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PHARMA: The real debate behind reimportation

So to continue from last week’s rant on reimportation, I got an email from the subject of the rant Stephen Chang. (And correcting something I said in my original post Stephen’s group does have a website Cures California.org (I just couldn’t find it easily on Google). Stephen wrote to me saying:

My you get upset easily! I certainly understand your points and the panels and probaly agree on some of them. However, uncontrolled illegal importation from Canada via trans shipments is not the answer. This will potentially make the issue worse as we will jeopardize our own fragile drug supply. I too have been looking for that answer in how to increase access to drugs and fully agree that something needs to be done. Do you have a sensible plan/policy that could be a win-win for everybody? Would love to hear about it

So I thought about this for a while, but before I spell out my ideas it’s worth noting that many people within the pharma business have serious problems with the industry’s stance. Don’t believe me? Take a look at this thread on the pharma-marketing list-serv about pricing, and look at this opinion piece by Pharma Marketing editor John Mack. John says correctly that ‘Pharma needs to realize that it just can’t “win the argument.” ‘ John also has two excellent articles on both the crisis in professional detailing and (on p 10) about better models to target physicians. There are also stories in the Pharma professional press on how high prices are hurting compliance (i.e. sales). This is all by way of showing that the industry has many sympathetic friends and even big-time supporters who feel that it has lost its way. So this is my reply to Stephen–it’s the closest I’ll ever come to trying to get big pharma to find a “Third Way” out of the mess it’s in.

Stephen–I don’t mean to get angry with you in particular, but you said one or two things on the show that I’m afraid were the straw on the camel’s back, following a year or two of me listening to PhRMA fail to make a serious argument in this debate. I don’t think you did yourself or your organization any favors by a) not speaking to the profit level of pharma companies, and — when countered with two GAO reports by your opponent on the show brought up — b) stating that only that research is expensive (“costs hundreds of millions of dollars”) without producing any evidence of its effectiveness or that pharma actually spends that much on R&D, especially when I’d already said in my call that marketing costs are nearly 3 times those of R&D.

However, you are not a professional PR person, you have a real job and a sincere position, so let me try to tell you why I think that your current position is counterproductive.

1) A simple executive order could allow the FDA to investigate and certify as safe a number of Canadian pharmacies, or a number of US based pharmacies that import from certified European pharmacies. Everyone knows that and that’s why the safety argument (or, worse, now the “terrorism” argument) is so disingenuous. Failing to do this when people are importing pharmaceuticals anyway is in fact increasing the risk of safety violations and means that the government’s position (bought and paid for by a short-sighted PhRMA) is actually increasing the risk to the American people.

2) The reimportation issue cannot be that big a deal for the US pharma market. Currently it’s less than $1 bn of a $200 billion market. Even if it went up tenfold it would be less than 5% of the market. PhRMA’s stance does two things. It stops some seniors getting drugs at a decent price (not that many are stopped I admit, but there are some who don’t want to break the law and it means that reasonable people are forced to flout the law). More importantly, it gives the anti-Pharmaceutical left a huge stick with which to beat the industry. More than 80% of seniors are opposed to the ban. Sometimes when you’re that outvoted you have to realize that your position is untenable.

3) The likely consequence of this is that there’ll be a backlash either in 2005 or 2007 or 2009 against big pharma, and severe price controls will come in shortly thereafter. The only people within pharma who don’t care about this are the senior executives of the big pharma companies who are judged on their current quarterly profits. People who care about the creation of new drugs and the availability of those drugs five to ten years out (i.e. you and your coalition) should be concerned about creating an environment in which those drugs for which the efficacy and cost-effective can be proven are available to patients. Currently big pharma’s only trump card is the vast amount of cash it has spent with the Republicans (even if some of them haven’t stayed bought as they can read polls too). That luck will run out sometime –and this November is my guess as to when.

OK, you asked how we get to a better place? I propose three quick measures which wouldn’t cost pharma companies much and would put them in a much better spot.

a) Help the FDA set up a safe channel for drugs from Canada and commit to supplying a decent amount of drugs in a safe import market. I suspect the amount would be smaller than PhRMA fears, and this would remove the number 1 image problem that pharma has.

b) Announce a voluntary reduction in the size of sales forces and marketing budgets, and transfer some of that money into R&D spending, and some into price cuts. This will have to happen anyway, and by getting ahead of the game pharma will be able to control it. Having the CEOs of Schering, Pfizer, GSK, Amgen, etc take a public salary reduction down below $5m from their current stratospheric levels wouldn’t be a bad idea, although it would alert the public to the obscene amounts they get now.

c) Realize that there is a long-term cost problem with health care and set up a system to deal with it. Expecting the rest of society to keep paying more and more into the bottomless pit of health care costs is not only heads-in-the-sand foolish, but it ends up denying access to health care insurance and basic care to millions of Americans. Pharma R&D has some potential to actually alleviate health care costs (the success of Tagamet in reducing ulcer surgery is a prime example, but the replacement of bone-marrow transplant with Gleevac is another). Pharma should be starting a real debate about how as a society we are going to deal with a future of genomics-inspired drugs, and which ones we should be funding. Again if pharma doesn’t lead that debate, the government will in a few years, and it’ll be much less pretty that you and your group would like.

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