The high cost of prescription drugs in the United State has led many state and federal legislators to call for new laws allowing American consumers to purchase prescription drugs from retailers in other countries. This process, known as drug reimportation, does allow consumers to purchase drugs at lower prices, but it does so with several negative consequences. One consequence is the potential danger to patient safety due to the reimportation of counterfeit or expired drugs. A second consequence is that it would create a disincentive for pharmaceutical companies to engage in the research and development necessary for the development of new drugs.
Many supporters of drug reimportation argue allowing overseas purchasing would dramatically decrease the cost of drugs, but the real-world evidence found this is not the case. In an article in The Wall Street Journal, Peter Pitts, president of the Center for Medicine in the Public Interest, pointed to research by the Department of Health and Human Services that found legalizing importation would “shave only 1% to 2% off the nation’s collective pharmaceutical bill, with less than half that flowing to consumers.”
Critics of the status quo argue correctly the United States has borne much of the cost of developing new drugs while other countries have imposed price controls on the same drugs within their borders. If an American pharmaceutical company refuses to sell its drugs at the mandated price, foreign nations often threaten to break their patents and allow production of knockoffs.
In his Wall Street Journal article, Pitts argues other countries freeload off U.S. medical innovation, and because they implement price controls, American consumers are made to shoulder a larger share of the burden of funding research through higher health care costs.
“Because foreign countries can import new U.S. drugs and price them however they see fit, many have largely checked out of the innovation business themselves,” wrote Pitts. “The U.S. produced 57% of the world’s new medicines between 2001 and 2010, up from less than a third in the 1970s, the Milken Institute reported in 2011.”
Allowing reimportation would not solve this problem. Encouraging patients to buy drugs at the price-capped rates mandated in other countries would create an indirect price cap in the United States, and the high cost of regulatory compliance and the threat of lawsuits would create a disincentive to develop new drugs. Affordable drug prices won’t matter much if pharmaceutical companies stop producing new products.
A great deal of the costs created during the drug-development process are due to existing government regulations. The Pioneer Institute found from discovery to launch, drug development takes about 15 years to complete. This is significantly longer than the process length that existed just a short time ago. Development time has increased by 145 percent since 2003. The study also found the cost of development averaged $2.6 billion in 2014.
The other major issue posed by drug reimportation is patient safety. Counterfeit, substitute, contaminated, or expired pills are often very difficult to differentiate from genuine products, and the consequences of taking a bad medication can be lethal. Counterfeit drugs are prevalent in many countries, including several European Union member states and Canada.
Efforts to combat these illegal drugs have demonstrated how widespread the problem really is. In an article in The Hill, former U.S. Rep. Ron Klink (D-PA) says counterfeit drugs are already a serious problem, pointing to a recent joint effort by the World Health Organization, Interpol, and the World Customs Organization in which more than $36 million worth of counterfeit cancer, cholesterol, and malaria medications were seized.
Counterfeit drugs cost lives, as Klink argued in his article. According to Klink, in just one tragedy in India, 8,000 patients died as a result of a hospital using a counterfeit antibiotic that was missing a key active ingredient.
While drug prices have become too high for many patients, flooding the market with reimported drugs of questionable quality while killing domestic research and development is not the answer. Commonsense reforms here in the United States can bring down drug prices, including a streamlining of the approval process for new and generic drugs, increased pricing transparency, and steps to limit lawsuit abuse.
The following documents examine drug reimportation in greater detail.
Ten Principles of Health Care Policy
http://heartland.org/policy-documents/ten-principles-health-care-policy
This pamphlet in The Heartland Institute’s Legislative Principles series describes the proper role of government in financing and delivering health care and provides proposed reforms to remedy current health care policy problems.
What’s Wrong with Importing Drugs from Canada?
https://heartland.org/publications-resources/publications/december-2003-whats-wrong-with-importing-drugs-from-canada
This essay, written by Heartland Institute President Joseph Bast and the late Conrad Meier, then managing editor of Health Care News, discusses at length the pros and cons of drug importation.
Debunking the Myths of Drug Importation
http://www.heritage.org/health-care-reform/report/debunking-the-myths-drug-importation
Nina Owcharenko writes for The Heritage Foundation about drug importation and several myths about how reimportation would improve the price of drugs. “Policymakers should resist ‘quick fix’ policies that may sound logical but are dangerous and potentially counterproductive. In the end, if importation is approved but constituents do not see significant price reductions, some policymakers will quickly respond by calling for government-negotiated prices or directly advocating for price controls on prescription drugs in the United States, moving the United States one step closer to socializing the American health care system,” wrote Owcharenko.
Foreign Counterfeit Drugs Pose Increasing Threat
https://heartland.org/news-opinion/news/foreign-counterfeit-drugs-pose-increasing-threat?source=policybot
In this Health Care News article, Aricka Flowers discusses the growing problems foreign governments are facing due to a rise in the prevalence of counterfeit drugs in their markets.
Are Drug Prices Driving Healthcare Cost Growth?
http://pioneerinstitute.org/healthcare/are-drug-prices-driving-healthcare-cost-growth/
Jim Stergios and Gregory Sullivan examines why “state-level regulatory reactions to short-term increases in drug prices are not supported by the evidence and could produce negative consequences for patients and other purchasers.”
Regulating Drug Prices: U.S. Policy Alternatives in a Global Context
http://www.rand.org/pubs/research_briefs/RB9412/index1.html
In this article, the Rand Corporation examines the impact of drug price regulation. According to the Rand authors, “Regulatory approaches that reduce pharmaceutical revenues may generate modest consumer savings in the best cases, but risk much larger costs as decreased innovation leads to reductions in life expectancy.”
Government Regulation of Prescription Drug Pricing
http://www.amcp.org/WorkArea/DownloadAsset.aspx?id=18706
The Academy of Managed Care Pharmacy (AMCP) argues in this article government regulation of prescription drug pricing, regardless of its structure, would have an overall negative impact on consumer cost, quality, and access to health care benefits.Regulated prices can cause cost‐ shifting to other consumers and may inadvertently discourage appropriate drug prescribing, dispensing and utilization.”
The Impact of Drug Reimportation and Price Controls: The U.S. and Massachusetts
https://heartland.org/policy-documents/impact-drug-reimportation-and-price-controls-us-and-massachusetts
David Tuerck, John Barrett, Douglas Giuffre, and Zaur Rzakhanov of the Institute for Policy Innovation argue in this study price controls, while yielding lower drug prices in the short run, could have a significant negative impact on drug development and innovation, as well as a negative impact on the regional economies in which the pharmaceutical and biotechnology industries play an important role, such as Massachusetts.
The Demonizing of Drug Companies
http://www.beaconhill.org/Editorials/BG43200prescripDrugs.html
Prescription drugs and other technological advancements have succeeded in lengthening and improving quality of life. This was only able to occur, however, because of the economic system in which those drugs and that technology were incubated. The Beacon Hill Institute warns lawmakers that although pharmaceutical companies are the perfect political targets, they provide an invaluable service to the world.
Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Health Care News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.
The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions about this issue or The Heartland Institute’s website, contact John Nothdurft, The Heartland Institute’s government relations director, at [email protected] or 312/377-4000.
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance.
