Minnesotans take on Big Pharma

Americans have long lamented the escalating prices of medicine and Big Pharma’s near-monopoly on the industry. But a group of Minnesotans is challenging this national problem, alleging that nine pharmaceutical giants are colluding to keep us under the thumb of high prices.

The suit, filed May 19 on behalf of the Minnesota Senior Federation, may be awarded federal class-action status, depending approval by federal Judge John Tunheim. If Tunheim allows the suit to go federal, said lead attorney Marvin Miller, all Americans who have purchased brand-name pharmaceuticals that could have been more cheaply purchased in Canada would be eligible.

While the case is fundamentally concerned with drug prices in the United States, the details deal with the export and import of pharmaceuticals between the United States and Canada. Miller says the suit alleges that nine of the world’s largest pharmaceutical manufacturers — including Merck, Pfizer, and GlaxoSmithKline (GSK) — have colluded to threaten “and in some cases actually terminated the supply of pharmaceuticals that are sold by Canadian pharmacies or wholesalers to American citizens.” That alleged collusion leads Miller and the Senior Federation to believe that the drug companies are in violation of the national anti-trust Sherman Act.

The Minnesota Senior Federation has been agitating nationally about inflated drug prices for the past decade. In 1995, they began to transport drugs from Winnipeg to Minneapolis — trips currently being financed by senator Mark Dayton (MN-DFL). On their first excursion, federation members saved 49 percent on their drug costs — savings that have held steady over the past 10 years.

Canada sells the same drugs Americans do, but because of Canadian government price controls, the drug could cost up to 80 percent more in the United States. Americans spend more than 15 percent of their Gross Domestic Product on health care, and the largest segment is for prescription drugs, according to Peter Wycoff, the Senior Federation’s metropolitan region executive director.

“It’s one of the very few areas of the health industry, even in America, that doesn’t have some sort of regulation,” Wycoff notes. “We have a market system here that doesn’t work; you don’t have competition, you have over 50 percent of basic research being funded by the public; you have legalized monopolies through patent laws. Every other country in the industrialized world has said somewhere along the line that there ought to be some balance in the costs of these needed life-saving medications for its citizens.”

In January of 2003, the federation launched a nationally heralded prescription drug importation program. “These probably aren’t linked,” Wycoff recalled, “but about two weeks later, GlaxoSmithKline announced efforts to shut off supplies to Canadian pharmacies that exported to the U.S.”

GSK says that they have always acted in accordance with U.S. legislation. “It’s important to remember that cross-border trade of pharmaceuticals is illegal,” said GSK spokesperson Nancy Pekarek in June. “Illegal trade is not protected by anti-trust laws.”

In early May, however, this argument was flatly rejected by a Minnesota district judge in response to an ongoing probe of GSK by Minnesota Attorney General Mike Hatch.

In the beginning of 2004, Pfizer began a similar cutoff tactic. “Pfizer did this — and I find this beyond the pale of reason — in the name of safety,” Wycoff steamed. “Literally, it’s our belief as the Senior Federation that the Canadian drug supply is safer than the U.S. drug supply.”

With international sales in 2003 of $29.2 billion, Pfizer’s 28 percent net profit last year was more than six times higher than any other major corporation.

A new report by the AARP and the University of Minnesota, described as the most comprehensive study of U.S. brand-name wholesale prices ever conducted, was released in May. Together with a second study by Families USA, they found that prices for top selling prescription drugs in the United States have increased at three to four times the rate of inflation — a rate that has accelerated over the past two years.

Attorney Marvin Miller says that brand-name manufacturers explain away high prices with the claim that they need to recoup the costs of research and development.

Anita Larsen, a spokesperson for Merck, says that her company has “had a policy for a very long time to oppose price controls, because price controls can have the effect of eroding innovation. You need money to put into your pipeline to produce new medicines that make true advances in patients’ lives.”

With the help of one of the most powerful lobbies in the country, such explanations have long been accepted in Washington. But over the past couple of years that tide is beginning to turn – spearheaded in large part by Minnesota-based efforts, including those of governor Tim Pawlenty, one of the most outspoken political critics of the pharmaceutical industry in the country.

In 2003, based on advocacy by the Senior Federation, MN Congressman Gil Gutnecht sponsored the Pharmaceutical Marketing Access Act, meant to ease Canadian drug importation restrictions. Despite disapproval from the Bush administration, by June of this year three GOP Senate committee chairmen had begun actively pressing to open U.S. borders to circumvent unregulated drug prices.

At the end of July, MN Attorney General Mike Hatch buttressed his current pharmaceutical probe with a 57-page “white paper,” containing recommendations for reforming the Minnesota healthcare system outside of the judicial process. One of Hatch’s four major proposals incorporate suggestions for controlling prescription drug prices – including the creation of a bulk drug purchasing pool, possible inter-state partnerships, and simply requiring drug companies to prove truthful pricing information.

“We’ve got to start talking about the problem,” Hatch was quoted recently. “It’s no longer humane to let the system crush our society.”