Source: The Pink Sheet
Date: September 15, 2003
Section: Volume 65, Issue 37
Copyright © 2003 F-D-C Reports, Inc.

The pharmaceutical industry needs to re-cast the global pricing and reimportation debate as a trade issue, Pfizer CEO Henry McKinnell told the Bear Stearns conference in New York City Sept. 8.

“This is an issue we haven’t framed properly to the public yet,” McKinnell said. “Ultimately, you are going to have to turn what Canada, France and several other countries are doing into a trade issue.”

“It is just not fair that they should expect to be able to trade with the U.S. in a free market and at the same time not pay their fair share of the research costs,” McKinnell said.

“We hear from the unions quite often” that allowing importation of pharmaceuticals from countries with lower prices “would be a good idea,” McKinnell noted. “Well, if they want to import pharmaceuticals from Canada, they may also be in favor of importing low-cost labor from Mexico and elsewhere, which of course they don’t support.”

“We haven’t quite framed it that way yet,” McKinnell said. “Framing this issue properly is something we have yet to do.”

The Pfizer CEO suggested other lines of argument industry could pursue, including the possibility of making a trade argument based on the reality that most pharmaceutical production is now based overseas.

“It is perceived by some as ‘reimportation,’” McKinnell noted, “as if these drugs are made in the U.S., sent to Canada and can be brought back. Wrong. Most drugs in Canada are actually produced - somewhat in Canada, mostly other countries - so importing pharmaceuticals means exporting jobs and investment,” he declared.

McKinnell also proposed flipping the conventional image of seniors taking bus trips to Canada to buy cheaper drugs. “Yes, patent protected products are priced by the Canadian government below the price in the U.S., sometimes quite significantly, sometimes by much less than you might think,” McKinnell said.

However, “generic prices in Canada are 60%-70% higher than in the U.S. So I think I’m going to start organizing bus trips of Canadians who come to the U.S….to buy low-cost generics,” McKinnell joked.

McKinnell’s comments reflect the growing concern within the brandname industry that the arguments it has been using against opening the Canadian border are not working.

Each time either chamber of Congress has voted on a reimportation amendment, it has passed by a broad majority. Most recently, the House voted 243-186 in favor of allowing imports from Canada; the vote was intended to serve as instructions to House conferees on the Medicare bill (”The Pink Sheet” July 28, 2003, p. 13).

“We were disappointed that the political issue of importation became entwined with progress on the Medicare bill,” McKinnell said.

“Importation opens the door for counterfeit medicines,” he declared. “This is not a hypothetical issue. We know from our own experience that counterfeits originate abroad, and legalizing importation would make matters drastically worse.”

FDA is stepping up its efforts to highlight safety concerns with reimportation, including taking enforcement action against pharmacies involved in cross border drug distribution (see preceding story).

However, HHS Secretary Thompson stressed during a luncheon address to the Bear Stearns audience the need for the drug industry to “find a better way” to tackle global pricing disparities.

Drug companies are “losing the public relations battle,” he declared.

“You see the investments coming into America from Europe, where there is a market control system of paying for drugs. You see remarkable discoveries coming from America. The pharmaceutical companies, the research centers and the biotech companies in the U.S. I don’t think we want to change that.”

However, “pharmaceutical companies are going to have to realize - and I think that they have - that it is a huge problem out there, because it is difficult to explain to seniors in Northern Michigan or Wisconsin or Maine or New York about the need to pay a higher cost for the drugs they need when they can go across the border to Canada.”

“What we’re going to have to do is find a better way,” Thompson continued. “Industry is working on it. We’re working at it as a government.”

“Drug companies are going to have to go to the marketplace and use the marketplace much more effectively than they have in the past,” Thompson said.

“We have not come up with a decision, but I do not think that the correct direction is to do reimportation.”

Pfizer’s McKinnell has frequently stressed the need for the brandname industry to rethink its approaches to long-standing political challenges. Within the Pharmaceutical Research & Manufacturers of America, McKinnell led a “repositioning” committee that oversaw the adoption of PhRMA’s voluntary code of conduct for marketing practices (”The Pink Sheet” April 29, 2002, p. 18).

With Pfizer’s new scale following the completion of the Pharmacia merger, the company intends to be more aggressive in addressing the political environment, McKinnell suggested.

“To maximize tomorrow’s product opportunities, we must also be more effective in shaping in positive ways the external business environment,” McKinnell said.

“Even our staunchest allies are asking that we do a better job in helping voters better understand the value provided by the pharmaceutical industry,” McKinnell said. “This challenge requires us to exert leadership more vigorously.”

“As the world’s largest pharmaceutical company, people think of Pfizer first,” McKinnell said. “This provides an enormous opportunity for us to influence both public and legislative thinking.”

“We’re in a good position,” he continued. “Among companies that the public considers research-based pharmaceutical companies, we lead in perception favorability.” McKinnell credited Pfizer’s heavy promotion of the “Share Card” discount program as one factor “in building support and trust.”

McKinnell highlighted one recent success for industry in reframing a debate: the Trade Related Aspects of Intellectual Property agreement on pharmaceutical patents “was a significant positive step for the industry and one that I am pleased to say was led by Pfizer” (”The Pink Sheet” Sept. 8, 2003, p. 11).

“Reopening TRIPS was sought by others to undermine our intellectual property, but by working with the U.S. government, other countries and the WTO, we were able to not only protect our intellectual property, but also demonstrate our commitment to global access to medicines.”

“Resolving the TRIPS will now focus attention where it should have been all along: on building a fully functioning health care delivery system in some of the poorest countries in the world,” McKinnell said.

McKinnell continues to be an outspoken critic of the motives of international generic companies, both in the context of the global HIV drug access issue and in the U.S. Waxman/Hatch reform debate.

The Pfizer CEO noted that his company is involved in patent disputes over several products, “with in some cases valid litigation issues where we think we have the better of the argument.”

“In other cases, these are spurious free shots at our patent system,” McKinnell declared. In two cases (involving Norvasc and Lipitor), the litigants include “companies from India, where in their home market they are able to freely steal our technology, supported by their local government, and now they are coming to the U.S., trying to do the same thing.”

“I can’t tell you how angry that makes me,” he said. “If we can’t beat this in court, you are going to hear us at FDA and in Congress. This is once again a policy that the civilized world should not be engaged in.”

McKinnell spoke briefly about the Medicare prescription drug coverage debate. “We are actively supporting a Medicare drug benefit,” he said. “While pleased with the progress Congress has made so far, we are working to make the final bill as good for patients as it can be, with access protections, to ensure patients get the products their doctors believe they need.” Pfizer is pushing for limits on the ability of prescription drug plans to use formulary tools in managing the new drug benefit (”The Pink Sheet” June 2, 2003, p. 5).

McKinnell sounded the same theme struck by Lilly during an analysts conference Sept. 5: “The passage of a Medicare drug benefit is also the best way to lessen political pressures on the industry. Those pressures won’t go away completely, but we’ll be in a much better position to protect patient access and incentives for innovation” (”The Pink Sheet” Sept. 8, 2003, p. 3). FDCviaNewsEdge
Copyright © 2003 F-D-C Reports, Inc.