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Personal medicine importation: What are the risks, and how can they be mitigated?

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Key Points

  • Buying medicines over the web can be risky, but purchasing prescriptions from credentialed online pharmacies can be done safely.
  • Price controls in Canada and Europe allow their medicines to be far cheaper than in the US. US patients without adequate insurance should be allowed to import cheaper medicines.
  • Industry pressure and the opioid crisis are making it harder for importation to occur: Credentialing organizations cannot advertise, payment organizations are restricting users, and shippers are impounding products.
  • Political actors from both major parties are looking at how to allow drug importation. This report discusses how to do this without undermining the industry’s profitability.

Read the PDF.

Executive Summary 

Modern telecommunications and shipping net­works have simplified buying almost anything over the web from overseas, yet it remains illegal to import medicines without explicit authorization from the Food and Drug Administration. While the US gov­ernment does not generally enforce this prohibition for cases involving limited personal use, the restric­tion remains, and the practice is widely discouraged. Under the banner of patient safety, industry-backed lobby groups have advocated for and caused search engines such as Google and Bing to discourage people from buying overseas. Further, payment organizations such as Mastercard, PayPal, and Visa and delivery companies such as FedEx and the US Postal Service are being pushed by government bodies to make pur­chasing and delivery from foreign sites more difficult.

This problem has worsened because of recent responses to the opioid epidemic that are fueled in part by the pharmaceutical industry, the same group that benefits from the current restrictive sys­tem. However, a growing body of evidence, includ­ing empirical evidence in this report, demonstrates that foreign pharmacies credentialed by independent groups sell safe medicines. Furthermore, as high drug prices increasingly come to dominate conversations on health reform, politicians on both the left and right are beginning to see the benefits of limited per­sonal importation.

This report argues that rather than advancing patient safety, the main reason importation is illegal is economic. By arguing that the same logic justifying global price discrimination for pharmaceutical prod­ucts applies within countries and among them, I show that it is both equitable and efficient for underinsured (usually low-income) Americans to pay less than they currently do and, further, that personal importation achieves this aim without overhauling America’s exist­ing drug framework or compromising patient safety.

Introduction 

Unlike much of the industrialized world, drug companies maintain significant control over drug prices in the US market. While convoluted dis­tribution systems and governmental programs com­plicate the system—where prices are capped in some way—free pricing is central for most of the market.1 The result has been higher prices for most drugs in the US than any other large developed country.

However, unlike the US, Canadian authorities through both the Patented Medicine Prices Review Board and provincial health plans frequently use their regulatory authority or buying power to lower drug prices they consider excessive.2 For decades, Amer­ican patients—mainly seniors with chronic condi­tions—would take bus trips with seniors groups or ones organized by politicians and travel to Canada to buy medicines at prices substantially lower than their American equivalents. Much of this was political the­ater, but medical tourism was a significant business, largely driven by cheaper drug prices in Canada.

In the late 1990s, and accelerating through the early years of this century, online pharmaceutical sales have greatly surpassed physical trips to Canada to buy medicine.3 As drug prices continued to rise, this practice increasingly became a viable tool to help reduce drug prices for underinsured Americans. How­ever, according to expert opinion, importation may have peaked due to pressure against the practice.4

In 2003, as part of the Medicare Prescription Drug, Improvement, and Modernization Act, US patients, pharmacies, and wholesalers were authorized to import prescription drugs from Canada provided that the secretary of Health and Human Services certi­fied that such imports would pose no additional risk to the public’s health and safety.5 However, no such certification has ever been made. There is substantial importing of pharmaceuticals in the US by pharma­ceutical companies that take advantage of cheaper foreign ingredients and manufacturing abroad. While imports of lower-cost drugs are federally prohibited under most circumstances, in practice, the general public is essentially permitted to import a limited personal supply without fear of prosecution. Further­more, the Supreme Court has diminished intellectual property barriers to importation.6

Defenders of this system will argue that imported products may be inferior or even dangerous, but in reality, the question comes down to economics. Con­sider these two contrasting viewpoints by former Food and Drug Administration (FDA) Commissioner Scott Gottlieb.

On February 27, in a hearing for the House Com­mittee on Appropriations regarding FDA funding, Rep. Chellie Pingree (D-ME) asked Gottlieb for his thoughts on drug importation from Canada, noting that people from Maine could buy much lower-cost medicines across the border. Gottlieb asserted that people who buy medications while in Canada are safe. In contrast, Gottlieb voiced his “deep concerns” with online pharmacies “purporting to source their drugs in Canada or other First World markets but are not.” “We are seeing a lot of counterfeit drugs being sold through those channels,” asserted Gottlieb, going on to say that there is “a lot of investigative activity and some fairly egregious things [the FDA] are finding when we look at these websites . . . so we have deep public-health concerns.”7

In other words, one was OK buying medicines while in Canada, but using the web was risky. The idea here is that while we should view Canadian authorities and pharmacies as well functioning, web traders may be dangerous criminals. Of course, when one goes into a pharmacy in Toronto, the investment in the bricks and mortar is obvious. This provides confidence that the Ontario authorities have regulated this establish­ment to ensure it can handle medicines. Compare that experience to some organizations (criminal in some instances) selling on the web. There is validity to the arguments questioning if web sales are genuine.

But many web sellers are either working with, or indeed are, those very same physical entities we can walk in to. Simply because the US has no direct author­ity over these entities in Canada does not mean they could have no influence. The FDA approves thousands of facilities worldwide for export to the US, many of which it frequently inspects, but some of which it has not visited in over a decade.

On average, the FDA inspects fewer than 1 percent of foreign FDA-registered drug manufacturing facili­ties.8 It could oversee a subset of a few dozen foreign pharmacies with ease. The reason it does not is due to politics, not an inability to do so. I suspect most peo­ple in the FDA and other entities of the US govern­ment know this to be the case. The few I have spoken with certainly do. They may object to drug importa­tion for various reasons, but they generally believe it poses a minimal risk to safety.

This report evaluates the effect of permitting lim­ited drug importation. First, this report articulates the economic case for global price discrimination for pharmaceutical products. Second, it argues that the same logic that stipulates that drugs in develop­ing countries should be priced differently than their industrialized neighbors holds true within countries as much as it does between them. Next, it explains why a limited form of importation via the web is both equitable and efficient and why it does not undermine price discrimination or the profit that innovator com­panies make from the US and require for research and development (R&D). The report then provides an empirical case for the safety of imported drugs from accredited sites, arguing that concerns over quality of imported products are substantially overstated. Finally, it explains why personal importation has not accelerated in practice and what competing efforts are underway to increase and decrease it.

Read the full report. 

Notes

  1. There are substantial discounts to the sticker price of medicines in the US for patients. Programs such as Medicaid and Medicare negotiate lower prices and rebates provided by pharma companies, and insurance coverage can, in some instances, drastically lower the price the patient pays. This report is primarily about the people who, for whatever reasons, fall through the cracks, and there are millions of them. Either they do not qualify for government programs or are uninsured—or more often underinsured. A generic exam­ple (based on many examples I have come across) should suffice. Let’s say the sticker price for medicine is $100 per month in the US, but it can be bought online from Canada or elsewhere for between $42 and $45 per month. If patients qualify for a government pro­gram or have good insurance, they are likely to have a co-pay of somewhere between $0 and $15. As a result, no one in these programs or with decent insurance will buy from overseas. However, for the few (amounting to millions of people) who are outside the system for whatever reason, $42 per month is more affordable than $100, and far more patients will take their medication at that lower price. This is undoubtedly better for their health, and although I have not seen any studies detailing this, companies could receive more rev­enue, too. It depends how many more people will buy at the lower price than at the higher one.
  2. Patented Medicine Prices Review Board, https://www.pmprb-cepmb.gc.ca/home.
  3. Gabriel Levitt, “Online Pharmacies, Personal Drug Importation and Public Health,” PharmacyChecker.com, February 2015, https://cdn.pharmacychecker.com/pdf/online-pharmacies-personal-drug-importation-public-health.pdf.
  4. Gabriel Levitt, “Fewer Americans Importing Medications in 2016: Good or Bad? Oh, and Happy New Year!,” PharmacyChecker. com, December 31, 2015, https://www.pharmacycheckerblog.com/fewer-americans-importing-medications-in-2016-good-or-bad-oh-and-happy-new-year.
  5. Medicare Prescription Drug, Improvement, and Modernization Act of 2003, H.R. 1, 108th Cong.
  6. National Academy for State Health Policy, “Supreme Court System Removes Barrier to Importing US Patented Drug Products at Lower Cost,” 2019, https://nashp.org/supreme-court-decision-removes-barrier-to-importing-us-patented-drug-products-at-lower-cost/.
  7. Watch from 1:34:23 for this exchange. House Appropriations Committee, “Food and Drug Administration—Status of Operations (EventID=108876),” YouTube, February 27, 2019, https://www.youtube.com/watch?v=KZc7Ka5SM5E&feature=youtu.be&t=5661.
  8. Prescription Drug Importation Programs, H. 19, Florida Legislature (2019), http://www.flsenate.gov/Session/Bill/2019/19/ Analyses/h0019c.APC.PDF.

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