Pfizer: Don't Fence Us In on Drug Costs

April 23, 2004 ( - Hank McKinnell, chief executive of pharmaceutical giant Pfizer Inc. agrees that something has to be done about the high price of medicine in America.

However, the answer is not to allow American consumers to have their prescriptions filled in the far less expensive Canada, McKinnell told the Pfizer annual meeting Thursday, the St. Louis Post-Dispatch reported. Numerous state and local governments are turning to Canadian drug reimportation as a way to slash their health-care coverage costs – a growing political movement that has already drawn the attention of Congressional lawmakers.

The solution, according to McKinnell: The United States should act against countries that fix drug prices. Consumers in France, Germany and Canada, among others, should buy their drugs in a market-driven system like the one in the U.S. so they can share the cost of developing medicines, rather than simply reaping the rewards, McKinnell asserted.

Pfizer is doing what it can to make that happen: “We are encouraging members of Congress to recognize this for what it is – a trade issue,” McKinnell said. Pfizer, the world’s largest drug company with $45.2 billion in 2003 sales, also is lobbying the Office of the U.S. Trade Representative.

Last week, the trade office created the new position of Assistant U.S. Trade Representative for Pharmaceutical Policy and filled it with Ralph Ives, who recently negotiated free-trade agreements with Australia and Singapore.

Drug companies can reap rich profits in the U.S. market, while in Canada, the government forces companies, including Pfizer, must meet a given price – or it will eliminate Pfizer’s patent protection and allow lower cost generic versions of its drugs to be made. Pfizer’s net profit in 2003 was $3.91 billion, after taking more than $6 billion in merger-related charges.

As a result, Canadian consumers pay less than Americans for brand-name drugs – 30% to 40% less, by some estimates. That price gap has lured cash-strapped American senior citizens to fill their prescriptions north of the border. Several states say they should be allowed to do the same.

Minnesota Gov. Tim Pawlenty, who wants Congress to legalize drug imports from Canada, met with Pfizer executives before the meeting. They “agreed to disagree” on that issue, he said. Yet they found common ground in the need to address foreign price fixing. “We identified a series of trade issues” that should be addressed, he said.

McKinnell’s main objection to reimportation is that systems such as Canada’s don’t allow Pfizer to recoup the cost of developing new drugs. If it had to stick to set prices everywhere, the company would have to stop innovating, he said.

More than 93% of drug development is funded by pharmaceutical companies, he said. And the expense is growing: It takes up to 15 years and costs $1.7 billion, on average, to develop a drug, according to a recent study cited by McKinnell. Previous estimates held that cost at $800 million to $1 billion. Pfizer said it will spend nearly $8 billion this year on research and development.