CONKO: High price of cheap drug imports

OPINION:

With the Senate set to vote on one of the few “must-pass” bills of the year, pharmaceutical industry critics are plotting ways to add poison pills to the Prescription Drug User Fee Act. PDUFA, as it’s known in health policy circles, was first enacted in 1992 and has significantly sped up the Food and Drug Administration’s (FDA) drug-approval process, giving new hope to millions of patients suffering from debilitating and fatal diseases that a cure is on the way. It is arguably the most important piece of health care legislation you’ve never heard of.

Here’s how it works. Biopharmaceutical companies pay a “user fee” to the FDA each time they submit a drug or other medical product for the agency’s safety and effectiveness review. Under a bill circulating in the Senate, the industry will pay $4.6 billion in fees over the next five years.

Before PDUFA, FDA typically took two years or more to evaluate new drugs - that’s after they already had been through nearly 10 years of clinical testing. The net effect was that American patients were often the last to benefit from important medical breakthroughs. Since 1992, the PDUFA user fees have enabled the FDA to hire new medical reviewers and improve its scientific capacity. More important, the average drug-approval period was cut in half, to just more than a year.

Ideally, individual firms should not have to pay user fees to fund regulatory oversight that is ostensibly for the public’s benefit. But in an era of tighter federal budgets, Congress has given the FDA more and more responsibilities but not the additional revenue to fund them. Without PDUFA, the FDA’s budget shortfall would mean fewer new medicines reaching the patients who need them.

Reauthorizing the user fees is a second-best choice, but in the face of a slow economy and pressure to reduce the federal budget deficit, it seems to be the best available option. That’s why small-government conservatives can vote for PDUFA with a clear conscience. But this year’s bill also includes a few much-needed FDA reforms that should make reauthorization a no-brainer.

One provision would expand the Accelerated Approval pathway, which provides for streamlined testing and review of “breakthrough” therapies for serious and life-threatening diseases. The bill also establishes performance standards for the drug-review process that should make the FDA more efficient and responsive. These and other measures will help lower development costs and speed drugs to market. But the biggest winners would be patients waiting for new drugs to be approved.

What Republicans should reject, however, is any attempt to attach amendments to PDUFA expanding FDA’s regulatory authority or legalizing prescription drug importation. This latter idea is a real threat, with a proposal being floated by a bipartisan group of senators attracted to the superficial appeal of reducing drug prices.

Without question, brand-name drugs are often cheaper in countries with rigid price controls than in the United States. But piggybacking on other countries’ price controls would have serious negative consequences for American patients. In the short run, it might result in lower prices for drugs already on the market. In the long run, it would reduce the capital available for drug research and reduce the flow of new medicines to the marketplace.

As the late Milton Friedman and more than 160 other economists warned the last time Congress seriously considered importation, “American consumers would get the short-term windfall of lower prices, but they would end up unnecessarily suffering and living shorter lives - because promising new therapies would be delayed or not even developed.”

On average, it takes more than $1 billion and 15 years of development and testing to win FDA approval for a new drug. It’s a staggering investment in money, time and manpower. But for the industry to fund the innovation that has led to scientific breakthroughs in cancer, Alzheimer’s, AIDS and other deadly diseases, those investments must be recouped.

It is an unfortunate reality that many of the most innovative new medicines are so expensive. But importing another country’s prescription drugs essentially imports their price controls. In effect, it would let, say, Canada, set the price ceiling for drugs in the United States. That goes against the very core of the free-market principles held by millions of Americans.

Importation is myopic, deeply flawed and at best would deliver minimal, short-term gains at the expense of long-term patient health. The message to Senate Republicans should be clear: Pass PDUFA, reject importation.

Gregory Conko is a senior fellow at the Competitive Enterprise Institute.