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Will importing drugs save U.S. costs?
The cost of health care
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TEXT OF STORY
Kai Ryssdal: For a good three hours on the floor of the United States Senate today, this was the sound of the health-care debate:
Bernie Sanders: Section 1514, payments for prescription drugs. A, establishment of lists. One, in general, the boards shall establish...
Republicans used Senate rules to slow things down and force a page-by-page reading of a proposed amendment by Vermont Independent Bernie Sanders today. Sanders eventually gave up and pulled his 776-page amendment before it could be voted down.
Among the amendments that actually have been voted down is one that would have let Americans import lower-cost prescription drugs from other countries. Seeing as how part of the original premise for a health-care overhaul was to make things cheaper, we asked Marketplace's Nancy Marshall Genzer what the decision is going to cost.
Nancy Marshall Genzer: The Congressional Budget Office estimates the U.S. government could save almost $20 billion on its drug costs over the next 10 years if it could import prescription drugs. Other estimates say consumers would save $80 billion if they could buy their drugs from countries, like Canada, where they're much cheaper.
Larry McNeely is the health-care advocate for the U.S. Public Interest Research Group.
LARRY MCNEELY: You could see some drugs going for literally a fraction -- a tenth of what they're charged here in the United States.
Vermont Senator Bernard Sanders says you can fill a Lipitor prescription in Canada for $33. In the U.S., the same prescription costs $125. But the Senate voted down an amendment to the health-care overhaul that would have allowed the U.S. to import drugs approved by the FDA. McNeely says that's because of the lobbying muscle of the pharmaceutical industry.
MCNEELY: Pharma is powerful enough to deny the success of a number of major pieces of legislation.
The drug industry has been generally supportive of a health-care overhaul because it cut a deal with the Obama administration that it would give up no more than $80 billion in revenue over 10 years. Drug importation would have cost it billions more. White House critics say the industry got a sweetheart deal.
But University of Michigan economist Erik Gordon says President Obama needs the drug companies' support to get any kind of an overhaul at all.
ERIK GORDON: I think what he's trying to do is come up with something that's workable.
Even if it doesn't get you Lipitor for $33.
In Washington, I'm Nancy Marshall Genzer for Marketplace.
In my opinion, this story missed the central issue regarding this proposed legislation. There is a reason that prescription drugs are less expensive in Canada. Government-mandated price controls. Without those price controls, these drugs would cost more in Canada than they do now, while these drugs would cost less in the U.S. We are in effect subsidizing Canada. Allowing the importation of drugs from Canada would really be the importation of price controls. That is really the central issue. Should the U.S. have price controls on prescription drugs? Sounds great; but, be wary of the unintended consequences. Getting a new drug approved takes many years and costs hundreds of millions of dollars, if it gets approved at all. In return, the drug company receives patent protection for a limited number of years. Add price controls and I wonder why any company would make the required investment to create new drugs.
I enjoy and respect the in depth reporting that I hear on Marketplace, but the story on importing drugs from Canada raised more questions than it answered. Being a business program, I was somewhat disappointed that the following questions were not asked. Not as disappointed that these issues were not raised in Congress, but still..
1. Why are the drugs cheaper in Canada?
2. If the drugs are cheaper because they are subsidized by the Canadian government, and Congress allows the importation of Canadian drugs, how long is it possible for the Canadians to subsidize not only their own citizens but also all of us?
3. Are the drugs cheaper in Canada because there is less government regulation? If this the case, are more Canadians dying because of bad drugs? If not, maybe Congress should look at changing the regulations in the US as opposed to allowing the import of Canadian drugs, possibly putting US pharmacists out of business.
4. Is there a tariff on that the US imposes on drugs? If so eliminating the tariff may go a long way to reducing our health care cost!
5. Are the drug companies artificially raising the cost of their product for US consumers because they know it is a cost we will bear? I am willing to bet that there are less than 10 factories in the world that produce a particular drug, so from an manufacturing standpoint the price should be about the same everywhere.
6. Has the Canadian government negotiated some sort of volume discount with the drug companies? I was under the impression that the Obama administration was essentially working on a similar deal for us. Given the population of the US verses the population of Canada it would stand to reason the US could work out an even better volume discount and we would have Canadians flocking to the US to buy drugs helping our overall trade imbalance.
I am sure that there are other aspects to this story that I have not considered or comprehend but I would love to hear a future report on Marketplace that attempts to answer some of these questions.
I'm all about buying American goods. I am also about lowering prices, though. Competition does that. It sounded like the drug companies did something similar to what Intel did in your other story. They just kept competitors completely out of the market.
When I heard the section about how insurance companies are exempt from monopoly and antitrust laws, my eyes opened wide. I don't see how market prices can lower without competition.
The drug in Canada is cheaper because the Canadian government sets the price. To those who would want to allow re-importing the drugs, I ask, why not just suggest that we fix the price here in the US ourselves? Why would you want another sovereign country setting the price for you? I suspect you doubt you could get no support for openly fixing the prices directly.
