Why Drugs Cost So Much / The Issues '04: Why We Pay So Much for Drugs

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While the FDA and the drug industry have talked at length about the threat posed by drugs brought in from Canada, what they neglect to mention is this: prescription drugs bought by Americans increasingly are produced in foreign countries with minimal FDA oversight and then shipped to the U.S. In 2002 pharmaceutical imports to the U.S. totaled $40.7 billion, a nearly fivefold increase from $8.7 billion in 1995. Seventeen of the 20 largest drug companies worldwide now make drugs in Ireland, largely because of tax incentives. Pfizer's Lipitor for cholesterol, the largest-selling drug in the world, is made in Ireland. So too is Viagra, for erectile dysfunction. AstraZeneca's Nexium, for heartburn and acid reflux, comes from Sweden, France and other countries. TAP Pharmaceutical Products' Prevacid, another brand prescribed for heartburn and acid reflux, comes from Japan. Because of the rapid rise in drug imports, especially from Ireland, Britain and Germany, the U.S. balance of trade in pharmaceuticals has tipped sharply into deficit. During the early 1990s, according to the U.S. International Trade Commission, imports and exports of pharmaceuticals were "almost equal at just under $10 billion each." Since then the U.S. trade deficit has spiraled from nearly $600 million in 1995 to more than $20 billion in 2002, the last year for which complete data are available. The trend is continuing. Singapore is on track to be a potential Ireland. Lured by tax breaks and other incentives, American drug giants like Merck are investing heavily in the Southeast Asian country. According to the Singapore Economic Development Board, Merck has invested more than $500 million to build two plants, which will produce the cholesterol drugs Ezetrol and Zocor.

For its part, the FDA maintains that all these facilities are perfectly safe, that they have undergone inspections and that their manufacturing processes have been certified as meeting the agency's standards. But while the FDA does indeed inspect plants before opening, after that the oversight trails off. "The FDA has limited resources," an industry consultant told TIME. "The foreign drug-inspection program I don't think is very strong." Yet the industry is building more facilities abroad--both research and manufacturing complexes--placing an ever greater burden on an already overextended FDA staff.

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