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No Holy Grail on Drug Prices in Importation

By James Edwards


The Trump administration’s drug importation rule takes another step in seeking the holy grail of lower drug costs.  It’s a noble quest destined for failure.


Like the recent order pegging Medicare pharmaceutical payments to those of foreign government-run health systems, drug importation too will backfire.


All Americans want foreign freeloader countries to pay their fair share for medicines.  But importing drugs or foreign price controls or undermining U.S. intellectual property rights aren’t the answers.


Instead, the administration should apply America’s assets of innovation, market-based competition and President Trump’s backbone for standing up to countries that take advantage of us.


Foreign countries, including Canada and others with socialized medicine, definitely abuse their power to dictate prices and ration health resources to freeload on U.S. medical innovation and leadership.


As it stands, drug importation will put American patients’ lives at risk.  It will do little to reduce drug costs.  It will set back pharmaceutical innovation by essentially assaulting U.S. drug companies’ IP and R&D.


First, the importation proposal magnifies the ways it reduces patient safety, may be exploited by bad actors or otherwise expose patients and providers to impure medicines.  It outsources to states, Indian tribes and others authority to design their own version of importation.  This harms the ability to confirm a drug’s provenance.


Entry of prescription drugs through multiple channels outside normal regulatory controls introduces great risk to Americans’ health and safety.  Counterfeit and adulterated pharmaceuticals constantly target the U.S. drug supply.  Those trafficking in fake medicines have become very sophisticated.


“Foreign versions” of FDA-approved drugs may appear to be the same drug in packaging, labeling, and form as the real drug.  But they often are found to lack the active ingredient, to have poisonous or toxic components, or contain inert ingredients such as water.


Responsible U.S. officials of both parties have taken important steps to secure the safety of our pharmaceutical supply chain.  Until now they’ve assured safeguards, despite demagogic politicians who promise simplistic solutions like drug importation.


The Drug Supply Chain Security Act of 2013 introduced a track-and-trace system.  It’s intended to ensure that only bonafide pharmaceutical products enter the U.S. supply chain.  While DSCSA’s electronic product tracing at the package level will help, each home-grown importation scheme hands sophisticated fake-drug suppliers many more opportunities to feed counterfeits into the medicine cabinets of unsuspecting American patients.


Previous Health and Human Services secretaries and Food and Drug Administration heads of both parties have been unpersuaded that importation is safe for patients.  Nothing has changed to make drug importation any safer.


Second, importation won’t cut drug costs.  Each importation scheme will create set-up and maintenance costs.  There are regulatory compliance and other costs from any Section 804 Importation Program, incurred by federal regulators, state government, law enforcement agencies and all the private companies in the drug supply chain.  Additional costs at each of these stages will probably translate into higher drug prices for patients and more taxes for residents in a given area.


The Congressional Budget Office determined that “permitting the importation of foreign-distributed prescription drugs would produce at most a modest reduction in prescription drug spending in the United States.”  The FDA couldn’t predict drug cost savings from the importation order.


Canada will likely respond to U.S. importation.  It could restrict access, raise prices, assess export fees or take other action.  A drug’s price in Canada today won’t be its price when U.S. importation starts.


Thus, importation won’t lead to the holy grail of lower drug costs.


Third, importation will impair the U.S. pharmaceutical sector’s advantage in innovation and research and development.


Make no mistake:  America’s drug companies lead the world in developing new drugs and getting them to patients.  They pour private investment into good-paying U.S. jobs for scientists and researchers who work in cutting-edge laboratories performing amazing science that results in cures, treatments and vaccines.


Importation curbs the ability to pursue arduous pharmaceutical R&D.  R&D involves dead ends.  About nine of ten drug candidates don’t make it through clinical trials and to market.


IP protections enable the virtuous circle of making discoveries and turning some into beneficial products by funding R&D.  The U.S. free enterprise system fosters competition that gives consumers faster access to innovations and high-value medicines.


Drug importation and other misguided policies are tantamount to eminent domain on intellectual property.  They deprive the American people of new medicines and innovators of the fruits of their labor.


Importation is a shortsighted way of trying to lower today’s prices while locking in a static set of pharmaceutical products.


All in all, the drug importation scheme will impose a high price for “cheaper” medicine.


James Edwards, Ph.D., is executive director of Conservatives for Property Rights (@4PropertyRights) and patent policy advisor to Eagle Forum Education & Legal Defense Fund.  The views expressed are his own.