A Plague on the Nation

By Robert Kuttner
Web Exclusive: 08.23.04

There is something quite lunatic about the entire debate on whether to permit imports of drugs from Canada. It's not as if Canada manufactures drugs more cheaply. Nor are drugs like trees, or bauxite, or hydro power, which just happen to be naturally plentiful in Canada.

No, the cheaper Canadian drugs are the same ones sold at higher prices in the United States, and either exported or licensed for manufacture in Canada.

Why are they cheaper up north? Because Canada has a policy of controlling drug prices through its national health insurance system. As Deborah Stone, a health policy expert at Dartmouth, has observed, it's not the drugs we should be importing, it's the policy.

But the pharmaceutical lobby has so much power in the United States that cheaper drug prices are off the political radar screen. In fact, the recent Medicare bill pushed through Congress by the Bush administration explicitly prohibits Medicare, the largest bulk purchaser of pharmaceutical drugs, from negotiating cut-rate bulk prices. A consequence of these sky-high drug prices is that seniors who elect to take the new Medicare drug coverage must pay thousands of dollars out of pocket each year before the coverage fully kicks in. (Senator Kerry, to his credit, would reverse this policy.)

Instead of debating head-on whether the United States should have a national health program like Canada's, or at least controlled drug prices, the news media have generally accepted the nonsensical premise that the battle is about imports and that the issue is the safety of drugs from Canada. This is the drug industry line, and it's a complete red herring. In fact, there is no documented case of an American getting sick because of tainted or adulterated drugs brought in from Canada. On the contrary, Canadian safety standards are at least as strict as our own. But Bush appointees at the FDA, as a service to their allies in the pharmaceutical industry, have tried to make the public focus on safety. Why? Because if drug imports from Canada became widespread, the domestic structure of drug overpricing would collapse. Everyone would buy from Canada.

If the administration were not hostile to the idea of drug imports or cheaper drug prices, it would be easy to set up safety spot checks. Indeed, in areas where the administration promotes free trade, it satisfies its safety concerns with spot checks of raw agricultural products imported from countries whose rudimentary sanitary standards are far less sophisticated than Canada's. To add insult to injury, the administration is actually pressing America's trading partners who have lower drug prices to raise those prices so that our high prices won't stick out like a sore thumb and tempt Americans to seek cheaper drugs from abroad.

The drug industry and its friends in the administration contend that the exorbitant prices are necessary to pay for research. You've probably seen the TV ads in which an idealistic research scientist at a drug company vows to find a cure for Parkinson's or Alzheimer's, mentioning in passing that it costs $800 million to "bring a new drug to market."

But as author Merrill Goozner documents in his book, The $800 Million Pill, much of the money attributed to "research" goes to advertising and copy-cat drugs rather than true breakthroughs, and much of the actual research is financed by taxpayers through the National Institutes of Health). Economist Dean Baker has calculated that only about one dollar in five that US consumers spend on inflated drug prices go to finance drug research. Baker adds up all the money contributed by taxpayers to drug companies through Medicare, Medicare, the Veterans Administration, and NIH. He concludes that it would be more cost-effective to pay for all drug research through government grants and then put the results in the public domain. Manufacturers, as in the case of aspirin, doxycycline, and other off-patent drugs, would then earn only a normal profit, and all drugs would be far cheaper.

Scientists would still innovate. The pioneers of antibiotics weren't in it to get rich. Nor was Dr. Jonas Salk. Their breakthroughs quickly went into the public domain to help the greatest number at the lowest cost.

It's charming that the Republican governor of New Hampshire, Craig Benson, is suing the FDA to allow Canadian pharmacies to fill U.S. prescriptions and that congressmen of both parties have sponsored bills to legalize imports. But these worthies are fighting the wrong fight and ducking the real one. Forget Canada. We need a national policy to lower drug prices right here in the USA.

Robert Kuttner is co-editor of The American Prospect. This column originally appeared in The Boston Globe.