Allowing US citizens to import prescription drugs from countries where prices are lower than in the USA would reduce the financial incentives for manufacturers to invest in R&D, a US Congressional panel has been warned.

Such a policy would lead to R&D projects being terminated, or not initiated, because they would no longer generate the expected net returns for shareholders, said John Vernon of the University of Connecticut School of Business, testifying before a hearing of the Senate Committee on Commerce, Science and Transportation’s subcommittee on interstate commerce, trade and tourism.

“The result will be a decline in the rate of pharmaceutical innovation – fewer new drugs will be developed and it will take a longer time to find cures for many diseases,” Dr Vernon forecast. He dismissed as “stupid” suggestions than an importation policy which reduces prices in the USA would actually increase profits and thus lead to increased R&D spending because, he said, this would assume that company managers are currently not acting in shareholders’ interests.

Dr Vernon also stressed that importing is not a free trade issue; drug prices in Canada and elsewhere are lower than in the USA because they are regulated. The real issue at hand is intellectual property rights, he said; if patented drugs are imported from aboard, price controls will be imposed indirectly on medicines in the USA.

However, Nelda Barnett, a board member of the seniors’ advocacy group AARP (formerly the American Association of Retired Persons), said it was a “national embarrassment that people from all over the world come to the United States to access our advanced medical systems, while many of our own citizens need to look outside our borders in order to afford their prescription drugs.” Congress can no longer afford to do nothing but hope that the millions of Americans who purchase prescription drugs from abroad do so without “dire consequences,” she said, and urged legislators to pass Bill S 242, the Pharmaceutical Market Access and Drug Safety Act, this year.

Anti-gaming provisions

S 242, which is sponsored by Senators Byron Dorgan (Democrat) and Olympia Snowe (Republican), “balances the challenge of designing a prescription drug importation program to ensure the integrity of pharmaceuticals while, at the same time, providing consumers access to lower-price prescription drugs,” said Ms Barnett. The bill also includes anti-gaming provisions, aimed at preventing drugmakers from halting supplies of their drugs to companies which export them.

Attorney William Schultz dismissed fears that S 242 would open the door to dangerous foreign drugs entering the USA as “ignoring the world as it is today. I firmly believe that if Congress creates a legal mechanism for providing lower-cost drugs, consumers will no longer resort to buying substandard or possibly dangerous drugs off of illegal internet websites or mail-order companies. People are resorting to this practice because their only other option is to go without their medicine,” he told the hearing.

Nevertheless, the US Food and Drug Administration remains immensely concerned about unapproved, imported medicines whose safety and effectiveness cannot be assured, said Randall Lutter, the agency’s acting deputy commissioner for policy. Moreover, he told the hearing, a survey conducted in January had found that, out of 462 drug products intercepted and examined at one US international mail facility, over half were drugs that are available as FDA-approved generics in the USA and, most likely, cheaper there than abroad. More than 40% of the products examined, with generic equivalents, are available at US retail chains that offer some generics for $4 each, said Dr Lutter, adding: “this is less than the shipping price of most internet sellers.”

Billy Tauzin, chief executive of the Pharmaceutical Research and Manufacturers of America (PhRMA), described imports of foreign drugs as “nothing more than importation of foreign price control practices” which have proved a disaster for patients overseas, limiting their access to new medicines and significantly restricting R&D in those countries. “American patients deserve better,” he said.

The trade opens US borders to drugs from anywhere in the world, while attempts to “guarantee” safety provide no assurances that imported drugs will be safe, he added.

Moreover, said Mr Tauzin, the importers often benefit considerably more than patients, and price differentials between the USA and other countries are frequently exaggerated. “If the experience in Europe is any guide, any cost savings resulting from foreign importation will be captured by the parallel traders, rather than passed on to consumers,” he told the hearing. By Lynne Taylor