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May 20, 2004

CONTACT: Jerry Flanagan, (415) 633-1320

U.S. Senate Committee Debates Drug Reimportation; California Proposals Provide Effective Alternative

The debate over prescription drug reimportation took center stage today in the U.S. Senate Committee on Health, Education, Labor & Pensions when Senators weighed several competing proposals to reimport cheaper U.S. made drugs from Canada and elsewhere. Several California city, county and state proposals to bulk purchase prescription drugs on behalf of patients provide an effective alternative to reimportation, according to the Foundation for Taxpayer and Consumer Rights.

"The pending proposals providing for the reimportation of prescription drugs are at their essence allowing U.S. consumers to piggy-back on Canada's bulk purchasing program," said Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights. "On the other hand, direct bulk discount negotiations by the Medicare program, or in conjunction with the existing programs for veterans, would cut out the middleman and circumvent drug company tactics to dry up excess supply in Canada."

The City and County of Los Angeles and San Francisco are considering proposals to allow residents and small business owners to join bulk purchasing pools in which prescription drugs would be available at pharmacies at bulk discounts. A state proposal, (AB 1958 -- Frommer, Los Angeles) would allow the uninsured and business owners to join a bulk purchasing pool run by the California Public Employees Retirement System (CalPERS), the nation's second largest public purchaser of health care.

Though the Medicare law currently bars the federal government from negotiating bulk discounts on behalf of beneficiaries, under several of the pending reimportation bills vendors providing Medicare Drug Discount Cards may be allowed to reimport cheaper Canadian drugs to U.S. pharmacies.

However, a new law may be a moot point because Canadian pharmacies will likely not have enough supply or administrative capacity to provide for American demand. A better option would be to allow Medicare to do what the U.S. Department of Veterans Affairs ("DVA") and the Canadian government are already allowed to do to achieve 30-60% discounts off U.S. made drugs: negotiate bulk discounts directly with pharmaceutical companies.

Prescription drug bulk purchasing has been effectively to control prescription drug expenditures by large U.S. purchasers and Canada to bring down the price of drugs:

** The U.S. Department of Veterans Affairs (DVA) and other federal agencies purchase drugs through a bulk discount established by the Federal Supply Schedule. The DVA saves 52% off of list price of a drug (average wholesale price -- "AWP"). Therefore a drug with an AWP of $50 would be available for $24.

** The Canadian government negotiates bulk purchasing agreements with U.S-based pharmaceutical companies and pays about 60% of AWP --- 40% less than the average Californian.

** Health insurers also use their membership clout to negotiate bulk discounts on drugs to save 33% of off AWP. Therefore a drug with an AWP of $50 would cost an HMO $34.

** In comparison, a cash customer in the U.S. will pay 4% above AWP. Therefore a drug with an AWP of $50 would cost $52.


The Foundation for Taxpayer and Consumer Rights (FTCR) is a non-profit and non-partisan consumer advocacy organization. For more information visit us on the web at