Drug importation and its deleterious effects on the u s pharmaceutical r d industry
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Drug Importation and its Deleterious Effects on the U.S. Pharmaceutical R&D Industry. Jeannie Chow 30 November 2004 Pharmaceutical Regulatory Affairs. Agenda. Background Will Drug Importation Work? FDA’s Rules & Regulations Financial/R&D Effect of Drug Importation

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Drug importation and its deleterious effects on the u s pharmaceutical r d industry l.jpg

Drug Importation and its Deleterious Effects on the U.S. Pharmaceutical R&D Industry

Jeannie Chow

30 November 2004

Pharmaceutical Regulatory Affairs


Agenda l.jpg
Agenda Pharmaceutical R&D Industry

  • Background

  • Will Drug Importation Work?

  • FDA’s Rules & Regulations

  • Financial/R&D Effect of Drug Importation

  • Other Risks of Drug Importation

  • Conclusions

  • Recommendation/Approach

  • Contingency Plan


Background l.jpg
Background Pharmaceutical R&D Industry

  • Motivation: The pursuit of cheaper foreign prices for prescription drugs.

  • Hypothesis: U.S drug spending would be lowered if drug importation were allowed.

Source: IMS Health Data. Anderson, Gerard F., “Doughnut Holes and Price Controls”. Health Affairs. 21July2004.


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Will Drug Importation Work? Pharmaceutical R&D Industry

  • Financial Impact: Would drug importation decrease U.S prescription drug spending? NO

  • Drug importation of foreign-distributed prescription drugs would produce at most a modest reduction in prescription drug spending in the U.S.; it would be approximately a reduction of $40 billion over 10 years or about 1 percent.

  • Volume Impact: Would drug importation create sufficient supply volumes for the U.S demand? NO

  • Assuming all drugs currently parallel traded in Europe and Canada were made available in the U.S., supply would only be sufficient to meet 3-5% of existing U.S. demand.

Congressional Budget Offfic, H.R. 2427: The Pharmaceutical Market Access Act of 2003, CBO Cost Estimate (November 2003)

“The Future of Price Regulation in the U.S. Pharmaceutical Market,” The Cambridge Briefing. September 2004.


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FDA’s Rules & Regulations Pharmaceutical R&D Industry

  • 1938 – Food, Drug and Cosmetic Act

  • 1988 – Prescription Drug Marketing Act

  • States that no drug…which is manufactured in a State and exported may be imported into the United States unless the drug is imported by the person who manufactured the drug.

  • 2000 – Medicine Equity & Drug Safety Act (MEDS Act)

  • Required the Secretary of Health & Human Services to certify that the MEDS Act would pose no additional risk to the public’s health and safety, and would result in a significant reduction in the cost of prescription drugs to the American consumer (21 U.S.C. Section 384(l)).

  • FDA guidance “Coverage of Personal Importations”

  • Allows individuals to import otherwise illegal drugs under certain defined circumstances, and as a matter of enforcement discretion. The drug quantity must not represent more than a three-month supply.

Source: www.fda.gov


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Source: IMS HEALTH Pharma Prognosis International, 2000-2004

The Pharmaceutical Market

  • Why is the U.S investment so much greater?

Source: EFPIA member associations, PhRMA, JPMA. 2003 U.S figure is an estimate. 2003 Japan figure not available.


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U.S vs. EU Pharmaceutical R&D

Source: SCRIP-EFPIA calculation (according to nationality of mother company).

Source: EFPIA member associations.


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Financial Impact to U.S Pharm. Industry

  • R&D spendingwould fall by $14.8 billion.

  • Abandonment of an additional 262 drugs

  • Only nine new drugs would likely be approved in a year – a decrease of more than 70% from the current average of 31.

  • A loss of $14.8 billion in R&D corresponds to an approximate loss of $21.8 billion in net after tax profits!

Source: Tuerck, D.G., Barrett, J., Giuffre, D., and Rzakhanov, Z. “The Impact of Drug Reimportation and Price Controls: The U.S and Massachusetts.” Institute for Policy Innovation. Policy Report 184. September 2004.

Source: Reinhardt, U.E., “U.S Health Care Spending In An International Context”, Health Affairs 23(3): 10-25. May/June 2004


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Other Risks of Drug Importation

Lack of FDA’s Ability to Assure Safety

Patent Rights Jeopardized

Significant FDA Administrative Resource Costs


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Conclusions

  • Drug importation would drastically decrease the investment in research & development.

    • $14.8 billion in R&D spending would be lost over 12 years.

    • This loss in R&D spending corresponds to an approximate loss of $21.8 billion in net after tax profits!

    • Only nine new drugs would likely be approved in a year – a decrease of more than 70% from the current average of 31.

  • Drug importation would pose a great health risk to U.S. consumers as the FDA lacks the ability to regulate any drug reimportation policy.

  • Drug importation would produce at most a modest reduction in prescription drug spending in the U.S.

    • It would be approximately a reduction of $40 billion over 10 years or about 1 percent.


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Drug Importation:

Decreases R&D spending/No. of New Drugs

Lacks Drug Safety

Would not reduce U.S. prescription drug spending

Direct to Consumer Advertising

Recommendation/Approach to the Possibility of Drug Importation

  • Recommendation: Prevent the implementation of drug importation in the U.S.

  • Approach: Utilize cross-functional departments within the organization to promote public awareness.

  • Resources: 1 Marketing FTE; 0.25 Regulatory FTE; 0.25 Scientist FTE

  • Costs: Allocate ~ $20 - $40 million for DTC advertising on drug importation.


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Contingency Plan if Drug Importation Implemented

  • Stricter evaluation of a project at each phase of development.

  • Evaluate and reduce administrative costs.

  • Strategic use of outsourcing to complement in-house manufacturing and testing capabilities.

  • Launch new product first in markets without price controls or allows the highest price. Must take into consideration ethics and therapeutic use of product.


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