Congress Should Enact A Prescription Drug Benefit

September 05, 2001

Instead of imposing Canadian-style price controls or adopting a dangerous reimportation scheme, Congress should deal with the underlying problem and expand seniors' access to medicines by enacting Medicare reform with a prescription-drug benefit, Marjorie Powell told a Senate panel.

"The Canadian government-controlled health care system, where there is a double layer of price controls imposed both by the federal government and the provincial governments, makes it difficult for Canadians to have access to and coverage of innovative, new, life-saving medicines," Powell, an Assistant General Counsel of the Pharmaceutical Research and Manufacturers of America (PhRMA), testified before the Senate Commerce, Science and Transportation Subcommittee on Consumer Affairs, Foreign Commerce and Tourism.

Compared to the U.S., Powell said, Canadians experience long delays in access to and reimbursement for new pharmaceuticals due to delays in market approvals, delays in coverage pending formulary decisions, and reimbursement restrictions.

"Canada's price controls simply have not worked," Powell said. For example, she said, total expenditures on drugs at the retail level were 15.5 percent of total health care expenditures in Canada in 2000, while outpatient drugs in the U.S. were 8.6 percent of national health expenditures.

Many products, not just some prescription drugs, generally are less expensive in Canada than in the U.S., Powell said. That is because the Canadian government imposes price controls and unnecessary regulations on many industries for many products. The Canadian government runs marketing boards that operate throughout the entire country or within specific provinces for most industries.

While various attempts have been made to compare the prices of prescription medicines in different countries, Powell said, virtually all such studies have been fatally flawed by faulty methodology. One of the most common flaws is that manufacturers' U.S. list prices for drugs are compared with list prices in other countries. This results in erroneous conclusions because the actual transaction price in the U.S. often is significantly lower than the list price for many drugs, which is not the case in many other countries.

Another flaw in international price comparisons, Powell said, is that the drugs that are compared are not always directly comparable because of differences in package size, dosage forms, strengths, indications, and dispensing methods.

"We should learn from Canada's mistakes - not import them," Powell said. "Nor should we make the mistake of adopting a risky and hazardous reimportation scheme instead of addressing the underlying problem by reforming the Medicare program, including enacting a prescription drug benefit for America's senior citizens."

PhRMA represents the country's leading research-based pharmaceutical and biotechnology companies, which are devoted to inventing medicines that allow patients to live longer, healthier, and more productive lives. Investing more than $30 billion in 2001 in discovering and developing new medicines, PhRMA companies are leading the way in the search for new cures.