Monday, December 7, 2009

Importation of Pharmaceuticals to the US?

An old amendment is rearing it's ugly head. The Washington Post reported yesterday that Senator Dorgan's (democrat from North Dakota) amendment #2973 is in discussion behind closed doors in the Senate. This amendment would allow both pharmacies and drug wholesalers to import drugs from a number of specified countries like Canada.

While I have not sharpened my pencil on this one yet, the Congressional Budget Office (CBO) has estimated savings to the government of almost $20 billion over the next 10 years. Of course the overall cost to the pharma industry would be even greater considering non governmental purchases.

$2 billion per year seems a bit "light" to me...
even just considering the impact from government purchases only. However, a "ball park" estimate, utilizing national healthcare data from CMS (government spending is roughly 36% of total pharmaceutical expenditure), places the total hit to industry revenue in the range of $5 to $6 billion per year. Should this amendment move forward I'll need to have my own look at the impact on industry revenue.

More importantly, if the amendment is embodied with the final reform legislation, Pharma will need to look into their global pricing models and strategies. According to IMS Health, the North American sector(almost all US)represented 40% of the global pharmaceutical market at $312 billion in 2008. With US brand pricing being significantly higher than in most countries, there is quite an arbitrage opportunity for importing pharmaceuticals from beyond the US boarders.

Dec 8th Update - FDA Opposes Dorgan's bill. This will likely be the "kiss of death" for the amendment but will other pharma price reducing proposals gain steam then?

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