Friday, September 12, 2008

Drug Importation and Global Wholesale

Last year, I speculated that drug importation legislation may be inevitable. Does the rise of global wholesalers make it more likely?

A Tuesday article in The Hill reminded me that both Barack Obama and John McCain favor importation. McCain even took a shot at drug companies in his acceptance speech, which is consistent with his comments during the primary. (See my January post Crazy Talk from John McCain.)

In addition to our old friend S.242, Senators Kennedy (D-MA) and Grassley (R-IA) just introduced S.3409 The Drug and Device Accountability Act. Section 122 of the new bill touches on drug importation safety "standards" and could be seen as foundational legislation.

Of course, importation won’t actually save very much money for consumers because most of the price differential will be absorbed by the channel. For example, wholesalers, importers and exporters are the big winners from importation because they absorb 80% or more of the price differences between European countries. (See my op-ed from last year Importation Illusions.)

That’s why I’m keeping my eye on cross-border wholesaler transactions. European wholesaler-retailer Alliance Boots entered the Brazilian market in July. (See Alliance Boots to enter Brazil.) Alliance Boots already has a strategic alliance with Cardinal Health (CAH) and entered the Chinese market last year. Meanwhile, both McKesson (MCK) and AmerisourceBergen (ABC) have significant market positions in Canada.

The Healthcare Distribution Management Association, which represents the drug wholesalers, has an official position against importation, stating: “HDMA is opposed to permitting the importation of pharmaceuticals. Importation, whether restricted to just Canada or not, significantly increases the likelihood of counterfeit or adulterated drugs entering the U.S. market and reaching our medicine cabinets.

I happen to agree with HDMA on the dangers, but I wonder if their position will change if (when?) importation is legalized under a new administration. Or am I too convinced that an importation bill will actually pass?

4 comments:

  1. Adam, I agree with you. I expect HDMA's position to change quickly if the Big 3 can take advantage. What a mess this would be for consumers.
    Thanks for keeping us posted!

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  2. Adam, I think you are probably one of the more optimistic about US drug importation eventually passing. I don't share that optimism because I just don't see any administration signing up for something that will put significant risk into the US market. Under the surface of the political rhetoric is some hard reality that is largely overlooked.

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  3. Drug Importation is largely in use as we speak. The pharmaceutical companies in the UK, EU Asia, among others have been supplying the US for imported drugs for years at higher prices than that many can afford. ED Rx's for example: Cialis 20mg have gone up to almost $20.00/Tb. The active ingredient is found elsewhere at <$4.00./Tb. Counterfeit? Probably...

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  4. Adam, Seems like the concept of importation is like government collusion. One government strikes a deal for low cost product. The company agrees to the term figuring something is better than nothing or that medicine should be accessible to a poor market. Non- value adding business people use the price differential to profit under the illusion of helping all. This, in turn, becomes a key vector for counterfeits to enter the supply chain.
    Maybe the answer is global pricing. Rich countries get a break, poor ountries can seek foreign aid and Pharm. companies stay apolitical since the view of them is so poor anyway.

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