Medical News

(PREWB) March 25, 2004 — If you are not confused by the heated debate over whether or not Americans have the right to buy their prescription drugs in countries where prices are 50 to 80% cheaper, you have not been paying attention. There is a great deal of anti-prescription drug reimportation spin these days from special interest groups committed to keeping the US market closed so that our Rx prices remain the highest in the world by a wide margin.

Much of the spin attempts to explain the dramatically lower prices in other countries as the result of “socialists” not allowing drug makers to earn a profit on sales.

However, a simple examination of the facts reveals that “the emperor has no clothes” when it comes to this claim.

European Union countries do allow profits to be made but use two simple common sense mechanisms to stimulate price competition in the market.

First, their national health systems spend taypayers’ money wisely by setting a reimbursement cap (not a price cap!) on what a member can receive on their prescription drug purchase. This cap takes into account the cost of developing and producing the drug, a profit for the maker and other middlemen, and finally the cost of equivalent generic substitutes. The aim is to promote the use of equivalent generics in place of expensive brand name alternatives whenever both are equally effective. However, the consumer still has the freedom to pick the more expensive alternative so long as they pay the difference out of pocket. Finally, the drug companies have the freedom to set prices at levels higher than the reimbursement cap.

Second, European Union members promote and enjoy the benefits of “parallel trade” for prescription drugs. This means that a pharmacy in Germany is free to buy Rx supplies from Italy or Spain if the prices there are cheaper on a given day. Parallel trade means “free trade” which in turn results in lower prices for consumers.

These two mechanisms provide the necessary countervailing force a free market needs in order to have effective price competition. Unfortunately, the US market has nothing to counter Big Pharma’s immense pricing power. The results are the world’s highest prices.

The movement for prescription drug reimportation is simply a call for free trade to be finally introduced to the US market. The Pharmaceutical Market Access Act of 2003 identified 26 countries deemed to be safe sources of prescription drugs. Right now the only party with any freedom in the closed US market is Big Pharma which is free to charge whatever it wants to the rest of us.

Imagine what would happen to domestic prices if Americans were finally free to source the best possible prices for their medicines in the same way that they can source the best possible deals on sneakers and DVD players.

With 29% of prescriptions going unfilled in America due to their inaffordability, according to the Kaiser Family Foundation, it’s time to stop paying lip service to free markets and actually open up our market.

(PREWB) March 25, 2004 — If you are not confused by the heated debate over whether or not Americans have the right to buy their prescription drugs in countries where prices are 50 to 80% cheaper, you have not been paying attention. There is a great deal of anti-prescription drug reimportation spin these days from special interest groups committed to keeping the US market closed so that our Rx prices remain the highest in the world by a wide margin.

Much of the spin attempts to explain the dramatically lower prices in other countries as the result of “socialists” not allowing drug makers to earn a profit on sales.

However, a simple examination of the facts reveals that “the emperor has no clothes” when it comes to this claim.

European Union countries do allow profits to be made but use two simple common sense mechanisms to stimulate price competition in the market.

First, their national health systems spend taypayers’ money wisely by setting a reimbursement cap (not a price cap!) on what a member can receive on their prescription drug purchase. This cap takes into account the cost of developing and producing the drug, a profit for the maker and other middlemen, and finally the cost of equivalent generic substitutes. The aim is to promote the use of equivalent generics in place of expensive brand name alternatives whenever both are equally effective. However, the consumer still has the freedom to pick the more expensive alternative so long as they pay the difference out of pocket. Finally, the drug companies have the freedom to set prices at levels higher than the reimbursement cap.

Second, European Union members promote and enjoy the benefits of “parallel trade” for prescription drugs. This means that a pharmacy in Germany is free to buy Rx supplies from Italy or Spain if the prices there are cheaper on a given day. Parallel trade means “free trade” which in turn results in lower prices for consumers.

These two mechanisms provide the necessary countervailing force a free market needs in order to have effective price competition. Unfortunately, the US market has nothing to counter Big Pharma’s immense pricing power. The results are the world’s highest prices.

The movement for prescription drug reimportation is simply a call for free trade to be finally introduced to the US market. The Pharmaceutical Market Access Act of 2003 identified 26 countries deemed to be safe sources of prescription drugs. Right now the only party with any freedom in the closed US market is Big Pharma which is free to charge whatever it wants to the rest of us.

Imagine what would happen to domestic prices if Americans were finally free to source the best possible prices for their medicines in the same way that they can source the best possible deals on sneakers and DVD players.

With 29% of prescriptions going unfilled in America due to their inaffordability, according to the Kaiser Family Foundation, it’s time to stop paying lip service to free markets and actually open up our market.