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The Second Boston Tea Party

Should the U.S. pharma industry worry that the rebellion against prescription drug costs will turn into a replay of 1773?

January 26, 2004

Should the U.S. pharma industry worry that the rebellion against prescription drug costs will turn into a replay of 1773?

Despite the passage of a prescription drug benefit for Medicare in December 2003, few Americans doubt that drug prices and healthcare costs will continue to register double-digit increases annually.

They worry that there will be even more pressure on the wallets of ordinary Americans, further restricting their economic liberty.

And their nascent rebellion has a familiar ring, harking back to another pivotal event in U.S. history some 230 years ago.

Indeed, there is reason to wonder whether "Big Pharma" is the new East India Company. Freedom-loving Americans are in ever-greater numbers taking matters into their own hands — even if it means breaking the law.

Some two million Americans already drive to Canada to buy the drugs themselves, while many U.S. officials have decided to procure drugs for their local health care systems from abroad.

So far, U.S. government regulators have sided with the pharmaceutical industry in opposing various means of purchasing drugs at lower prices, for example via Internet pharmacies.

Regulators and industry representatives cite vague "risks" from imported drugs as the reason for their stance, even for importing FDA-approved drugs from Canada and Europe.

But it is becoming obvious to most Americans that on this front, their own government is primarily acting in the interest of large corporations — giving them competition-free pricing power on the American market.

All of this sounds suspiciously like what went on in the American colonies exactly 230 years ago.

That event became known in history as the Boston Tea Party — and proved the first salvo of the American Revolution. Back then, the government of King George III passed the Tea Act of 1773.

It allowed the East India Company — which was at the time on the brink of financial ruin — to sell tea directly to the American colonies.

The act also permitted the company to appoint its own agents to distribute its product in the New World. The colonies rebelled against such high-handedness.

After all, King George III was effectively reaching straight into their wallets. Governments in different colonies, from Pennsylvania to South Carolina, expressed their outrage.

But it was in Massachusetts where things finally came to a head.

On December 16, 1773, Americans boarded British ships in Boston harbor and — disguised as Indians — dumped their cargo of East India Company tea into the water.

Now fast-forward more than two hundred years, to the start of the new millennium.

Instead of the East India Company selling tea, Americans now have to contend with pharmaceutical companies charging as much as a possible market will bear for prescription drugs — knowing that Americans are a captive audience, fenced in by FDA regulations.

And the government that is infringing on the right of ordinary Americans is no longer that of some far-away royal in the Old World, but their own popularly elected government in Washington.

Even the much-heralded prescription drug benefit has done nothing to address the needs of groups other than seniors.

More and more working-age Americans are taking a variety of prescription drugs to combat high blood pressure, high cholesterol and other chronic illnesses.

Not surprisingly, the insurance companies are balking at the high cost of prescription drugs. And, of course, millions of uninsured Americans are completely on their own when it comes to getting the drug treatment they need.

Most other nations have long figured out what to do about the high cost of prescription drugs. They simply do not allow pharmaceutical companies to charge whatever the market would bear.

They believe restrictions are in order, especially because drug companies have a patent-enforced monopoly on their medicines for several years when they first come out.

In neighboring Canada, for instance, where the population is enjoying universal health care coverage, prescription drug prices are regulated.

As a result, the same FDA-approved prescription drugs in Canada are priced at 30% to 75% less than in the United States.

In general, regulation is considered a dirty word in the United States.

Surprising though it may be in this case, the government in Washington and the FDA have been very keen to regulate with a heavy hand — by forbidding any parallel imports.

Curiously, the FDA has resorted to some remarkably fatuous arguments to make its case for the continued ban on drug purchases from Canada.

It turns out that buying drugs across the Northern border, from America's orderly, highly regulated Canadian neighbor, can be "unsafe."

Although individuals have not yet been prosecuted for buying drugs abroad, the federal government is going after a chain of pharmacies called R-X Depot, which make it easier for Americans to shop for their drugs in Canada.

The Bush Administration and the Republican leadership in the U.S. Congress also opposed a bill that passed the House of Representatives in July 2003, which would make drug imports easier.

That bill is currently held up in Senate-House negotiations.

But America's own history shows that such inflexibility in the face of a popular rebellion may be dangerous.

The Bush Administration has been siding with Big Pharma against its own citizens for too long.

It should be mindful, perhaps, that its determination to do big pharmaceutical companies' bidding might trigger something like a new Boston Tea Party — revealing other grievances against a high-handed government in the process.