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PHARMA: How big a deal is cross-border Internet pharmacy?

Regular THCB readers will know that I’ve been forecasting that the Republican administration will have the FDA back down from its stance banning re-importation of drugs from Canada (and elsewhere) mostly because over 80% of the public think that they ought to, and it’s by far the most disliked part of the recent Medicare bill. AARP has thrown its weight behind the change and HHS secretary Tommy Thompson has set up a commission to come up with that ruling, but of course there are still massive objections from the pharma industry. An organization called the Partnership for Safe Medicines is so keen on keeping the status quo that it even had a PR firm contact yours truly to ask me to cover a press conference it had yesterday, which included Peter Neupert, President of Drugstore.com speaking out against imports. Here’s the press release which quotes Neupert as saying:

    “Rogue Internet drug sellers, which operate offshore, overseas, or through Canada, are illegal and unregulated by U.S. or Canadian authorities,” said Peter Neupert, chairman of the board of drugstore.com, inc. “It is extremely difficult for consumers to know who they are dealing with on the Internet today; even sites purporting to be Canadian pharmacies may be actually located in Third World countries. We feel the only safe way to purchase prescription drugs over the Internet is to shop at an online pharmacy certified by the National Association of Boards of Pharmacy(R)’s (NABP(R)) Verified Internet Pharmacy Practice Sites(TM) program (VIPPS(R)).”

A little background. There are three types of internet pharmacy. 1) US based mail-order operations that are legitimate parts of US pharmacies and PBMs or are similar–Drugstore is in this number with Medco, Walgreens etc. They request that you send in a genuine prescription and are just another delivery vehicle like the corner pharmacy or the mail order that’s been used for years with no problems. 2) Then there are the ones who send you spam offering access to Viagra or Cialis and allow you to go online and buy with a prescription “their doctor” gives you. These guys are clearly cowboys and they are being dealt with by the proper authorities here, although some bloggers with a libertarian bent don’t believe that type of dispensing should be illegal. (By the way Trent, I somewhat agree, but it’ll never happen!).

3) What the SafeMedicine folk fail to point out is that there is a third group, which is composed of legitimate pharmacies already certified by the Canadian government which are simply mailing across the border as opposed to across the country. These look far more like the first group than the second. If you go to their site they demand a prescription, and their drugs come from reputable suppliers and are handled in as reputable a way as in the US. So is SafeMedicine advocating that these pharmacies receive the VIPPS certification so that US consumers can tell them from the cowboys? Of course not. They’re holding press conferences like yesterdays and peddling propaganda like this from a Pfizer sponsored doctor-journalist. That’s because the members of Safe Medicine are PhRMA and various associations of American pharmacists, who’s economic interests are hurt by imports, and by restricting the supplies available in Canada they are actually making it harder for those legitimate Canadian pharmacies to get drugs to send to the US and so are opening up the opportunity for the cowboys to step in. If the industry really cared primarily about patient safety they would support the FDA or VIPPS certifying Canadian based online/mail-order pharmacies. This was suggested on 60 Minutes a couple of weeks back by the mayor of Springfield, MA:

    Mayor Albano concedes that casually buying drugs on the Internet could be risky, but says it was quite simple for him to check out his Canadian supplier, and challenges the FDA to do the same thing. “The FDA has become a pawn of the pharmaceutical industry, that they are protecting those high profit margins. If the FDA wanted to put a plan together similar to what we’re doing in Springfield, that would be good for all Americans, they can do it in 15 minutes, relative to safety,” says Albano. “We get all our medications from certified, regulated pharmacies in Canada. It’s no different than going to your neighborhood pharmacy. And it’s the exact same medication.”

So beyond the ridiculous credibility problem that the industry is facing here, and the fact that they seem to have even lost the Republicans they bought and paid for in 2002, how much would it really cost them to retreat on this issue? My guess is not that much. Harris reports this week that only 4% of Americans have bought a drug online when prompted by email (which may of course be spam or a legitimate reminder email from drugstore.com or a competitor). That number is itself a problem for Drugstore.com, because it really means that only a small proportion of the drugs consumed in America come via mail order or online.

One number I found was that mail order counted for around 14% of all drugs in 1999–that was back in the days when PlanetRX and Drugstore.com could actually afford advertising! The vast majority of that 14% comes from the big PBMs mail-order operations. There don’t appear to be any good numbers on the amount of imports (at least the AMA News couldn’t find any) Quick update IMS reports that imports from Canada totalled about $1 billion in 2003 which is less than 0.5% of all drugs sold. The fundamental question is, why would you bother going to the trouble of importing from Canada if someone else is picking up the tab? Most Americans have pretty decent drug coverage and aren’t getting their drugs from Canada. The ones that do are the small share of Medicare folks who don’t have any drug coverage, and a few leading edge employers (like the city of Springfield). I suspect that the cost of losing that revenue is less than the hit the pharmas are taking in bad publicity right now. Let alone how bad it might be for them if this issue is enough to lose Bush Pennsylvania and Florida, which it well might be. In 1992-4 the pharmas kept pricing in check in what we called the “heads down for Hillary” effect. In the end the outrage against their pricing then wasn’t enough to prompt price controls, and they had a bonanza for the rest of the 1990s. Those tactics might be just as advisable now.

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