Consumers, states challenge federal ban on drug imports.
Ray and Gaylee Andrews are at the forefront of widespread concern over U.S. prescription drug prices. Both 74 years old and on Medicare, the Andrewses take brand name medications--some manufactured domestically--for ailments common in elderly people, including arthritis, asthma, and diabetes. Their monthly drug bill is about $800. That cost, Gaylee said, has forced both of them to take jobs; they are also selling their home of 32 years to make ends meet. The Andrewses said that buying the same drugs from Canadian pharmacies via the Internet or mail order could save them as much as $350 a month (Canada has drug price controls that the United States does not).
The only hitch: Such drug purchases are currently illegal. The federal Food, Drug, and Cosmetic Act prohibits the importation of drugs that have not received FDA approval, even if the only difference between an approved drug and an unapproved one is a matter of packaging. Also, to ensure that all drugs are made and handled according to FDA specifications, only a drug's manufacturer is permitted to import or reimport prescription drugs into the United States. Several bills pending in Congress at press time would allow individuals to import drugs themselves.
The recently passed Medicare Prescription Drug Improvement and Modernization Act (MMA), while prohibiting the U.S. government from negotiating with pharmaceutical companies for better Medicare drug prices, gives the HHS secretary the power to approve imports of cheaper drugs from Canada. Since the statute's passage in 2003, however, the secretary has refused to act on that power.
Indeed, in April, the Illinois governor and attorney general filed a petition with the FDA, demanding a response within six months to the governor's proposed plan to import drugs from Canada for Illinois citizens. The governor, who has spoken in favor of the Andrewses' lawsuit, created the project to save the state millions in prescription drug costs. So far, however, the FDA has not responded, although an agency task force the MMA called for expects to issue a report by the end of the year on the safety of drug imports.
In the meantime, illegality has not stopped some states and municipalities, including Minnesota and New Hampshire. Both states run Web sites, for instance, with information on purchasing lower-priced prescription drugs from Canada and links to online Canadian pharmacies.
Thus far, breaking the law has brought only limited ramifications. The FDA sued to shut down Rx Depot, a U.S.-based online drug provider. (United States v. Rx Depot, 290 F. Supp. 2d 1238 (N.D. Okla. 2003).) In separate actions, the FDA has also conducted several "blitz" examinations of packages sent via the U.S. Postal Service and believed to contain unapproved and imported drugs.
Perhaps because of such relatively lax enforcement, illegal imports are a booming, if somewhat covert, business: IMS Health, a company that analyzes time pharmaceutical industry, estimates that last year approximately $216 billion was spent in the United States on prescription drugs. Stephen Schondelmeyer, director of the University of Minnesota's PRIME Institute, which studies pharmaceutical policy issues, believes about $2 billion of that was spent on illegal imports. And William Vaughn, government affairs director of Families USA, a health-care advocacy group based in Washington, D.C., estimated that about half of those imports came from Canada, either by mail or with returning U.S. visitors.
At press time, the FDA had been granted an extension, until mid-May, to respond to the Andrewses' lawsuit. The agency emphasizes that current laws protect U.S. consumers from counterfeit and dangerous drugs that are illegally imported.
"It is hard to overcome the argument that the overriding purpose of the FDA is to protect the public health," admitted George Bellas, one of the Andrewses' lawyers. "The FDA is entrusted with the enforcement of the statutes, and any violation is presumed to cause public harm."
Thus, the Andrewses have taken a novel stance. "Our tack in this lawsuit," said Bellas, "is to look at the issue from an individual, consumer-rights perspective. The whole statutory Damework violates consumers' constitutional rights."
The lawsuit alleges that current law violates
* the Fifth Amendment's Due Process Clause, which protects citizens' privacy rights to make personal medical decisions
* the right to equal protection incorporated into the Fifth Amendment, by allowing selective enforcement of the law so that residents near Canada may cross the border and buy drugs without much threat of punishment, but mail-order sales are shut down
* substantive due process rights under the Due Process Clause, by preventing the importation of prescription drugs from Canada that are chemically identical to drugs sold in the United States and thus defeating "the historically rooted and traditional right to direct one's own medical treatment"
* the Presentment Clause in Article 1, [section] 7, by letting the HHS secretary modify a federal statute and allow drug imports without presentment to the president or congressional approval
* the Vesting Clause in Article 1, [section] 1, by giving the HHS secretary the power to determine when legislation allowing importation will take effect.
For the FDA and others who oppose importation, however, the satiety of imported drugs remains key. Even though there have been no reports of harm from illegally imported drugs, the FDA would not necessarily receive such reports, said agency spokesman Jason Brodsky. "Patients aren't typically inclined to tell their doctor that they purchased their drug from an illegal source."
As noted by Jeffrey Axelrad, an attorney and adjunct professor at George Washington University School of Law in Washington, D.C., illegal prescription drug imports also raise significant liability issues.
"Because even safe and efficacious drugs can have effects that are untoward and, for a tiny proportion of users, even catastrophic, the potential for litigation is very real," he wrote in a Legal Times opinion article.
"For states and municipalities, (liability for] injuries due to the inherent risks in drugs would be added to liability for purchasing stale, counterfeit, or ineffective medications." A single liability, judgment, he wrote, could wipe out ally savings from such imports. (Jeffrey Axelrad, Watch Out for Canadian Drugs!, LEGAL TIMES, Mar. 1, 2004, at 52.)
Paying the price
Americans pay the highest prices in the world for prescription drugs, but the reasons for that vary, depending on who's talking.
"Basically, what we're importing from Canada is the backbone of the Canadian politicians," said Families USA's Vaughn. "They have taken the tough steps to negotiate with powerful lobbies to get a better price."
Although increases in U.S. prescription drug spending consistently outpace inflation, pharmaceutical companies say the spending funds important research. However, the nine companies that made the top 50 drugs used by seniors in 2001 spent that year on average only 11 percent of their revenues on research, compared to 27 percent on marketing, advertising, and administration, according to a Families USA report. (Profiting from Pain: Where Prescription Drug Dollars Go (July 2002).)
Drug costs are at issue in several lawsuits. In Massachusetts, a federal court judge allowed a suit against pharmacy benefits managers (PBMs) to proceed. (In re Pharm. Indus. Average Wholesale Price Litig., MDL. No. 1456, Civ. A. No. 01-12257-PBS, 2004 WL 345847 (D. Mass. Feb. 24, 2004).) In the suit, consumer groups allege that PBMs--which negotiate drug prices for health plans--and drug manufacturers inflate the average wholesale price of drugs and give discounts to pharmacies and doctors without passing on those savings to consumers.
The District of Columbia Circuit rejected a pharmaceutical-industry challenge to the use of "preferred drug" lists in Michigan. (Pharm. Research & Mfrs. of Am. v. Thompson, 362 F.3d 817 (D.C. Cir. 2004).) Several of the state's health programs use these lists to steer qualifying residents toward lower-priced drugs. The state programs (which were approved by HHS--the reason the HHS secretary is named in the suit) require that drug makers give rebates; without a rebate, a drug would not be automatically covered under the state plans and would probably be used less.
Rebates also figured in a recent settlement by the nation's largest PBM, Medco Health Solutions. (U.S.A v. Merck Medco Managed Care, Civil Action 00-737 (E.D. Pa. Apr. 26, 2004).) The company will pay 20 states for damages, restitution, and tees in a case alleging that it encouraged switching patients to drugs with higher manufacturer rebates and then pocketed the rebates without passing along the savings to consumers.
Generic drugs have been cited as a solution to high U.S. prices. In congressional testimony in March, for instance, FDA Commissioner Mark McClellan noted that U.S. generics are generally cheaper than those abroad. He said consumers could reap savings by using more generics and that those savings would eventually "reduce the inequities in new drug prices across countries."
For the Andrewses and others like them, however, generics are not the answer, said their lawyer, Bellas. He noted that there are no generics for most of the medications the Andrewses take, and one generic Gaylee tried caused complications that forced her back to the brand-name drug.
The PRIME Institute's Schondelmeyer thinks raising generics as the answer is a distraction. "People aren't going to Canada to buy generic drugs," he said. "They are going to buy brand-name drugs that aren't generically available. To say that generics are the solution is to tell a person who needs a drug that's under patent today just to wait six years and then buy it generically."
The safety question
Proponents of drug importation claim that Canada's regulations for drugs are similar to, and as good as, those in this country. A Congressional Research Service memorandum last year concluded that there are essentially no differences between FDA standards and those used in Canada.
The FDA's Brodsky, however, said Canada's system for regulating prescription drugs, "like ours, is not designed to ensure the safety of exports to other countries," a statement affirmed by Health Canada, the Canadian agency that develops and administers that country's health policies.
To prevent safety problems with imported drugs, advocates have called for more regulations. A bill the House of Representatives passed by a large margin in July 2003, tot instance, called for imports of FDA-approved drugs from FDA-approved facilities in other countries, as well as counterfeit-resistant packaging on all imported drugs. But implementing such a system "would be very expensive," Axelrad said. "You'd have to set lip a whole new regulatory regime to do that, and who's going to pay for it?"
Schondelmeyer, however, believes that the benefits of such a regime would outweigh any costs. "I think the cost will be far less than the cost to American consumers overpaying for their prescriptions in the current U.S. marketplace. That isn't economically efficient," he said.
Last year, in an attempt to stem the tide of illegally imported drugs from Canada, several major U.S. pharmaceutical companies began to limit supplies to that country. Minnesota's attorney general sued to force one of them, GlaxoSmithKline, to turn over documents related to its Canadian sales as part of an investigation into whether the supply limits are retaliatory. Arguments were heard last fall; at press time, a judgment had yet to be reached. (in re GlaxoSmithKline, PLC, No. CIV. MC03-015992 (Minn., Hennepin County Dist. Ct. filed Sept. 30, 2003).)
For Schondelmeyer, the current situation inevitably pits consumers like the Andrewses against drug makers.
"What we have here are consumers trying to express price sensitivity. They're saying, 'I am concerned about the cost of my medicine, and if it means going to Canada, and there's a reasonable chance that it's the same quality and safety, I'm willing to go to Canada.' They're voting with their fleet. That's the way the American market works. But here we have an industry under the banner of free markets saying, 'Don't do that.' It's a bit ironic."
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|Date:||Jun 1, 2004|
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