A terrible mistake

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Next week, thanks to a deal the House Republican leadership cut with Congresswoman Jo Ann Emerson, the House will vote on a bill that will finance terrorism, undermine drug safety and threaten to suck billions of dollars out of the pharmaceutical and biotech industry at a time when more money than ever is being spent on breakthrough medicines.

It is a bill that will bar the Food and Drug Administration, which was expressly created to guarantee the safety of drugs, from stopping drugs from coming in from Canada and 25 other countries, including South Africa, where more than 20 percent of its drugs are counterfeit or adulterated, even if it thinks it might undermine the safety or security of the supply of medicines in America. Imagine that: Congress telling the FDA to take a powder when it comes to the basic mission of ensuring that the medicines we take are safe.

This bill is at odds with a letter Mark McClellan, the FDA's commissioner, recently wrote saying that he couldn't guarantee safety, and neither could his Canadian counterparts. But Mrs. Emerson and her GOP colleague, Gil Gutknecht of Minnesota, are so determined to import Canadian-style price controls that they ignore Mr. McClellan's warnings. In the FDA's place, Mr. Gutknecht would require that packaging of every prescription drug incorporate "overt optically variable counterfeit-resistant technologies," whatever that means.

The idea of allowing drugs in from South Africa is unbelievable. South Africa's Health Department notes that up to 20 percent of the medicines sold in South Africa are fakes or stolen and are almost impossible to distinguish from the real thing. Once it becomes a way station for reimportation, the amount will only grow. The fake are impossible to detect and blend well into the wholesale supply.

By the same token, Canada's pharmaceutical distribution system is porous, which is why HealthCanada stated it could not vouch for the safety or reliability of drugs imported to America. There are 85 companies that can import drugs in Canada and several hundred more that wholesale and distribute drugs. Many have been using the personal use exemption, which allows individuals to import drugs into Canada, as a way to import large quantities of drugs into Canada from other countries such as Mexico, or ship them to America via Internet sites.

As HealthCanada recently noted: There are "ramifications related to safety because large quantities of products, which have not been reviewed for safety and/or efficacy, and which are of unknown quality, can enter the country and be distributed. The lack of an importer also means no person is responsible for meeting [Good Manufacturing Procedure] requirements such as appropriate record retention or recall mechanisms."

Passage of a reimportation bill will increase the number of companies in the business of packaging and repackaging drugs in Canada. This spring, Los Angeles County authorities reportedly seized two tons of drugs shipped from Canada that were in the process of being illegally repackaged and resold by an American repackager. It is estimated that the operation nets millions of dollars a month. This situation is still under investigation, but it has been suggested that this operation is similar to those in other parts of the country that net millions each month. Their numbers will only grow if the Gutknecht bill becomes law.

That will make the 50 operational terror cells in Canada quite happy. For example, Hezbollah has engaged in pseudophedrine smuggling through Canada to finance some of its operations. Purchased legally in Canada, the drugs were then brought illegally into the United States to produce methamphetamine, or speed. But why smuggle when you can legally ship your phony products and cheaper goods through legitimate pharmaceutical operations?

According to GlobalOptions, a firm that specializes in evaluating the terrorist threat to our nation's medicine supply, "Legalizing the importation of drugs would also facilitate a terrorist attack on the medicine supply. Instead of smuggling drugs across the border, a strike could be launched by sending tainted drugs through the mail system or by adulterating drugs bound for the U.S."

Finally, even if the safety and terrorist issues could magically disappear, the impact of rerouting all pharmaceutical sales through Canada or other countries on future innovation would not. (The bills basically force American drug and biotech companies to sell as much of their products to foreign wholesalers as they order.) Drug companies in Canada, compliant with price controls, have seen their profit margins shrink. In the process, the amount they have spent on research has declined from 10 percent of sales in 1999 to 8 percent in 2002. Reimportation would have the same effect on American firms.

Drug companies and biotech firms alike would be forced to sell their products at generic drug margins and at the lower value of the Canadian dollar, devastating investment in a generation of smarter drugs and personalized medicine. Mrs. Emerson and Mr. Gutknecht blather on about how their bills promote "free trade," but if they really did, they wouldn't stop at drugs. They would allow for the reimportation of automobiles, which, if just limited to the top selling 50 models, would save Americans $11 billion a year. Why not just turn Canada into one big Costco, for that matter?

There are rumors afloat that Republicans will vote for this measure and that the administration is so desperate to sign a Medicare bill that it would support it. This measure is so harmful to our safety, so disrespectful to the FDA and so devastating to our biomedical industry that this would be a terrible choice. Mrs. Emersonand Mr.Gutknechtare parochial members of Congress; they can be excused for being clueless to the broader national effects. But what is the House leadership's excuse?

Robert Goldberg is a senior fellow of the Manhattan Institute and director of the institute's Center for Medical Progress.