Stanford Report, Mar. 3, 2004
'The cow is out of the barn' on gap in prescription drug costs
BY BARBARA PALMER
Panelists including two former U.S. Food and Drug Administration (FDA) commissioners discussed issues including the gap between domestic and international prescription drug prices during two standing-room-only, hour-long sessions on "The Future of Healthcare." The sessions were part of Friday's economic summit at the Stanford Institute for Economic Policy Research (SIEPR).
"The cow is out of the barn," in terms of Americans knowing the difference between the cost to consumers of prescription drugs in the United States and other parts of the world, said Dr. Alan Garber, professor of medicine and director of the Center for Health Policy at Stanford. A recent study reported that Europeans pay on average 60 percent less per capita than their U.S. counterparts, he said.
Addressing opposition to legislation that would allow U.S. distributors and pharmacists to re-import prescription drugs into the United States, Garber said that drug companies probably are making a political mistake by "going to the mat" over the issue.
The effort by the FDA and pharmaceutical companies to convince U.S. consumers that there are compelling safety reasons for the differences in price between drugs purchased in the United States and drugs purchased in Canada is like trying to convince a passenger who paid $2,400 for a plane ticket who is sitting next to a passenger who paid $450 that the first passenger got a good deal, he said. The FDA is "trying to convince the American public that they aren't in the same plane as the people sitting next to them -- that the Canadians' plane is more likely to crash or not arrive on time." It hasn't succeeded, he said.
Drug companies also have made a mistake by not recognizing the monopoly power that they have in negotiating with foreign governments, he said. "The tougher the American public gets about not wanting to pay more, the more we improve the negotiating position of drug companies with respect to their foreign customers."
However, the fundamental problem is with the demand side of the market, he said. Health plans lack the ability to negotiate drug prices, particularly when there is a single effective FDA-approved drug for a condition, he said. "It's the best kind of market you can imagine: a monopoly, selling in a market where nobody is paying out of pocket. Nothing could be sweeter."
Americans in northern states are reaching the point where the fear that buying drugs outside of the United States is risky will be overwhelmed by the amount of money that can be saved by doing so, said President Emeritus Donald Kennedy, a panelist and one of several former FDA commissioners who have opposed re-importation legislation. In one example he recounted Friday, consumers who took a day trip by bus to Canada saved a total of $19,000 by buying prescription drugs in Canadian pharmacies.
If re-importation legislation were achieved, however, harm could be done by dampening investment by U.S. pharmaceutical companies, Kennedy warned. The U.S. pharmaceutical industry is a "unique source of significant research and innovation -- if we discourage research and innovation, that's a problem not only for the U.S. but for the rest of the world," he said.
In his remarks, Dr. David Kessler, a former FDA commissioner and dean of the School of Medicine and vice chancellor for medical affairs at the University of California-San Francisco, talked about the effect that differential drug prices have on the ability to treat the millions of people who are HIV infected globally. Although the 1990s was a "historic period" in the development of drugs that could treat the disease, "that was almost the easy part," he said.
In the next decade, 45 million people are expected to become infected with the disease, he said. "It's a nightmare for Africa and a nightmare for the rest of the world."
While fewer than 200 children will die this year of pediatric AIDS in the United States, 45 percent of young women in Botswana are infected with AIDS, he said. By 2010, life expectancy in that country is expected to drop to 27 years, he said.
In late February, $125 million to buy drugs to treat HIV-infected children and adults was awarded to nongovernmental organizations, including the Elizabeth Glaser Pediatric AIDS Foundation, of which Kessler is a board member, he said. However, the funds are restricted for purchase of drugs regulated by Western authorities, which cost twice as much or more as in other places. "Where am I supposed to buy drugs?" he asked.
It's a mistake to try to solve the healthcare crisis issue by issue, since "healthcare is an ecosystem," said panelist Sen. Ron Wyden, D-Ore. And with the "tsunami" of Baby Boomers headed toward old age, there isn't time to solve it piece by piece, he said. At the current rate, "we'll have universal coverage in 3050," he said.
Wyden, with Sen. Orrin Hatch, R-Utah, authored health care reform legislation, the Health Care that Works for All Americans Act, which was approved as an amendment to the Medicare prescription drug bill. When funded, the measure will create a 26-member Citizens' Health Care Working Group, which will develop healthcare reform recommendations from public input gathered from community meetings and online. Had healthcare reform efforts made a decade ago included public debate and education, "we'd be in a different position" today, Wyden said.