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We commend CMS administrator Seema Verma for the efforts she and her team have announced to, in her words, "fulfill President Trump's promise to negotiate better deals for Medicare patients." Those efforts, however, can only be fully understood within a broader context. A little historical research helps put prescription medication prices in perspective.

The full impact of the pharmaceutical industry's influence over Congress, via its trade association PhRMA, becomes apparent when viewed across three very different administrations. Following the creation of Medicare Part D at the behest of George W. Bush in 2003, prescription prices began to skyrocket because of the provision preventing Medicare from negotiating volume discounts from drug manufacturers. At the time, which happened to be in the midst of the 2012 campaign season, we summarized the process whereby that law was passed in "Is Paul Ryan Another Tom Scully? Medicare Providers and Beneficiaries, on the Brink, Hope He Is Not."

Quickly but quietly, Americans discovered they could purchase the same exact medications from Canadian and European pharmacies, who were more than willing to re-ship U.S. drugs sent to them back to U.S. consumers, at a fraction of what those consumers were paying local pharmacies, especially if they fell into the so-called doughnut hole provision of Part D.

During the Obama administration, reinforced by massive campaign contributions, PhRMA complained to Congress about competition from their own drugs re-shipped from foreign pharmacists. Obligingly, Congress instructed the DEA to crack down on consumer freedom to purchase medications from overseas suppliers. The purported justification for the law was that consumers were unable to distinguish between legitimate online pharmacies and scam operations selling fake drugs, a claim broadly disputed by Public Citizen and other consumer advocacy groups.

Fast forward to 2017

The Trump Justice Department is continuing the Obama effort to block re-importation of low-priced "foreign" medications (which, remember, originated here) but posits a different justification, the opioid crisis. To supposedly reduce the importation of dangerous drugs, all importation has been banned, even though opioids amount to less than four percent of the drugs intercepted by the implementation of this executive order.1 The rest are common blood pressure, thyroid, Crohn's Disease, and other medications that U.S. drug companies sell in Canada and Europe for a fraction of the suggested retail prices of our insurance-dependent healthcare system. (See sidebar.)

We learned the details from a series of articles by investigative reporter Michael McAuliff,2 writing for Tarbell, an online consumer protection blog founded by former insurance industry executive Wendell Potter.3

Stupid? Or Cruel?

“Something is really stupid. The government is supposed to help the American citizen, not hinder them,” said Francis Donnelly, an 85-year-old retiree in New Jersey.

Donnelly was notified in early April by the FDA that it had intercepted his order of a drug called Asacol, which he’s been taking for decades to treat Crohn’s disease and ulcerative colitis. He has to get it overseas because its manufacturer stopped making it in the United States just before its patent expired in 2013. Donnelly said he and his doctor could not find alternatives that worked as well.

For his order, Donnelly used the online branch of a business called The Canadian MedStore that primarily serves people in Florida through a string of six storefronts. The business, according to founder William Hepscher, aims to help consumers gain safe access to overseas drugs by steering customers toward pharmacies that require prescriptions, are closely regulated in the countries where they are located, and ship genuine products.

Hepscher’s stores were raided in October 2017 just as the FDA was ramping up its efforts to block international shipments of medication. Since then, Hepscher says he has gotten steady complaints from individual customers whose medication has been seized.

Restricting foreign imports

U.S. pharmaceutical companies sell some of their products domestically and import some to other countries. U.S. consumers discovered long ago that Canada, Mexico, and the European Union sell these medications to their people at a fraction of the cost they must pay and that pharmacies in these countries are more than willing to ship their own medications or the exact same U.S. manufactured drugs back to Americans. Often, the net price, including shipping, is less than their co-pay if they filled the same prescription from their local pharmacy. Sometimes, life-saving drugs are not even available in the U.S. American drug companies do not appreciate having to compete, essentially, against themselves.

In 2009, PhRMA created the Alliance for Safe Online Pharmacies and began to lobby Congress, the freshman Obama Justice Department, and the White House with the claim that these overseas drugs – which they themselves manufactured and shipped overseas – are not safe. As evidence, they cited a handful of actual rogue suppliers of fake drugs, usually Viagra knock-offs, that are also located outside the United States. According to McAuliff:

When the Obama administration launched a push to protect U.S. intellectual property in 2010, the group saw a chance to use the battle against counterfeit and copycat products not just to discourage fakes and patent-infringers, but to curtail all importation of drugs, including properly manufactured medicine coming from regulated pharmacies outside the U.S.

The ruse was successful. Persuaded by the industry's inflated argument that all foreign sources sell nothing but unsafe drugs, in late 2010 the Justice Department created the "Center for Safe Internet Pharmacies," a public/private non-profit modeled after the blueprint ASOP had offered the year before. McAuliff again:

Domain registrars would help shutdown rogue pharmacy sites. Credit card companies would deny payments to online pharmacies that were not verified by LegitScript or were flagged by manufacturers.
Search engines would no longer run online pharmacy ads, including from legitimate overseas pharmacies. Google, which had already backed away from pharmacy ads while facing prosecution for running ads from rogue pharmacy sites, was a key part of the deal. This all would likely have been impossible ... had ASOP and drug companies not leveraged the White House's [unrelated] intellectual property push.

Forced to accept payment only by check, most legitimate international pharmacies lost interest in the U.S. consumer market. The Canadian International Pharmacy Association, which credentials more than 60 international pharmacies, was profoundly affected. "We see ourselves as being collateral damage to a policy that they’ve created that is overall designed to stop the sale of narcotics and controlled substances, and prescription drugs without a prescription, none of which we are involved with," said Tim Smith, general manager of the Canadian International Pharmacy Association.4

Hiding behind heroin

Encouraged by its success under Obama, and buoyed by a new, industry-friendly administration, in early 2017, PhRMA renewed its efforts to stifle competition. This time, the smokescreen is not unsafe medications but the opioid overprescription epidemic.

Responding to the government's request to help curtail over-prescribing and massive over-distribution of Oxycontin and other prescription opioids, the pharmaceutical industry redoubled its efforts in 2017 to eliminate competition from legitimate Canadian and overseas pharmacies. Investigative reporter McAuliff describes the plan, spearheaded by FDA Commissioner Scott Gottlieb, M.D.5 this way:

FDA Commissioner Scott Gottlieb confirmed in a mostly secret summit on online opioid sales that his agency is not just targeting illicit trade in addictive painkillers, but stepping up enforcement aimed at other sorts of FDA-regulated products purchased on the internet.
Although Gottlieb did not specify those other products, Tarbell reported earlier this month that the FDA is dramatically ramping up interdictions of cheaper regular prescription drugs that Americans order online from overseas pharmacies.
Gottlieb cast the heightened enforcement primarily as targeting opioids, however, pointing last Wednesday to a recent FDA operation against nine online networks that allegedly offered the drugs.

Though he has initiated a crackdown that appears to be more for PhRMA's benefit than the consumer's, the New York Times noted that Gottlieb displays "a collaborative management style, seeming to allay the concerns of some career employees who had balked at his industry ties." Those ties include work resulting in payments in the millions from Vertex Pharmaceuticals, Cell Biotherapy, GSK, Bristol-Myers Squibb, New Enterprise, TR Winston, MedAvante and Glytec.6

At least Dr. Gottlieb chooses not to disguise that he is doing this to protect Big Pharma from competition. According to Gottlieb, the vast majority of the FDA’s investigations still target non-opioids. Citing new statistics, he said that of 339 probes at U.S. ports of entry in 2017 by the FDA’s Office of Criminal Investigation, 19 involved opioids. This year, with 167 investigations launched so far, 25 involve opioids.


1 According to a 2017 study by the Substance Abuse and Mental Health Services Administration, only 0.1 percent of people aged 12 and up got their pain pills over the internet. The Internet Association — which attended the summit — told reporters in a conference call that data shows just 3.4 percent of people who abuse opioids get them online.

2 McAuliffe, Michael; Tarbell, 7/3/2018 FDA Boss Confirms Opioid Crackdown Is Aimed at Cheaper Prescriptions, Too

4 As a postscript to this story, on June 11 of this year, Florida State Representative Danny Burgess, chair of the Florida House Insurance and Banking Subcommittee and member of the same body's Oversight Transparency & Administration Subcommittee, asked Attorney General Jeff Sessions to investigate the restrictions imposed by CSIP. "I believe that an open and transparent investigation by the Department of Justice is warranted in this instance. Attempts by the Executive Branch, or members of a particular industry, to stifle their competition or to prevent citizens from having access to all available safe and affordable options is unconscionable."

Edney, Anna. "Drug Prices Become Target for FDA as Chief Expands Purview". Bloomberg. Retrieved July 27, 2017.

6Thomas, Katie. "F.D.A. Nominee, Paid Millions by Industry, Says He'll Recuse Himself if Needed", New York Times, March 29, 2017, Retrieved May 10, 2017.

©2018 by Rowan Consulting Associates, Inc., Colorado Springs, CO. All rights reserved. This article originally appeared in Tim Rowan's Home Care Technology Report. One copy may be printed for personal use; further reproduction by permission only.