SUSAN DENTZER: Let's start with just an overview of what Pfizer's position is about the efforts on the part of many states and localities now to have broad policies to import drugs from Canada. What's the company's position?
HANK McKINNELL: I understand that many people are having difficulty affording the prescription medicines they need, but importation is not the answer. People don't understand the extent of counterfeit medicines around the world. In fact, nobody knows the true extent.
The World Health Organization has estimated 20 percent of prescription medicines sold around the world are counterfeit. In some countries it's as high as 40 percent. Here in the United States the incidence of counterfeit medicine is very low, thanks to laws that were enacted several decades ago, that have been enforced by the FDA very effectively. But quite frankly, those laws are now being overwhelmed by Internet pharmacies and shipments of medicines from abroad. And we know that something like almost nine out of ten medicines that are imported into this country through these Internet sites are fake or substandard.
SUSAN DENTZER: ...[W]e were down in Puerto Rico where Lipitor is made, most of it for the U.S. market, some of it potentially for the Canadian market, and American consumers look on the Internet and see that they can buy Lipitor from a Canadian Internet pharmacy for half the price as in the United States. So what's the message to them?
HANK McKINNELL: Well, we've looked at those so-called Canadian Internet sites. What we found is more than 50 percent were registered to fictitious persons and fictitious addresses here in the United States, or in countries like Belize and Argentina and India and Pakistan. You might think those are Canadian Internet sites, but they are not. And the products that come through those sources do not come, in most cases, from FDA approved manufacturing sites.
SUSAN DENTZER: So from the standpoint of safety alone, people are nuts to bring their drugs back through these sites or through Canada?
HANK McKINNELL: This is a risk not only to patients who are on lifesaving medicines, it's a risk to all of us. The tablet that you swallow, the cough syrup that you take may in fact be substandard and not give you a therapeutic dose of the medicine you need, but in fact it may be toxic or it may not control the conditions for which that medicine is indicated.
These are literally life and death concerns.
SUSAN DENTZER: As you mentioned, counterfeiting is going on at the moment and is quite widespread. What would make it worse if there were a broad policy to allow importation of drugs from Canada?
HANK McKINNELL: If we were to legalize the importation of drugs from abroad, the incidence of counterfeit in this country would increase twofold, fourfold, tenfold. It would be a regulation and enforcement nightmare to insure the safety of drugs to the patients. This is, after all, an issue of patient safety.
The FDA currently, with the ban on imports, is spending $12 billion, not of the FDA's money but of taxpayers' money enforcing the rules and regulations. Can you imagine what it would cost to insure the safety of drug supply if we had free importation from abroad, and the counterfeit incidence went up by fourfold or tenfold? It would be an enormous cost to all of us.
SUSAN DENTZER: I'm going to play the role now of somebody from Middle America wanting an explanation of why the same drug produced in Puerto Rico costs double to a U.S. consumer buying something at the retail level versus Canada. Why?
HANK McKINNELL: Well, prices are lower in Canada. In fact, they're lower on patented drugs, mostly manufactured by American companies, American manufacturers, and those prices are not set by the manufacturers. They're set by the Canadian government, and they, of course, set those prices recognizing they're not harming their own companies, their own manufacturers, they're setting them to minimize the cost to the payers.
It is interesting, however, that Canada does have a generic drug industry. Coincidentally, generic drugs in Canada are 50 to 60 percent more expensive than the same generic drug here in the United States. So this is more a matter of trade policy and industrial policy in Canada, quite frankly, we need to resolve, but importation from abroad is not the answer. That opens up all sorts of concerns around the safety of the drug supply here in America.
SUSAN DENTZER: So the Canadian government is playing favorites with its domestic generic industry?
HANK McKINNELL: Well, when you have prices of patented products, mostly manufactured by American companies, cheaper than prices in the United States, and the generic products, which are manufactured in Canada, much more expensive, something unusual is going on here.
SUSAN DENTZER: Let's talk about Pfizer's own pricing experience in Canada with respect to, for example, Lipitor. What happened vis-a-vis the initial setting of the Lipitor price, and in general what is Pfizer's experience of the way prices are set in Canada?
HANK McKINNELL: Well, prices are set by government. There is no negotiation. The government determines, based on what they consider to be comparable products available in the country. They determine a price. We have a choice of either accepting that price or not. If we don't accept that price, the Canadian patent law allows the government to expropriate our patent rights and give them to a local company to manufacture the product that we discovered in Canada.
We essentially have no power over this "negotiation," and prices, as a result, are much lower in Canada than they are in the United States.
SUSAN DENTZER: Can you still make a profit, though, in Canada?
HANK McKINNELL: Yes, we do make a small profit, but the result of this is that the Canadian payers, mainly the Canadian government, are not paying their fair share of the costs of discovering and developing these very important products.
SUSAN DENTZER: And in addition to that, as I understand it, some products that Pfizer does have available have not been approved for sale in Canada.
HANK McKINNELL: Well, the Canadian government not only relies on wage and price controls, they also ration access to care, not only doctor and hospital care, they ration access to medicine.
Our drug Aricept for the treatment of Alzheimer's disease was approved in Canada in 1997, but it's still not available in three of the provinces, and was not available in two of the provinces until 1997 and 1999. Now, the government does pay for the nursing homes that these patients are admitted to. The use of Aricept delays admission to nursing homes, we've found from a study in Canada, by up to two years. So the fact that the government pays for the nursing homes but won't pay for the drug to keep people out of those nursing homes, in their own homes and in productive life, is not a very wise decision for us, the patient, or the Canadian government.
SUSAN DENTZER: FDA Commissioner McClellan, as you know, has proposed a global revisitation of pharmaceutical pricing policy that in theory would have many of the countries like Canada and European nations that are holding prices down ease up on that so that prices can be higher in those countries, and potentially lowered in the United States.
HANK McKINNELL: Well, we believe in free trade. Free trade means free of government restrictions. You can't have free trade when the government sets the price, and that is what's happening in many countries that, quite frankly, are putting their own budget concerns ahead of the interests of the patient.
I don't think it's right in either a sense of trade policy or industrial policy to pay for the treatment of heart attacks and strokes, but not pay for the drug that prevents those heart attacks and stroke. I agree with the commissioner that it is time that we re-look at policies which have a single focus on drug costs. We really need to recognize that countries outside the United States do need to pay a fair share towards the cost of creating those drugs. They can't continue to free ride on American research. And maybe most importantly of all, they have to do with right for the citizens of their own country.
SUSAN DENTZER: Is it conceivable that if those countries agreed that they needed to bear a greater share of R&D costs that prices would be lowered for U.S. consumers?
HANK McKINNELL: Well, prices in the United States are set by free market forces. It's not entirely clear prices would be lower in the United States, but it certainly would be one of the factors in the dynamics of the market place the way companies make individual decisions on pricing, and there would be no direct relationship. But I think the competitiveness of the American marketplace could very well bring prices down.
SUSAN DENTZER: The harshest critics of the pharmaceutical industry say that there is a lot of room in pharmaceutical industry budgets, particularly on the marketing side, to reduce expenses, such that profits could be potentially maintained and prices lowered at the same time. Is that a plausible scenario?
HANK McKINNELL: Well, in fact, we do that. We compete in the United States for contracts for the government where prices are lower, we compete for large purchasers where there are some discounts provided. So, in fact, that process is part of the natural competitive marketplace.
We are looking at all times at ways to improve our efficiency and bring down our costs so that we can maintain our commitment to research, our commitment to patients in a competitive environment which is bringing prices down in the United States.
SUSAN DENTZER: Specifically back to Canada, what would Pfizer prefer to see in terms of the way that the Patent Medicines Review Board would approach price setting of new medications, the provincial government's approach, availability of product, as you said. What would be a better scenario for the Canadian government and the provincial governments as far as Pfizer is concerned?
HANK McKINNELL: Well a better policy for Canada, for the government, for the provinces, for patients in Canada would be to abolish the combination of federal price controls and provincial formulary access that frankly conspire to push prices to a level which would not sustain continuing investment in research for the products that we need for future medical needs, and rationing care to patients.
It's quite clear to me that if we allowed free pricing in Canada, the prices of generics would come down quite dramatically. There would be competition for new products launched in Canada, and most importantly of all, patients would have access to the medicines they need. That's not happening in Canada.
SUSAN DENTZER: And you said earlier that this is all about politics. The response from that side would be to say to the pharmaceutical industry response, this is all about profits.
HANK McKINNELL: I've heard that charge. We understand that people need help obtaining access to the medicines they need and in fact, Pfizer alone last year contributed more than $650 million of free medicines around the world, $450 million of which are here in the United States.
Those programs such as the sharecard program under which any low income senior can obtain access to a 30 day supply of any Pfizer medicine for a flat $15 fee, those programs are part of the answer. The real answer is coverage, not only for seniors in the Medicare program, which we will have, but for the uninsured.
We've seen passed a prescription drug benefit under Medicare. I think we now need to turn our attention to insuring affordable access to medicine by those who are uninsured in America.
SUSAN DENTZER: I want to ask you about the steps that Pfizer has taken to cut off importation of drugs from Canada in terms of cracking down on wholesalers. If you could tell me what Pfizer has done, said to those wholesalers, etc., and are those policies working?
HANK McKINNELL: We have reviewed our distribution policies and practices both in the United States and Canada to insure the safety of drug supply, that the Pfizer drug patients receive is the drug they expect to receive. We have authorized certain wholesalers -- not all wholesalers -- to do business with us. We have insisted that those wholesalers supply only authorized pharmacies both in the United States and Canada to make it much more difficult for counterfeit products to find their way into the distribution chain, and eventually to patients.
SUSAN DENTZER: And are those policies working?
HANK McKINNELL: We think they are. We have seen few, but some, examples of counterfeit medicine here in the United States reaching patients. We've seen problems with supply in Canada, and we are taking steps to insure that the patients intended for patients in Canada, that those patients receive the product they expect to receive.
SUSAN DENTZER: Leaving aside, though, the counterfeit product issue, a lot of these policies seem designed to keep legitimate product out of the hands of the Internet pharmacies. Is that the intent and is that working?
HANK McKINNELL: Well, the product we sell in Canada are intended for people in Canada, and pretty clearly, if you take the supply intended for 25 million people in Canada and make it available to 250 million people here in the United States, there's going to be shortages in Canada. Our obligation is to make sure our products are available when needed, and that they're high quality products.
SUSAN DENTZER: And is that working? Is product being kept out of the hands of the Internet pharmacies?
HANK McKINNELL: We still hear reports of illegal diversion of products from Canada and elsewhere into the United States, so we have more work to do.