Misdirected outrage

November 17, 2003|By Morton Kondracke

AMONG THE things that the Republican Party has stood for throughout the years have been free enterprise and the profit motive. So how is it possible that under a Republican president with a Republican Senate and a Republican House, the most direct assault upon free enterprise and the profit system may succeed?

Many members of the GOP are surrendering core free-market principles and turning their backs on vital political contributors by their support of drug reimportation legislation.

For some years, Democrats have been waging a political war against the pharmaceutical industry, treating it as if its products were as lethal as tobacco or guns. They've accused the drug companies of charging high prices, gaming the patent system to keep generic drugs off the market and spending too much of their revenues on advertising and promotion.

The Bush administration stoutly fought attempts at reimporting Canadian drugs on safety grounds. But administration officials say that the president will sign a Medicare prescription drug bill that allows reimportation from Canada.

Why have Republicans turned their backs on both core values and valued supporters? Mostly because it's politically popular, based on a misdirected sense of outrage.

Pressure for Canadian drugs is driven by widespread indignation -- mainly from seniors and lobbies representing them -- over the fact that drugs in Canada and Europe commonly sell for a fraction of the cost in the United States. For example, monthly doses of the breast cancer drug tamoxifen cost $360 in the United States and $60 in Germany; a prescription for the blood pressure medicine Toprol-XL costs $108 here and $40 in Canada.

The suspicion among patients, egged on by politicians, is that the drug companies are ripping them off. But there are reasons for the disparities beyond anything the drug companies can control.

One big one is that Canada, Germany and other countries control the prices drug companies may charge, using the power of a clause in the Uruguay Round world trade agreement that would allow them to violate the patent of any drug whose manufacturer refused to sell it to them. So drug companies are forced to cut their prices dramatically or see the market flooded with cheap imitations.

These lower prices, though, don't pick up the cost of developing a drug, which is substantial. It costs more than $800 million to develop a new drug and bring it to market, according to Food and Drug Administration Commissioner Mark McClellan; foreign countries are paying only the cost of manufacture and distribution. That leaves the R&D costs to be paid by Americans.

Patients and politicians here are outraged. But their rage should be directed at the free riders in foreign lands, not the drug companies. Reimportation of drugs from those countries amounts to reimportation of other countries' price controls -- and that threatens the very profits drug companies must make if they are to raise the investment dollars to research and develop new drugs.

Politicians pushing reimportation may please their constituents, but eventually their actions will cost the lives of people who will die of diseases that won't be treated from medicines that won't exist.

For all the money it spends on advertising and campaign contributions, the drug industry has been unable to convince the public of the costs involved in developing and testing drugs. Stomach ulcers once treatable only with major surgery now can be halted with pills. The reduction in the death rate from cardiovascular disease in the United States has been valued at $1.5 trillion annually, according to Mr. McClellan.

Of every 5,000 compounds screened for development, only 250 proceed to pre-clinical testing, only five make it to clinical trials and only one results in an application to the FDA. Only half of those, moreover, get to the most expensive Phase 3 clinical testing, and fewer make it to market.

Those realities are difficult to describe, while the price differences are so easy to see.

The consequences of reimportation on drug prices and medical research is what cash-strapped governors should be focused on. Drug companies may refuse to sell Canada more product than its domestic market can absorb, in which case either prices will rise in Canada or Canada will refuse to ship drugs to the United States.

Some reductions will occur and that will result in fewer drugs. Worse, it may leave the public with fewer medical miracles.

Morton Kondracke is the executive editor of Roll Call and an analyst for Fox News.

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