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Drug Prices

The Latest Drug Reimportation Idea

It’s been a while since we talked about drug reimportation here, but it’s been back in the news recently. Drug prices are, naturally, of economic, medical, and political importance, and the administration has been making a great deal of noise about lowering them. To that end, HHS Secretary Alex Azar has announced the formation of a working group to look into drug reimportation in some circumstances.

This gets complicated, since there are several situations where drug prices go up. The most egregious examples usually come when someone deliberately games the system on an old generic drug, as in a Martin Shkreli-style “closed distribution” plan that can insulate them from further generic competition. The FDA itself seems to be taking some action on this. Other price hikes have come about as side effects of deliberate FDA policies, such as the awarding of market exclusivity for running new trials on old drugs that were never approved under the modern framework. And then there are the price hikes on drugs that are still under patent, where one manufacturer has the exclusivity until that patent expires. As a side note, I have watched Congressional hearings – or tried to – on these problems, only to feel actual physical pain at the degree to which the different issues are mixed, misrepresented, or just plain misunderstood by some elected officials. I would be very interested in the result of a live, face-to-face survey of all the member of the House and Senate, asking them to briefly explain the difference between a patented drug and a generic drug, for example. But that’s a topic for another day.

So it’s not clear to me which of these things reimportation is being explored as a solution for – but it looks like it’s aimed at the first two above, though. Which doesn’t do much about drug prices in general. Steve Usdin at Biocentury is even less impressed than I am:

The drug importation policy announced by Alex Azar last week is a political stunt, aimed at generating headlines at a time when the HHS secretary seems desperate to demonstrate to Donald Trump and the media that he’s fulfilling the president’s pledges to lower drug prices.

In fact, as Azar knows, importation will have a negligible effect on access to drugs.

Opening the door to importation as a price control tactic will, however, create precedents that will damage FDA, and consequently hurt biomedical innovators and patients.

The new policy would allow importation of drugs that lack patent protection or exclusivity, and that are produced by one manufacturer.

Azar indicated in a July 19 interview with Fox News that the move was his idea, and that he expects FDA to fall into line behind it. The HHS secretary said he called FDA Commissioner Scott Gottlieb to demand establishment of a working group on importation, telling him: “I insist that you find a pathway to make this happen.”

The record shows both Azar and Gottlieb know that importation won’t move the needle when it comes to drug prices.

Speaking to reporters in May, Azar dismissed drug importation as a “gimmick,” arguing that even if it could be done safely, drug companies would respond by limiting supplies to countries that were exporting to the U.S.

In March 2016, Gottlieb wrote that presidential candidate Trump’s endorsement of importation was “good politics” but that it would “offer consumers little relief.” The cost of ensuring the safety of imported drugs would eat up any savings, he wrote.

This sounds like the way politics works, all right, and most especially in the current administration. To be fair, everyone wants to make sure that their boss thinks that they’re doing a great job implementing the boss’s great ideas so that the boss looks great, but we seem to have turned up the volume on that stuff even more.

Usdin’s worry – and it’s definitely a serious one – is that if you get the FDA involved in drug pricing in this way, then there’s no place to draw the line. The agency is fundamentally in charge of judging efficacy and safety, and these are very different things than price. I think that the regulatory framework should be set up in general to allow competition on price (which is why I object to the generic drug situations mentioned above). But once the government starts deciding that “Ya know, the price of Drug X is just too damn high”, then you’ve stepped off into picking financial winners and losers, walking through the landscape with your magic wand and bestowing favors as you see fit. This system would absolutely be a moral hazard.

And unless you go for high-volume patented drugs in this manner, the reimportation idea isn’t going to do much, anyway. Drugs like Daraprim get huge headlines when a Shkreli rams up their prices, but the insurance companies hardly even notice. Which is why he can do it. The amount of money that will make a tiny company rich off a tiny drug is just a roundoff error on the big spreadsheet of costs. So we could be setting a dangerous, tempting, easily abused precedent for. . .hardly any effect at all in the present, except the chance to strut and preen in front of the cameras. Not a good plan.

 

46 comments on “The Latest Drug Reimportation Idea”

  1. Hap says:

    Drug importation seems in general to either be expecting other countries to solve our political problems or, worse, to circumvent our laws by relying on those of other countries (analogous to relations between NSA and GCHQ, as reported by Bamford – they were/are spying on the people of the other’s home nation and feeding the other country the data to avoid prohibitions on spying on their own citizens).

    Considering Trump, I have to assume that lots of his policies are designed primarily to give him a chance to strut and preen in front of the camera – it’s why he’s President, and as long as it works to keep him there, why stop?

  2. Project Osprey says:

    But once the government starts deciding that “Ya know, the price of Drug X is just too damn high”… This system would absolutely be a moral hazard.

    Would it?… It’s entirely routine in a lot of places, the UK particularly. NICE effectively decides what will be paid for a drug, based on (largely) technocratic reasons, but once approved the NHS is obliged to supply it.

    The current system seems more of a moral hazard to me. Particularly in cases where things get out of hand as with Shkreli – surely Government has a duty to step in there

    1. Mike says:

      But NICE doesn’t approve drugs. So there is a separation between the assessment of efficacy and safety and the price the NHS is willing to pay.

    2. Design Monkey says:

      UK system – practically state communism implemented in drug pricing. Has usual communism problems, like large queues to free state doctors, low qualification of them, and regarding drugs – communism does not innovate anything, they are parasites on body of others. If all major countries would implement UK like drug communism – any new drug research would stop like running into concrete wall.

      1. tim Rowledge says:

        Ooh look, somebody that has no clue on the internet. Haven’t seen that in a while.

      2. David Edwards says:

        The short answer to the above. Crap.

        The more detailed answer now follows.

        I’m pretty sure that the doctors and other NHS staff, who provided me with an extra 25 years of life at a time when I didn’t think I’d have that, would rightly regard your characterisation of them as “low qualification”, as the product of your rectal passage. As for those queues, well while there are queues for elective surgery, the moment clinical need dictates a rapid response, it’s forthcoming, as was the case with me. The moment the pathology lab results were available, and my case was deeemed a case of need, the staff in question moved like lightning. Furthermore, when it came time for my treatment, I experienced world class care all the way down the line, including surgical procedures that would have been the stuff of science fiction just 25 years ago. I came away from the hospital thinking “wow, this is what we as a species are capable of, if we put our minds to it, and it’s stunning to behold”.

        In the space of nine days, I went from “one foot in the grave”, to being able to cycle to the shops for my groceries. If you want to deride that as “communism”, then give me more of it.

        Plus, why are so many Americans pathologically incapable of even fantasising about providing useful, beneficial services, without said provision involving the C-suite of a fat tax-dodging corporation pursuing naked greed? In case you’ve been living under a rock for the past five years, the whole “neoliberal” economic model is now so thoroughly discredited, among those of us with functioning neurons, that I find myself wondering how the hell anyone can still post drivel of the sort above, dismissing a properly constituted health service and its components as “communism”, just because it doens’t involve some Parasite Papers fat cats collecting mansions and yachts. Indeed, said avarice on the part of the offshore slush fund brigade is part of the problem, not the solution. In the world of healthcare, the real parasite is corporate profit – money siphoned out of the system to allow a privileged few to live like King Midas, that could have been much better spent on the front line service and the research backing that service up. Those of us who realise this essential fact aren’t “communists”, we’re simply taking note, in good scientific manner, of the data provided to us by the neoliberal wastrels and their paid political whores in right-wing parties, with respect to such matters as graft, corruption, and the wholesale assault upon decent, humane civil society by wannabee plutocrats.

        Indeed, we’ve had evidence of the failure of the profit motive in quantity here in the UK, courtesy of the fetish for privatisation on the part of the collection of neoliberal droids currently in power, who handed lucrative healthcare contracts to their crony capitalist friends, only for the requisite services to degrade faster than a rotting corpse the moment the new, supposedly more “efficient” for-profit masters took over. Some of said examples being documented here. Of course, we all know why Jeremy Hunt was such an enthusiast for such contracts during his disreputable and at times, downright evil tenure as Health Secretary, because he was hoping to be one of those politicians at the head of the queue when it came to handing out seven-figure “non-executive directorships” with the privatised healthcare companies whose palms he greased. He didn’t spend so much of his time sniffing around Kaiser Permanente for nothing – he was hoping to be a material beneficiary of privatisation, in a manner that would once have attracted the attention of the Serious Fraud Squad, but which, in this “neoliberal” era, has become standard operating procedure among right-wing politicians and their sleazy relationships with “lobbying” groups.

        As for NICE, it’s job is to be in part a regulatory authority, and as such, it’s involved in work that’s boring, tedious, but necessary, if UK healthcare is to be provided in accordance with best practice. That it suffers from being overtaken at times by the pace of technological development, isn’t a malaise unique to it – plenty of private, for-profit organisations have suffered this too. Plus, a part of the remit of the organisation, is to see that we in the UK aren’t swindled by the likes of Shrkeli.

        And before someone comes in bemoaning the presence of heavy regulation within healthcare, just ask yourself this. Would you like to have been one of the people affected by Thalidomide before said regulation was enacted? Or one of the people who died from taking Opren?

        Quite simply, if you need to bend the rules to make it easier to pursue greed, in such a manner as to flush other people’s right to decent, humane treatment down the toilet, then you’re not an “entrepreneur” or “wealth creator”, you’re at best a spiv, at worst a mobster.

        1. Design Monkey says:

          Short answer to above: dave eddy = pile of steaming crap, and really stupid one at that.

          ‘Patients queue up but there’s no doctors’: GP reveals the stress on surgeries in a diary of his average week
          As cuts bite deep into the struggling National Health Service it is now harder than ever to see your overstretched GP.
          The latest figures show an average GP has 41.5 calls, visits or consultations per day. Some had 70 – almost three times the “safe” daily limit of 25.

          That, stupida davie, was first hit that jumped up at google about UK medical system. And by far not the only one.

        2. Design Monkey says:

          Another cute one:

          The queue that shames Britain: 7.11am and desperate patients wait in the cold and dark outside surgery – just so they can be seen by their GP

          More than 30 patients queued outside The Sunbury Health Centre in Surrey
          Originally designed for some 6,000 patients, it now serves nearly 19,000
          Residents say extra demand is result of new housing developments in area
          Patients say they face wait of up to two weeks for appointment with doctor
          They say the only option is to queue in hope of seeing GP on same day
          Scene is not unique as surgeries across UK are stretched to breaking point

          But that is absolutely normal for communism, crap davie. Where is communism, there is queues, because there never is and never will be enough of those free cakes for everybody.

          1. David Edwards says:

            Oh look, someone else who didn’t bother checking his facts, before rushing to post his apologetics for right-wing bullshit.

            What do I find when I look up Sunbury Health Centre?

            Oh wait, it’s under pressure because a huge new housing development was approved before considering the effects on the practice. The practice was originally designed to handle 6,000 patients, but now has to handle 19,000 or more courtesy of the new housing development, without additional funding having been provided to expand it. Which happened because the Tories are too busy bleeding the NHS dry to soften it up for privatisation, because they don’t think poor people should have healthcare, just like the Republicans in the USA.

            Those cuts biting deep into the NHS your previous post referred to, are all the work of right wing politicians trying to turn the NHS into another money trough for their rich friends to stick their pig snouts in.

            Come back when you’ve learned to post something other than ad hominem playground abuse, and badly sourced news from right wing tabloids run by tax dodging billionaires.

          2. Design Monkey says:

            crap davie, I do not care not a broken cent about your local village political spider fights. 😀 Save that bullshit for your indigenous UK idiot forums.

            Besides, the more you spam, the more you demonstrate yourself as not exactly full pound in the attic.

  3. Do-it-yourself medicine could be an alternative for at least some drugs:

    https://motherboard.vice.com/en_us/article/43pngb/how-to-make-your-own-medicine-four-thieves-vinegar-collective

    Not convinced that this will take off in a major way, but it is an interesting concept!

    1. Hap says:

      Maybe other people have cleaner houses than mine, but making my own medicine would probably be worse even than the variety of generics producers getting warning letters from the FDA for the added “bonuses” in their medicines, the birds flying around the factory, or the “try, try again” assay results for drug product. It might be better than dying, but that might be the outcome in either case.

    2. Chester says:

      This is the stupidest idea I’ve seen all year.

    3. ScientistSailor says:

      Wow:
      After Four Thieves synthesized cabotegravir, it was just a matter of convincing at-risk populations to use it. According to Laufer, some Four Thieves affiliates began partnering with heroin dealers to cut their product with the cabotegravir. This would ensure that users would receive a regular dose of the preventative medicine every time they used heroin.

      Such wildly improper use of this drug is going to quickly drive resistance. This is really sad, all the hard work that went into developing this drug is going to be flushed down the drain in no time.

      And don’t even get me started on the CMC. Are they testing their street cabotegravir for GTI’s? Or impurities that form reactive metabolites that are going to blow up livers?

      Ugh…

    4. junker says:

      Dude people get hard time making their own meals instead of buying junk food, how anyone is going to convince them to make their own medicines?

    5. Bagger Vance says:

      “Wow, Drumpf’s a monster and Shrkeli only charged insurance companies, but let’s glorify a bunch of street chemists as long as they’re willing to provide us with abortifacients.”

      Well that’s a nice point for my graph on how quickly cyberpunk’s coming true.

      1. Hap says:

        I don’t know – it gets harder from this to take hold quickly when your target audience dies.

        Didn’t we already try this with Fentanyl? That didn’t work out so well for the targets (though we got new information on how to kill the substantia nigra – I guess that’s something).

        1. Jacob says:

          You’re thinking of desmethylprodine-MPTP, not fentanyl, but yeah basically true.

    6. drsnowboard says:

      I’m a medicinal chemist by training so should be institutionally opposed to this biohacker approach but my gut reaction is, if they get really good chemists and analysts involved there’s no reason they can’t generate ‘drugs’ to a usable purity. Let’s face it, illegal drugs are produced to a recipe in buckets and kitchens around the world…. And it is the logical consequence of ultimate deregulation except people aren’t getting paid for it. Desperation will generate solutions

      1. Design Monkey says:

        Yeah, they can, only lab scale hand made drugs won’t be especially cheap, if taking in account material, equipment and labor costs.
        They can wave their PR d%ck with daraprim, which is dirt primitive and needed for tiny number of patients.
        Hack making, for example, velpatasvir/sofosbuvir – nope, they will not throw free pills of these at crowd anytime soon, if ever.

    7. ANON says:

      I would consider using my own homemade oral drugs, but I wouldn’t dream of using a homemade IM or IV drug.

  4. Alan Goldhammer says:

    Overlooked in all of this is the simple fact that “legal” importation on a large scale is almost impossible. Companies know their market shares in virtually every country and will seek to only supply the amount of drug necessary for that country. So ask yourself, where will the imported drugs come from? They can come only at the expense of patients in the country that also the exportation. Is this fair to those patients? Will those countries seek to control this exportation? Those answers are no & yes.

    Remember also that the pharmaceutical industry has dealt with a similar issue in the EU trading sphere where parallel trade was frequent and distributors were seeking arbitrage opportunities where there were price differentials (there is no common EU price rather pricing is done on a country by country basis through their own health system). The EU presents a different market issue than the US given the laws that govern such transactions. Companies have developed marketing strategies to deal with this issue and such strategies would easily translate to the US market.

  5. Christophe Verlinde says:

    Just in case you were curious how much Belgians pay for their drugs:
    http://www.cbip.be/fr (Centre Belge d’Information Pharmacothérapeutique).
    (This Center was established by the Belgian professors of farmacology in 1974,
    is officially recognized by the Belgian state, and is a non-profit provider of
    knowledge about medications).
    For example, find azathioprine under “principe actif”, then select oral 50 mg,
    and you will see that 100 tablets cost about 23 EURO and will be reimbursed
    fully under certain conditions.
    Note that Belgium negotiates prices with the drug industry.

  6. Anon says:

    As Alan Goldhammer points out, drug companies are global price discriminators. They sell first to the people willing to pay the most. Patients in countries with controlled pricing, Britain and Canada come to mind, wait longer for new drugs and have older formularies. This imposes costs on patients, costs which are seldom addressed in this kind of policy discussion. Administered prices leave little room for patients to signal their preferences.

    When a couple of states allowed importation from Canada some years back, Canadian brick and mortar stores started having shortages. Canadian governments stepped in to keep the shortages from growing worse. There have been cases of NHS hospitals buying drugs at the controlled British price and selling them abroad for profit.

    Bottom line, as this blog emphasizes, is that if one wants new drugs one is going to have to pay highly skilled people to discover and manufacture them. Price controls should be absolutely the last resort because they deplete the capital needed to develop new drugs. A more fruitful approach might be to start taking a hard look at the regulations that have been layered on since the 1930s, with an eye towards getting rid of those that simply impose additional costs. It might also help if government stopped legislating special pharma deals for government programs, a practice that just loads more cost on the private sector and results in less accountability in Medicare, Medicaid, and the VA.

    1. Hap says:

      Except they’re running out of targets for price discrimination – I don’t think China is going to give up pricing leverage to get new drugs earlier, for example. If pharma can’t get the money here, they’re probably not going to make as many new drugs (because they money won’t be there, more so than now), but they’re going to have a harder time with differential leverage – where else are they going to make money? There aren’t too many market where governments don’t negotiate over drug prices that they could count one as a rock against which to push.

      If negotiating countries are getting drugs later, then their health statistics should reflect that. Do they? (I was under the impression that we don’t in fact do all that well – the extra access to drugs is likely for a small enough market that the inhibition of care from higher costs swamps the better outcomes made possible by newer drugs.)

      1. Hap says:

        Not that I think this is a good idea, but I don’t think there’s leverage if the US decides to use.

        How do the deals HHS cuts with drug companies increase their cost? At this point, almost everyone but the very poor and very rich have to get medicine through insurance (and the very poor likely have Medicaid). HHS has more leverage than most insurance companies, but all of the entities are negotiating as hard as they can. Removing HHS’s ability to do so will raise their prices, but won’t likely lower the insured people’s (or more likely, their PBM’s) cost – pharma still wants to get as much as they can for their drugs.

        1. Alan Goldhammer says:

          HHS doesn’t buy drugs directly and Medicaid works through the states. The Medicare drug benefit is administered by the private sector who negotiate prices for the members of the particular plan. The only Federal program I am aware of that buys direct is the VA and they do have low prices. They also have a pretty restrictive formulary.

      2. MrRogers says:

        In fact, 5-year survival and median survival for cancer patients (a pharmacologically intense group) in the US is the highest in the world. For some cancers, the US vs. UK gap is surprisingly wide.

        1. tim Rowledge says:

          Does this claim include data for those people that can’t get any treatment at all in the US because they don’t have insurance that actually covers anything?
          I mean it’s nice and all if treated people have a better outcome than an equivalent group in the UK but it would be disingenuous to leave out those that had a much worse outcome due to no treatment.

        2. neil says:

          Survival does not mean living longer. It can be measured from detection to death. If you diagnose earlier but are unable to change the timing of the endpoint then survival is improved. Is the US experience a reflection of this?

    2. johnnyboy says:

      yada yada – free market – yada yada – cut regulations – yada yada – invisible hand – yada yada…

      Same old discourse, which has placed the US right where it is now, with the highest drug prices in the western world, the highest health care cost, and one of the lowest quality of health care overall with a lowering life expectancy. US Pharma R&D may be the most innovative, but US patients aren’t reaping the benefits – patients from countries with price controls are (thanks for that !). But yeah, keep pushing for more of the same, at least a few people are getting rich from it so that’s what really counts.

      1. NotNuts says:

        WRT lifespan, remember that when you import large numbers of people from the third world, you import their health problems and life expectancy too. The US looks much better when you include only those born here, and is among the best in the world when you include those whose parents were also born here. And don’t try the infant mortality ploy. Once you do apples-apples comparisons, the US is world-leading there too.

        1. Hap says:

          Where did you find that data?

  7. DTX says:

    A number of years ago, one of my students did a paper on the risks & benefits of drug reimportation. What surprised both him & the class was how many fraudulent drugs the post office was already stopping. A customer may think they are contacting a Canadian pharmacy, but the organization could be anywhere on the globe.

    If drug reimportatation is allowed, they should eliminate any liability for drug’s originator company. i.e., If you buy your Viagra from a “Canadian” pharmacy and end up with an anticancer drug instead, that was the unfortunate risk you took. It would be a terrible situation. Every link added to a drug’s distribution chain adds the potential for fraud. The more valuable the drug, the greater the interest in fraud.

    1. Alan Goldhammer says:

      When I was still at PhRMA in Scientific and Regulatory Affairs, the Association was purchasing and documenting a lot of counterfeit drugs from a variety of sources. It was truly shocking to see what kinds of “drugs” could be purchased. Some had API in various amounts and some did not.

      1. AQR says:

        Are these studies published somewhere that I could read them?

        1. Alan Goldhammer says:

          I don’t think they were published. I know some briefing books were compiled for policy makers. It was back in 2006-7 that this work was done.

  8. Ken says:

    There’s a special sort of genius in trying to import cheap drugs from other countries at the same time you’re starting a trade war with them and slapping tariffs on their other goods.

    And when I say “special”…

  9. mallam says:

    The way the current administration has gone, having drugs imported from countries where the cost is less due to the local governement’s laws in pricing and then trying to import at their prices could result in an export tariff before coming into the US so the selling country could make money on the transaction. Heck why not use all angles in the art of the swindle.

  10. WBK says:

    Back to Derek’s post, you cite three reasons for prices being high and say the HHS discussion about the first two, not the third which is about patents. Are you sure? When most people discuss reimportation they are talking about “parallel imports,” at least I always thought so, and most of the comments here (e.g. those about incentives for innovation, and those about reference pricing with single supplier in multiple markets) seem to be based on that too.

  11. Annoned says:

    With all the trade wars rising, I am more worried about just plain availability.
    Over 80% of the API comes from one country, China. This was explored in this book China Rx by Rosemary Gibson.
    (The link is to a C-Span talk, yes I am retired.)
    India is at least trying to do something about this, https://timesofindia.indiatimes.com/india/india-plans-to-lessen-its-drug-reliance-on-china/articleshow/60989553.cms
    What is the US doing?? Isn’t this of strategic importance?

    1. Annoned says:

      Sorry, the C-Span link did not come out, so here:

      https://www.c-span.org/video/?445077-2/china-

  12. les jabber says:

    What is the public benefit for prohibition of drug re-importation? Because tens of thousands of Americans living near the northern and southern US borders would laugh at the conclusions of the author as they take their little trips across their respective borders to buy their medicines.

    Drug companies deserve no more than the same treatment in trade that other corporations have- in consumer goods, in publishing, etc.

    The author appears to be forgetting that limiting access to medications for Americans by pricing causes morbidity and mortality too, and that studies show that pricing affects outcomes broadly.

  13. Scott says:

    Re-importation is called a ‘gray market’ in International Business terms.

    It’s not explicitly illegal (that would be “black market” in IB terms), but it’s not necessarily explicitly legal, either.

  14. DTX says:

    On Friday, the Philadelphia Inquirer noted: the FDA estimated that 22,000 international shipments of FDA-regulated products, primarily drugs had been intercepted at international mail facilities during the last 9 months. And these are just those that were intercepted. (7/27/2018). What % are counterfeit or substandard?

    In 2017, the World Health Organization estimated that in developing countries, 1 in 10 drugs are fake or substandard. Right now patients could save much money by buying their vaccines in China (read about the current scandal). In India, many companies compete on drugs costing a penny a pill. Patients could save a huge amount of $ by buying these.

    Yes, you can save lots of money by drug reimports, but there is significant risk as well. In the US, we take it for granted that we’re not buying counterfeit drugs and that generic drugs meet safety & potency requirements. It’s not like this in most of the world. Yes, if you can drive to Canada to buy your drugs, you’re OK. But if you are buying them over the internet, it’s a gamble.

  15. BoSb says:

    Not strictly related to reimportation, but relevant to why drug prices can be out of control. I did due diligence once on a company that had a whole portfolio of generic drugs with some kind of protection against competition. Their whole strategy was to find these things and then raise prices significantly, but slowly in a way that didn’t attract attention. The Shkreli’s of the world were considered to be bad actors because they made the game too obvious.

    Specialist distribution networks were only one of the ways that they could keep exclusivity, and actually not used by this company. Much better if:
    – You are the sole supplier and the drug manufacturing is highly specialist and expensive to set up
    – The reference standards for making a generic are just plain wrong, therefore no one not already on the market can actually start manufacturing it

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