Proposal to let consumers import prescription drugs draws fierce lobbying

By SHARON THEIMER
Associated Press Writer

WASHINGTON (AP) -- Hoping to recruit senior citizens as allies, the drug industry and other opponents of a plan to let
consumers import their prescription drugs are waging a massive campaign to sway Congress against the measure.

The multimillion-dollar effort is designed to convince consumers and lawmakers that the legislation -- aimed at giving
patients access to cheaper alternatives for their medicines -- would be hazardous to their health.

"We are talking to anyone who will listen at the 11th hour, and the message is very clear,'' said Jeff Trewhitt, a
spokesman for the Pharmaceutical Research & Manufacturers of America, PhRMA.

The drug industry fears the legislation, expected to get a House vote Thursday evening, could result in price controls.
It also is telling consumers to listen to the Food and Drug Administration, which has long argued that giving patients
broad access to drugs from abroad could expose them to unsafe drugs.

Trewhitt said he has visited nine congressional districts over the past few months.

He was in Republican Rep. Wayne Gilchrest's Maryland district Wednesday. Trewhitt was talking to a newspaper's
editorial page editor and doing a radio interview "saying we sure wish Congressman Gilchrest was not supporting this
bill because it's bad legislation.''

The measure would let consumers import FDA-approved drugs from 25 industrialized countries, including Canada and
European Union nations. Unlike other proposals on the issue, it wouldn't let the FDA or Department of Health and Human
Services stop importation if they cannot guarantee the safety.

The lead sponsor, Rep. Gil Gutknecht, R-Minn., said opening the market could cut drug costs for U.S. consumers at least
one-third.

"The average American pays the world's highest prices for prescription drugs,'' Gutknecht said. "I'm not saying with
the bill I have that that's the only answer or it's even the best answer. What we are saying is the status quo is
unacceptable.''

The highest-profile part of the effort -- an ad campaign -- has been organized by a senior citizens group partially
funded by drug companies.

The Seniors Coalition has spent millions on radio and newspaper ads, mailings and a phone bank urging people to ask
their member of Congress to vote against the bill.

"This legislation would allow drugs to flood across U.S. borders from all over the world with little or no FDA
monitoring to protect your health and safety,'' the script for the coalition's phone bank says.

The group also has sent an 80-year-old spokeswoman on its staff to some congressional districts to campaign against the
measure at senior citizen centers, spokesman Chris Butler said.

Gutknecht's office was among those receiving calls directed by the group. He said most callers ended up supporting his
bill after talking to his staff.

Gutknecht said he considered himself in a "David versus Goliath'' fight against drug companies and their allies.

Several consumer groups said that while they support Gutknecht's bill and sent letters to members of Congress saying
so, they were focused on lobbying on Medicare prescription drug legislation.

"We don't have the endless resources the pharmaceutical lobby does,'' said Ron Pollack, executive director of Families
USA. "Therefore we've got to choose how we're going to devote our staff time and resources.''

The pharmaceutical industry made more than $20 million in political contributions in the past election, with roughly $8
of every $10 going to Republicans, according to an analysis by the Center for Responsive Politics.

PhRMA itself gave over $3 million and spent more than $14 million lobbying Congress on various issues last year.

It also is part of a coalition, the Partnership for Safe Medicines that includes the U.S. Chamber of Commerce, the
National Association of Manufacturers, the Biotechnology Industry Council, the Kidney Cancer Association, and The
Seniors Coalition.

Others opposing the bill include the National Association of Chain Drug Stores and the American Medical Association.

------

On the Net:

Information about the legislation, H.R. 2427, can be found at http://thomas.loc.gov

H.R. 2427 Pharmaceutical Market Access Act of 2003

AP-ES-07-24-03 0344EDT

SOURCE: The Associated Press / The Charleston Gazette, WV
http://wvgazette.com/section/APNews/News/ap0476n

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Has anything changed from one year ago??  ...  murray

* * *

The Lorain Morning Journal, OH

Prescription Drugs
Patents, research keep costs high

MARK HOLTHAUS , Morning Journal Writer
08/06/2002

LORAIN -- Zocor is supposed to be the same the world over. Used for treating high cholesterol, it's the top selling
drug in the world. It's made by Merck & Co., one the world's biggest pharmaceutical companies.

In Canada, 60 tablets of Zocor cost about $55, according to a study released in May, and the average price in France,
Germany, Italy, Japan and Britain is about $70. In Lorain County, the same tablets would go for about $116.

It's no fluke that the same pill made by the same company costs much more in the United States.

Many other prescription drugs on the world's list of top 20 sellers -- including No. 2 Lipitor from Pfizer and No. 3
Prilosec from AstraZeneca -- have spreads between their foreign market prices and U.S. market prices ranging from 80
percent to more than 130 percent.

The question of why drug prices are high in the United States is part of a mounting debate on making prescriptions more
affordable, especially for seniors, but the answers are being spun so hard and in so many directions they are almost
impossible to understand.

Arrayed around the issue are literally hundreds of special interest groups and political forces tugging and pushing
Americans to choose sides on a range of proposals, from giving prescription benefits to seniors and others squeezed by
high prices, to reducing many of the product protections for drug makers, to even letting Americans get their medicines
from cheaper foreign markets.

At the center of all the attention is the U.S. pharmaceutical industry.

Now under attack in the courts, the media and Congress, the drug makers have reason to be defensive, particularly about
their profits.

While the overall profits of Fortune 500 companies declined by 53 percent in 2001, the top 10 U.S. drug makers
increased theirs by 33 percent, making pharmaceuticals the country's most profitable business.

One reason is the ''blockbuster drug'' phenomenon.

Within the industry, any prescription drug that breaks $1 billion in sales becomes a blockbuster, and in 2001 there
were 29 of them, nearly double the number of two years before. According to Fortune, they generated more than $52
billion in retail drug sales last year.

Although the average price per prescription last year jumped 10 percent to $49.84, six times greater than the inflation
rate of 1.6 percent, the 29 blockbuster drugs had an average prescription price of $97.71.

Since they accounted for 34 percent of total U.S. drug sales in 2001, blockbusters are clearly driving prices and
profits.

Pfizer led U.S. pharmaceutical companies with $7.8 billion in profits in 2001, earning 24 cents on each dollar of
sales. It owns the biggest blockbuster drug in the United States, the cholesterol reducer Lipitor, which had sales of
$4.5 billion last year. Pfizer also produced other blockbuster drugs such as anti-depressant Zoloft ($2.1 billion in
sales), blood pressure reducer Norvasc ($1.7 billion) and Neurontin for epilepsy ($1.4 billion).

A few weeks ago, Pfizer Inc. acquired Pharmacia Corp. for $60 billion, vaulting to $48 billion in revenues and adding
the sex-enhancing blockbuster Viagra and Celebrex for arthritis and joint pain.

Merck was the second most profitable U.S. pharmaceutical company, netting $7.3 billion, or 15 cents on the sales
dollar. Its cholesterol reducer Zocor was the second highest selling drug in the country, grossing $2.7 billion. It
manufactured three other blockbusters: arthritis pain reliever Vioxx ($2.0 billion), osteoporosis fighter Fosamax ($1.0
billion) and asthma reliever Singulair ($1.0 billion).

Pfizer derived almost one-third of its revenue and profits from its four blockbusters and it raised prices on them by
an average of 4.9 percent last year, three times the rate of inflation. Merck raised the prices on its four
blockbusters by an average of 6.5 percent last year, or four times the rate of inflation.

One reason for the popularity of blockbuster drugs is that they are among the most heavily advertised. Eleven
blockbusters were among the 25 most advertised drugs in 2000.

The five drugs that were most advertised direct to consumers in 2000 all became blockbusters in 2001: Vioxx, Zocor,
heartburn reliever Prilosec, allergy reliever Claritin and anti-depressant Paxil.

The $160 million Merck spent that year advertising Vioxx was more than PepsiCo spent pitching Pepsi ($125 million) and
Anheuser Busch spent hawking Budweiser ($146 million).

Each of the top seven most heavily advertised drugs topped Nike's $78 million ad budget for its shoes.

While blockbuster drugs have flourished, some analysts say 2002 and 2003 may produce even more as the Federal Drug
Administration finishes testing on 15 drugs with potential to become blockbusters. These drugs, if approved, could
allow patients to treat illnesses like schizophrenia, multiple sclerosis and even prostate, breast and colorectal
cancers.

Blockbuster drugs are lucrative because they are so medically effective and they have little or no competition.

High prices aside, no one is arguing the new stars of biotechnology don't perform spectacularly, whether it's lowering
cholesterol or raising libido. Even when less expensive generic equivalents are available, many physicians prescribe
the brand name blockbusters and most patients prefer them.

Blockbuster drugs are part of the reason why more prescriptions are being written and why prescriptions are being
shifted to higher-priced medicines. Those two factors, along with price hikes averaging 10 percent, are why
expenditures for prescription drugs increased 17 percent last year, making them the fastest-growing component of health
care costs.

The drug makers argue the effectiveness of blockbuster drugs comes at a high cost -- to cover research and development
and a lengthy approval process -- which justifies their high prices.

For a drug to move from the research and development stage to FDA approval takes 10 to 15 years and costs an average of
$800 million, according to the Pharmaceutical Research and Manufacturers of America, or PhRMA, the drug industry's
public relations and lobbying arm.

''That is an extremely heavy investment and we expect that that investment be protected,'' said Jeff Trewhitt, a PhRMA
spokesman.

The upfront investments necessary to develop new drugs that may or may not produce profits seven or eight years down
the road are encouraged by the 20-year patents awarded for many drugs seeking FDA approval. The patents give the drug
makers the right to sell the new medicines exclusively, and protects against copying and marketing of their products by
rival manufacturers.

''For every five drugs that are researched and developed, only one makes it to market,'' said Trewhitt. ''Drug
companies lose millions of dollars in research and development spent on unsuccessful drugs.''

The average 13 years of patent protection usually remaining after drugs win FDA approval guarantees they will have
minimal competition when they get on the market. If a drug becomes a blockbuster, high profits for its maker are
virtually locked in until the patent expires.

When a drug loses patent protection, generic competition moves into its market niche and profits quickly erode.

Patent protection will expire at the end of this year for Claritin, which is made by Schering-Plough Corp. The $3.1
billion the company pulled in last year will drop by 50 to 75 percent as soon as it happens, according to the Federal
Trade Commission.

By 2006, almost 200 patents covering $36 billion in U.S. pharmaceutical sales will expire.

The whole scenario of drug companies recouping long-ago upfront costs by protecting high profits on pills that today
cost just cents to make is being vigorously defended by a pharmaceutical industry which is under fierce attack on all
sides.

Consumer groups are challenging the industry's claims of high research and development costs, in part to reduce the
drug makers' credibility and soften them up for assaults on their vital patent protections.

Public Citizen, a leader in the attack on the drug makers' positions, says the $800 million average claimed by the
industry needed to get a drug to market significantly overstates real research and development costs, which are likely
to be as much as 75 percent lower.

Public Citizen notes that many drugs brought to market receive financial support from the government at some stage in
their discovery and development, and the companies are wrong to factor that into the average.

A number of government studies agree that taxpayers have been the drug industry's silent partner. Many innovative drugs
would not have been discovered or would have taken much longer to discover without research contributions from
government labs and noncommercial institutions, say the studies.

Nearly 44 percent of all drug research in the United States is funded by American taxpayers through funding of the
National Institutes of Health. President Bush proposed increasing the NIH's 2002 budget to $23.4 billion, not so far
off the $30 billion which PhRMA says its member companies spent the year before on research and development.

Public Citizen calculates that after eliminating what taxpayers contribute, and adjusting for accounting and tax
considerations, the average actual outlay by a company for the research and development of a new drug is only about
$240 million.

As the U.S. Senate started debate on prescription costs a month ago, a nonprofit healthcare advocacy group repeated its
charge that top U.S. drug companies were spending twice as much on advertising, marketing and administration as they do
on research and development.

Families USA said its analysis rebutted drug company arguments that lowering drug prices and promoting the use of
cheaper, generic drugs would cut into their ability to develop new medicines.

The widely-reported findings use numbers from the annual reports of nine leading drug companies which show, for
instance, that in 2001 Merck spent $6.22 billion on marketing, advertising and administration, but only $2.46 billion
on research and development. Pfizer spent 35 percent of its $32.2 billion in revenue on marketing, advertising and
administration and 15 percent on research and development.

PhRMA has responded by saying much of the marketing and advertising expenses represents the $10 billion in free samples
given each to doctors which are passed along to patients, many of them seniors.

Meanwhile, the actual attack on the drug industry's patent protections is taking place in the courts and Congress.

Generics now account for 46 percent of prescriptions written in the United States, in part because of the Hatch-Waxman
Act that was passed in 1984 to clarify drug patents and allow companies to develop and market generic forms of drugs
once patents expire. However, the drug industry has been using several loopholes to slow down and keep generics off the
market.

The main piece of legislation recently passed by the Senate is a measure aimed at amending the Hatch-Waxman Act to
close the loopholes and speed generic drugs to the market. Democrats had hoped to attach a number of amendments to the
generic drug measure, including a Medicare drug benefit costing as much as $500 billion over 10 years and a plan to re-
import less expensive brand name drugs from other countries.

Republicans in the House have already passed a much smaller Medicare prescription proposal, but it doesn't address
generic drugs.

''Every year the patent goes on, the public is getting ripped off,'' said U.S. Rep. Sherrod Brown, D-Lorain. ''The ways
they have fought to get patents extended is amazing. These guys have invented new meaning for the word greed.''

''We are the innovators and we fund the millions of dollars of research that goes into making these drugs that save
lives,'' counters Trewhitt. ''The patent protection we have, is earned.''

On the legal front, there has been a surge of antitrust and price-fixing lawsuits against drug companies.

Ohio was one of 29 states in a successful lawsuit charging that Bristol-Myers illegally delayed generic competition to
its cancer drug Taxol by manipulating patent laws to keep generic versions off the market.

Another lawsuit accuses Astra-Zeneca and Barr Laboratories of getting together to block a generic version of the cancer
drug Tamoxifen.

Several other drug makers have recently settled with the Federal Trade Commission over allegations they listed
questionable patents to block generics from the market or made payments to makers of generic drugs to delay them. More
investigations are under way.

Ohio Attorney General Betty Montgomery is chairing a 35-state drug-price task force that hopes to stop drug companies
from inflating prices.

Perhaps most worrisome to the drug companies is that class-action law firms, including some that were prominent in the
1998 tobacco settlement with the states, are courting state attorneys general and public interest groups as clients.

Whether prescription prices in the United States are unfairly high is in the eye of the beholder, and depends on the
country and the situation.

Several studies have concluded that Americans without some kind of drug-cost coverage or benefits probably pay more for
their medicines than anyone else in the world. That would include the 60 million people, or about one in four, who have
no insurance coverage for prescription drugs and the third of the nation's elderly who can't pay for the prescription
medications they require.

However, because of the unique U.S. free-market healthcare system, and although they pay more, Americans have unlimited
access to the widest selection of drugs and to the newest ones. Those with relatively liberal drug-cost benefits see it
as an ideal situation. Due to price controls and market restrictions, people in many other countries have more limited
choices or none.

Citizens of a country like Italy where the government purchases all medications and distributes them within a national
medical system pay next to nothing, if In Canada, government-sponsored drug plans restrict or exclude the newest and
most costly treatments. For example, to hold down its costs, the Ontario provincial government listed only 25 of 99
drugs approved by Canada's federal government in 1998 and 1999. As a result, critics say, seniors in the province were
denied new and better medicines for osteoporosis, Alzheimer's and Parkinson's disease.

Like Italy, France directly controls its drug prices. Other countries, such as Germany, the Netherlands and Japan, do
it indirectly through social insurance plans. Britain does it through limits on profits.

Examples of how price controls can restrict access to prescription drugs are beginning to be seen in the United States.

Managed care organizations routinely limit access to drugs not on their approved lists. At Veterans Administration
clinics, if a physician is asked to prescribe an unlisted drug the cost is not covered.

Several states, including Ohio, are trying to implement purchasing pools or preferred drug lists for their Medicaid
programs which lower costs by extracting discounts from drug makers but then limit the availability of drugs not on the
list or included in the pool.

The Democrat version of a Medicare prescription benefit made distinctions between ''preferred'' and ''non-preferred''
drugs, which many worry are the seeds of future price controls and drug steering.

Much evidence has been presented that U.S. drug prices are so high because American consumers are subsidizing the costs
of drugs in other countries where governments regulate them in different ways.

Other studies counter that although some ''cost shifting'' might take place, most of the differences in prescription
prices are explained by flawed studies failing to account for different living standards and per capita spending,
consumption patterns, currency exchanges, a much wider use of generics in the United States than elsewhere, product
liability, altered drugs, black market medicines and many other variables.

There seems to be more agreement that the United States subsidizes drug research and development for the price-
controlled markets in the rest of the world, especially Europe.

The United States is footing the bill for nearly 40 percent of the world's drug research and development. Of more than
150 major new global drugs developed recently, nearly three quarters came from just three countries -- the United
States, Britain and Switzerland -- with the United States providing nearly half.

In most other countries, including the entire European Union, where the government is the sole purchaser of medical
goods or regulates them through national health plans and social insurance funds, there is a tendency to focus on the
direct costs of medications and let other countries cover the cost of research and development.

Called ''free riding,'' the practice is abetted by the fact that the United States has developed the world's most
strict and sophisticated regulatory apparatus for pre-market approval of new drugs and post-market monitoring of drug
safety.

The inclusion of much of the world's cost for research and development makes U.S. drug prices high. If those higher
prices are resisted, as is happening now, and unless there is a global leveling of prices, the U.S. pharmaceutical
industry argues the innovation of better drugs and competition will be eroded.

Reference:

Prescription drug costs -- a bitter pill to swallow
http://tinyurl.com/hwaa
http://www.morningjournal.com/site/news.cfm?newsid=4953349&BRD=1699&PAG=461&dept_id=499256&rfi=6

SOURCE: The Lorain Morning Journal, OH
http://tinyurl.com/hw9x
http://www.zwire.com/site/news.cfm?BRD=1699&dept_id=499256&newsid=4962734&PAG=461&rfi=9

* * *

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