“Reimportation is nothing more than free trade in pharmaceuticals, and there are no good grounds for the U.S. government's interfering with it. - Jude Blanchette, Henry Hazlitt Research Fellow at the Foundation for Economic Education

“The ban on reimportation is unconscionable, and most Americans know it despite the best efforts of the pharmaceutical companies and their mouthpieces.” - US Congressman Ron Paul (Republican), former Libertarian Party presidential candidate

“[The reimportation ban] should be removed.” - Cato Institute report on reimportation

“The U.S. government has no business telling the American people what they may and may not buy from people living outside the country. That’s called freedom, something earlier Americans actually understood and valued.” - Sheldon Richman, Editor, The Freeman

“All that free traders are asking is that US firms be willing to let Americans buy US drugs at market prices when they are imported from other countries. The only possible reason to pay more would be if you want to dump vast sums of money on the US drug industry for no good reason. Consumers might want to—they can send Eli Lilly a fat check—but they shouldn't be forced to.” - Lew Rockwell, President of the Mises Institute

The New York Times today talks about Susan Finston of the Institute for Policy Innovation who is "just the sort of opinion maker coveted by the drug industry":

In an opinion article in The Financial Times on Oct. 25, she called for patent protection in poor countries for drugs and biotechnology products. In an article last month in the European edition of The Wall Street Journal, she called for efforts to block developing nations from violating patents on AIDS medicines and other drugs.

Both articles identified her as a "research associate" at the institute. Neither mentioned that, as recently as August, Ms. Finston was registered as a lobbyist for the Pharmaceutical Research and Manufacturers of America, the drug industry's trade group. Nor was there mention of her work this fall in creating the American Bioindustry Alliance, a group underwritten largely by drug companies.

The institute says Ms. Finston's ties to industry should not have prevented her from writing about those issues. Nor is there a conflict, it says, in the work of Merrill Matthews Jr., who writes for major newspapers advocating policies promoted by the insurance industry even though he is a registered lobbyist for a separate group backed by it. "Lobbying is not a four-letter word," said the institute's president, Tom Giovanetti.

But organizations like the institute, which bills itself as an independent, nonprofit research group committed to a "smaller, less intrusive government," are facing new and uncomfortable scrutiny over their links to special interest groups after the disclosure this week that the Washington lobbyist Jack Abramoff had paid at least two outside writers for opinion articles promoting the work of his clients.

According to Helen Disney of the Stockholm Network:

"parallel trade in medicines is in a different league to, say, parallel trade in handbags or jeans. Why? Because the opportunities for public harm are so much greater. Parallel trade is legal in Europe but, by its nature, it opens up much wider possibilities for unscrupulous individuals to insert counterfeit or substandard medicines into the legitimate distribution chain. These fakes have the potential to do great harm to the public and yet there is very low awareness of this problem among patients or indeed among many health professionals who prescribe medicines. US patients may wish for cheaper medicines but, by granting their wish, the US government could be doing more harm than good, unless it sets very strict guidelines in place - and even then, the risks of public harm will be greater then they currently seem."

But before condemming free trade in pharmaceuticals, we should look at the facts. Yes, Pfizer says free trade is dangerous. But exactly how dangerous?

Pfizer's vice president of global security, John Theriault, argues against free trade in pharmaceuticals, but when CBS News pushed him on the question of how many cases of death or serious disease had occured because of parallel trade among Europe's 457,000,000 people, he said: "there have been none known due to this practice."

That's right, for something Pfizer denounces as dangerous, a population of 457 million people can't show a single case of anyone being harmed.

Pfizer marketing vice-president Peter Rost was fired on Thursday. Rost rose to prominence as a whistleblower and his public support for free trade in pharmaceuticals. It is reported that Pfizer has given him virtually no responsibilities for the past two years. After appearing on major US television show 60 Minutes, his e-mail and cellphone stopped working, which Pfizer says was not intentional.

Rost told a Committeee of the US Senate earlier this year: “I joined this industry to save lives, not to take them. And that's the reason I've chosen to speak out.” He carefully explained to the Committee that the views expressed were his own and did not reflect those of Pfizer Inc. His subject was “Drug Importation: The Realities of Safety and Security”. At one point during his career, Rost was responsible for an entire region in Europe where he gained personal experience with parallel trade. 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 when he had lots of parallel traded 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."

Rost advised the committee that every day, "Americans die because they can’t afford lifesaving 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 re-importation has a high cost, Rost warned, "Not just in money, but in American lives."

A European Directive, the Food Supplements Directive, came into UK law on 1 August. Although there are exemptions until 2009, the Directive will introduce a huge regulatory burden on the selling of food supplements, and it is likely that many supplements will disappear off shelves. In practice this means:

The vitamin & mineral tablets used by millions of British people are under threat. Products such as 1gram Vitamin C tablets that are frequently used in the cold season, and the mineral Boron, important for strong bones and teeth, are set to become illegal once recently passed European laws are fully introduced.

Many more specialist vitamins that have been used safely by UK consumers for many years will also disappear. Almost every multi-vitamin tablet sold in Britain will have to be reformulated to avoid breaking the law.

So why is the EU doing this? In part it is caused by an over-zealous appreciation of regulation. But, there is another, more significant reason for this Directive: the lobbying by pharmaceutical companies. Diet supplements - as sold in health food stores like Holland & Barratt - are cheap and not covered by patents. By discouraging their use or getting them banned, Big Pharma is able to force consumers onto patented drugs, increasing their profits and tightening their pharmopoly.

“When you are in the health care business, when you create products as powerful and important as prescription medicines that can save lives and heal disease, you have a profound responsibility to gain and keep the trust of patients and health care professionals who rely on and use your products by being forthright and honest.”

- PhRMA president Billy Tauzin

The WTO is unlikely to get an agreement at all for two years, and to be honest most of the activities of people trying to make trade more pro-poor have been to do with agriculture. But TRIPS will resurface in the future. This is an article from Intellectual Property Watch:

Key officials in Geneva indicate that World Trade Organization members are not likely to find a compromise on a permanent amendment to global trade rules in order to allow poor countries to import affordable medicines in time for the December WTO ministerial in Hong Kong.

There is no formal deadline for items to be included in the Hong Kong agenda, but “in practical terms any text to be taken to Hong Kong should be completed by about 2 December at the latest,” a WTO official said. That is because the following week people will have started travelling, he said. The ministerial will be held from 13 to 18 December. The public health issue is not required to be part of Hong Kong agenda.

At issue is a mandate for members to make a permanent amendment to the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) to allow countries to import cheap generics under compulsory licenses when deemed necessary. Such a waiver was mandated to be made permanent by 2002 under paragraph six of the 2001 Doha Declaration on TRIPS and Public Health. A temporary waiver was agreed on 30 August, 2003.

TRIPS is opposed by the leading free-market economists. Dr Razeen Sally of the London School of Economics says in a report for the Cato Institute, under the heading "Alarming Trends in the WTO": "TRIPS takes WTO rules in a new direction - not further in the direction of market access, but elsewhere, towards a complex, regulation-heavy standards harmonization agenda..."

Similarly, Prof. Jagdish Bhagwati attacks TRIPs in his book In Defense of Globalization. He writes that: "The damage inflicted on the WTO system and on poor nations has been substantial." He attacks the "pseudo-intellectual justification" for them through the pretense that they were "trade-related". Moreover, he writes:

TRIPs... were like the introduction of cancer cells into a healthy body. For virtually the first time, the corporate lobbies in pharmaceuticals and software had distorted and deformed an important multilateral institution [the WTO], turning it from its trade mission and rationale and transforming it into a royalty collection agency.

The consequences have been momentous. Now every lobby in rich countries wants to push its own agenda, almost always trade-unrelated, into the WTO, following in the footsteps of the IPP [intellectual property protection] lobbies. This is true... of the AFL-CIO and the ICFTU (International Confederation of Free Trade Unions), which want labor standards to be included in the WTO in the form of the Social Clause, allowing trade sanctions to kick in if the included labor standards are not met. Their principal argument is that TRIPs were allowed for the benefit of capital, so the Social Clause must be allowed to do the same for labor; environmentalists want the same done for nature.

So while drug companies pretend to support free markets, the reality is that their lobbying is damaging the future ability to make free trade agreements.

Alfred Engelberg, a Florida-based IP lawyer, had a letter in the Financial Times yesterday questioning whether intellectual property protection for pharmaceutical companies had gone too far:

...Seemingly oblivious to a growing chorus of concern about imbalance, trade negotiators for the most developed nations, spurred on by a powerful group of multinational pharmaceutical, software and entertainment giants who see new profit opportunities in emerging markets, seek to impose even greater levels of intellectual property rights protection. In some cases, they are demanding that developing nations impose protection levels that go beyond existing law in their own country. They also seek global harmonisation of patent laws - not for the purpose of raising the quality of patents or the standards of patentability, but rather to make it easier and cheaper to obtain and enforce patents....

As was demonstrated by the Cipro shortage during the anthrax scare of 2001 and recently by the Tamiflu shortage, developed nations will not hesitate to throw their intellectual property regimes overboard to satisfy their national interests. Yet they do not seem to appreciate the burden that excessive intellectual property protections impose on developing nations with fragile economies and limited resources.

The time has come not only for a pause in the imposition of greater levels of intellectual property rights protection but, more importantly, for a careful re-examination of whether the existing rules regarding both the creation and enforcement of those rights are balanced in a manner that truly supports sustainable development.

An interesting article in the Financial Times last month suggested a way of stockpiling medicines for emergencies without excessive cost. James Love, director of the Consumer Project on Technology, suggests:

a better way of thinking about the management of emergency medical stockpiles - one that would change the incentives to protect us from anthrax, avian flu, severe acute respiratory syndrome and other emerging public health threats, at least for medicines that already have commercial markets for other uses.

The proposal is to permit governments to acquire medicines freely for stockpiles from generic suppliers, on the condition that if the medicines were used to treat people, the patent owner would receive royalties. This makes it much cheaper to acquire the stockpiles but also increases the value of the patented invention, as long as there is some probability that the emergency use will occur.

The Pharmaceutical Research and Manufacturers of America (PhRMA) offered cash to a book publisher to publish a book about "a dastardly group of Balkan terrorists [which] launches an attack on the United States by poisoning low-cost prescription drugs from Canada bought over the Internet by unsuspecting U.S. consumers."

The Toronto Globe and Mail says that:

According to one of the book's co-authors, Kenin Spivak, the goal was simply "to scare Americans into opposing any amendment to existing legislation" that formally bans the import of low-cost prescriptions from Canada. He said that the book's publisher, Phoenix Books, was paid an unspecified amount of money to publish the novel by the drug group, which also said it planned to buy 40,000 copies...

"Final approval of the book's content was with PhRMA. They would not have to publish the book if they didn't like it," Mr. Spivak said. Under the arrangement, the group's payments to the publisher were supposed to remain secret.

"As the project progressed, PhRMA's requests became increasingly odd," Mr. Spivak recalled. "They wanted the bad guys to be fundamentalist Muslims." So the terrorists, who were originally Croatian, were moved to neighbouring Bosnia and morphed into Muslims intent on poisoning Americans to punish their government for not supporting the Muslim cause in the Balkans.

The authors were also asked to simplify the story to make it more appealing to women, who are apparently major purchasers of drugs.

PhRMA initially claimed that the commission had been made by a "rogue employee", a "lower-level employee who acted without authority". It was later revealed that the said employee was Valerie Volpe, a very prominent spokesperson and the organisation's Deputy Vice President for Federal and State Affairs.

But it seems that the authors, fed up with dealing with PhRMA, are going to capitalise on the publicity anyway. The Karasik Conspiracy will now, says one of the authors, feature "a large company commissioning a real terrorist attack to scare Americans about Canadian drugs."

The book will be out early in 2006.

At a debate on intellectual property held in Westminster last week, Alan Story LLB LLM from Kent Law School launched a savaging attack on the way how pharmaceutical companies make monopoly profits at the expense of consumers. He said that it was ridiculous for pharmaceutical companies to claim their research is risky when they have consistently been the world's most profitable industry for three decades and that they make three to four times the profit levels of the Fortune 500 average.

Free trade between European countries is enshrined in the Treaty of Rome. But some pharmaceutical companies like Pfizer don't like free trade: they'd much prefer to keep national markets separate. They argue that pharmaceuticals aren't like other products. They complain that some European governments, most commonly Spain, impose price controls on pharmaceuticals. With this claim, they argue that European free trade in drugs should be banned.

The European Commission, however, has rubbished the price-controls claim. The Commission has pointed out that:

factual evidence shows that [Glaxo] does not simply accept prices set by the Spanish authority. There is always negotiation and for four products which are prime candidates for parallel trade, [Glaxo] has even negotiated price increases with the Spanish authorities.

Furthermore, the Commission has pointed out that:

...there does not appear to be any causal link between the losses due to parallel trade and [Glaxo's] R&D investments. Moreover, these losses are too insignificant to affect these investments to a considerable extent. Finally, it must be stressed that the R&D budget of pharmaceutical companies while important only represents around 15% of their total budget.

And as the Pharmopoly campaign has pointed out:

This can not be emphasised often enough: Europe does not have price controls, it has big customers who, like the U.S. Veterans Administration, obtain volume discounts from the pharmaceutical suppliers and negotiate lower prices. [Talking of] price controls, which do not actually exist, makes no sense. Buyers negotiate with sellers in the market-place every day. Big customers get big discounts; the U.S. army can buy Humvee vehicles cheaper than retail customers because they are the biggest buyers of military vehicles in the world, Wal-Mart pays low prices for coffee because it is the biggest retailer of coffee in the world and Britain's NHS negotiates keen drug prices because it buys nearly $20 billion of pharmaceuticals every year.

Pfizer marketing vice-president Dr Peter Rost (pictured) has published a review of a new book by his colleague Hank McKinnell, the CEO of Pfizer. Dr Rost has come to prominence for speaking in favour of free trade in pharmaceuticals which would allow US citizens to legally import drugs from Canada and Europe. He writes:

Pfizer's CEO, Dr. Hank McKinnell has written an astonishing book in which he admits that he doesn't always believe in what he's saying (p. 11), that drugs from Canadian pharmacies are safe (p. 69) and that high US drug prices have nothing to do with past R&D expenses (p. 46)...

Dr. McKinnell starts his book with the surprising confession that he doesn't always believe in what he's saying. "They listened to my logic, but I could tell they weren't convinced, and to tell you the truth, I wasn't either." (p. 11).

He also doesn't shy away from embarrassing facts, "Branded drug prices are anywhere from 25-100 percent more expensive in the United States." (p. 50) He even admits, "Drugs from Canadian pharmacies are as safe as drugs from pharmacies in the United States." (p. 69).

But his impressive mea culpa doesn't stop there. He slams everyone who makes a connection between drug prices and R&D. "It's a fallacy to suggest that our industry, or any industry, prices a product to recapture the R&D budget spent in development." (p. 46)...

Dr. McKinnell ends his book with a wonderful quote by Gandhi, for those who desire change. "First they ignore you. Then they laugh at you. Then they fight you. Then you win." (p. 193) Dr. McKinnell just doesn't realize that he has become "them."

Dr Ron Paul is a medical doctor by training who has a seat in the US House of Representatives as a Republican. Dr Paul has been nicknamed "Dr No" for his consistency in saying no to corporate welfare and big government. He is scathing about those who profess to be free-marketeers but, through some weird intellectual gymnastics, simultaneously argue that consumers should not be allowed to buy pharmaceuticals from abroad.

In 2003, when a bill to allow imported drugs was being debated, he stood up in the House and said:

...I wish to express my disappointment with the numerous D.C.-based "free-market" organizations that are opposing this bill. Anyone following this debate could be excused for thinking they have entered into a Twilight Zone episode where "libertarian" policy wonks argue that the federal government must protect citizens from purchasing the pharmaceuticals of their choice, endorse protectionism, and argue that the federal government has a moral duty to fashion polices designed to protect the pharmaceutical companies' profit margins. I do not wish to speculate on the motivation behind this deviation from free-market principles among groups that normally uphold the principles of liberty. However, I do hope the vehemence with which these organizations are attacking this bill is motivated by sincere, if misguided, principle, not by the large donations some organizations have received from the pharmaceutical industry. If the latter is they case, then these groups have discredited themselves by suggesting that their free-market principles can be compromised when it serves the interests of their corporate donors.

He later wrote:

...while Americans ostensibly enjoy a freer economy than the rest of the world, they perversely pay more for their prescriptions than residents of any other nation.

The pharmaceutical industry obviously likes this, and it worked overtime lobbying against the reimportation measure - paying off some strange bedfellows in the process. Several supposedly free-market groups came out against reimportation, making tortured attempts to argue that the free-market principles they normally promote somehow just don't apply to imported prescription drugs. Some even made the outrageous argument that reimportation will threaten the pharmaceutical industry's profits, as though it is the job of government to ensure the profitability of any industry!

The truth is that many of the organizations opposing reimportation either directly represent the pharmaceutical industry, or receive funding from it. They are transparently willing to abandon their free-market "principles" when necessary to protect their bottom line.

PhRMA, the Pharmaceutical Research and Manufacturers of America, presents itself as pro-consumer. But when thinking about this trade body, readers should remember the wisdom of Adam Smith:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

Despite their free-market rhetoric, Pfizer et al do not operate in a free market. They work in a protected market. In the market for laptop computers, for example, if existing producers enjoy abnormally large profits, new companies come into the market to get their bit of the action. But in the market for pharmaceuticals, patent protection prevents that from happening. In the US, uninsured consumers of drugs are being held to ransom.

In opposing free trade ("parallel trading") in pharmaceuticals, drug companies are effectively putting a gun to the heads of US consumers and saying: your money or your life! Either pay our inflated prices or we won't be able to develop new drugs. If that does not convince, the companies implausibly claim the issue is one of safety. Yet there has been free trade in drugs in Europe for over two decades and safety has not been an issue.

Given that pharma has been the most profitable sector in the US economy for most of the last quarter century, and given that they spend less on R&D than on marketing or on profits to shareholders, their claim that free trade would affect their R&D makes no sense. All they are trying to do is protect their profitability. As one Pfizer vice-president has explained, profit is the sole reason drug companies oppose free trade in drugs.

When you also note that drug companies are heavily reliant on government-funded research for many of their most innovative, most socially-important new drugs, one thing becomes clear: the economic system the research-based drug companies support today is not the free market. It is statism.

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

"Open Source, Charitable Drug Development for the World's Poorest?"

Download here.

The May commentary, by Alex Singleton of the Globalisation Institute, examines the possibility of utilising open source methods for the development of drugs to counter the diseases of poverty.

USA Today reports on the Washington lobbying by US drug companies. They have doubled their spending on lobbying from $79.6 million in 1998 to an estimated $158 million in 2004.

Drug companies and their officials contributed at least $17 million to federal candidates in last year's elections, including nearly $1 million to President Bush and more than $500,000 to his opponent, John Kerry. At least 18 members of Congress received more than $100,000 apiece.

The industry also liberally funds think tanks and patient-advocacy groups that don't bear its name but often take its side; the National Patient Advocate Foundation, for instance, receives financial support from at least 10 drug companies. And the industry isn't above playing hardball, according to David Graham, a Food and Drug Administration scientist who got on its bad side.

Since 1998, drug companies have spent $758 million on lobbying - more than any other industry, according to government records analyzed by the Center for Public Integrity, a watchdog group. In Washington, the industry has 1,274 lobbyists - more than two for every member of Congress.

Of couse, pharmaceutical companies have a rational reason to lobby so hard. Thanks to the corporate welfare they receive, drug companies enjoy the highest profit margins of any US industry, almost four times the Fortune 500 average. It looks likely that, despite the lobbyists, the ban on free trade ("parallel trading") in drugs will be lifted. That will cut costs for American consumers - and without harming research and development of new drugs.

Alex Singleton wrote an interesting article for the Globalisation Institute which we reproduce here.

New drugs to counter the 'diseases of poverty' are hard to come by. As The Economist has pointed out: "About 90% of the planet's disease burden falls on the developing world. Yet only 3% of the research and development expenditure of the pharmaceutical industry is directed toward those ailments." The problem, commonly defined, is that poor people do not have an effective demand for new drugs. They are too poor to be attractive customers for Western pharmaceutical companies.

International Policy Network recently published a report, Incentivising research & development for the diseases of poverty, which makes some important points about the healthcare infrastructure of poor countries. The report's conclusion that the best way of dealing with the problem is for poor countries to become rich. In other words, they don't have an effective demand now: it's really important for them to get that effective demand.

In the shorter-term, the report discusses several ways that drugs to combat 'diseases of poverty' could be developed. One suggestion discussed is that drug companies who do work on third world drugs could gain extensions on the patent lengths of drugs aimed at the developed world. This is an unattractive proposal. Higher prices for pharmaceuticals cause less consumption. Thus, extending patent lengths on drugs in developed countries would have a negative effect on the health of those countries. In the US, where the uninsured pay the highest prices for drugs, it would be the uninsured that would suffer the most. It is perverse to try and help the world's poor by attacking health in the rest of the world.

It is difficult to see the idea working at all well in practice. The likely effect would be that companies would make considerable noise about working on drugs for developing countries in order to extract as much extra patent protection as possible. Pharmaceutical companies' profits would increase, but at the same time causing problems for consumers in the developed world. Their income would not be particularly related to the success of their third world drugs, so the normal market incentives would not exist. Moreover, there is a stack of evidence that pharmaceutical patent lengths are already overkill. Extending them further would be a remarkable thing to do, and politically difficult in America as the high cost of drugs is an important political issue.

So what should we do? Until poor countries have an effective demand, charitable development offers the best solution. Of course, Britain has a prominent charity doing non-profit development called Cancer Research UK. Now we need more such charities, but focussed on the world's poorest. The Economist has featured an interesting development: the Institute for OneWorld Health, which is a non-profit pharmaceutical company dedicated to the diseases of poverty. Charities are a better model than public sector development because there is competition between charities. They have to justify themselves to their supporters. There is distance between them and politics.

There is also a strong case for greater use of an 'open-source' approach to development, a la the Tropic Disease Initiative. A dispersed approach would enable scientists to volunteer some of their time, for charities to contribute to a range of projects, and for the inclusion of developing country scientists, which might in turn help improve the scientific base of the poorest countries.

In the IPN report, it is stressed that open source drugs ought to follow a BSD license rather than a GPL license. These are popular licenses in open source software development and use copyright law to determine what may be done with the software. In drugs, we are talking about patents, not copyright. What the report means is that pharmaceutical companies should be able to take an open-source developed drug, work on it a bit and then patent it. Given that a key purpose of open source development is to provide drugs at marginal cost, I am not sure whether this is going to be a popular idea. Moreover, such patents might have the effect of preventing open source developers from building on their own work. In software, the BSD license merely lets Apple build on BSD software and produce its Mac operating system. Apple's copyright does not prevent others from also building upon BSD software. But in drug development a BSD-style license might enable drug companies - through patents - to stop others from building upon open source drugs. That would not be a desirable outcome.

In the long run, wealth is what will eliminate diseases of poverty. But in the short-run, developing drugs for the poor is not an insurmountable problem.

U.S. states that have looked to Canada to help their residents win steep discounts on prescription drug prices are turning to Europe for the same deals because the Canadian government is considering shutting off the southbound flow. Illinois and three other states already have authorized reimportation programs that recognize shipments of prescriptions from such places as the United Kingdom and Ireland.

It's unclear how successful they and other state legislators might be with that initiative because there have been moves in Europe to restrict access to low-cost drugs across national lines. But lawmakers say it is important to explore every possible avenue toward cheaper prices.

States from Illinois and Wisconsin to New Hampshire and West Virginia have either authorized reimportation of prescription drugs from Canada or explored the idea. Several of them now have added Europe to the mix because Canada's health minister has said the government was considering significantly limiting sales to individual U.S. consumers.

"The idea was to spread the risk" of drug manufacturers cutting off supply to an individual country that reimported prescriptions to the United States, said Caleb Weaver, project manager of I-SaveRX, the initiative launched by Illinois and now available in Wisconsin, Missouri and Kansas. Vermont would join that program.

The European Court of Justice is considering whether manufacturers can limit supplies to countries with cheap prices. That would crack down on consumers who get their drugs cheaper from neighboring countries via "parallel trade" among European Union nations, according to the U.S. National Legislative Association on Prescription Drug Prices. There have been several such challenges in the past.

Patients blame the pharmaceutical industry for efforts to choke off supplies from countries where prices are low because of strict government regulation. They accuse the industry of using its economic muscle to force such national policy decisions.

"You actually have an industry that's bullying around countries," said House Health Care Chairman John Tracy, D-Burlington. "It's bizarre that we're even in this position."

Wanda Moebius, a spokeswoman for the industry trade group Pharmaceutical Research & Manufacturers of America (PhRMA), disingenuosly spins the line that the lobby group is concerned about the safety of drugs being imported to the United States and those concerns are increased by the possibility of importing from Europe. Really Wanda's worry is profits - European drugs are exactly the same and are regulated just as strenuously.

Wanda claims European imports could threaten safety because they could carry labels in languages that consumers don't speak. "There's no guarantee English will be used," Wanda said. "When you start going outside the U.S., you are opening yourself up to a number of safety issues." Wanda seems not to know which language the English speak.

Dr. Peter Rost, a marketing vice president with Pfizer Inc., told Vermont lawmakers Thursday that reimportation from Europe was a logical and viable alternative. Parallel trade, a version of reimportation among European countries, has operated successfully for 20 years, he said.

"Just authorizing a scheme where drugs come from Canada is doomed to fail," said Rost, who emphasized he was not speaking on behalf of his company. "You must look to the European Union." Despite the myriad obstacles, including opposition in Washington, state legislators continue to push for reimportation because consumers can save an average of 50% on the costs of drugs purchased in Canada.

"For very expensive drugs it really can be a lifesaver," said Sharon Treat, executive director of the National Legislative Association. "Unfortunately in this country many people don't have any kind of prescription drug coverage that approaches those savings, or any (coverage) at all."

Prescription drugs are big business and have become a big political issue. A recent federal report said retail sales of prescription drugs amounted to $179.2 billion in 2003. That represented 11% of all health care spending. Precise estimates are hard to come by but between 1 million and 2 million Americans get their drugs from Canada. The Canadian model developed after U.S. Rep. Bernie Sanders, I-Vt., began staging high-profile bus trips to Canada more than five years ago. He took senior citizens to Montreal and its suburbs, where they got so-called maintenance drugs at significant savings. Maintenance drugs are those that patients must take regularly to care for a chronic disease such as high blood pressure.

What has developed since then is an Internet-based system in which a prescription from an American doctor is co-signed by a Canadian physician, filled and then shipped to the United States. Sanders unsuccessfully sought in the federal Medicare bill to explicitly authorize reimportation from Canada and 18 other countries.

"While we don't think it would necessarily be bad if it was just Canada, we think it's important that the state of Vermont as well as the federal government open as many markets as possible so you don't give the government and pharmaceutical companies so much power to manipulate the situation," said Sanders spokesman Joel Barkin. "We are encouraging Vermont and the federal government to look for any licensed pharmacy outside the U.S. where people can find affordable, safe drugs."

The first of the Pharmopoly campaign Critical Commentary on Pharma & Politics is now available to download.
Donald W. Light and Joel Lexchin are the authors of The International War on Cheap Drugs. Donald W. Light is Professor, University of Medicine & Dentistry of New Jersey and Fellow, Center for Bioethics, University of Pennsylvania. Joel Lexchin is Associate Professor, School of Health Policy and Management, York University, Toronto.

The commentary covers the objectives and efforts of Big Pharma to undermine Free Trade Agreements and redefine the language of trade negotiations in their commercial interest. It deals with the myths put out by Big Pharma's lobbyists in Washington for domestic consumption - particularly about Europe's "free ride". It highlights the need for transparency and the links between lobbyists and the politicians they back financially.

Sandoz, the generic manufacturing affiliate of Novartis, is under investigation by the Serious Fraud Office (SFO) for alleged criminal marketing practices. The SFO is investigating activities at Sandoz to ascertain if it broke criminal and competition law while selling its products between January 1996 and December 2000.

Sandoz manufactures an extensive range of generic drugs in the UK, including tamoxifen and ibuprofen. However, both Novartis and the SFO were unable to comment on which drugs are being investigated.

During the four-year period in question, Sandoz traded as Lagap Pharmaceuticals and was not part of the Novartis portfolio but as an affiliate of the Swiss-based pharma company today, if Sandoz is found guilty it could be costly for Novartis. The inquiry into the generic affiliate's activities is part of a widening investigation by the SFO into price-fixing by pharma companies.

In April 2002, the SFO launched a major investigation into a suspected conspiracy to defraud the NHS through price-fixing on prescribed penicillin-based antibiotics and warfarin between January 1996 and December 2000.

The SFO is now planning to interview leading figures, a spokesman for the SFO confirmed that other, so far unnamed, individuals would also be called for interview. News of the investigation came as Novartis chief executive admitted that big pharma had lost the trust of consumers and regulators.

An arthritis drug withdrawn on safety grounds last year probably killed many thousands of patients, a new study suggests. Researchers said the drug Vioxx may have caused between 88,000 and 140,000 serious heart problems in the United States alone since its introduction in 1999.

With heart disease death rates in the US running at 44%, many of these cases were likely to have been fatal, it was claimed. Vioxx, which has the scientific name rofecoxib, was prescribed to 400,000 patients in the UK. It was taken off the market at the end of September after a three year trial linked it to an increased risk of heart disease events.

The study published on-line today by the Lancet medical journal analysed data from 1.4 million Californians who had used various kinds of non-steroidal anti-inflammatory drugs (NSAIDs).

Among them were 27,000 patients who had been taking Vioxx, which belongs to a family of drugs known as Cox-2 inhibitors. A total of 40,000 were given another Cox-2 inhibitor, Celebrex, while others were taking ibuprofen or naproxen. The investigators, led by David Graham from the US Food and Drug Administration's Office of Drug Safety, found that 8,143 had suffered from serious heart disease between 1999 and last September.

Of these, 1,508 died suddenly from a heart problem.

Professor Donald W. Light, a fellow of the Center for Bioethics at the University of Pennsylvannia, says Big Pharma has declared war on the price of patented drugs in Europe, Australia and other affluent countries. It hopes to counter efforts within the U.S. to lower domestic prices, aiming instead to raise prices everywhere to U.S. levels. The goals pursued in the Australian and other Free Trade Agreements (FTAs) are to:

- Restructure internal markets to raise prices on patented drugs
- Extend patent protection and data exclusivity to delay generic competition
- Block cheap exports to the U.S

A feature in this campaign is doublespeak.

"Competitive liberalization" means competitive restrictions, or liberalisation from competition. "Free trade" means restricted trade, or the ability to trade freely at prices set by drug companies. "Free markets" for patented drugs means free from normal competition so that the longer competition is delayed, the "freer" the market is said to be. "Openness" means opening other countries' price setting processes to drug company influence. "Reimportation" refers to the global free trade in drugs, but makes it sound like a bizarre unnatural act.

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.

Increasing numbers of pharma companies are heading East to conduct R&D operations in India as globalisation makes it a small world. Just as a call to your bank might involve a long-distance connection to a call centre in India, pharma R&D is likely to have an Indian accent in the future. Attracted by a largely untapped, skilled and English-speaking workforce pharmaceutical companies are following suit, with more and more firms conducting clinical trials and setting up R&D facilities in India.

Research conducted last year by clinical research consultancy Oxygen Healthcare estimated that 1% of global clinical trials are currently conducted in India. This figure, the research suggested, could increase to 10% in the next five years and the country has the potential to be the premier destination for conducting global clinical trials.

Big pharma is already shifting eastwards according to Juerg Haelelfinger, deputy director of Roche's pharmaceutical division, reasoning that “no big pharmaceutical company can afford not to be present in India”. Roche has committed circa $20m to its Indian operations and Pfizer has doubled its R&D spending in India to $13m. Eli Lilly and Novartis are also expanding their R&D operations in the country.

Last month, AstraZeneca laid the foundations for an R&D facility in Bangalore. The facility forms part of AstraZeneca's $10m investment in India and the company hopes that its Indian operations will “play a crucial role in taking the discovery phase of research to bringing drugs to the market”.

GlaxoSmithKline is also eager to grab a piece of the action. Its vaccines business, GSK Biologicals, has vowed to make India its global hub for clinical R&D and plans to conduct four clinical trials in India this year. “We are now significantly increasing investments on clinical R&D and have every intention to make India a global centre for clinical trials,” confirms Sanjoy K Datta, South Asia director of clinical R&D and medical affairs at GSK Biologicals.

Pharma's attraction to India has been boosted by last year's confirmation from the Indian government that it would, for the first time, honour its pledge to the World Health Organisation and recognise the patents of foreign drugs. Previously, India had refused to recognise pharmaceutical patents and a number of its pharmaceutical companies have created profitable businesses by copying foreign drugs using a different manufacturing process to the original product.

However, concerns remain. Maxine Taylor, former director of corporate affairs at Eli Lilly admits that the main challenge pharma faces when operating in India is intellectual property protection. “This is being closely scrutinised and could hinder further investment by the industry unless progress continues to be made,” she reveals.

Beyond regulation, it is no surprise that India is such a mouth-watering prospect for pharma firms. Cost is, undoubtedly, a major factor. “The cost of trials continues to escalate in much of Europe, the US and Japan, whereas in India, as in many other areas of business, pricing is highly competitive,” says Taylor. Sunil Shah, director of Oxygen Healthcare, agrees: “Companies in India operate on about a third of the cost-base to Western companies.”

Recruiting patients for clinical trials is also a huge bonus, as India has a huge population with many untreated patients who are currently taking no other medication. “India provides access to patients with diseases common to Europe and North America, as well as tropical diseases,” says Alan Boyce, vice president of Europe for Kendle.

“In addition, the training and experience gained in Western countries by many investigators has resulted in closer alignment to international standards in clinical research.”

India will undoubtedly become a world leader in global research for pharma and this sector is likely to follow the massive success the country has had with regards to information technology. The logic of Globalisation should result in lower cost R&D for new drugs leading to worldwide benefits.

Reuters reports that an antipsychotic drug frequently given to Alzheimer's patients actually worsens their illness, researchers say. Patients given AstraZeneca's Seroquel had a marked deterioration of memory and other higher brain functions compared to those on placebo, according to Professor Clive Ballard of the Institute of Psychiatry and colleagues. AstraZeneca, Europe's third largest drugmaker, disputed the findings.

Drugs such as Seroquel, which was originally developed to tackle schizophrenia, are increasingly used to treat the personality changes and aggression often associated with Alzheimer's disease.

They are not approved by regulators for dementia but are often prescribed by doctors on an "off-label" basis for patients who develop serious behavioural problems. In one form or another, antipsychotics are used in up to 45 percent of British nursing homes, experts estimate.

"It's a big potential threat to patient health," Ballard told Reuters.

There have been concerns that the two most commonly used antipyschotics, Eli Lilly and Co's Zyprexa and Johnson & Johnson's Risperdal, may increase the risk of stroke -- something British healthcare regulators warned about last year. But, writing in the British Medical Journal, Ballard said Seroquel was not a viable alternative.

His team studied 93 patients with dementia in the northeast of England over six months and found those taking Seroquel experienced a doubling in cognitive decline compared with patients given a dummy pill

The UK government is set to examine how regulations imposed on the pharmaceutical industry affect how it conducts business. The Cabinet Office's business regulation team revealed that it has earmarked pharma as one of three industries to investigate this year, with an in-depth study expected to start this summer.

Although the Team is still to decide which areas of pharma regulation to examine, the Team has revealed on its website that two of the main areas which are currently being considered for more detailed investigation are the regulation of animal scientific procedures, under the Animals (Scientific Procedures) Act 1986 and the regulation of clinical trials, under the Clinical Trials Directive which came into force on May 1, 2004.

The Cabinet Office's Scoping Report 2005, lists seven further issues including: Control of Entry Regulations 1987, data exclusivity and the ten-year rule, GP software, generic substitution, the NHS drug tariff, NHS procurement of medicines and braille medicine labelling.

“No decisions have been taken at this stage about which of the issues might be most appropriate for shortlisting for further review,” the report states. “Further discussions are likely to be needed with interested parties in industry and government before decisions are taken.

“Relevant factors affecting the choice of issues for the shortlist are likely to include the potential benefit to industry from resolving the issue and whether there are good prospects for taking remedial action,” it adds.

Last year the Canadian health minister passed legislation restricting the "evergreening" of supposedly innovative drug patents. "Evergreening", the tactical extension of monopoly rights over "innovative" medicines that have large sales, costs millions of dollars each year. The Australian Government has made similar efforts, through legislative amendment and policies such as the 12.5% automatic discount once a brand-name patent expires.

Dr Tom Faunce writing in the Sydney Morning Herald says;

These efforts will soon be tested as US drug companies claim that generic or copy drugs nominated to be included in the Pharmaceutical Benefits Scheme infringe their "innovative" drug patents, thereby breaching the Australia-US Free Trade Agreement.

The arm-twisting between Australia and the US over pharmaceuticals, and their prices, will be carried out in private, through select committees on pharmaceutical policy set up under the trade agreement. The US is likely to be well advanced in its nominees for these committees. Hopefully, the Australian Government is taking its appointments equally seriously.

Under the agreement, a medicines working group is to be established with membership restricted to federal government officials of both countries. This committee is limited to discussing transparency issues under the Pharmaceutical Benefits Scheme, including the nature of the "independent review process" of PBS decisions.

It is permitted to weigh the relative public health importance of pharmaceutical research and development against cheaper, quality generic medicines. But this committee cannot define "innovation" in pharmaceuticals, or consider how to make drugs available in a more "timely" or "expeditious" fashion.

This task has been left to talks between Australia's Therapeutic Goods Administration and the US Food and Drug Administration. Defining just what is "innovation" in medicines is fundamental, and on it may hang decisions to spend hundreds of millions of dollars on drugs whose comparative therapeutic significance has yet to be proven.

In the US, drug companies can claim that medicines are innovative if they perform better than a placebo, that is, a tablet with no pharmacological effect, or have minor molecular variations without necessarily adding value to community health.

Yet, under the trade agreement, drug innovation is linked with the concepts of "affordability" and "objectively demonstrated therapeutic significance" - concepts which may require comparison with existing therapies.

Concern over drug innovation has been spurred by the recent Vioxx and Celebrex debacles. These drugs, though possessing minor variations over competitors, were aggressively marketed as "innovative".

The former federal health minister Michael Wooldridge mentioned Celebrex's "dramatically lower side effects" when including it in the PBS, a listing that cost taxpayers $140 million over the following nine months alone. More was spent on advertising these "me-too" drugs than on their research and development yet manufacturers continued to promote them long after they were known to cause fatal heart attacks.

Their claim to be innovative appears to have been too readily accepted by government officials; public safety suffered as a result.

Perhaps most important for Australian drug policy is the joint committee which is to "supervise" the implementation of the trade deal. It will comprise government officials of both parties and be chaired by the US Trade Representative and the Australian Minister for Trade.

This committee may delegate its functions to other committees, including the medicines working group. It may interpret any ambiguities in the agreement, including the definition of pharmaceutical innovation.

This committee may, but is not required to, seek advice from non-governmental persons or groups. If the Australian officials aren't careful, this could result in the input of Australian community groups with a stake in seeing a continuing important role for cheap, quality generic medicines under the PBS being sidelined. These include organisations of pensioners and retirees similar to those who fought brand-name drug patent "evergreening" in Canada and the US.

In the final exchange of letters for the free trade agreement, the US reserved its right to challenge Australian amendments protecting the role of generic drugs under the PBS. If a dispute arises, the US can threaten dispute resolution proceedings, including seeking damages and retaliation in trade areas such as agriculture or manufacturing, if its "legitimate expectations", such as those about drugs, are not achieved.

With what is at stake, it is crucial that Australian officials on these committees be experienced and dedicated to implementing PBS policy. If the Australian Government succeeds in achieving a balance between our emphasis on generic and the US focus on innovative medicines, if it succeeds in demanding research about "objective therapeutic significance" to back up claims of drug innovation, it will have defused a future political issue and gone a long way to assuring a healthier future for our ageing population.

Dr Tom Faunce is a senior lecturer in the medical school and lecturer in the law faculty at the ANU.

In a study of bankrupts in the U.S. half cited medical causes, which indicates that 1.9-2.2 million Americans (filers plus dependents) experienced medical bankruptcy. Among those whose illnesses led to bankruptcy, out-of-pocket costs average $11,854 since the start of illness; 75.7 percent had insurance at the onset of illness. Medical debtors were 42 percent more likely than other debtors to experience lapses in coverage. Even middle-class insured families often fall prey to financial catastrophe when sick.

Download "Illness And Injury As Contributors To Bankruptcy"

Sandoz, the generic manufacturing affiliate of Novartis, is under investigation by the Serious Fraud Office (SFO) for alleged criminal marketing practices. The SFO is investigating activities at Sandoz to ascertain if it broke criminal and competition law while selling its products between January 1996 and December 2000.

Sandoz manufactures an extensive range of generic drugs in the UK, including tamoxifen and ibuprofen. However, both Novartis and the SFO were unable to comment on which drugs are being investigated.

During the four-year period in question, Sandoz traded as Lagap Pharmaceuticals and was not part of the Novartis portfolio but as an affiliate of the Swiss-based pharma company today, if Sandoz is found guilty it could be costly for Novartis. The inquiry into the generic affiliate's activities is part of a widening investigation by the SFO into price-fixing by pharma companies.

In April 2002, the SFO launched a major investigation into a suspected conspiracy to defraud the NHS through price-fixing on prescribed penicillin-based antibiotics and warfarin between January 1996 and December 2000.

The SFO is now planning to interview leading figures, a spokesman for the SFO confirmed that other, so far unnamed, individuals would also be called for interview. News of the investigation came as Novartis chief executive admitted that big pharma had lost the trust of consumers and regulators.

An arthritis drug withdrawn on safety grounds last year probably killed many thousands of patients, a new study suggests. Researchers said the drug Vioxx may have caused between 88,000 and 140,000 serious heart problems in the United States alone since its introduction in 1999.

With heart disease death rates in the US running at 44%, many of these cases were likely to have been fatal, it was claimed. Vioxx, which has the scientific name rofecoxib, was prescribed to 400,000 patients in the UK. It was taken off the market at the end of September after a three year trial linked it to an increased risk of heart disease events.

The study published on-line today by the Lancet medical journal analysed data from 1.4 million Californians who had used various kinds of non-steroidal anti-inflammatory drugs (NSAIDs).

Among them were 27,000 patients who had been taking Vioxx, which belongs to a family of drugs known as Cox-2 inhibitors. A total of 40,000 were given another Cox-2 inhibitor, Celebrex, while others were taking ibuprofen or naproxen. The investigators, led by David Graham from the US Food and Drug Administration's Office of Drug Safety, found that 8,143 had suffered from serious heart disease between 1999 and last September.

Of these, 1,508 died suddenly from a heart problem.

U.S. states that have looked to Canada to help their residents win steep discounts on prescription drug prices are turning to Europe for the same deals because the Canadian government is considering shutting off the southbound flow. Illinois and three other states already have authorized reimportation programs that recognize shipments of prescriptions from such places as the United Kingdom and Ireland.

It’s unclear how successful they and other state legislators might be with that initiative because there have been moves in Europe to restrict access to low-cost drugs across national lines. But lawmakers say it is important to explore every possible avenue toward cheaper prices.

States from Illinois and Wisconsin to New Hampshire and West Virginia have either authorized reimportation of prescription drugs from Canada or explored the idea. Several of them now have added Europe to the mix because Canada’s health minister has said the government was considering significantly limiting sales to individual U.S. consumers.

"The idea was to spread the risk" of drug manufacturers cutting off supply to an individual country that reimported prescriptions to the United States, said Caleb Weaver, project manager of I-SaveRX, the initiative launched by Illinois and now available in Wisconsin, Missouri and Kansas. Vermont would join that program.

The European Court of Justice is considering whether manufacturers can limit supplies to countries with cheap prices. That would crack down on consumers who get their drugs cheaper from neighboring countries via "parallel trade" among European Union nations, according to the U.S. National Legislative Association on Prescription Drug Prices. There have been several such challenges in the past.

Patients blame the pharmaceutical industry for efforts to choke off supplies from countries where prices are low because of strict government regulation. They accuse the industry of using its economic muscle to force such national policy decisions.

"You actually have an industry that’s bullying around countries," said House Health Care Chairman John Tracy, D-Burlington. "It’s bizarre that we’re even in this position."

Wanda Moebius, a spokeswoman for the industry trade group Pharmaceutical Research & Manufacturers of America (PhRMA), disingenuosly spins the line that the lobby group is concerned about the safety of drugs being imported to the United States and those concerns are increased by the possibility of importing from Europe. Really Wanda's worry is profits - European drugs are exactly the same and are regulated just as strenuously.

Wanda claims European imports could threaten safety because they could carry labels in languages that consumers don’t speak. "There’s no guarantee English will be used," Wanda said. "When you start going outside the U.S., you are opening yourself up to a number of safety issues." Wanda seems not to know which language the English speak.

Dr. Peter Rost, a marketing vice president with Pfizer Inc., told Vermont lawmakers Thursday that reimportation from Europe was a logical and viable alternative. Parallel trade, a version of reimportation among European countries, has operated successfully for 20 years, he said.

"Just authorizing a scheme where drugs come from Canada is doomed to fail," said Rost, who emphasized he was not speaking on behalf of his company. "You must look to the European Union." Despite the myriad obstacles, including opposition in Washington, state legislators continue to push for reimportation because consumers can save an average of 50% on the costs of drugs purchased in Canada.

"For very expensive drugs it really can be a lifesaver," said Sharon Treat, executive director of the National Legislative Association. "Unfortunately in this country many people don’t have any kind of prescription drug coverage that approaches those savings, or any (coverage) at all."

Prescription drugs are big business and have become a big political issue. A recent federal report said retail sales of prescription drugs amounted to $179.2 billion in 2003. That represented 11% of all health care spending. Precise estimates are hard to come by but between 1 million and 2 million Americans get their drugs from Canada. The Canadian model developed after U.S. Rep. Bernie Sanders, I-Vt., began staging high-profile bus trips to Canada more than five years ago. He took senior citizens to Montreal and its suburbs, where they got so-called maintenance drugs at significant savings. Maintenance drugs are those that patients must take regularly to care for a chronic disease such as high blood pressure.

What has developed since then is an Internet-based system in which a prescription from an American doctor is co-signed by a Canadian physician, filled and then shipped to the United States. Sanders unsuccessfully sought in the federal Medicare bill to explicitly authorize reimportation from Canada and 18 other countries.

"While we don’t think it would necessarily be bad if it was just Canada, we think it’s important that the state of Vermont as well as the federal government open as many markets as possible so you don’t give the government and pharmaceutical companies so much power to manipulate the situation," said Sanders spokesman Joel Barkin. "We are encouraging Vermont and the federal government to look for any licensed pharmacy outside the U.S. where people can find affordable, safe drugs."

If the Canadian government closes the door to U.S. citizens importing prescription medications from Canada one drugstore plans to keep open for trade. Universaldrugstore.com, one of Canada's largest mail-order pharmacies, is not threatened by recent dire promises by the Canadian Federal Government to possibility eliminate the cross border sale of prescription medications to uninsured and low income Americans. They plan to import drugs from Europe.

"Our current customers and our prospective new customers need not worry," says Jeffrey Uhl, President of Universal Drugstore. "We have been anticipating such a move by our government for some time now, and we were not surprised that action to stop prescription drug importation has progressed so quickly following President George W. Bush's visit with Prime Minister Paul Martin about six weeks ago."

Universal Drugstore has taken steps over the past year in preparation of challenges by the pharmaceutical industry and governments on both sides of the border. While many other Canadian pharmacies have been caught off guard by the speed at which the Canadian government is progressing, Universal Drugstore says that they are ready to flip the switch and move elsewhere.

"We have strengthened our network of international partner pharmacies, developed a steady stream of safe, reliable medicine, and taken steps to ensure quick and easy delivery to our customers," says Mr. Uhl. "Our Director of International Affairs has been working diligently to find the best resources for our customers. He is a pharmacist, as well as a former independent consultant and analytical writer on international pharmaceutical issues. His main focus is wholesale and retail distribution, generics and parallel trade. He oversees procurement, regulations and safety of our European operations." Uhl continues, "Standards of pharmacy in Europe mimic or exceed those in Canada, and we are confident of our continued long term success," he continues. "New pressure from the Canadian government has caused serious concern for our patients whose access to affordable medicine appears to be threatened. We want to assure our customers that we will be here for them. We have an ethical and moral obligation to all of our customers that rely on our services. Their medications will remain available through our service."

Mr. Uhl who is cautiously optimistic about what will happen to other mail order pharmacies and the effect these actions may have on the industry in Canada says, "Many have looked to us to create strategic alliances and European partnership arrangements. Unfortunately, we can't help all the other Canadian pharmacies. Our investments in technology, people and foreign pharmacy inspections have paid tremendous dividends for us and are the keys to our future. We have not been fiddling while Rome is burning."

Mr. Uhl finds the timing and motives behind the recent push for regulatory changes by the Canadian government suspicious. "Why, after four years of allowing this industry to flourish and prosper is it now questionable?" asks Mr. Uhl. "Is this just a ploy to stop Big Pharma's recent decrease in profits? Heaven forbid the most profitable industry in the world would take a miniscule hit to their massive bottom lines so that the uninsured and poor seniors of the U.S. could obtain affordable medications."

Universal Drugstore remains confident that they will stay in business and continue to provide Americans with affordably priced medications even in the face of regulatory pressures by the Canadian Federal government. They will continue to provide high quality medicines, obtained from licensed pharmacies in strictly regulated countries from around the world. "The countries we are looking into are extremely safe and well regulated. Also, they often have prices that are equal to or better than in Canada," states Randall Stephanchew. "Our customers will be delighted with the quality and pricing of medications from our international pharmacy partners." Mr. Stephanchew, Director of Pharmacy and Professional Services for Universal Drugstore, has over 14 years experience as a Health Canada official, specializing in compliance and enforcement, and was instrumental in signing the Mutual Recognition Agreement between Canada and the EU.

The Kaiser Family Foundation and the Harvard School of Public Health recently released results from a survey that found that 80% of Medicare beneficiaries supported legalisation of drug re-importation if it would lower costs. The survey found strong support – 68% of the public and 65% of retirees for legislation that would make it easier for people to buy prescription drugs from Canada. When given pro and con arguments (supporters say the proposal would lower prices for many people and opponents say it could lead to unsafe drugs being imported into the country), 63% of the public and 57% of retirees continue to express support.

Re-importation of goods, including medicines, within the European Union is perfectly legal and is known as parallel trade. Obtaining a product from one country where it is relatively cheap and selling it in a country where it is relatively expensive is the basis of all international trade and has been going on for thousands of years. Parallel trade of medicines under license, in particular, is a growth industry in Europe. Market share increased from 11% in 1999 to 17% in 2003.

Big Pharma has long relied on government enforced patent monopolies to ensure monopoly profits and its political influence has secured it an unusual degree of protectionist legislation in the US which it exploits it to the fullest. This allows it to achieve the highest industry operating profit margins regularly reaching 80%. Detailed financial analysis of the major Pharma corporations shows that the pharmaceutical industry is the most profitable industry sector in the world, with higher operating margins than even the technology, telecoms, oil or defence industries. Compare General Electric (GE), founded by Thomas Edison, a paragon of capitalism which today is the most valuable and innovative firm in the world, widely respected as a brilliantly managed firm and yet it achieves operating margins of 'only' around 15%, whereas the Big Pharma corporations average margins around 80%. How can the difference be explained? It is because GE operates globally in competitive, largely free markets, selling mainly to savvy private sector customers, whereas the Big Pharma corporations operate in government regulated markets, with high barriers to entry secured by thickets of government regulations and government-granted patent monopolies. Coupled with their products being largely purchased and paid for by politically controlled healthcare and government run bureaucracies financed, at great cost, by taxpayers. If the Pharmopoly acts like a monopoly, prices like a monopoly and quacks like a monopoly, it sure ain't a duck.

Big Pharma - Pfizer, Merck, GSK, Astra Zeneca, Novartis and others derive a huge proportion of their profits directly from taxpayer funded socialised health care systems. Medicare in the U.S., the N.H.S. in the U.K. and the socialised health care systems of Europe's welfare states provide a direct pipeline for money to flow from the world's taxpayers to Big Pharma's operating profits. The patent monopolies lead to monopoly profits, which has created a global Pharmopoly secured by heavy regulatory barriers to market entry from innovative start-up companies. The pharmopolies exploit their dominant market positions by licensing innovative new drugs from young start-up bio-techs firms or by buying out promising bio-tech firms.

The drug companies' lobbyists still claim that high development costs necessitate monopoly protection, yet innovative products tend to come out of universities and the niche bio-tech firms rather than the lumbering marketing-orientated pharmopolies. Big Pharma spends more money on marketing then on research and development; it employs more sales support staff than research scientists and tends to direct its efforts towards me-too products with lawyers manipulating patent laws to extend its monopolies rather than innovation. All assisted by the army of political lobbyists which outnumbers the politicians.

The polls suggest that the public sees through the self serving claims of Big Pharma that re-importing medicines from Canada to the U.S. and intra E.U. trade will lead to counterfeit drug supplies funding terrorism and international crime. Such wild conjectures are aimed at cynically smearing licensed entrepreneurs freely trading across Europe and North America. A parliamentary select committee in the U.K. has launched an investigation into the malign influence of the pharmaceutical industry on medicine and healthcare costs. In the U.S. research highlights that the pharmaceutical industry spent $500m on political lobbying during the lead up to the last two presidential elections, dwarfing even the lobbying efforts of arms manufacturers who rely almost entirely on the largesse of taxpayer funded government contracts. Lobbying on this scale serves to corrupt the political process, ensuring that government legislation and spending on healthcare is directed towards enhancing Pharmopoly profits. Is it any surprise that in the face of that kind of pressure, President Bush recently signed into law the most expensive piece of legislation for the taxpayer in the history of prescription drug financing?

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