Congress studies drug import plan

Monday, October 9th 2000, 12:00 am
By: News On 6

Seniors won't benefit soon enough, critics say

WASHINGTON – Lacking agreement on a prescription drug benefit for senior citizens, Congress is moving to approve legislation that would allow individuals, pharmacies and drug wholesalers to buy cheaper drugs abroad and bring them into this country.

But will the proposal bring speedy relief for senior citizens who must choose among food, rent and prescription drugs?

Probably not, some analysts say.

It will take two years or more for the Food and Drug Administration to write and implement regulations governing drug imports, the analysts said. And even then, drug companies can rearrange their business plans to decrease – or even eliminate – their exposure to the law.

"People have been trying to get importation as a quick solution to driving down prices here in the United States, especially for seniors," said Nancy Myers, a senior analyst with Lehman Brothers in Washington. "But because this is such a complicated issue, it may take a long time to actually get up and running."

Supporters of the legislation disagree. Sen. Jim Jeffords, a Republican from Vermont, said last week that cheaper drugs would flow into this country in "months, not years."

According to Ms. Myers and other analysts, drug companies have a variety of options to minimize the widespread use of imported drugs:

•They can limit the quantity they supply to other countries based on population and anticipated demand.

•They can charge other countries the same price as the United States for new drugs and decide not to sell their drugs in those countries at a lower cost.

•They can manufacture their drugs at overseas plants that are not approved by the U.S. Food and Drug Administration, a prerequisite for importation here.

•They can manufacture the drugs in different shapes, sizes and colors, which would allow them to track drugs coming into this country and adjust supplies to other countries.

"At the end of the day, the companies have a lot more strategies and options than they are being given credit for," said Jeffrey Chaffkin, a drug analyst at PaineWebber in New York.

Similar versions of the drug-importing legislation have passed the House and Senate as an amendment to the Agriculture Department's spending bill for 2001. A conference committee reconciled differences between the bills Thursday, but Democrats and President Clinton have said that the new version crafted by Republican leaders is too watered down.

Among other things, the legislation would expire five years after the importation process begins. The original proposal did not contain such a provision.

"We had an agreement to work in a bipartisan fashion, which they rejected in favor of writing a bill on their own, which is more acceptable to the drug companies," Mr. Clinton said Friday. The president did not say whether he would sign the legislation.

Republicans disagreed, citing the industry's continued opposition to their proposal.

Still, if the measure is approved by Congress and signed by the president, it will be the first federal law that attempts to curb overall prescription drug prices.

Under current law, only pharmaceutical companies can import drugs from overseas. The FDA has chosen not to pursue individual offenders, who typically purchase three-month supplies of their medications.

Support on the rise

Support for the provision has grown steadily the last two years as lawmakers have attended town meetings with outraged seniors and taken bus trips to Canada and Mexico to buy discounted drugs for constituents. Under the fast-track approval process envisioned by supporters, drugs could be imported within a year from Canada and Britain, which have established drug safety programs.

"It's impossible for any piece of legislation to anticipate every potential devious idea that someone may come up with," said Joe Karpinski, a spokesman for the Senate Health, Education, Labor and Pensions Committee. Mr. Jeffords is the panel's chairman.

"If the drug industry uses unscrupulous tactics to try to circumvent it, then Congress will come back with even stronger legislation in the future," Mr. Karpinski said.

In this election cycle alone, the pharmaceutical industry has donated $16 million to candidates and political parties; about two-thirds of the money went to Republicans.

The industry has also spent millions on television and newspaper ads criticizing the legislation, said Rep. Bernie Sanders, I-Vt., a leading proponent of drug imports.

"If you are suggesting to me that it is very difficult to pass effective legislation that takes on the most powerful special interest in America, I most certainly agree," he said.

Industry leaders say Congress should spend its time crafting a prescription drug benefit that would help all 39 million Medicare beneficiaries. The Pharmaceutical Research and Manufacturers of America, the trade group known as Pharma, supports a benefit administered by private insurance companies but not one through the Medicare program.

"Congress could probably get together on expanding drug coverage under an improved Medicare program long before any reimported medicines arrive in the United States," said Jeff Trewhitt, a Pharma spokesman.

Industry leaders have said that imported drugs have a higher chance of being counterfeit, and they have maintained that lower prices will hurt their research and development engines.

In the last two weeks, though, the industry has changed tacks, arguing for provisions that would lessen the bill's scope. They have also warned that the legislation would be a broken promise to the nation's seniors.

Supporters of drug importing say the pharmaceutical industry is trying to maintain its profit margins. In terms of safety criticisms, they say, the secretary of Health and Human Services must certify that drug imports won't pose a public health risk and would save consumers money.

Mr. Clinton and Health and Human Services Secretary Donna Shalala have said previously that they would support the importation measure as long as Congress allocates $23 million to create a safety tracking system in the first year. The annual cost would increase to about $93 million after the system is operational.

Operational restructuring

When drug companies have faced previous legislative and regulatory hurdles, they have restructured their operations, analysts say.

The Maine Legislature, for instance, passed a law this year that would allow regulators to dictate prices in July 2003 if companies do not lower their prices before then. In the last five months, three major drug makers have said they would stop shipping drugs directly into Maine to avoid the reach of the law, and Pharma has sued the state.

A similar nimbleness has been displayed as patents begin to expire on popular drugs, analysts say. In some cases, federal lawyers have said, companies signed suppliers of essential chemical ingredients to exclusivity agreements, which means that makers of generic versions of the drugs have trouble getting raw materials. In other instances, they say, brand-name producers are paying generic-drug firms directly not to produce less-expensive alternatives.

Mr. Chaffkin of PaineWebber called the phenomenon "leapfrogging." Sensing a problem, Congress takes action, he said, and the drug companies figure out ways around it. The pattern continues.

"There's always this question of who can stay ahead of the curve," he said.

Individual drug companies declined to comment, referring inquiries to Pharma. Mr. Trewhitt, the group's spokesman, said member companies must be able to respond quickly to regulatory changes.

"They learn to adapt," he said. "Sometimes it's done with difficulty, but they certainly make the effort and they do succeed – and certainly they go along with the law."