Competitive Intelligence

Big Pharma Giving Thanks for Medicare Turkey: Seniors Get Stuffed, Canadians Refute FDA Drug Quality Complaints

The Medicare drug benefit, which will really only "benefit" pharmaceutical companies in its current form, is the subject of debate on Capitol Hill today as it appears the government will be barred from negotiating drug prices with big pharma:

With Congress poised for final action on a major Medicare bill this week, some of the fiercest debate is focused on a section of the bill that prohibits the government from negotiating lower drug prices for the 40 million people on Medicare. That provision epitomizes much of the bill, which relies on insurance companies and private health plans to manage the new drug benefit. They could negotiate with drug companies, but the government, with much greater purchasing power, would be forbidden to do so.

Likewise, last week in Canada, Diane Gorman, the assistant deputy minister in the federal health department, met in Ottawa with Mark McClellan, the commissioner of the U.S. Food and Drug Administration. "Canada's safety record is second to none internationally," she said, as the Canadian government said that there was no evidence that drug exports had violated Canadian laws or jeopardized the health of Americans, soundly defying a request by the Food and Drug Administration to clamp down on exports of cheap drugs to the United States.

Because the same prescription pharmaceuticals in the U.S. are 30 to 50 percent cheaper in Canada, naturally, there are a lot of Americans buying their drugs from the 140 or so Canadian pharmacies shipping to the U.S., despite threats against the practice by drug makers. So, at the same time that Big Pharma is threatening – apparently unsuccessfully – to restrict exports of drugs to Canadian distributors selling to mail-order pharmacies, U.S. Senator Ted Kennedy is attempting to get enough senators on board to filibuster against the attempt to scuttle Medicare’s ability to negotiate drug prices.

Here’s an excerpt:

The cross-border trade has become a divisive political issue, pitting pharmaceutical manufacturers and many traditional pharmacists against consumer groups.

In the United States, House and Senate negotiators earlier this week rejected proposals to let consumers import lower-cost prescription drugs from Canada and other countries as part of the bill creating a Medicare drug benefit. On the other hand, several state governors and local politicians are pushing for greater freedom to import cheap medications.

The Canadian government has taken the view that its priority is to ensure safe drugs for Canadians. Last month, the health department asked medical and pharmaceutical groups to notify it of any drug shortages or other supply anomalies. "At this stage, we don't have evidence of Canadian law being broken," Ms. Gorman said at a joint news conference with Dr. McClellan.

Several drug makers have begun rationing supplies to Canadian pharmacies in the hope of curtailing the cross-border trade. The Canadian subsidiaries of at least four companies have also announced price increases of 4 percent to 8 percent.

Dr. McClellan praised Canada's drug approval process, but said that "it's not a system that's designed to handle the large flows of drugs to Americans."

He said he was concerned at the potential for unapproved and mislabeled medications to be imported from Canada, and the difficulty of enforcing drug recalls north of the border in the United States. According to Dr. McClellan, Internet pharmacies have recently sprung up that claim to be based in Canada but do business from another country using a Canadian domain name. "Our focus is on safety for Americans," he said.

Citing cooperation between the F.D.A. and more than 20 states in improving drug safety, Dr. McClellan expressed the hope that the Canadian health department would "provide more leadership" in dealing with other levels of government in Canada. Manitoba Province has encouraged Internet drugstores to attract investment and to create jobs.

Earlier, Dr. McClellan and Ms. Gorman signed a memorandum of understanding intended to improve collaboration between American and Canadian drug regulators. While Dr. McClellan described the agreement as "a bridge to span the regulatory gaps that separate us," Ms. Gorman said the deal was aimed mainly at sharing information.

Ms. Gorman said that while she "acknowledged and respected" the American government's concerns about the fast-growing importation of drugs from Canada, "our health care system is a defining characteristic of who we are as a nation."

In a speech to the Drug Information Association here, Dr. McClellan expressed concern about the prevalence of every-country-for-itself drug policies. Keeping drug prices artificially low, Dr. McClellan said, lessened the incentive for innovation by drug manufacturers. He said rich nations should "fairly share the costs, not just the benefits, of new drugs."

- Arik