Healthy Skepticism Library item: 1346

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Olive D.
Big Pharma blames Canada
Toronto Star 2003 Jul 17

Full text:

An open letter to U.S. prescription drug consumers:

Our country’s reputation has become a political football in your debate about how to control soaring U.S. drug prices.

Opponents of a proposed bill before the U.S. House of Representatives that would allow Americans to legally buy prescription drugs from Canada and other countries are depicting Canada as a potential source of snake-oil remedies and even as a conduit for bioterrorism.

If you weren’t convinced by our non-participation in the Iraq invasion, our same-sex marriages and pot legalization, maybe this will convince you we really are the enemy next door.

Federal and state governments struggling with budget crises and blue-chip U.S. employers hobbled by mounting health-care expenses are desperate to rein in prescription drug costs.

That pressure culminated last month in a lopsided vote in the Republican-controlled U.S. Senate to allow Canadian drug imports.

That would legalize the drug purchases already now made by an estimated 1 million Americans who travel to Canada for their essential meds or buy them on the Internet.

The matching House bill has the same intent. By threatening Big Pharma with a flood of cheap drugs from the north, critics of alleged price-gouging by the giant pharmaceutical companies are hoping to coerce the industry into dropping prices for U.S. consumers by as much as 30 per cent.

Free-market alarmists respond that with this radical legislation, the United States would essentially give a Canadian government agency, the Patented Medicine Prices Review Board, the power to set drug prices for the U.S. economy.

Whew. We did not ask for this responsibility.

The Canadian review board was part of a compromise by which Canada agreed to extend patent protection for Big Pharma’s new drugs in exchange for some restraining influence over price hikes.

Some prescription drugs in Canada are 50 per cent or so cheaper than in the United States, but many drugs cost us about the same as you pay.

Canada is actually Big Pharma-friendly compared with Europe and Japan, where drug prices are even lower and health outcomes are better to boot.

Meanwhile, you’re hearing slanderous reports about us on your airwaves.

The pending U.S. legislation, says a new radio advertising campaign sponsored by an industry-backed group called the Seniors Coalition of Springfield, Va., “would open America’s border to a stream of imported prescription drugs for which the FDA (U.S. Food and Drug Administration) cannot assure safety, effectiveness or quality.” Message: You could die if you take these drugs from Canada.

Some of this language is lifted almost word for word from the website of the drug industry’s trade group, the Pharmaceutical Research and Manufacturers Association of America, or PhRMA.

Last month, PhRMA circulated a document on Capitol Hill saying, “If importation were legal, Canada would become the easiest portal into the United States for the world’s terrorists and counterfeiters.”

U.S. President George W. Bush got the message. In vowing this week to veto the importation bill, Bush said it “could result in unsafe, unapproved or counterfeit drugs being imported into the U.S.”

Dr. Bill Frist, U.S. Senate majority leader, heart-transplant surgeon and conspicuous water-carrier for PhRMA, heartily agrees that importation is a spectre “in this era of bioterrorism.”

At the very least, the industry argues, any measure that would undermine its profitability would depress R&D activity in the one major economy where drug makers are assured of reaping the maximum free-market reward from their search for miracle cures.

“It’s one thing for the Canadians and Europeans to free-ride on American R&D, but we can’t free-ride on ourselves,” says John Calfee, a “resident scholar” at the American Enterprise Institute, whose alarum is linked by the helpful PhRMA site.

The institute is better known for its lead role in promoting an image last winter of American soldiers being greeted as liberators in Baghdad – and none too soon, the institute argued, given Saddam’s stockpile of weapons of mass destruction.

“The system that gave us the drugs the whole world wants would be hobbled,” Calfee says, “just when researchers are finally glimpsing pathways to cures for cancer, Alzheimer’s, and other killers.”

Some facts:

Health Canada slavishly follows FDA directives in approving new prescription drugs for use in Canada – the FDA is essentially the drug regulator for Canada.

A report last spring by the U.S. Congressional Research Service acknowledged the point. “The statutory requirements for approving and marketing pharmaceutical products in the United States and Canada are, in general, quite similar,” it said, also noting that Canada has the same strict “chain of custody” control procedures from factory to distributor to pharmacy.

If Canada and other nations are such potential havens of unsafe drugs, why did the United States import almost $15 billion (U.S.) in brand-name drugs from overseas plants last year?

As Big Pharma has consolidated through mergers into a handful of superpower firms, the industry’s R&D productivity has plummeted. In 1996, the FDA approved 53 new drugs. Last year, it approved just 17.

Increasingly, Big Pharma doesn’t invent drugs. It licenses them from smaller firms around the world, or buys them outright by acquiring the firms that hold the rights, passing along the high takeover costs to consumers.

The biggest threat to Americans from unsafe drugs originates at home, not overseas. In the past few years, almost every multibillion-dollar U.S. drug company has been cited by the FDA for shoddy manufacturing processes or has settled government prosecutions and class-action suits over compounds with terrible side effects or which made false claims to efficacy.

With Pfizer Inc., the kingpin of Big Pharma, it’s a combination of several of the above.

Pfizer blockbusters Lipitor and Celebrex, for instance, were acquired through mergers. The company’s own new-product pipeline has never been the class of the industry, giving rise to recent hints from Pfizer that it may curtail future increases in its vaunted R&D budget.

Last year, Pfizer was told by the FDA to fix alleged faulty manufacturing processes at its antibiotics plant in Terre Haute, Ind. It was cited by federal investigators along with other firms for the more the $1 billion that Medicare, a federal U.S. health-care program, overpays each year due to confusing or misleading drug-price data from Big Pharma.

Last October, Pfizer paid $49 million to settle a U.S. justice department allegation that it over-charged Medicaid, another federal program, for Lipitor – the result of a whistleblower lawsuit.

Pfizer, the second-most valuable company in the world after General Electric Co., is a $54 billion (projected 2004 sales) behemoth. And Pfizer’s size is its problem. To generate respectable double-digit sales growth on such an enormous revenue base – hugely inflated by its merger activity in recent years – Pfizer must come up with $6 billion or so in additional revenues this year.

It needs, in other words, to introduce six new blockbuster drugs this year (those with a minimum of $1 billion in annual sales), or it has to boost the volume of existing drugs. It’s a safe bet the former won’t happen. Pfizer will be lucky to come up with a six-pack of blockbusters this decade.

No, salvation for Pfizer lies with increased sales of its current portfolio, chiefly by coming up with new advertised uses for the same drugs. A timed-release version. A children’s version. A compound that can be taken once instead of three times a day, or orally rather than by injection. That works for depression and, it turns out, PMS. This is in large part what Big Pharma research consists of, reformulating and repackaging drugs that in some cases have been around for decades.

Goosing volume means prodding docs, of course. That’s why Pfizer keeps laying on more sales people, with a field force now exceeding 11,000 “detail men” – peddlers who have become such a nuisance with their repeated calls on doctors that many docs have begun to shoo them away.

Industry-wide, the number of sales reps has tripled in the past decade, to 90,000. The annual pay for those folks is $12 billion

You can see the opportunities here for reducing drug costs for consumers. For starters, the industry could cut back on marketing.

“Is it necessary” for Glaxo- SmithKline PLC to have a huge sales force, asked chief executive Jean-Pierre Garnier, interviewed last month in the Wall Street Journal. “No, but if my competition can do it and I can’t do it, then I’m at a disadvantage. This has been an arms race in the worst possible manner.”

Dr. Henry A. (Hank) McKinnell Jr., the Canadian expatriate who heads Pfizer, doesn’t see it that way. Anything to boost sales. Promising his shareholders continued 10 per cent revenue growth to justify the staggering sums paid for the acquisitions of Warner-Lambert Inc. and Pharmacia Corp. in recent years, McKinnell explained last month that “Great businesses are built on top-line (revenue) growth.”

McKinnell’s doctorate is not in medicine but business, earned at Stanford University after he worked his way through University of British Columbia as a deckhand on freighters. The scare-mongering Seniors Coalition counts PhRMA as a donor of undisclosed largesse. Since PhRMA doesn’t twitch without Pfizer’s say-so, the good Dr. McKinnell is heavily complicit in the current slur on the country where he was raised.

We saw this coming, and should have alerted you to it. Confidential PhRMA budget documents obtained by the New York Times in late April showed that the trade group has allocated $1 million “to change the Canadian health-care system” and $450,000 to fight the importation threat to its profits that is posed by new online pharmacies that first sprouted in Manitoba and are proliferating across the continent.

The PhRMA documents complained about the unfair “demonization of the industry.” The industry’s response has been to demonize Canada, as part of its over-all $150 million plus campaign to lobby U.S. and foreign governments and to subsidize “like-minded organizations” such as the Seniors Coalition.

Some of us are flattered by the attention of this Blame Canada tactic. But you have to know, this is your fight, not ours. We’re just a calculated distraction.