HHS Importation Study Draws the Wrong Conclusions

This quick, one-time registration gives you access to members-only site benefits. The recent Health and Human Services study on drug reimportation estimated that total savings from legalized commercial importation would only be one to two percent of total drug spending. Headlines screamed that imports “likely won’t save money” or that net savings wouldn’t be worth the effort required. However, a closer look at the data in the report shows that savings could be much more substantial. In fact, I believe savings would be in the neighborhood of seven percent (very conservative) to 28 percent (using U.S. market assumptions) of total drug spending, resulting in U.S. savings of $15 billion to $62 billion. So why is there such a discrepancy between the HHS conclusion and my calculations, which are detailed below? It’s actually quite simple: The report’s key conclusion related to lack of savings is built upon three premises. The first and most important of these premises disregards the language in the Gutknecht Reimportation Bill that was approved by Congress as well as the Dorgan bill that the Senate wasn’t allowed to vote on. This premise states that “Imported drugs may be around 12 percent of total use of such drugs in the U.S., depending on the scope of any importation program, because drug companies have incentives to impede exports.“ This premise doesn’t take into account that current reimportation bills would make it illegal to limit supply. The second faulty premise is that “U.S. drug buyers — including families, HMOs and insurance companies — may get a discount much less than the full difference between U.S. prices and foreign prices. U.S. drug buyers may get discounts of only 20 percent or less, with the rest of the difference between U.S. and foreign prices going to commercial importers.” This assumes unprecedented price