Cracks in High Drug Prices

The thick political wall put up by pharmaceutical companies around their U.S. pricing is showing cracks.

It has never made sense that Americans should pay more than Canadians, Britons or Spaniards for drugs made by U.S. companies, which often use research financed by U.S. taxpayers. Common sense, however, doesn’t maximize drug profits.

The industry’s relentless, costly congressional lobbying has prevented Medicare from bargaining directly for better prices even under its new drug benefit. The elderly and chronically ill years ago became federal lawbreakers for filling their prescriptions in Canada, a nation that does bargain with drug companies. Some states tried, with varying success, to defy federal regulators by offering drug-import assistance to their residents.

A few federal lawmakers have for the last several years tried to legalize and regulate ordering from abroad. They saw their bills buried by overblown claims that it is impossible to safely order drugs (often made in U.S. factories by U.S. companies) from a pharmacist in Toronto or London.

Now, finally, change is in the air. For the first time, a former head of the Food and Drug Administration has come down on the consumers’ side. At a Senate Health Committee hearing last week, David Kessler, the FDA chief under presidents George H.W. Bush and Clinton, said drug imports can’t be stopped, so the best approach is to legalize and regulate them. A drug-import bill by Sens. Byron L. Dorgan (D-N.D.) and Olympia J. Snowe (R-Maine) would protect consumers from substandard or defective drugs, Kessler said, and “I believe Congress has the responsibility to fix this serious problem.”

A crack in the wall is not a collapse. Those who have opposed drug imports outright (Republican congressional leaders) or simply called for more study (President Bush) now may go to a fallback, pressing for “compromise” bills designed to be narrow and ineffective.

The Senate committee’s chairman, Michael B. Enzi of Wyoming, said Tuesday he would introduce his own drug-import bill in an effort to compromise between the Dorgan-Snowe bill and its critics. Enzi is respected by ranking Democratic colleagues as a straight shooter. He shouldn’t bother tinkering with a bipartisan measure that has Kessler’s seal of approval.

The roadblock doesn’t stem from a lack of congressional support for import legalization. It’s that such bills seldom come to a vote at all. If Enzi allows a committee vote, it will almost certainly pass. If Senate Majority Leader Bill Frist (R-Tenn.) lets it come to a floor vote, it will pass. If Speaker J. Dennis Hastert (R-Ill.) orders a vote on a similar measure in the House, it will pass. If House leaders decline to pack a final House-Senate conference committee with importation enemies, a good final bill will be sent to the president’s desk. It seems unlikely that Bush would issue the first veto of his presidential tenure to keep drug prices high.

If importation became legal, simple and widespread (which is not a sure thing even under the Dorgan/Snowe bill), U.S. prices would almost certainly sink closer to foreign prices. Drug makers would have to figure out the premium that U.S. consumers would be willing (not forced) to pay for the convenience of buying American. Drugs that patients take for emergencies or one-time prescriptions would probably remain relatively costly. Prices in Canada, Europe and Japan might rise slightly as companies bargained harder to make up some of the difference.

Drug makers would be likely to maintain healthy profitability, according to a dense mathematical model developed at the University of Alabama, though perhaps at less astronomical levels. Makers could then consider shifting some of the billions of dollars they spend yearly on marketing to maintain research and development.

In effect, the rest of the world would do the bargaining for U.S. consumers. Good deal, eh?