Stacey Brooks
PUBP 710
Dr. Arnauld Nicogosian
May 9, 2003

Should There Be Competition on the Global Marketplace for Prescription Drugs?

Purpose

One of the number one issues in the 2000 Presidential election was the desire for prescription drug coverage as a standard benefit for Medicare recipients. In addition, debates about what to do for the 40 million Americans who lack health insurance [1] has been a hot topic for years. Central to each of these issues is the cost of prescription drugs and if the government and insurers can afford to supplement the cost of medicine for those who can’t meet their own needs. Congressional Budget Office prospects have placed the cost of prescription drug coverage for just Medicare recipients in the range of $4.3 Billion for the first year and $341 billion over the next 10 years [2] with a high level of out of pocket costs for the consumer. However, the Congressional Budget Office has drastically underestimated every health prediction they have made over the last several years.

The purpose of this research paper is to explore a legislative solution that would impact the global marketplace for prescription drugs.  Before the issue of reimporting prescription drugs came before Congress, there were few if any viable efforts to address the issue of the difference in costs from one part of the world to another for the same drug.  This imbalance in the price of drugs to consumers has caused resentment in seniors and others using large amounts of prescription drugs to maintain their quality of life.  However, would buying drugs overseas under the watch of the Food and Drug Administration (FDA) really make a difference in creating an open marketplace across borders?  The answer to that question will have to wait for now, but a bill passed into law in 1999 attempted to test this concept.

Background

In the book Agendas, Alternatives and Public Policies John Kingdon discussed at length, the role of national mood in opening a window of opportunity for issues. The American people wanted something done about prescription drugs, but what made prescription drug reimportation an idea whose time has come? “National mood is one thing that creates the fertile ground. (Kingdon 147)” Republicans and Democrats alike were proposing Medicare prescription drug programs left and right in 1999 and 2000 to answer the call from 78% of Americans who worry about seniors being able to afford needed medicine. Congress was trying on different solutions to see what appeased the American people. The people weren’t helping guide Congress to solve the problem, but the public was steering the agenda.  Proposals made were expensive and were not addressing the fact that prescription drug costs were increasing at one and a half to three times the rate of inflation [3] .

Following several reports by the media on the costs of drugs in our country versus overseas, people began to question why Americans were paying more. The media clearly affected the public opinion agenda. The pharmaceutical industry said those increases were to cover the cost of expensive research on successful and failed drugs. However, with the latest craze of lifestyle drugs (Viagra as an example) that are targeted at healthy consumers with nagging flaws, it lead to questions of what kind of research the industry was doing. The media began to look at the amount of money spent on research, and also brought in the fact that much of the actual medical research has been paid for by tax dollars through the Food and Drug Administration, the National Institutes of Health and public universities. People began to get upset that drug industries charge Americans several times the amount they charge for the same drugs in other countries. Especially since many drugs are made in the U.S. and shipped to other countries where their consumers pay one third to one half the prices charged to Americans. [4]            

In the meantime, a crisis is brewing in the minds of American consumers. Americans are relying more on prescription drugs for treatment and less on medical procedures such as surgery, therapy and most importantly, a healthy lifestyle to keep them on their feet. A lack of prescription drug coverage was a condition that, until drugs became useful in a broader sense, was not a problem society saw the need to fix. However, when seniors started to cutting pills in half or eating dog food so they could afford their medicine, we came to believe that we should do something. More than 10 million seniors pay for prescription drugs at full price. Thirty nine percent of low-income seniors spend more than $100 a month to fill prescriptions and 25% of those do not fill all the prescriptions they need to simply because of cost. [5]

Elections also play a role in agenda setting. "Elections take on great importance, not because there is any kind of mandate from the public to move in one direction rather than another, but simply because the cast of characters in positions of authority can change.” (Kingdon p.62) Congress had to do something to calm the masses before the 2000 elections, but what?            

The political process had many players, and the lines between the sides got very fuzzy. Those outside of government played a key role in the issue of affordable prescription drugs. There were the seniors and the many organizations demanding for protection from the rising prices. The pharmaceutical industry desperately wanted a program to pay for drugs without their losing profits, and health insurance providers desperately wanted the government to do something to slow down the cost of drugs for all Americans because the cost of insurance continues to rise. Pharmacists and pharmacy benefit managers had something at stake too because they fill all the prescriptions and Congress could take aim at their profits as well. The political parties and presidential candidates certainly played a role in moving the issue forward, and the Food and Drug Administration (FDA) and Health and Human Services (HHS) as well as other health oriented agencies all had a stake in providing accurate information to those trying to find a solution. Getting this group of players to build a consensus would be very difficult.            

It seemed with all the partisan bickering, there was only one way to pass a bill in the 106^th Congress. This is where unorthodox lawmaking comes into play. The debate on making prescription drugs more affordable looked more like a hockey game than a lesson in how a bill becomes a law. In 1999, Democrats kicked off the debates with the introduction of their legislation HR 886 and S. 696 called the Medicare Prescription Drug Coverage Act of 1999. House Republicans did not get into the act officially as a party until June 15, 2000. In this issue, House committee organization caused all bills of this nature to be forwarded to two committees, the House Commerce Committee, and the Committee on Ways and Means which handles issues pertaining to Medicare. This number of referrals fairly “routine,” but that was the only thing routine about the bill. This legislation was quickly rammed through the House after the committees of jurisdiction held two hearings and markups. The committees negotiated a behind the scenes post committee adjustment and brought the bill to the floor. The House Rules committee made a special rule allowing no amendments and only two hours of debate. The bill passed on June 28, 2000 . There were several other solutions proposed by Republicans, but the leadership had one bill in mind, and hearings and floor time were given only to ideas which had their blessing no matter the party membership. The bill did not get addressed in the Senate, and the failure of this legislation became a focusing event to open the window specifically for the following legislative proposal.

Another proposal was brewing in the background, and began to make sense to members from both parties. On May 20, 1999 , Representative Marion Barry (D-AR) introduced the International Prescription Drug Parity Act along with Representatives Jo Ann Emerson (R-MO) and Bernie Sanders (I-VT). Senator Byron Dorgan (D-ND) introduced an identical bill in the Senate on June 9, 1999 . This legislation proposed to allow licensed pharmacists to access the overseas prescription drug market as a resource to provide their inventory of FDA approved medicines. The legislation assumed the access to the free market would inspire pharmacies to lower drug prices and save US consumers millions over time. This legislation was very unpopular among drug industry supporters, but the concept was ignored for some time because passing it was thought of as unrealistic. Since the bill did not specifically deal with Medicare or other federal programs, the bill was only referred to the House Commerce and the Senate Health Education, Labor and Pension committees. However, even though several members on those committees wanted to hold hearings on the issue, the House never held a hearing, and the Senate only held one or two, but never reported out a bill.            

Supporters of the legislation hammered their colleagues with facts about the drug industry’s profit margins, price differences overseas, research funding supported by tax dollars, and other details that became hard to ignore. A new skepticism of the industry’s numbers began to open the door for new support. Momentum changed quietly and by the time the Republicans were voting on their Medicare plan, people began to ask why drugs cost so much in the United States . All this information and lack of progress with the major coverage proposals seemed to be opening a window of opportunity. However, Democrats and Republican leaders did not yield to requests to address this issue when legislation regarding prescription drugs reached the House floor. Nor did committee members meet the requests of several members to review the legislation in a formal hearing. The price of drugs continued to come up in various hearings as a side topic, and finally came up on the House floor through the House Agriculture appropriations bill (which funds FDA) where the rule allowed for amendments as long as they were pre-printed in the congressional record. By this time several members began to question why prescription drugs were so expensive.            

Congress began to feel the heat from their constituents, and members felt the need to take matters in their own hands. Members started using political tools to get something passed. Sinclair discussed how House special rules could allow for a restriction on amendments (Sinclair p. 77), but in this case, House leaders only required amendments to be pre-printed in the Congressional Record. In the House debate over the Agriculture Appropriations bill on July 11, 2000 there were several amendments targeted at the cost of pharmaceuticals including the following:

• H.AMDT.964 Crowley amendment prohibits funds from being used to enforce Federal restrictions on travel abroad to purchase prescription drugs.
• H.AMDT.967 Coburn amendment prohibits funds from being expended to take any action to interfere with the importation into the US of drugs that have been approved for use within the US and were manufactured in an FDA-approved facility in the US, Canada, or Mexico.
• H.AMDT.974 Allen amendment required that upon FDA approval of a new drug, the disclosure of the taxpayer funded contribution to the total cost of research and development of that drug.

These amendments passed by overwhelming margins and made it clear that members were hearing from their constituents on the inequity of drug pricing throughout the world. The House amendments also opened the door to make another piece of legislation germane once the bill reached the Senate.

Senator Jim Jeffords (R-VT) introduced the Medicine Equity and Drug Safety Act of 2000 (MEDS Act) in mid 2000.  Like previous reimportation legislation, this bill was based on the premise that drug prices in foreign countries are drastically cheaper than in the US , this legislation would allow licensed pharmacies to purchase FDA approved drugs from approved foreign countries at the lower price. The difference with this bill was the amount of input Jeffords received from the FDA. The internet market has already taken advantage of the lower prices with sales available through Canada and Europe . Sites such as www.canadarx.com use Canadian pharmacists to re-write American prescriptions and mail the drugs out to patients. The MEDS Act would bring American pharmacists into that business and make the whole process completely legal and monitored for safety.

As a rule, the Senate does not allow “extraneous measures” to be attached on an appropriations bill unless it can be cleared by a three-fifths majority because of the Byrd rule. The House amendments made the Jeffords bill germane and not accountable to the Byrd rule. Jeffords proposed the bill as an amendment to the Agriculture appropriations bill, and it passed the Senate with most members thinking it would not make it to the conference report.  They just knew they would get credit for voting to reduce the cost of prescription drugs. The Agriculture Appropriations bill was headed to conference, but not before some serious back door negotiating took place.

A large, bi-cameral, tri-partisan coalition began to develop. Members from key committees, including the appropriations committee, started coming out in support the legislation, and the leadership began to realize the issue was not going away. This coalition held several press conferences insisting the bill be kept in tact. Members of the coalition appeared on talk shows and used the media to get the message out to the public. At the same time, the pharmaceutical industry was relentless in their lobbying on the hill. Advertisements ran daily in the major newspapers including one full page ad that billed at $475,000 for three days. “The industry has employed a swarm of lobbyists [estimates showed nearly 300] on Capitol Hill and has run full page ads in several major newspapers, arguing that [the amendment] poses a safety threat to consumers. [6] ” The safety argument was a strong one, but when the Senate bill was passed with numerous safeguards incorporated, the safety discussion didn’t carry.

From July to October (when the bill went to a Conference committee), House and Senate leaders debated what to do. The Agriculture Appropriations bill was put on hold much longer than usual due to this and numerous controversial issues. It became more contentious in the election year when President Clinton decided to endorse the reimportation amendment and request that Congress pass it and include additional funding so the FDA can properly implement. The Republican leadership sent an alternate proposal to President Clinton to seek his approval knowing he could use this issue to veto a critical bill in an election year. Since appropriations bills make up an increasingly important part of Congress agenda, Congress knew they couldn’t risk the public relations nightmare that comes with every veto. The draft included several changes that would weaken the legislation. The bill was not shared with the coalition or the original sponsors, but some of the Democratic staffers were able to obtain a copy of the bill from the White House. The behind the scenes negotiating would begin soon.

As a demonstration of how times have changed, traditionally appropriations subcommittee members were appointed to the conference committees for their jurisdiction. However, “members have come to expect that their leaders will take a hand at the conference stage when legislation is in trouble.” (Sinclair, p 63) Supporters on the Agriculture appropriations subcommittee feared they would not be part of the conference committee so they prepared to negotiate changes before the conferees were chosen. The tri-partisan coalition members and staff met together to discuss the leadership proposal, and determined what they would hope to change. Staff members for Representatives Emerson and Gutknecht met with staff members from House Speaker Denny Hastert’s office and from the House Commerce Committee. The meeting revealed how upset the Commerce Committee was about not being able to hold a hearing on this legislation before it reaches a vote.

Several meetings with staff were required to hash out the problems with the bill. There were several major issues left unresolved and were left to the Republican members to negotiate. Around a table in the speaker’s conference room sat Speaker Hastert, Representatives Emerson, Gutknecht, and Kingston (all members of the Agriculture Appropriations subcommittee), and Senators Lott, Jeffords, and Gorton. The fact that the whole appropriations subcommittee was not involved left a number of voices out in the cold. Once an agreement was reached, negotiators came out of the room to see a swarm of media wanting to know what happened. The media reported the compromise, and the Democrats were outraged because they hadn’t been involved. The coalition was broken apart, but the bill went on to conference. With some objections from a few Senate Republicans, the new amendment almost didn’t pass, but concerns that colleagues would lose their elections convinced them to support it.  Thanks to several closed door meetings interrupting the conference committee, where pressure from House and Senate leaders was applied, the agreement held together.

Shortly before the final conference report was brought to the floor, a faxed memo from the Chamber of Commerce was circulated asking members to vote against the conference report because of the amendment. Republican leaders were jumping on members to continue supporting the bill, but many were worried because of the power of the Chamber of Commerce in swaying voters nationwide. However, supporters of the bill quickly learned that the fax was funded by a donation to the Chamber from the Pharmaceutical industry and the concern died as quickly as it came up.  The bill passed the House and Senate October 11 and 12^th, 2000, and the President signed it into law on October 28^th, just eight days before the election. The day after Christmas, Secretary Donna Shalala sent a letter to Congress saying she could not implement the importation law because she could not certify that it would be safe or save consumers money.            

This legislation was unorthodox through and through. First, the bill never went to a hearing on any committees let alone the committee of jurisdiction. The amendment was legislating on an appropriations bill. The final legislation was negotiated by Republican staff with members only coming in at the last minute to finish the controversial parts. Appropriations Conference Committee members were asked to vote for the bill by leadership even though they had no input, and some had serious objections. When the bill came to the floor on Oct. 11-12, members had very little time to review the final bill. Many members were opposed to it, but leadership asked them to support it to help members who needed it for the elections. The bill was signed into law October 28, 2000 , just weeks before the election to specifically address the concerns of the American people. Finally, Secretary Shalala decided she wanted to join the fun and would not ask her department to issue regulations to implement the required policies because of “flaws and loopholes contained make it impossible for me to demonstrate that make it safe and effective.” To this date, regulations have not been written, and no other prescription drug coverage has been passed.

Methodology

In order to hypothesize on the potential of this legislation, I looked at the flaws of the bill and potential hazards to allowing reimportation of prescription drugs by someone other than the manufacturer.  In addition, I looked at the many parties who would have to sign off on the process of this bill to make it happen.  There was a lot of interest from pharmacists to have this concept passed into law, but would this bill accomplish its mission?

Results and Discussion

The MEDS act was signed into law, but it has never been implemented.  This is because of one fatal flaw the authors new about, but weren’t sure they could do anything to stop it.  The flaw was a provision in the bill which required the Secretary of Health and Human Services (HHS) to certify that reimportation could be done safely before the law could be implemented.  Secretary Shalala and others in the government’s health community were not enthusiastic about being responsible for ensuring the safety of the prescription drugs coming into the country, and never took the steps to have the process certified.  In addition, this provision allowed one more political card to be played at the end of the Clinton administration to discount the accomplishments of the Republicans in Congress. 

There were other flaws in the bill that alone were not all that daunting, but combined caused a great deal of time and effort for those wanting to pursue this interest.  First, a pharmacist had to ensure the drug was imported from one of a short list of developing countries included in the bill.  They had to have a sample of the drug inspected before it could be released to the pharmacy.  Before the FDA would approve the drug to enter the marketplace, the drug had to be repackaged with the approved labeling for U.S. consumption which means the pharmacists in some cases had to be sure they were not violating patent restrictions by using logos and other proprietary materials.  The dosage and delivery method also had to be consistent with U.S. guidelines.  The FDA had to verify all of this and was given funding to support this effort, but the funding was not adequate to provide thorough inspections to the letter of the law.           

This leads to the extensive discussion on the safety and efficacy of the medication once it went through all the traveling.  Since medications loose their effectiveness if they are stored at certain temperatures or pass a certain date of expiration, time was critical in the success of this process.  With the FDA already overwhelmed by existing inspections they are accountable for, there was concern that the drugs would sit in storage until they could be released and may lose their potency. Although the extensive safety measures were put into place in the bill, there were constant discussions on if people could really do this safely without unintentionally getting hold of counterfeit medication.  This concern was mostly brought up by the industry, but there were some questions on who would be liable should counterfeit drugs enter the system.  One other issue which was not as prevalent at the time of debate but became an issue one year after passage was a concern with terrorism.  If large amounts of drugs were being imported into the country along with food and other potential targets, would we be opening ourselves up for deadly consequences?             

An interesting discussion came out of the foreign health agencies who were concerned that the pharmaceutical industry might stop giving price breaks to their government health plans if their country and its retailers were caught selling medications to the United States .  The response to this concern from Americans seemed to be calloused, as if to suggest that it would only be fair that the countries who could afford to should bear the weight of the market price.  The idea of using the global marketplace to save American consumers money could, over the long-term, balance out the inequity in the marketplace by having
free trade among civilized nations. This would not save as much money in the long run as people hoped, but it would impact the balance of pricing.

However, one of the biggest weaknesses of the legislation would have likely hurt that chance for a balanced marketplace.  The legislation had a 5 year sunset.  It was unclear if the clock would start ticking on that sunset immediately or after regulations were written.  If it was the former, it would be likely that the regulations would have taken a couple years to surmount all the challenges.  Then, it would take more time for pharmacists to get up and running with a system that met FDA’s scrutiny.  The first drug to be reimported would take years and many pharmacies might not see the investment being worthwhile if they know a year after they get their first order Congress will have to debate the legislation again and the bill could just opportunity could just fade away.            

The main strength of this legislation and the one thing it did accomplish was a wake-up call to the pharmaceutical industry that Congress is getting a lot of heat from their constituents about the cost of prescription drugs.  It became clear that the right to affordable medicine seemed intrinsic to many Americans, and the industry needed to find a way to convince Americans that they were not getting the short end of the stick before Congress brought this issue up again.

Conclusion

There is little chance of this bill actually being enacted with regulations in the current political climate, although the President and Secretary Thompson certainly have a right to dig it back up again without the permission of Congress.  Once Americans begin to feel safe again and their attention is drawn away from thoughts of terrorism, they will start to raise the issue of prescription drugs again.  There is no doubt within that issue, there will be a concern about the prices Americans pay compared to other developed countries.  I am unsure if the concept of an open market for prescription drugs will be possible in the future, but one thing is for certain:  American’s will find ways, as they already have, to buy drugs at overseas prices.  Our government has to decide if they want to make sure it’s done with supervision or let Americans proceed at their own risk.  The government simply does not have the resources to enforce any laws that prevent individuals from importing prescription drugs.   

The health care market is changing rapidly with stress from the increased cost of providing insurance, a problem that has been most attributed to rising drug prices and increased use of pharmaceuticals.  If insurance companies continue to see rising costs for providing coverage to even the healthiest Americans, they will no longer be willing to bear the risk.  Let’s face it.  They are in the business to make money.  If the consequence is that more Americans have to pay for drugs on their own, the fixed prices of other nations will be a prime target to reducing the cost of drugs in America .  In addition, the debate of providing access to prescription drug coverage for seniors will be hard to address without looking at the escalating prices the industry is charging. The drug industry is also in this business to make money, and it is very likely that if the government is paying even some of the tab for drugs, there will be no guilt in raising prices as new drugs hit the market. There will certainly be more to come on this issue in the future.

References

Kingdon, John W., Agendas, Alternatives and Public Policies, Second Edition. (1995)

Sinclair, Barbara, Unorthodox Lawmaking New Legislative Processes in the U.S. Congress, Second Edition. (2000)

American Health Line:

• Politics and Policy - RX Drug Costs I: Industry Desperate to Quash Bill (July 19, 2000)
• 2. Politics and Policy - Drug Reimportation: PHRMA Runs New Ad (September 21, 2000)
• 3. Politics and Policy - RX Drug Costs I: GOP Reaches 'Shaky' RX Reimport Deal (October 5, 2000)
• 4. Politics and Policy - Drug Reimportation: Senate Passes Agriculture Bill (October 19, 2000)

Federal Document Clearing House:

• Transcript of News Conference Regarding Prescription Drug Costs (July 27, 2000)

Congress Daily

• Drug Reimportation Plan Would Expand FDA Power (September 29, 2000)
• Agriculture Conference Stalled Over Drug Labeling (October 4, 2000)

Associated Press

• Clinton says he'd support Jeffords drug reimportation bill (September 25, 2000)

Washington Post

• Shalala Halts Bid to Lower Drug Costs; Reimportation Bills 'Fatal Flaws' Cited (Marc Kaufman, December 27, 2000)
• Bitter Pill: The Rising Prices of Prescription Drugs for Older Americans; Families USA Publication No. 02-104 © 2002 by Families USA Foundation

Congressional Record

(As a side note, I was involved in the passage of this bill as a staffer for Representative Emerson. Much of what is in this paper is personal anecdotes of how the process played out. In this case, I am my reference.)