It’s time for my monthly look at noteworthy news stories from the Drug Channels universe. In this issue:
Yes, you read the headline correctly. U.S. Senator Olympia Snowe (R-ME) has just re-re-re-re-re-introduced the misnamed Pharmaceutical Market Access and Drug Safety Act (S.319). It has 18 co-sponsors.
Senator Byron Dorgan (D-ND) just announced that he will not seek re-election. Read his official statement. Today's Wall Street Journal reports Health-Care Views Hurt Dorgan's Bid. I guess the drug importation thing wasn't so good for your political career after all.
Importation is off the table (again). See Measure to Allow Drug Imports Fails.
Senator Byron Dorgan (D-ND) is trying to staple his infamous importation bill to the 2,000+ pages (and counting!) Senate health care bill and claims that Senate Majority Leader Harry Reid (D-NV) will allow a vote on it (per the Puffington Host).
"A fanatic is one who can't change his mind and won't change the subject" – Winston Churchill
Our old friend Senator Byron Dorgan (D-ND) has once again tried to bring drug importation back from the dead. His latest maneuver failed, but the tenacity of importation fanatics remains impressive and scary.
The Senate is currently considering The Family Smoking Prevention and Tobacco Control Act (S.982), which would give the Food and Drug Administration (FDA) authority to regulate tobacco products under the Federal Food, Drug, and Cosmetic Act. The House version (H.R. 1256) passed 298-112, so FDA regulation seems inevitable.
Last week, Senator Dorgan proposed stapling the Pharmaceutical Market Access and Drug Safety Act (S.525) onto the tobacco bill. (See Surprise! New Importation Bill Introduced for background on the bill and its dangers.) Senator John McCain (R-AZ), who co-sponsored S.525 in March, joined the fray as described in Spat between Reid and McCain delays tobacco bill from The Hill. Industry blogs provided both pro (from eDrug Search) and con (from Drugwonks) viewpoints.
Late on Monday, Dorgan dropped his ridiculous attempt to add the drug importation to the tobacco bill, although Senate Majority leader Harry Reid reportedly said that importation will come forward for a Senate vote "very soon." (source)
I find it quite shameful that Senator Dorgan would link drug importation, which has a high probability of reducing public health, to the efforts at regulating a product with a clearly negative impact on human health. But then again, Dorgan has never seemed to have any shame as his consistent inconsistency on beef importation demonstrates.
Three other quick points:
The only trade association reaction has been from NACDS (text of NACDS letter), which is developing a reputation as first out-of-the-gate in press response these days. Interesting.
As it happens, I've been working with some companies in the tobacco industry to help them envision how their current distribution system might evolve – with the pharmaceutical industry as a possible model! Yes, I also find this to be one of the more ironic assignments in my consulting career.
Although you didn't ask, Thank You For Smoking is a hilarious satirical movie (and an even funnier book) about lobbying and political correctness -- two thumbs up from this blogger!
The Senate Finance Committee voted yesterday to approve Kathleen Sebelius as Secretary of Health and Human Services. See Panel Backs Sebelius for Health Post. Some last minute disclosure issues regarding politically sensitive campaign contributions almost derailed her nomination, but the full Senate is likely to confirm her.
So, what's next?
I thought it would be fun (yes, my kind of fun) to look at Governor Sebelius' responses to questions from the Committee on two popular topics here on Drug Channels: Average Manufacturer Price (AMP) and Importation.
You can savor all 137 pages of the political posturing for yourself here: Finance Committee Questions For The Record
AVERAGE MANUFACTURER PRICE
As you may recall, AMP is the reimbursement cap that will supposedly put half of all pharmacies out of business. (No, not really.) Here's the exchange from the Q&A:
Question (from Senator Grassley): The Medicaid statute requires states to reimburse prescription drugs in Medicaid by the average manufacturer price. The regulation implementing the statute was prevented from going into effect by a federal court. While maintaining compliance with the injunction on the regulation as previously issued, do you think CMS should withdraw the regulation and try to more accurately follow the statute?
Answer: I understand that stakeholders have many concerns about this regulation. If confirmed as Secretary, I look forward to working with you to better understand those concerns and explore potential solutions.
Very interesting. As I see it, Governor Sebelius gave a non-answer answer, leaving the door open to implementing AMP.
Balancing the concerns of stakeholders will be difficult. AMP's most important role today is as the basis for computation of brand manufacturer payments under the Medicaid drug rebate program. President Obama's budget proposes increasing the rebate amount from 15.1% to 22.1% of AMP. Since there is only one AMP calculation, this dual role creates conflict between manufacturers and retailers. The Medicaid rebate program suggests that manufacturers want the lowest AMP possible, whereas using AMP as part of a pharmacy reimbursement formula (for generics) means that pharmacies want the highest AMP possible.
The AMP battle is perceived to be even more important to pharmacy now that Average Wholesale Price (AWP) may cease to be. (See Farewell, AWP). AMP – an actual computed transactional price – was scheduled to be published online per the Deficit Reduction Act of 2005. Publication was temporarily suspended until at least September 30, 2009 by the Medicare Improvements for Patients and Providers Act of 2008 (S. 3101) and perhaps longer given the unresolved legal issues. AWP is not dead yet and won't be leaving without a fight.
IMPORTATION
Governor Sebelius is a big fan of importation as I discuss in Obama + Sebelius = Drug Importation. Check out this back and forth from the Q&A:
Question (from Senator Grassley): Will you support an importation program, and if so, how will you assure appropriate implementation that ensures public safety as well as providing access to lower cost prescription drugs?
Answer: There are number of options to lower the cost of drugs. We need to examine all options from expanding the use of generic drugs to providing greater flexibility to negotiate lower-priced drugs when appropriate, to reimportation of drugs from developed nations that have strict safety measures like the United States. That said, the recent incidents involving heparin and other consumer products has highlighted the potential challenges that must be addressed before we import drugs so we can be assured they are safe and effective. The President's FY 2010 budget includes new resources to plan for the safe reimportation of drugs, and I look forward to working with the Congress to implement such policies.
So while she acknowledges the dangers of diversion, I interpret her comment to mean that she will be working to provide the required certification to allow an importation bill to be implemented.
On the other hand, I see that Pharmaceutical Market Access and Drug Safety Act (S.525) has only 27 sponsors. Hmmm.
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President Obama has nominated Dr. Margaret Hamburg to be Commissioner of the Food and Drug Administration (FDA). However, you may not know that Dr. Hamburg’s first-hand knowledge of the drug distribution business because she’s on the board of directors of a major healthcare wholesale distributor. If she is confirmed, I expect that the FDA will move forward more quickly on a national strategy for the drug distribution system.However, we could soon have someone running the FDA who actually understands distribution and supply chain issues. Imagine that!
Since 2003, Dr. Hamburg has been on the Board of Directors of Henry Schein, one of the largest wholesale distributors of dental, veterinary, and medical products to office-based physicians, dentists, and veterinarians. The company was recently named the “world’s most admired” health care wholesaler by Fortune magazine. See Henry Schein at a Glance for the official overview of their business.
Although pharmaceuticals are a minority of its overall business, Henry Schein is an Authorized Distributor of Record (ADR) for most leading drug makers. Thus, the company has had to sweat the details of state-level pedigree requirements, including varying pedigree standards for human versus animal health products. Notably, Schein was the first wholesale drug distributor in the nation to have its entire distribution system accredited through the NABP’s Verified-Accredited Wholesale Distributors® (VAWD®) designation in 2006. The company generates about one-third of its revenues from international markets, so drug importation could be another hot topic for the company.
Dr. Hamburg’s affiliation with Henry Schein has also been personally profitable for her. Her shares are worth more than $2.3 million and she received director’s fees of about $250,000 (in 2007). Naturally, she will resign from the Board
Roy Poses, who blogs at Health Care Renewal, is skeptical about Dr. Hamburg’s objectivity, writing:
“Given that Dr Hamburg has spent over five years living with the obligation for unyielding loyalty to the interests of Henry Schein, and has become what many people would consider rich in the process, how easy will it be for her to turn to becoming a strict regulator of the products her former company used to sell?”
I’m not as cynical as Dr. Poses and believe that Dr. Hamburg can still be effective. Nevertheless, I am curious to see how her personal experience at a distribution company (versus a manufacturer, pharmacy, or health care provider) will influence the FDA’s approach to pedigree, serialization, counterfeiting, diversion, secondary wholesalers, importation, etc.
Given the heavy site traffic and comments (public and private) about Thursday’s importation posting (Surprise! New Importation Bill Introduced), here are a few more thoughts on the topic along with some totally unrelated Spinal Tap news. Currency fluctuations can scramble importation economics
Check out the dollar’s volatility over the past six years – a 25 percent decline from 2002 through mid-2008. The trend sharply reversed in August as global investors fled to our (for now) safer currency.
The weak dollar led to a U.S. export boom, although export growth is now slowing as global economies falter and the dollar strengthens.Just more sand in the vaseline for importation enthusiasts.
More Fun from the CBO
Ooops. I pointed you to the wrong Congressional Budget Office (CBO) analysis in Thursday’s post about importation.
I highlighted this 2004 CBO white paper. But CBO has done at least two more recent reports, although the overall conclusions (limited savings of about 1%) were the same:
Note that CBO 10-year cost savings estimates went down by about $1 billion between 2005 and 2007, presumably due in part to the currency issue.
Thanks to Nick Basta, editor of Pharmaceutical Commerce magazine, for pointing out my oversight.
Manufacturer channel strategies
I got a number of emails regarding my comments about new limitations for U.S. distribution agreements from Pharmaceutical Market Access and Drug Safety Act (S.525).
In 2007, I highlighted one issue with regard to a predecessor bill in Will US logistics deals be illegal? I am also working on some educational materials about the impact of importation on pharmacy economics and the pharmacuetical supply chain. Drop me a line if you want to talk more.
SPINAL TAP: UNWIGGED AND UNPLUGGED
2007’s California pedigree legislation revealed that many Drug Channels readers are also Spinal Tap fans. Check out their current Unwigged and Unplugged tour. I just bought tickets for the May 14 show at the Keswick Theatre!
Sometimes, I don’t like being right.One day later, Senators Byron Dorgan (D-ND), Olympia Snowe (R-ME), John McCain (R-AZ), and Debbie Stabenow (D-MI) introduced this year's model of the Pharmaceutical Market Access and Drug Safety Act (S.525).Fans of redundancy will recall 2007's S.242.
The festivities included the obligatory misrepresentations and falsehoods about cost savings and safety by the pro-importation lobby.
Sigh.
It’s really a shame that the public perception of pharmaceutical manufacturers is so low that no one recognizes the supply-chain dangers of cross-border importation. As someone who studies drug distribution, I believe that politicians are abdicating their responsibilities and endangering public health by opening up diversion doorways for criminals.
UNSAFE
Let me be clear:
Over the years, I’ve given you plenty of examples, such as Diversion from Canada via China, Canadian Dreamin', or even Crazy Talk from John McCain (a co-sponsor of S.525). Now we can get ready for fun headlines in the US such as “30K Fake Drugs Dispensed to Patients.” Wheee!
IMHO, Manufacturers should begin scrutinizing their wholesaler agreements with importation in mind. Trade relations and commercial relations executives should pay particular attention because the legislation explicitly limits the way a manufacturer can structure its U.S. distribution agreements. (Contact me privately for more details.)
NOT CHEAPER
Importation will open up new gateways for counterfeits but won’t save us much money because the price differences will be absorbed by the middlemen. See Importation Illusions.
Check out how Senator Dorgan blatantly twists the conclusions of a CBO study. Yesterday’s press release from Senator Dorgan’s office states:
"The Congressional Budget Office estimates the bill would save American consumers $50 billion over the next decade, including more than $10 billion in federal government savings.”
Alas, the press release deliberately omits the CBO’s actual conclusion. If you care, here is the 6-page CBO report: Would Prescription Drug Importation Reduce U.S. Drug Spending?
The very first paragraph states:
“On the basis of its evaluation of recent proposals, the Congressional Budget Office (CBO) has concluded that the reduction in drug spending from importation would be small.”
I hope that the journalists who read this blog are paying attention.
In the meantime, I remain surprised that Senator Dorgan's nose does not appear to have grown.
[Update: See my subsequent post More on Drug Importation Economics for details on two more recent CBO studies.
The new version of Friday the 13th broke box office recordsa few weeks ago. So perhaps we should not be surprised that drug importation is also coming back from the dead to wreak havoc once more. The danger comes from both President Obama as well as his latest nominee for Secretary of Health and Human Services.
This week, the Apparently, the Medicines Health Products Regulatory Authority (MHRA) issued four emergency drugs recall notices in June 2007. Almost half of a batch of 70,000 fake drugs are still unaccounted for.
You won’t be surprised to learn that the fakes were parallel imports. A former industry investigator is quoted as saying: "All three medicines would have pretended to be medicines that were destined for other European markets..."
I often criticize parallel trade in the EU because it is (by definition) diversion, i.e., the sale of a drug outside of the distribution channels for which it was originally intended. Although many (most?) parallel trade products may be legit, it’s logical to me that any type of diversion will open up gateways for counterfeits.
So, "Where are the bodies?" That is, where is the unpleasant evidence that counterfeit drugs entered a supply chain?
As the BBC dryly notes in How fake drugs got into the NHS: "The fate of his potential British victims may never be known because no-one knows who took the drugs, and because of that, no-one knows whether anyone died as a result or what effect it has had on people’s treatment."
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Bye bye, Tom Daschle! Gosh, I was kinda looking forward to complaining about your support of drug importation, especially with a re-launch of the Friday the 13th franchise on the way.
Was he treated fairly for accepting money from the industry that he would be regulating? As one average American opined: "It's still not as bad as the $400,000 that Interior Secretary Ken Salazar has received from the geyser and
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Check out the all-new Health Wonk Review for the best in health care blogging from around the web.
As a follow-up to yesterday's Pfizer Tries to Choke Demand for Parallel Imports, check out NHS Drug Shortage Looms as Pound Falls from the UK's Health Service Journal.According to the article, "drug manufacturers and wholesalers have begun rationing the amount of certain drugs each UK pharmacist, GP and hospital dispensary can buy."
The article describes a dramatic slowdown in parallel drug imports into the-------------
Also related to yesterday's post, here are three rat-free sites that educate U.S. consumers about counterfeit drugs:
Drug importation into the A couple of months ago, I was relieved to note that both Presidential candidates were backing away from drug importation into the
Unfortunately, former Senate Majority Leader Tom Daschle, who has been nominated by President-elect Obama to head the Department of Health and Human Services, is a big fan of importation.
Check out Senator Daschle’s 2004 Op-Ed Health-care system picks winners and losers, in which he states:
Second, to lower drug costs, we can pass bipartisan legislation supported by Republicans John McCain and
FYI, he is referring to his co-sponsorship of the 2004 Senate importation bill (S.2328), which didn’t get very far. He was no longer in the Senate by the time the 2007 version (S.242 Pharmaceutical Market Access and Drug Safety Act of 2007) came along, so he could not join then-Senator Obama in supporting this bill.
The conventional wisdom suggests that the contaminated heparin incident, among other things, has pushed drug importation off the radar screen. But I’m not so sure given Sen. Daschle’s many, many public pro-importation comments over the years. And some groups, such as wholesalers, will potentially benefit from legalized importation, as I note in Drug Importation and Global Wholesale.
Stay tuned for Part XIII...
----New Drug Channels readers can read a summary of my views in Importation Illusions (published in Pharmaceutical Manufacturing) or in many previous DC posts.
The credit markets may be going crazy, but at least our Presidential candidates are starting to make sense over importation.According to Reuters, McCain, Obama rethink drug reimportation. From the article:
I’m glad that these advisers spent some time in their thinking chairs. Their conclusions should be no surprise to readers of Drug Channels given my posts on importation over the past few years. As I noted in April, the Heparin contamination has pushed the security of
On a related note, check out this comment on the Reuters story from a new blog called PharmaComa. I’ll be keeping an eye on this blog because it’s written by Tim Marsh, Senior Manager of Global Packaging Technology at Pfizer – an actual pharmaceutical executive! Tim is also the co-chair of the GS1 Global Healthcare User Group and co-chair of the Global Traceability for Healthcare Working Group, so I’m looking forward to some good insights. Let’s see how long Pfizer lets him speak his mind.