Letters to the Editor

The harm of imported drugs

Reimportation, or parallel trade, of pharmaceuticals should be legalized in the United States, but making it legal does not make it effective (“Importation and prescription prices,” Op-Ed, Wednesday).

It is unlikely that it would be a significant boon to the U.S. consumer. In the European Union, where reimportation is legal, the United Kingdom gets 15 percent of its drug supply by this mechanism; none of the other member nations get more than 10 percent this way.

If the intent is to decrease costs to consumers in the destination country, overall, the effect has not been realized. The effects are negative to the pharmaceutical manufacturers, but only modest savings, at best, are realized by health systems. Most of the benefits accrue to the traders, not the consumers.

The lack of reciprocal licensing agreements is the legal impediment to parallel trade of pharmaceuticals in the United States. In the European Union, RLAs exist between countries that allow for reimportation of pharmaceuticals without each country having to recertify manufacturers.

Importation of pharmaceuticals to the United States requires that every manufacture site be inspected, certified and licensed by the Food and Drug Administration, not just that the drug be FDA-approved as suggested by Rep. Anne Northup.

In actuality, the major problem is not importing, but exporting. U.S. pharmaceutical companies have difficulty accessing the EU market, for example, because of price, volume, practice and access controls placed on medicines by national governments.

These controls undermine the value of patents, distort competition and limit access by patients to innovative products; they also have decimated European research and development in the pharmaceutical industry. This conveys a burden on U.S. (and Japanese) consumers via higher prices to cover the benefit to consumers in other countries from U.S. R&D.

The United States applies the principle of national exhaustion to intellectual property (patents); by contrast, the European Union applies international exhaustion.

In short, the former allows the first purchaser to distribute only inside the country of that purchaser as opposed to distributing anywhere. There is no legally binding global agreement pertaining to exhaustion of intellectual property.

A patent holder would like to set different prices in different markets with different demands (i.e. price discrimination), just as car-radio manufacturers do, to use Mrs. Northup’s example. Parallel imports remove that ability and may lead to uniform pricing — everyone pays the same price.

Although this sounds fair, uniform pricing locks out the lowest-income countries from the products they may need the most: new anti-HIV/AIDS drugs.

In general, low-income countries actually are better off under price discrimination. In the case of the United States, parallel trade would be a net positive in the short run. Our gain, however, would be at the expense of lower-income countries.

The lower the income, the greater the adverse effect of uniform pricing. This market inefficiency affects innovation in the long run. It has been estimated that a drop in R&D levels by 25 percent over the average U.S. life span will result in 79 million life-years lost (1 million lives). The dollar cost would be about $8 trillion, or about three-quarters of a year’s U.S. gross domestic product.

Safety has been the primary argument against reimportation. It is used more for its emotional appeal and political expediency than because of any reality.

It deflects criticism from the political right by virtue of being the basis of opposition by almost every head of the Department of Health and Human Services, the FDA and the surgeons general since 1969. Parallel trade may benefit the United States, but it would do so at the expense of the lowest-income consumers and countries. This is the argument the political left wants to avoid.

The best argument against reimportation is its long-term effects, especially on innovation and new products. However, this is a far more nebulous concept, which is impossible to quantify accurately, and it lacks immediate emotional impact. This makes it an intellectual non-starter as a campaign issue for most politicians.

JOE CREA

Columbus, Ohio

Agricultural concerns

Thomas Sowell calls concern about farmland “ridiculous” and one of the “romantic self-indulgences of the affluent and wealthy” (“Affluent notions,” Commentary, Tuesday). While America currently has food enough to fatten us all, Mr. Sowell has missed some important underlying problems. Our food production is unsustainable in several ways.

We are draining aquifers faster than they recharge, and the Colorado River no longer reaches the sea. It takes a massive amount of water to grow a ton of wheat, so when our aquifers run dry, our food production will be reduced.

Modern agriculture uses oil for tractors, for irrigation pumps, to dry grain, and to produce fertilizer and pesticides. America’s oil production peaked in 1970, and the world has been burning more oil than we discover since the early 1980s.

America has only 2 percent of world oil reserves but uses about 25 percent of world oil production. Oil is finite, so to the extent that our production relies on oil, it is unsustainable.

Finally, we are converting our farms to suburbs at an alarming rate. From 1992 to 1997, more than 6 million acres of agricultural land in America was converted to developed use — an area almost the size of Maryland. There is nothing ridiculous about preserving the agricultural lands that feed us.

ROSEMARY M. HAMILL

North Potomac

Doing business in Russia

In “Blue Russian skies for business” (Commentary, July 1), former Sen. Bob Dole makes a pitch for investment in Russia, arguing that Western concerns over the government’s renationalization of the Yukos oil company are exaggerated. As evidence, he cites U.S. businesses operating in Russia that are uniformly bullish and do not fear state interference.

In recent years, certain U.S. investors in Russia have seen a marked increase in profits. Others, however, have been subjected routinely to crude interference by government officials backed by a dependent judiciary. Yukos is neither an aberration nor the most important example of the Russian state’s selective prosecution of business. In fact, under the Putin administration, the government has subjected many honest and successful U.S. investors to “creeping” expropriation.

As a long-term investor in Russia, I agree with Mr. Dole’s aim to focus attention on the nation’s potential. However, the specter of state interference cannot be removed from the investment horizon with one stroke of the brush. By downplaying the Kremlin’s abuse of the law, Mr. Dole encourages those who are determined to preserve the state’s dominion over private property.

MATTHEW H. MURRAY

President

Sovereign Ventures Inc.

Arlington

Growing use of natural gas

Your article “Natural gas hits resistance as fuel of clean-air future” (Nation, Wednesday) states that using natural gas as a fuel “has become a boondoggle for many public transportation companies.” This not only is wrong, it’s 180 degrees wrong.

Almost 25 percent of all transit buses on order today are natural-gas buses, and that number is growing. The reasons are straightforward. Natural-gas buses produce much less urban air pollution and fewer greenhouse gases than diesel buses (and that gap will widen over the next several years). Also, as your article points out, natural gas costs substantially less than diesel fuel. More important from a national-security perspective, using natural gas displaces 100 percent of the petroleum that would have been used.

Our dependence on foreign oil is approaching 60 percent, but almost all the natural gas we use is produced in North America.

In some applications, diesel is still the preferred fuel. In those cases, newer, less-polluting diesel technologies should be used, and all the vehicles should be running on biodiesel blends.

However, transit buses are not one of those applications. In urban transit fleets, vehicles that run on 100 percent natural gas make the most sense — environmentally, economically and for our energy and national security. This also is true for school buses, trash trucks, shuttle vans and urban delivery vehicles.

RICHARD KOLODZIEJ

President

Natural Gas Vehicle Coalition

Washington