Rost says that on average, drugs in Europe are about half the price of
those in the United States.

"You have certain drugs that cost 10 times more in the U.S.," says
Rost. "We're talking about exactly the same drug, made in the same
plant, by the same manufacturer."

CBSNews.com Home
Insider's Rx For Drug Costs
June 5, 2005

If you think you're paying a lot for prescription drugs, you're
right. Drug prices have been rising faster than inflation and Americans
pay more for brand-name prescription drugs than anyone else in the
world.

Why? Well, the drug companies and the government say we have to, so the
companies can keep developing new drugs.

But that's no consolation to the tens of millions of elderly and
uninsured who can't afford to pay for the drugs they need.
Correspondent Bob Simon talks Dr. Peter Rost, a critic of the way drugs
are priced and sold in the United States, who also happens to be a vice
president of marketing for the pharmaceutical giant Pfizer.

Rost has taken the risky and possibly career-shattering step of
opposing his own employer, and the rest of the drug industry, by saying
America can have cheaper drugs if it set up a system like the one in
Europe.

Rost says that on average, drugs in Europe are about half the price of
those in the United States.

"You have certain drugs that cost 10 times more in the U.S.," says
Rost. "We're talking about exactly the same drug, made in the same
plant, by the same manufacturer."

And Rost says these are drugs that are also made in the same plant. "It
is stunning," he says. "Once people become aware of it, it is stunning.
And obviously, they get upset."

One example: the commonly prescribed cholesterol-lowering drug Lipitor,
made by Pfizer, the company he works for. In the United States, the
full retail price is about $76 dollars for a month's supply. The
exact same drug costs $55 dollars in Canada and just $43 dollars in
Italy.

It's the high price of drugs in the United States that has outraged
Rost and led him to put his career on the line to try to help
America's uninsured find a way to get cheaper drugs. He's a
physician and a businessman who's worked in the drug industry for 20
years - both in America and Europe - marketing and pricing
prescription drugs.

"We're the wealthiest nation on earth, yet we have between 49 and 67
million Americans without any kind of insurance for drugs," says Rost.
"And they pay full price, cash, and they can't always afford drugs."

He says that's because drug pricing is not a free market in the
United States, the way it is with most other industries. Brand-name
drugs have patents, which means no other drug company can make the same
drug until the patent runs out in 20 years.

Remember: Rost is an executive for Pfizer, but he's not speaking for
the drug company.

"The industry likes to talk about the U.S. as a free market. A free
market in this case simply means that the drug industry is free to set
whatever price they want. And mostly patients and others simply have to
pay. There isn't a choice," says Rost. "In a situation like that, you
can obviously raise your prices as much as you can get away with."

Rost makes a comparison to a car company that can charge whatever it
wants for a car: "What's going to happen is if they double their price
on cars? Imagine what's going to happen to their sales? A new car is
not a necessity, but where you're sick, to get treatment, to get
well, and to survive, that is a necessity."

But why can't you just buy a generic? "For some areas, that works
fine," says Rost. "For many areas, there aren't generics available."

Instead of Americans taking buses across the border to Canada to buy
affordable drugs, Rost thinks the drugs should come to them. That's
what happens in Europe, where a tightly regulated system of importing
drugs from country to country has been in place for more than 20 years.

Here's how it works in Europe. Pharmaceutical companies sell the
exact same drug to different countries at different prices. For
example, most drugs cost less in Spain than they do in Denmark. So an
entire industry has developed that buys up drugs in countries where
they're cheaper, and sells them in countries where they're more
expensive, at a discount, of course. The practice is called parallel
trading.

Paranova is a parallel trading company just outside Copenhagen, owned
and run by Eric Pfeiffer. Paranova is stacked with drugs coming from
and going to different European countries.

Pfeiffer showed 60 Minutes how parallel trading works to get cheaper
drugs into the marketplace. An asthma inhaler is expensive in Denmark
and cheaper in Spain. Pfeiffer's company bought a lot of it from
Spain, and is now repackaging it to be sold in Danish pharmacies, at a
discount. They don't make drugs; they're just the middlemen.

"Effectively, what we do is take it out, put the label on and then
it's put back in the boxes again with a leaflet in Danish language,"
says Pfeiffer.

"We sort of walk a little bit into the world of the absurd when you
figure out that what you're doing is spending money to make something
cheaper," says Simon.

"Yes," says Pfeiffer.

The original asthma inhaler is never opened. In fact, no one at
Paranova ever touches any of the drugs, only the outside packaging, and
the factory is inspected regularly by the Danish health authorities.

Pfeiffer says this same arrangement could happen between Canada and the
United States: "Or between Europe and the United States. And by doing
it from Europe, it would even be cheaper than from Canada."

To help ensure safety in Europe, you can't buy parallel traded drugs
over the Internet, only from a licensed pharmacy. Danish pharmacist Uta
Porksen showed 60 Minutes how it works for the consumer.

She displayed an asthma inhaler that's called Spirocort in Denmark.
It happens to be the exact same drug as a product called Pulmicort,
which was imported by Paranova. The big difference? The Spirocort costs
about $40 dollars more.

"If I come in and I've got a prescription for Spirocort, you're gonna
give me the Spirocort, right, the more expensive one?" asks Simon.

"The law in Denmark is made the way that I have to ask the patient if
he wants the cheaper one. And we always ask the patient," says Porksen.

"Ok, you're asking me if I want the one that's $40 dollars less?"
asks Simon.

"Yes," says Porksen.

"And I'll ask you, 'Is it the same thing? And you'll says, 'Yes.' And
I'll say, 'Give me the cheaper one.'"

"Yes, and you will get the cheaper one," says Porksen.

But is parallel trading safe? It depends whom you ask.

"I would be happy to let FDA in here to see how we do it and they would
have no problem whatsoever," says Pfeiffer.

"So, if the big question for Americans, as it is, is, 'Is it safe to
ship drugs from country to country as long as it's properly
regulated?'" says Simon.

"Yes," says Pfeiffer. "For sure."

But in America, the drug companies say they aren't so sure that
importing drugs from country to country really is safe.

Pfizer, the drug company Rost works for, declined to talk to 60 Minutes
about Rost, but Pfizer's vice president of global security, John
Theriault, did tell say that importing drugs is potentially dangerous.

"The position we take is that the more times a product changes hands,
the more opportunity there is for the introduction of bad medicine,"
says Theriault.

"Some people might be skeptical of your saying it's not safe to
import drugs from overseas," says Simon. "You do work for Pfizer and
all the drug companies tend to lose money if drugs are cheaper."

"I'm not making a pricing argument today at all. But I don't think
that patient safety should be sacrificed for affordability," says
Theriault. "I think there needs to be a solution to this problem. But
opening the flood gates to product from all over the world to freely
enter the U.S. market, I think, is a mistake."

"Clearly this is a matter of profits. It's not necessarily a matter
of safety," says Rost. "I mean, I think it would be derogatory to claim
that Americans would not be able to handle re-importation when the rest
of the educated world can do this."

How many cases of death or serious disease have there been due to this
practice?

Rost says "there have been none known due to this practice."

So it works? "It works very well," says Rost.

Has anyone in Europe been hurt by taking a bad drug because of parallel
trading?

"I don't know that anyone has," says Theriault. "But the point is
that we're making the safety issue before that happens."

"My job is to ensure the safety of the American public," says Dr.
Richard Carmona, surgeon general of the United States. He recently
chaired a task force to study drug importation. It concluded that
building a safe system to do it in the United States would be
difficult, and very expensive.

"It could be done. The evidence that we have says it could. But the
cost to do it, the additional regulatory authority necessary, the
hiring of more people, then you have to step back and say, 'Well, is
that cost gonna outweigh any savings benefit that we provide the
American public,' and that's a very tough one."

"Why are drugs so much more expensive in the United States than they
are in almost any other country?" asks Simon.

"The United States does a lion's share of research in the world for
research and development of drugs," says Carmona. "That's why the
Canadian government sells it cheaper. They don't have the overhead."

The surgeon general's task force report agrees with the
pharmaceutical companies -- that if they lower their prices, they'll
spend less on creating new drugs, and research and development.

Rost doesn't buy that argument. He says drug companies won't cut
back on research and development because it's their bread and butter.
They have to develop new drugs or they won't have anything to sell
when the patents on their existing drugs expire.

He recently testified before a Senate committee, urging Congress to
pass a bill legalizing the importation of cheaper drugs from overseas,
even though his own employer is against it.

"Stopping good re-importation bills has a high cost, not just in money
but in American lives," says Rost, who says he still works for Pfizer.

Pfizer, however, claims that Rost lacks the credentials to say anything
about importing drugs from other countries. The company sent a letter
to the Senate committee saying, "We have no basis to support Dr.
Rost's purported expertise in this area..." Pfizer also sent 60
Minutes a letter saying: "Dr. Rost has ...no substantive grasp of how
importation threatens the safety of the U.S. drug supply."

"It's an attempt to discredit me. And they should have known better
because they know that I have a lot of experience in this area, so
it's completely wrong, and they knew it," says Rost. "I mean, you
have an insider here who knows how things really work, who has lived
this."

When he goes to work, what kind of response does he now get from his
co-workers? "The majority of the feedback has been basically treating
me like a sinner, somebody who has fallen from the righteous way," says
Rost, who works from home a lot now.

He's still employed by Pfizer, but he's not sure how long that will
last.

A bill has been introduced in the Senate that, if passed, would allow
the United States to import cheaper drugs from other countries, just as
they do in Europe. The pharmaceutical industry opposes it. But the
large drug companies have announced they are expanding their programs
to offer low cost drugs to the poor.