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The Pew Charitable Trusts Letter to Congress Raises Concerns About Drug Importation Bill Undermining Supply Chain Protections

Dear Senator Sanders,

The Pew Charitable Trusts is an independent, non-partisan research and policy organization with a health portfolio that includes initiatives on enhancing the security of drug manufacturing and supply chain and on addressing the rising costs of prescription medications.

Americans spent approximately $310 billion on prescription drugs in 2015, after accounting for rebates and other price discounts.1 This is projected to increase six to nine percent annually through 2021, faster than health care overall.2’3  Over three-quarters of Americans now believe the cost of prescription drugs is unreasonable, and most favor additional steps to keep prescription drug costs down.4

Multiple factors affect drug spending growth, but the largest contributors are spending on new, brand-name drugs and year-on-year increases in prices for existing branded drugs.5  Although these innovative products often deliver  significant health benefits to patients compared with existing therapies, many have very high costs by historical standards.

Policymakers should consider a variety of tools to manage drug spending, and Pew has undertaken an analysis of many of these  approaches, including polices to:  increase generic competition; allow for price negotiation in Medicare Part D; and reform how Medicare pays for drugs in Part B,  including biosimilars. These analyses are available at http://www.pewtruts.org/en/projects/drug-spending-research-initiative.

Importation of prescription drugs from countries that limit drug prices may give  Americans access to some medicines at lower prices. Competition from imports could also put  long-term pressure  on drug  companies   to reduce  the  price  of their  products  in the  U.S. However,  large scale  importation could  potentially strain the supply of pharmaceuticals  in other countries. Foreign governments seeking  to protect  their  own  drug  supply  may limit export of drugs  to the United  States. It is difficult  to estimate potential savings  of such a program  without  knowing  how many entities  would participate, but the Congressional Budget  Office  (CBO)  evaluated a 2003 proposal that would have required  the  Secretary of Health and Human Services to issue regulations permitting pharmacists, wholesalers, and individuals to import  prescription drugs from  25  countries, including Canada.6  While acknowledging the difficulty in predicting the effects of drug importation, CBO estimated that the proposal would have produced “at most a modest reduction in prescription drug spending in the United States,” approximately $40 billion over 10 years.7  In addition, CBO stated that permitting importation  only from Canada would produce a negligible reduction in drug spending.

Against those potential savings, Congress must weigh the effect of importation on the pharmaceutical supply chain security provisions that Congress enacted in the Drug Quality and Security Act (DQSA) of 2013. This law protects public health by establishing a national drug supply chain security system that requires every package of drug product sold in the U.S. to carry a product identifier that will enable electronic tracing of that product throughout the drug supply. By 2023, all manufacturers, repackagers, wholesalers and pharmacies must participate in this system, creating an interoperable electronic drug security system that can track every unit of drug product, everywhere in the supply chain. This will make it easier to detect when counterfeit or illegal product is introduced into the system, and will significantly enhance the speed and accuracy of implementing product recalls.

The Affordable and Safe Prescription Drug Importation Act attempts to integrate importation provisions with the DQSA;  however,  significant  gaps  remain  that  would  compromise the security of the U.S. supply chain. While in many circumstances foreign sellers would be required to purchase from FDA-registered facilities, it is unclear how that requirement would be enforceable, particularly given the profit potential for entities that purchase from illegal sources and sell to the U.S. market. Even if it were, product would be sold into the U.S. system without the product  identifiers necessary to allow  a fully electronic and interoperable drug security system, thus making it difficult for supply chain partners who encounter product that is not DQSA-compliant to determine which products are counterfeit or otherwise illegal, and which are legally imported.

This poses a safety risk with respect to imported product, but also undermines the entire system, which depends on being able to flag non-compliant product as being potentially counterfeit or otherwise illegal. With a steady supply of non-compliant product coming over the border, or through online pharmacies, it will be very difficult, and product that is non-compliant because it is authorized under this legislation from product that poses a risk to public health.

We appreciate your commitment to addressing  the significant problem of increasing drug costs, and would welcome the opportunity to work with you going forward to address  the rising  price of drugs in a way that would not compromise the safety of the drug supply.

Sincerely,

Allan Coukell
Senior Director,  Health  Programs

I   IMS Institute for Healthcare Informatics, “Medicines Use and Spending in the U.S.:  A Review of 2015  and Outlook to 2020.” April 2016.  Available at: http://www.imshealth.com/en/thought-leadership/quintilesims-institute/reports/medicines-use-and-spending-in-theus-a-review-of-20l5-and-outlook-to-2020

2  Centers for Medicare & Medicaid Services, “National Health Expenditure Projections 2016-2025.” Available at:

https://www.ems.gov/Research-Statisties-Data-and-Systems/Statistics-Trends-and- Reports/Nationa!HealthExpendData/Downloads/proj2016.pdf

3  IMS Institute for Healthcare Informatics,  “Outlook for Global Medicines through 2021.” December 2016.

Available at: http://www.imshealth.com/en/thought-leadership/quintilesims- institute/reports/outlook _for_global_medicines_through_ 2021

4  Kaiser Family Foundation, “Kaiser Health Tracking Poll:  September 2016.” September 2016. Available at:

http://kff.org/health-costs/report/kaiser-heaIth-tracking-poll-september-2016/

5 The Pew Charitable Trusts, “What’s Driving lncreased Pharmaceutical  Spending?” May 2016. Available at:

http://www.pewtrusts.org/en/research-and-analysis/anaylsis/2016/05/26/whats-driving-increased-pharmaceuticalspending

6  H.R.  Pharmaceutical Market Access Act of 2003.

7 Congressional Budget Office, “Would Prescription Drug Importation Reduce U.S. Drug Spending?” April 2004. Available at: https://www.cbo.gov/sites/default/files/108th-congress-2003-2004/reports/04-29-prescriptiondrugs.pdf