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Fantasy’s End.
Back to reality for supporters of drug importation.

Sally C. Pipes
December 30, 2004

The Health and Human Services Task Force on Drug Importation, which delivered its report to Congress four days before Christmas, ought to move the debate over importing foreign sourced drugs into the United States from fantasyland back to reality. As the report makes clear, the issue isn’t about free trade or re-importing drugs produced in the United States. It centers on public safety, property rights, price controls, and pharmaceutical progress.

What’s perhaps most interesting about the report is that it really puts little new on the table. “The conclusions of the report are generally consistent with studies by the drug industry, the Food and Drug Administration, the Congressional Budget Office,” reports The New York Times. “Many economists and health care experts say importing drugs from countries that control their prices would do little to solve the problem of expensive drugs here.”

Still, it’s worth reviewing the findings, since most people won’t slog through the 145 page report.

A Limited Program is Possible

The report finds that “[a] commercial importation program could be feasible but would require new legal authorities, substantial additional resources, and significant restrictions on the type of drugs that could be imported, which would increase the cost of imported drugs.”

This weak endorsement is the only good news for backers of drug importation from foreign lands since the report insists that importation must be limited to Canada. And putting even this limited program in place would require an expensive new bureaucratic buildup. Adding insult to injury, at least half of any price savings would be gobbled up by middlemen, as is now the case in Europe. Consequently, once the program was up and running it might trim a minimal 1 to 2 percent off the nation’s annual drug tab.

Yet even this savings is unlikely. It rests on the assumption that there will be foreign supply available from Canada, a highly dubious leap. “To me it is a matter of common sense that Canada cannot be the drug store of the United States,” the Canadian Health Minister Ujjal Dosanjh told a Harvard audience in early November. “Neither American consumers nor Canadian suppliers should have any illusions otherwise.”

Imported Drugs Aren’t Safe

Public safety is of paramount concern and can only be addressed by limiting both the number and type of products available and the source. “American consumers currently purchasing drugs from overseas are generally doing so at significant risk,” finds the report. The current practice by which individuals purchase drugs directly from Canadian web sites is too unwieldy to regulate – it would cost $3 billion just to monitor the current levels of personal importation, $1 billion more than the total savings of an importation program.

Personal importation is also highly dangerous. Many of the purchases people think are coming from Canada are really coming from other countries. Half of the drugs imported each year come from such countries as Thailand, Belize, Malaysia, Philippines, Nicaragua, Romania, Cambodia, Uganda, and the U.K.

Why are Canadian importers searching so far afield? Do the math. Canada accounts for 2 percent of the world’s drug sales. The United States accounts for 45 percent. Last year U.S. residents siphoned-off $700 million worth of “Canadian” drugs, and yet there have been no reported widespread shortages in the Great White North. The reason is that many drugs are simply being transshipped through Canada, or brokered from a website that claims to be providing Canadian drugs. In fact, they are not Canadian in origin, haven’t been inspected by Canadian health officials, and may not even be name brand drugs.

In July, U.S. Customs intercepted over 400 packages in Miami purchased from Not only were the drugs not Canadian—they were shipped from the Bahamas—but half the drugs were generic. FDA approved versions of these generics could have been purchased for less money in the United States.

Better ways for Americans to Save Money

Americans looking to cut their drug bill ought to heed Booker T. Washington’s great advice and cast down their buckets where they are. U.S. generic drugs, which already account for half of the nation’s consumption, are the cheapest in the world. Simply switching to generics when possible could save $17 billion, 8 to 17 times more than any import scheme, and requires no new bureaucracy.

Innovation will Suffer

The report finds that even a limited program would erode a company’s property rights, eat into revenues, and reduce R&D spending that produces life enhancing products. The United States has benefited greatly from allowing pharmaceutical companies to operate in a relatively free pricing environment. In 1983, only 1 in 20 new drugs was first launched in the U.S. Twenty years, later, nearly half of all new drugs are launched here first. The report’s estimate is that an importation program would result in between four and eight fewer drugs being introduced over the next decade.

The report’s message couldn’t be clearer and the data more overwhelming. Drug importation from Canada may be an effective political gimmick, but it’s lousy public policy. It places American’s health at risk and undermines one of the country’s most innovative industries, all for a negligible cost savings.

That’s the reality. We can only hope that policymakers on Capitol Hill are paying attention.

Sally C. Pipes is president and chief executive officer of the Pacific Research Institute, a San Francisco-based think tank.

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