Importation is back? Really?!?

Yes, you read the headline correctly. U.S. Senator Olympia Snowe (R-ME) has just re-re-re-re-re-introduced the misnamed Pharmaceutical Market Access and Drug Safety Act (S.319). It has 18 co-sponsors.

There must be some bizarre advanced political calculus behind this move, because it makes no logical economic or public safety sense. A weak dollar and a high generic dispensing rate imply that even the theoretical financial benefits are minuscule, so the diversion dangers from this bill would never justify the risk. The chart below tells the story.

I don’t see this legislation moving forward, but then again, drug importation has been declared dead more times than an orange parka clad Kenny McCormick. So here’s a brief review of the economic and safety issues. You can also revisit previous Drug Channels articles tagged with Importation.

IMPORTATION WILL BE UNSAFE.

My reasoning is quite simple:

• Diversion is the sale of a drug outside of the distribution channels for which it was originally intended, as in “made to be sold in Europe but diverted to the U.S.”
• Drug diversion is the primary way that counterfeit drugs get into legitimate pharmacies.
• Importation and parallel trade are—by definition—diversion.

The problems with importation arise because independent wholesalers and pharmacies can buy, repackage, and resell the products. This trading activity, a.k.a. “parallel trade,” creates the potential for counterfeit and mishandled products to enter the supply chain. The Partnership for Safe Medicines has an impressive archive of counterfeit drug news stories, many of which involve diversion.

Are all diverted drugs counterfeit? No.

Does the risk of counterfeiting rise dramatically with diversion? Yes.

Why else do you think that the European Parliament has voted yesterday for the Falsified Medicines Directive, which will hopefully reduce counterfeit medicines in Europe due in part to a standardized serialization system. See Europe votes in new anti-counterfeit law.

The U.S. still has a crazy patchwork of pedigree, serialization, and licensing laws across the 50 states. The FDA does not have the authority to put a national system in place. Check out this review of the February 2011 FDA meeting on track-and-trace from Pharmaceutical Commerce.

IMPORTATION WILL NOT SAVE MONEY.

I am amazed at Senator Snowe’s apparently willful disregard for today’s healthcare realities. The new bill, like its infamous predecessors, excludes biologicals and therefore most specialty drugs. So, we are talking about importing traditional brand-name drugs, which are a diminishing part of the industry as the generic dispensing rate climbs.

The chart below tells the story. The value of drug importation declines as we move toward the lower right portion of the chart.

But wait, there's more! Cross-border trade can create shortages if a country happens to be “low cost” based on current exchange rates. Yes, this matters because the U.S. is a nearly bankrupt republic with a debased currency. And any remaining price differences will be absorbed by the middlemen—retailers and wholesalers —while manufacturers and consumers would bear the risks and costs. See my 2007 editorial Importation Illusions.

In December 2009, an aide to President Obama stated the White House still favors drug importation. (source). Let’s hope that the POTUS gets busy with legitimate matters—like, say the long-term fiscal health of our country—instead of this fraudulent and dangerous bill.