The Multinational Monitor

AUGUST 15, 1985 - VOLUME 6 - NUMBER 11

C I B A - G E I G Y ' S   C O V E R - U P

Treading in Trouble

by Monica Yriart

Each year hundreds of new pharmaceutical products are submitted to the Department of Health and Human Services for Food and Drug Administration approval prior to being sold to U.S. consumers. Although the FDA certification process is time consuming and extensive, it often weeds out drugs that are useless, harmful and in some cases fatal. In fact, three-quarters of the drugs submitted are ultimately withdrawn or banned.

Although the pharmaceutical industry would like to shorten this process, the industry's priority this legislative session is to change the law that allows consumers abroad to benefit from the FDA approval process. FDA approval of all drug exports is unnecessary, paternalistic and costly, argue pharmaceutical company representatives, especially since other major pharmaceutical producing nations are not subject to such safety standards. It is an argument that may prevail in Congress this fall.

In arguing for such a double standard, industry representatives cite the jobs and revenues that would be created, while leaving aside the fact that drugs-with the made -in-the-U. S.A. label-would be jeopardizing the health of consumers worldwide. Although current U.S. law prevents the export of drugs and biological products prior to approval by the FDA, few other countries have such standards for exports and many require only that the recipient nation approve the drug, despite the quality of the country's approval procedures.

In the United States new drugs go through some of the most rigorous and comprehensive tests in the world. FDA approval then complements the work of the World Health Organization (WHO) and the United Nations by providing reliable, timely and comprehensive information on the safety and efficacy of new drugs.

The result of such precautions, say representatives of the pharmaceutical industry, is expensive delays. It can take from one to two years to export drugs from the United States, time that gives foreign pharmaceutical companies an edge in overseas markets. To try to free up both the developing and the developed world for unapproved drugs, the domestic pharmaceutical industry in the last several years has focused on the export section of the Food, Drug, and Cosmetic Act.

Industry representatives say they would like to shed the requirements that are giving their foreign competitors the jump on U.S. pharmaceutical companies in the Third World. To make the competition more fair, the industry would like to see a U.S. export policy comparable to that of the other major pharmaceutical producing nations. In 1984 Senators Orrin Hatch, R-Utah, and Daniel Quayle, R-Indiana, introduced the Drug Export Reform Act to loosen federal controls over pharmaceutical exports to the Third World. Their bill would have allowed the export of unapproved pharmaceutical drugs to both the developed and the developing world after the specific drugs had been approved by any one of a select group of foreign approval agencies.

Opponents to the bill charged that the U.S. pharmaceutical industry would be using people in countries with less sophisticated review agencies as "guinea pigs" for U.S. manufactured drugs. "We think that it's bad for the U.S.'s image," said Robert Marlow, of the International Chemical Workers' Union. "All you would need to do is have a company sell something to some other country that wasn't FDA-approved and then if it came out to be hazardous later on, it would hurt the industry more than the few jobs it would create."

Although the bill was never brought to a vote in the Senate Committee on Labor and Human Resources in 1984, another hearing was held in the summer of 1985 to discuss a compromise bill that would mollify the opposition. At this hearing the deregulation, albeit more limited than the Hatch-Quayle bill, of the pharmaceutical export law garnered many more expressions of support from the committee members. Although no action was taken before the summer recess, the issue will be high on the docket when Congress resumes in September. And many onlookers fear that the climate may be right for the passage of such a bill.

The pharmaceutical industry has been persistent in its efforts to lift the single standard of FDA approval required for exports. The industry's powerful lobbying force on Capitol Hill has had some success over the past nine years in easing restrictions on exports. In 1976, the "Medical Device Amendment" to the Federal Food and Drug Act was passed by both houses, allowing the export of unapproved medical devices. In 1979, legislation to permit the export of unapproved new drugs actually passed the Senate floor, but failed to pass the House.

The existing law governing the export of pharmaceutical drugs also continues to allow the export of unapproved antibiotics. According to Dr. Phillip Lee, Director of the Institute for Health Policy Studies of the University of California, this omission in current law has contributed to the inappropriate use of antibiotics throughout the world, which in turn has led to the emergence of at least six antibiotic resistant strains of infectious bacteria.

Deregulation measures of this type appeal to Congress because of their presumed benefit to the U.S. economy and their impact on the domestic pharmaceutical industry. The American pharmaceutical industry is currently first in world export, sales, and new technology. At the June hearing, Senator Hatch said that the United States risked losing its lead in the biotechnology field because of the FDA approval requirement. "We find ourselves in danger of losing that position through forced export of critical biotechnology to companies of other nations, as a result of our inability to export as yet unapproved pharmaceuticals."

Recent reports on the development of biotechnology, however, suggest that entering into joint ventures with foreign companies is beneficial because of pooled research, funding, and access to markets.

According to testimony submitted by the American Cyanamid Company and the Pharmaceutical Manufacturer's Association (PMA), the one to two year difference in the time required to obtain FDA approval from the time needed for approval in most industrialized nations has led to an increase in manufacturing of pharmaceutical products abroad by U.S. industry-leading to the export of jobs, capital investment, and a negative balance of trade. If the United States were to allow unapproved pharmaceutical products to be exported, the United States would more likely be chosen as a site for the manufacture of new drugs, argue industry representatives. In one study done by the PMA and cited by Senator Hatch, it was conservatively estimated that exports would grow by $500 million annually and from 8,000 to 12,000 jobs would be created if the law was rescinded.

Laying aside the moral question regarding the export of unapproved new drugs for economic benefit, a drastic increase in jobs or in the amount of pharmaceutical drugs exported is highly unlikely.

"I'm not even sure it would create any." said Marlow of the International Chemical Workers' Union. "We think it would harm the industry and the jobs in the long run even more and we don't think you should take those kinds of gambles."

According to the Brookings Institute economist who assisted in the development of the PMA study, the main assumption made in its calculations was the number of new drugs which would actually be produced in the United States. Each of the large American pharmaceutical transnationals currently manufacture in thirty to fifty countries. The labor intensive tabletting, encapsulating, and packaging plants are located increasingly in developing countries, largely because of the vastly reduced cost of labor.

Decisions as to where to locate different phases of production rest on calculations based on the proximity to markets and the cost of materials, transportation, taxes and research, combined with the incentives offered by local governments. Marketing and export regulation are single factors in a matrix of issues leading to the decision of where to locate production or development of drugs. Several industry representatives admitted in testimony that a change in the U.S. export law would only permit the United States to be considered as a "candidate" for the location of new plants but would give no guarantees that any new facilities would be located in the United States. The only certain outcome of such legislation would be that existing facilities could export their new drugs without FDA approval.

The "deteriorating" condition of the U.S. pharmaceutical industry-the growth of U.S. exports has begun to level off-increasingly is being blamed on the more stringent laws governing the export of pharmaceutical drugs. "We are not trying to sound a death knell for the (pharmaceutical) industry," said Senator Hatch, but "very distressing trends" indicate that the industry's position as a world leader has become "increasingly tenuous."

A recent report by the U.S. Department of Commerce, entitled "A Competitive Assessment of the U.S. Pharmaceutical Industry," however, found that U.S. industry "remains highly competitive vis-a-vis foreign competitors," and that CS. firms had "performed well with respect to nearly every measure of competitiveness for which data are available." Of the 21 major industrialized member countries of the Organization for Economic Cooperation and Development, the U.S. was the largest exporter, accounting for nearly 20 percent of pharmaceutical products exported.

To date, three models for legislation to lift current export restrictions have been considered. FDA Commissioner Frank Young, is an advocate of opening both the developing and the developed world for unapproved drugs if the recipient country approves the import. Young argues that it is the sovereign right of each country to make its own drug import decisions.

But, the wide publication of corruption in drug sales in the third world, and the opposition of Sen. Edward Kennedy, D-Mass., who is traditionally concerned with Third World issues on the Labor and Human Resources Committee has so far inhibited the introduction of a bill providing for the export of unapproved drugs directly to Third World countries. Although Kennedy acknowledges the importance of allowing the export of drugs to countries with adequate approval agencies, he stresses the necessity of keeping unapproved drugs out of the developing world. "These products must not end up in Third World countries that do not have adequate infrastructure or public awareness to use them properly," said Kennedy at the June 5, 1985 hearing.

A compromise model was discussed, based on a bill circulated by Genentech, In(:. which would allow the export of drugs that had been approved by the drug regulatory authorities of any of a group of "FDA approved" government agencies in other industrialized countries. A complex labeling safeguard was attached to this model, which would have required a translation of labeling from the approving country's agency into the language of the country receiving the import. (The FDA had previously objected to the practical and political feasibility of each facet of this legislation). Two versions of this model were discussed, one allowing export to any country once the drug had been approved by one of the selected agencies, the other restricting exports to only those countries whose regulatory agencies had been approved. While supporting legislation of this kind, Kennedy maintained the position that unapproved new drugs must not reach markets in the third world. Kennedy's vote is seen as pivotal in this committee, as the other Democrats are expected to vote with him on this issue.

It is clear that the PMA wants a bill that would allow the export of unapproved drugs to the Third World, while Kennedy's concern would probably only allow him to support a bill that would open the developed world to the marketing of unapproved U.S. manufactured drugs. What's not certain is whether the industry will settle for the passage of a compromise bill that would allow access only to European countries or countries with acceptable drug approval agencies.

In testimony at this summer's hearing, industry representatives, including Gerald M. Mossinghoff, president of the PMA, reiterated an interest in legislation to facilitate exports to Western Europe, Canada, Japan and other developed countries. The compromise bill, it was argued, was modest enough, allowing developed countries to import American made pharmaceutical drugs if their approval agencies deemed it was appropriate. But even with such a compromise, problems remain.

The European drug regulatory agencies have been criticized for failing to adequately protect their own consumers. Each year the European drug regulatory agencies have had many more unsafe drugs slip through their nets than has the FDA. In Britain alone, six drugs were approved in the last two years that later had to be banned. Not only would unapproved made-in-the-USA drugs go on the market throughout the developed world, jeopardizing the health and safety of millions of consumers, but once these drugs were shipped to European countries, no mechanism could prevent them from being re-exported to Third World markets where they could endanger millions more. Indeed, many government reports have detailed how attempts to prevent the re-export of computers and other strategically significant merchandise to embargoed countries have failed.

At the close of the June hearing, Senators Kennedy, Hatch, Christopher Dodd, D-Conn., and Strom Thurmond, R-N.C., expressed an interest in passing some type of reform legislation to allow the export of non-FDA approved drugs. And given market forecasts that predict a significant growth in the Third World's demand for drugs, the pharmaceutical industry will continue pressing, perhaps with renewed urgency, for the removal of such FDA requirements.

The advent of essential drugs purchasing lists, tailored to the needs of developing countries, has been seen by many as the solution to the drug problems of the Third World. But such lists have been opposed by the industry, despite the fact that industry commentators have acknowledged that the eventual adoption of these lists may be inevitable. Until then, however, irrational drug purchasing patterns and exploitive unregulated industry promotion of unsafe and ineffective drugs will continue.

If the U.S. pharmaceutical companies are allowed to join with the other major pharmaceutical manufacturing nations in the export of unapproved drugs, the Third World will lose its most reliable source of information on new drugs and the United States will be guilty of setting a double standard that may jeopardize the lives and health of millions.

Monica Yriart is a law student at George Washington University.

Table of Contents