What’s become of the United States when a 70-year-old grandmother has to become a drug smuggler just to stay alive?
In the richest nation of the world, the United States of America, people are facing a dire reality. They must often choose between basic necessities such as food, shelter and needed medications. The skyrocketing cost of prescription drugs has caused some people to resort to drug smuggling to survive.
Although the United States is the world’s largest market for pharmaceuticals, Americans pay the world’s highest prices.1 Effectively, a two-tier price system exists for the same drugs manufactured by the same companies–Americans pay more for drugs while the citizens of other countries pay less.2
Many of the same drugs sold in the U.S. are available next-door in Canada and in Europe at half-price or less.3 However, the U.S. government has made it illegal for Americans to get these more affordable drugs.
Under U.S. law, it is illegal and criminal for a person to import prescription medications into the U.S.4 As a result, Americans who purchase prescription drugs from other countries, such as Canada, are transformed into drug smugglers. For many Americans, however, taking advantage of the global marketplace is the only way to afford needed medications. From the young to the elderly, insured and uninsured, millions of Americans are purchasing prescription drugs from Canada and other countries. Through internet orders, mail orders or by personally purchasing the drugs and crossing the border by foot, Americans are smuggling to survive. Each day, thousands of packages containing prescription drugs are illegally smuggled into the U.S.5 This amounts to about 10 million packages of prescription drugs smuggled into the U.S. each year.6 Approximately 4.8 million of these packages are from Canada.7
Canada and European countries, such as the United Kingdom and France, are able to provide drugs at substantial savings because these countries negotiate rates on behalf of all patients.8 With the exception of a few U.S. government programs9, attempts to implement a similar approach in the U.S., to negotiate better prices for all Americans, have thus far been blocked by the drug industry.
For example, the Medicare Program, which is a U.S. government run program, provides health care coverage for over 41 million, mostly elderly, Americans.10 In representing over 41 million people, one would think that the U.S. government would use its bulk purchasing power to negotiate lower drug prices. Basic business sense and capitalistic principles dictate that bulk purchases, particularly of a magnitude as large as for 41 million people, allow for the negotiation of a better price, i.e., a volume discount. However, a 2001 government report prepared for the U.S. Department of Health and Human Services acknowledged that “Medicare simply pays too much for prescription drugs,” over twice the prices that it should pay, and that Medicare’s “reimbursement method ... cheats taxpayers.”11 Instead of attempting to fix this glaring problem, Congress did quite the opposite. In 2003, Congress changed the Medicare laws to specifically forbid the U.S. government from negotiating lower prices for Medicare members.12 With the ability of the government to negotiate lower prices blocked, overpriced drugs remain the norm resulting in higher bills for taxpayers and larger out-of-pocket deductible costs to Medicare members.
A report released by Public Citizen13 found that “the drug industry hired 824 individual lobbyists in 2003–an all-time high. That’s more than eight lobbyists for each member of the U.S. Senate.”14 According to the report, the drug industry spent a record $108.6 million on lobbying in 2003.15
Although the drug industry blames the high price of prescription drugs on research and development costs, financial reports filed by the drug companies with the Securities and Exchange Commission show that, on average, the drug industry spends over two times more on marketing, advertising and administration than it does on research and development.16 The drug industry consistently ranked as the most profitable industry in the U.S. every year from 1994 through 2002.17 During each of these years, the drug industry reaped profits that were 300% to 560% as profitable as the median for all Fortune 500 companies.18 A report on drug industry profits found that in 2002, the profits of the 10 drug companies in the Fortune 500 ($35.9 billion) were more than the combined profits of all of the other 490 Fortune 500 companies ($33.7 billion).19
While drug companies rake in profits, the ever escalating cost of prescription drugs continues to compromise the well being of U.S. citizens as well as U.S. businesses that provide health care coverage to their employees. U.S. prescription drug costs have increased by double-digit rates every year for the past nine years.20 U.S. employers straddled with increasing prescription drug and health care costs are either cutting back on the coverage they make available to their employees or passing on some of the cost increases to their employees in the form of higher premiums, deductibles or co-pays.21 Insured or not, American consumers are facing ever-increasing out-of-pocket costs for their needed medications.22 Even seniors with drug coverage find the cost of prescription drugs often far exceeds their coverage limits and must choose between food, rent, and needed medications.23 As a result, one in five adults cannot afford to buy some or all of his or her prescribed medicines.24
Unless something is done to reign in the cost of drugs, the situation is poised to get worse. It is projected that prescription drug spending will continue to increase by double-digit rates each year through at least 2013.25
Immediate relief is available. The U.S. government can and should allow Americans to legally purchase prescription drugs from Canada and other countries.26 This would allow Americans to get the same drugs they need at a substantial savings27 and put pressure on the drug industry from charging Americans more for prescription drugs than they charge the citizens of other countries.28
1. California Assembly Joint Resolution No. 62, Resolution Chapter 112, Statutes 2004, Chaptered July 8, 2004; Pharmaceutical Market Access Act of 2005, introduced in the House as H.R. 328 and in the Senate as S. 109, 109th Cong., 1st Sess., 2005.
2. See for example, Susan Dentzer, “Importing Drugs,” PBS Online News Hour with Jim Lehrer, March 9, 2004, tracking Lipitor (a top selling drug to lower cholesterol) from its manufacture in Pfizer’s Puerto Rico plant to the store shelves in the U.S. and Canada where the drug is sold at substantially different prices [“The only difference between the Lipitor bound for the U.S. and that bound elsewhere is the packaging”] (available at http://www.pbs.org/newshour/bb/health/jan-june04/import_03-09.htm).
3. Health and Human Services Task Force On Drug Importation, U.S. Department of Health and Human Services, “Report on Prescription Drug Importation,” December 2004, at pp. 70-71 and Figure 7.2 (available at http://www.hhs.gov/importtaskforce/Report1220.pdf).
4. See U.S. Food and Drug Administration, letter (and statutes cited therein) dated February 12, 2003 from William K. Hubbard, Associate Commissioner for Policy and Planning, to Robert P. Lombardi, Esq., The Kullman Firm (available at http://www.fda.gov/ora/import/kullman.pdf).
5. Statement of William K. Hubbard, Associate Commissioner for Policy and Planning, U.S. Food and Drug Administration, before the Committee on the Judiciary of the United States Senate, July 14, 2004 (available at http://www.fda.gov/ola/2004/importeddrugs0714.html).
6. Health and Human Services Task Force On Drug Importation, U.S. Department of Health and Human Services, “Report on Prescription Drug Importation,” December 2004, at pp. 11-12 (available at http://www.hhs.gov/importtaskforce/Report1220.pdf).
8. Peter Lamy Center for Drug Therapy and Aging, University of Maryland School of Pharmacy, “Issues in Prescription Drug Coverage, Pricing, Utilization, and Spending: What We Know and Need to Know,” Report prepared for the U.S. Department of Health and Human Services, Office of the Assistant Secretary for Policy and Evaluation, Office of Health Policy, February 18, 2000, Appendix A at pp. 163-169 (available at http://aspe.hhs.gov/health/reports/drugstudy/appena.PDF).
9. One such program, for example, is administered by the U.S. Department of Veterans Affairs (“VA”) which provides health care benefits to U.S. military veterans. See William M. Welch, “VA Offers Medicines at Bargain Prices,” USA Today, June 17, 2003, which provides an overview of the VA program and examples of lower prescription drug prices obtained through the program (available at http://www.usatoday.com/news/washington/2003-06-17-vets-drugs-cover_x.htm); see also companion chart entitled “Comparing Prices: VA Dusts Competition in Drug Prices,” June 18, 2003 (available at http://www.usatoday.com/news/2003-06-18-va-drugs-chart.htm).
10. Centers for Medicare and Medicaid Services, information on website under heading entitled “Medicare Information Resource” (available at http://www.cms.hhs.gov/medicare/); Medicare Board of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, “2005 Annual Report of the Board of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds,” Centers for Medicare and Medicaid Services, March 23, 2005, at p.2 (available at http://www.cms.hhs.gov/publications/trusteesreport/tr2005.pdf).
11. Office of the Inspector General, Department of Health and Human Services, “Medicare Reimbursement of Prescription Drugs,” January 2001, at pp. 6, 10 (available at http://www.oig.hhs.gov/oei/reports/oei-03-00-00310.pdf).
12. Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173); see the “Noninterference” provision of the law which is codified at 42 U.S.C. § 1395w-111 (i).
13. “Public Citizen is a national, nonprofit consumer advocacy organization founded in 1971 to represent consumer interests in Congress, the executive branch and the courts” (see http://www.citizen.org/about/).
14. Public Citizen Congress Watch, “The Medicare Drug War: An Army of Nearly 1,000 Lobbyists Pushes a Medicare Law that Puts Drug Company and HMO Profits Ahead of Patients and Taxpayers,” June 2004, at p. 4 (available at http://www.citizen.org/documents/Medicare_Drug_War%20_Report_2004.pdf).
16. Families USA, “Profiting from Pain: Where Prescription Drug Dollars Go,” July 2002, at pp. 1, 5, and Table 1 at p. 3 (available at http://www.familiesusa.org/assets/pdfs/PPreport89a5.pdf).
17. Health Care Marketplace Project, “Trends and Indicators in the Changing Health Care Marketplace,” Exhibit 1.21: “Profitability Among Pharmaceutical Manufacturers Compared to Other Industries, 1995-2003,” The Henry J. Kaiser Family Foundation, publication number 7031, information updated April 1, 2005 (available at: http://www.kff.org/insurance/7031/ti2004-1-21.cfm?RenderForPrint=1); “Federal Policies Affecting the Cost and Availability of New Pharmaceuticals,” The Henry J. Kaiser Family Foundation, July 2002, at p. 35 (available at http://www.kff.org/rxdrugs/loader.cfm?url=/commonspot/security/getfile.cfm&PageID=14078).
19. Public Citizen Congress Watch, “2002 Drug Industry Profits: Hefty Pharmaceutical Company Margins Dwarf Other Industries,” June 2003, at pp. 1, 3 (available at http://www.citizen.org/documents/Pharma_Report.pdf).
20. Health Care Marketplace Project, “Trends and Indicators in the Changing Health Care Marketplace,” Exhibit 1.6: “Annual Percentage Change in National Spending for Selected Health Services, 1993-2003,” The Henry J. Kaiser Family Foundation, publication number 7031, information updated February 16, 2005 (available at http://www.kff.org/insurance/7031/ti2004-1-6.cfm?RenderForPrint=1).
21. Debora Vrana, “Rising Premiums Threaten Job-Based Health Coverage,” Los Angeles Times, September 15, 2005, at p. A1; Stephanie Armour and Julie Appleby, “As Health Care Costs Rise, Workers Shoulder Burden,” USA Today, October 20, 2003 (available at http://www.usatoday.com/money/workplace/2003-10-20-healthcare-cover_x.htm); Jeff Green and Bill Koenig, “UAW Says It Won't Reopen Contract With GM; Talks Continue,” Bloomberg, June 16, 2005 (available at http://quote.bloomberg.com/apps/news?pid=10000006&sid=afJhFCjtgd.c&refer=home#); Families USA, “Sticker Shock: Rising Prescription Drug Prices for Seniors,” June 2004, at p. 10 (available at http://www.familiesusa.org/assets/pdfs/Sticker_Shock5942.pdf).
23. California Assembly Joint Resolution No. 62, Resolution Chapter 112, Statutes 2004, Chaptered July 8, 2004.
25. Kaiser Family Foundation, “Prescription Drug Trends,” publication number 3057-03, October 2004 (available at http://www.kff.org/rxdrugs/loader.cfm?url=/commonspot/security/getfile.cfm&PageID=48305).
26. Several bills have been introduced in Congress which, if passed into law, would allow Americans to legally import prescription medications. See Pharmaceutical Market Access Act of 2005, introduced in the House as H.R. 328 and in the Senate as S. 109, 109th Cong., 1st Sess., 2005; and Pharmaceutical Market Access and Drug Safety Act of 2005, introduced in the House as H.R. 700 and in the Senate as S. 334, 109th Cong., 1st Sess., 2005.
27. It is estimated that allowing open pharmaceutical markets could save American consumers at least $38,000,000,000 each year. Pharmaceutical Market Access and Drug Safety Act of 2005, introduced in the House as H.R. 700 and in the Senate as S. 334, 109th Cong., 1st Sess., 2005; Peter Rost, “Contradicting Itself on Drug Imports,” The New Jersey Star-Ledger, January 5, 2005.
28. Other measures are also available. For example, prescription drug buying pools can be established by States that would allow anyone–from state and local governments, businesses and individuals–to join and use their combined buying power to negotiate lower prices for prescription drugs.