In fact, Rost told the committee that there came a time, where he had lots of reimported drugs coming into his market in Europe, and admitted, "I was not happy about this." However, in order to compete, Rost dropped his own prices, and by doing so, he said, "I doubled sales and increased my company ranking from No. 19 to No. 7 in less than two years."

There is simply no reason to believe that a free market would not work just as well in the US. The only conceivable downside is that it might mean a reduction in profits for the pharmaceutical industry. But when it comes to saving lives, why shouldn't the industry that is the most profitable in the nation be expected to get along with a little less profits?

Bogus Excuses Over Safety
The biggest argument put forth by Bush and the industry against importation is safety. But in reality, the safety concern is patently bogus, mainly because the imported drugs are nearly all from the same manufacturers who already provide drugs to US suppliers.

According to Rost, half of the large drug companies, including Roche, Glaxo, Novartis, Astra-Zeneca, and Sanofi-Aventis, are currently foreign corporations anyways. He maintains that our government allows these foreign drug makers to charge more in this country than their own governments allow them to charge, and this is the reason why they fight against reimportation.

"So what do these foreign companies do?" he said, "They take out big ads in American newspapers, and tell us that reimportation is not safe," he told the committee, "while they know full well that it’s been done safely and cost-effectively in their own home markets, in Europe, for over twenty years."

While testifying, Rost responded to an absurd comment about safety made by FDA Commissioner, Lester Crawford, who said that his main concern about drug reimportation was that al Qaeda might attack the Canadian drug supply.

This fear is totally irrational because according to Rost, "we have thousands of secondary wholesalers that trade drugs. States license them, not the FDA," he said. Therefore, he explained, "All it takes for a terrorist to become a drug wholesaler is a $1,000 and a driver's license, according to Aaron Graham, head of security for Purdue Pharma, quoted in the Providence Journal."

Rost believes drugs coming from other countries may actually be safer than those made in the US. A problem in this country, Rost advised, "is that our drugs are shipped in big vats to wholesalers, and then poured into smaller, bulk-size containers, from which tablets are dispensed manually to the patient," which means there are lots of entry points for a terrorist. In Europe, Rost explained, "drugs are sold in tamper-proof individual bottles or blisters, and no one touches a drug after it leaves the manufacturer."

He told the committee, "The German Federal Health Ministry has verified that not one single confirmed case of a counterfeit medicine has ever come through the parallel trade chain," and that "The UK regulatory authority has described the level of pharmaceutical counterfeiting as “virtually undetectable.”

Rost believes reimportation is about a safe drug supply and getting drugs to consumers who can’t afford them. The "biggest problem we have today is that drugs don’t work if you don’t take them," he warned.

False Assertion - Importation Won't Save Money
During his testimony, Rost told the committee about a 2001 study conducted by the Kaiser Family Foundation that determined that 15% of uninsured children and 28% of uninsured adults had gone without prescription medication because of cost, and cited the journal, Diabetes Care in February, 2004, that reported on a study of older adults with diabetes that found 28% went without food to pay for their medication.

Rost discussed the recently released HHS report that claimed that savings from reimportation would ultimately only represent a 1% to 2% savings on drug costs, and explained "that if this was true, reimportation of drugs would never have existed in Europe with much smaller price differentials than the US, and it would never take off in the US," he said.

Rost also pointed out that if this were true, the industry would not be working so hard to block it. "Why, then, do you think, the drug industry spends so much time and money fighting reimportation?" he asked, "The answer is that the data in the HHS report don't support this conclusion," he advised.

Rost thought it important to explain to the committee that this false conclusion was based on a London School of Economics study that was sponsored by the drug industry.

While testifying, Rost referred to Table 7.2 in the HHS report that showed US drug prices to be 100% higher than in Europe, and said, "So the premise of less than 20% savings assumes price gouging by importers and a complete lack of competition," and added, "Of course, we in the industry know that is not how the free market works."

Politicians Put Profits Over Lives
According to Rost, we have 67 million Americans without insurance for prescription drugs in the US. "Many of them don’t get the drugs they need because they can’t afford them, because drugs cost twice as much in the US as in other countries," he said.

Drug prices in Canada are significantly lower than in America because, unlike the US, the Canadian government negotiates for cheaper prices directly with drug companies.

With the exception of a few agencies, Bush won't allow the government to negotiate here, which leads to unequal and unfair drug costs for ordinary citizens. For instance, Rost told the senate committee that in the US, drug companies charge high prices to the uninsured, but through rebates, sell the rest of the drugs at the same low prices charged in other countries. "These are given to those with enough power to negotiate drug prices," Rost claims, "such as the Department of Veterans Affairs and various pharmacy benefit mangers."

Technically, it is illegal to import prescription drugs into the US from other countries, but the government has never before enforced the regulation when the drugs were imported specifically for individual use. However, Bush is banding together with the major drug companies to do it now.

In fact, many believe that Bush is behind the threat by Canada to ban importation to the US. "Canadian Health Minister Ujjal Dosanjh could issue new rules that would virtually halt drug exports. He would do so by forbidding doctors there from signing off on US prescriptions unless they actually examined the patients first.

"He said in a speech that Canada could just not be the drugstore for the United States," said Dosanjh's spokeswoman, Adele Blanchard. The minister said it could lead to shortages [for Canadians]. He also said it is unethical for Canadian doctors to just countersign prescriptions from an American doctor.

Canadian pharmacies now supply drugs to about 1.8 million Americans, mostly uninsured elderly or low-income people, according to David MacKay, executive director of the Canadian International Pharmacy Association, when he testified before the Canadian Parliament.

However, besides worries over the threats by the Health Minister, Canadian pharmacies are being pressured to stop importing drugs to Americans, by drugmakers who sent out letters warning of plans to stop the shipment of products to wholesalers who sell to the pharmacies, according to MacKay. As a result, some common drugs such as the cholesterol drug, Lipitor, are not always available for American buyers, MacKay reports.

Americans who buy drugs from Canada resent Bush and the drug industry for allowing drug prices to remain high in this country while trying to keep out cheaper drugs from the north.

Abraham Kaplan, who is a Canadian drug consumer says, "I don't think the U.S. should be in the position of protecting the obscene profits of these big manufacturers."

It remains to be seen what will happen with Bush in the US, should the Canadian Health Minister, Dosanjh, act to ban or limit US sales, MacKay says the Canadian International Pharmacy Association would likely fight him in court.

Just in case the plot to block supplies is successful, some Canadian suppliers have already arranged to keep selling to the US, with the overseas drugs, said Steve Fishman, manager of Prescriptions Direct in Hallandale, "Eighty percent of Canada will get shut down if the minister goes forward. The other 20 percent will find alternative sources to do the same thing that their pharmacies do now," Fishman said.

Rost maintains that "the fight against reimportation is a fight to continue to charge our uninsured, our elderly, our poor, our weakest, full price, while giving everyone else a rebate, is fundamentally unethical."

Rost advised the committee that every day, "Americans die because they can’t afford life-saving drugs, because we want to protect the profits of foreign corporations. I believe we have to speak out for the people who can’t afford drugs, in favor of free trade and against a closed market ..." Blocking reimportation has a high cost, Rost warned, "Not just in money, but in American lives."

The Sunday Times newspaper reports that pharmaceutical companies have been wining and dining increasing numbers of nurses since their powers to prescribe were strengthened in 2003. The firms have reportedly been treating nurses to meals and breaks at four-star and five-star hotels, as well as laying on opportunities for entertainment that, traditionally, were the reserve of the doctors.

AstraZeneca has held numerous events for nurses and recently the company held an event at a four-star hotel in Glasgow, which included a 45 minute long presentation. On another weekend the company also invited nurses on a weekend break at a five-star hotel on the banks of Loch Lomond in Scotland.

Although the event was cancelled at short notice, nurses would have been treated to three hours of presentations on asthma treatments followed by the chance to stay and dine at the exclusive hotel. Similarly, last year the company invited nurses to a four-star hotel near Grantham to discuss asthma.

GlaxoSmithKline (GSK) has also held events with the pharma giant inviting nurses to a four-star hotel in Lincolnshire to talk about diabetes treatments.

The firms' actions have come under increased criticism. Matt Griffiths, joint prescribing adviser for the Royal College of Nursing, was invited to give evidence at the Health Select Committee's inquiry into the influence of the pharmaceutical industry.

In a letter to the British Medical Journal, nurse Liz Darlington wrote: “I am utterly amazed at the pharmaceutical environment that prevails in primary care and the volume of invites to `educational meetings' with free lunches, trips to TV shows etc that have been put my way.”

However, pharma firms have defended their actions. A spokesperson for AstraZeneca said: “When deciding on a meeting location, AstraZeneca selects the venue that can best facilitate a robust educational programme while keeping costs to a minimum.”

A GSK spokesperson added: “Every hotel is chosen for its convenience and facilities and the hospitality has to be secondary.”

Nurses were given powers in 2003 to prescribe patients medication from a list of 180 products. Recently, Secretary of State for Health, John Reid, released plans to give nurses more prescribing powers. Nurses with appropriate training would be able to prescribe for any medical condition and from the full medical formulary, he said.

So is it a mere coincidence that nurses are now on the receiving end of lavish entertainment under the guise of 'education' since they have become in a position to boost the bottom line of pharma profitability? Now they are prescription decision makers, they are increasingly the target of pharma sales forces.

The Globalization Institute's Alex Singleton has written an article on why "Drug companies should not receive corporate welfare"

When a specific industry comes and puts itself forward as a special exception, the alarms bells should ring. Most industries - if they thought they could get away with it - would put the case for corporate welfare.

One industry claiming to be a special exception is the drug industry. They acknowledge that grey imports are good in general. It's just that in the drug industry, free trade is a bad idea. They have R&D costs, don't you know, and they wouldn't be able to develop new drugs if, for example, Americans could buy drugs from Canada. For good measure, they say that drug reimportation is a bad idea because of safety. This argument is mere scaremongering.

Drug companies do invest a good amount of money on R&D, about 10% of their turnover. Then again, Microsoft invests 17.3% of its turnover on R&D. Drug companies enjoy the highest profit margins of any industry in the US, nearly four times the Fortune 500 average. The fact is that drug reimportation would not hinder drug companies' ability to invest in new drugs. Its effect would be to push drug companies to ensure they sell to rich countries at a price that happily covers R&D.

Being against drug reimportation is the easy option for drug companies. In reality, it lets them charge consumers in each market as much as they can get away with. Free trade threatens their market power. Here, the interests of drug companies are directly opposite the interests of the sick. Blocking drug reimportation is corporate welfare at its worst.

Readers may be interested in a Cato Institute report: Drug Reimportation: The Free Market Solution.