McCain Will Cost Pharma $40 Billion
8 CommentsBy Ed Silverman // March 20th, 2008 // 6:47 am
The Republican presidential candidate, as you know, supports the idea of importing drugs from Canada, which plays into his carefully polished image of maverick. Consumers may like the notion, but it could cost drugmakers that much over 10 years, Bloomberg News writes.
“If there are ways to bring greater competition to our drug markets by safe re-importation of drugs, by faster introduction of generics, or by any other means we should do so,” McCain said in October. Supporters say that by attacking health costs, the Arizona Senator can make care more affordable for the 47 million Americans without coverage.
Opponents say the ideas are unrealistic…
Taking on health care spending also isn’t likely to win him support from an industry traditionally pro-Republican. “If you take his platform en masse, and began with his premise that it’s about cost and not access, then you can pretty much declare a jihad against all the stakeholders in the system,” Paul Keckley, director of the Deloitte Center of Health Solutions in Washington, D.C., tells Bloomberg.
Drugmakers could lose $40 billion over 10 years if pharmacists, wholesalers and individuals were allowed to import drugs into the US, according to a 2003 report by the Congressional Budget Office. Drug import legislation died in Congress when proposed in 2003. A renewed call isn’t likely to be any more successful, Robert Laszewski, president of Health Policy & Strategy, a consulting firm, tells Bloomberg.
McCain would attack drug costs by allowing Americans to legally purchase medicines from Canada, but he isn’t worried about riling interest groups, such as drugmakers, says Douglas Holtz-Eakin, the candidate’s policy adviser. “It’s not a plan that’s meant to solve constituent problems,” he tells Bloomberg. “It’s meant to solve a pressing national policy issue.”
Pfizer’s Lipitor, the world’s biggest selling drug with $12.7 billion in worldwide revenue last year, cost $60.78 for a 30-day supply of 20 milligram pills on CanadaDrugs.com, which is licensed in Manitoba, Canada to ship to US patients. Drugstore.com sells the same pills for $119.99, almost twice as much.
Americans spend 16 cents out of every dollar on health care, and the cost will rise by 20 cents within a decade if the system isn’t changed, according to a report in February by government economists. McCain says people need incentives to reduce wasteful health-care spending. “The problem is not that most Americans lack adequate health insurance,” McCain, 71, said in October, when he first outlined his health policy. “The biggest problem with the American health-care system is that it costs too much.”
Lifting restrictions on buying medicines abroad isn’t safe because U.S. regulators couldn’t block overseas counterfeiters selling through the internet, Ken Johnson, senior vice president of Pharmaceutical Research and Manufacturers of America, a drug industry trade group based in Washington, told Bloomberg in a statement.
Nathan
The article uses Lipitor as an example. They say that Lipitor costs $120 for a 30 day supply in the US while it costs $60 for a 30 day supply in Canada. What makes ANYONE think that Pfizer will supply enough Lipitor to Canada at the reduced rate in order to satisy US demend? That is ABSURD! As soon as reimportation is legalized, then shipment controls will begin. Canadian pharmacies will be FORCED to sell to only Canadians. Then US prices will (in the end) remain about the same that they are now. No one can FORCE the pharma industry to sell unlimited drug to any country.
Bruce
Nathan is right. The pharma companies in Canada have already weathered a battle against internet pharmacies.
Another angle to look at though is what does the Canadian government think of this plan. If the US pharma headquarters determines that Canada is going to impact their business models by diluting the market place with lower priced drugs, they will not launch innovative drugs in Canada. This would mean that 35 or so million people would not have access to these drugs.
Since the Canadian government has a deal with the pharma co’s for research and development, it would make sense that they would fight this. Just a thought.
Former pharma Marketing Exec
Nathan and Bruce, I agree with you both.
Not sure why republicans are not seeing the “flag on the play” on this one for McCain. Why should we Americans look to another country to solve our issues with drug pricing. Allowing reimportation doesn’t fix the problem as we all note here. Unless of course he is using reimportation as a “stick” to pharma? Or maybe I am just trying to make sense where none exists?
Would it be too much of a stretch to ask the government to look at what Canada is doing and implement the same thing here?
Adam J. Fein
And let’s not forget that “parallel trade” a.k.a. legalized diversion, from Canada will open the floodgates for criminals. The problem with importation is not that all drugs from Canada are counterfeit. Instead, the problem is that criminals can slip counterfeit or adulterated products into the supply chain. Diversion is the entry point for *every case* investigated by the FDA and DEA involving counterfeit drugs going into legitimate pharmacies. See my post from last April: http://www.drugchannels.net/2007/04/tony-soprano-and-drug-diversion.html
The European Commission just announced an attempt to tackle problems caused by cross-border import/export. See the link in my latest blog post:
http://www.drugchannels.net/2008/03/fda-and-ec-dive-into-supply-chain.html
Adam
Outside the Box
When Glaxo launched imigran they wanted a high price for what was a breakthrough in migraine therapy. I understand that the French government refused to reimburse at the high price and Glaxo said okay, o reimbursement - effectively cutting off the vast majority of patients from the new therapy. A compromise was reached, but the principle that Nathan and Bruce describe is in place.
I think limiting supply (or some other legal means of restricting reimportation) is highly likely for existing drugs. If a new drug was not launched for fear of reimportation the Canadian government could react with “national interest” licensing of IP like we’ve seen in Thailand and elsewhere - although that would be a huge escalation.
Bottom line here is that the industry in the US has done a terrible job of justifying prices. That may be because some of the prices are not justifiable, it may also be because prices need to rise in order to game the system (such as off-invoice discounts demanded by managed care), but the clear perception is that the industry is raking in the profits at the expense of US consumers (and the CEO remuneration stories don’t help this one bit).
Jack2
1. I’ve stated before that this plan will reduce the differences in prices between the US and Canada, and will at least lead to at least some price increase or lost access to Canadians.
2. The political problem for the pharm industry is two-fold:
A) American’s have a misconception that drugs constitute a much larger percentage of healthcare costs than they actually do (perception ~40%, actually ~10%), and that drug price increases are the drivers of th increased healthcare costs (when total drug costs actually increased ~1% last year).
B) The alternatives to McCain, Obama and Clinton, both seem more likely to me to propose direct negotiation between the government and the pharma companies. A proposal that would likely have a larger effect on the bottom line (and something that strikes me as anti-innovative, anti-American, and eliminates pricing based on value). On the bad to worse spectrum, McCain’s merely bad for the drug industry.
Now if only I agreed with McCain on other issues voting would be easier for me…
Callie Roberts
McCain displays his complete idiocy on this one… suggesting the a US President should direct Americans to purchase the meds from another country… meds manufactured by a US firm… Has he no clue as to what it means to be “presidential”… it’s just a popularity contest, right? no leadership, statesmanship, integrity required.
This is his solution to reduce health costs? O please…
McCain Will Cost Pharma $40 Billion | Pharma Night Fever
[...] Tiziani Whitmyre Inc. wrote an interesting post today onHere’s a quick excerptjohn-mccain.jpg The Republican presidential candidate, as you know, supports the idea of importing drugs from Canada, which plays into his carefully polished image of maverick. Consumers may like the notion, but it could cost drugmakers … Tags: Fever, Night [...]