The $300 billion pharmaceutical industry in the United States is on the verge of a revolution. Whereas once the rules and regulations that governed health maintenance organizations (HMOs), medical insurance plans, and government health care and drug purchasing assistance programs (such as Medicare and Medicaid) divided the pharmaceutical market by country and by state, now pharmaceutical and health care industries are feeling the pressure of increased globalization and consumerism.
Cross-border prescription drug purchasing and re-importation are at the center of national debate, the subject of several new state and federal bills, a hot-button topic in the media, and a point of serious contention with pharmaceutical manufacturers. With the recent uproar regarding Americans fulfilling prescriptions in Canada, the pharmaceutical manufacturers dialed up Capitol Hill, arguing that, if allowed to continue, such practices would put the industry in financial duress. Fair point.
Meanwhile, entrepreneurs on both sides of the border are opening up shop in the form of online pharmacies and border-hugging retail outlets, even thin storefronts from Wisconsin to Florida, built solely to process prescriptions fulfilled by Canadian companies. Canadian medical professionals benefit as well, with American seniors day-tripping to Canada by the busload for a quick check-up and prescription reload.
Busload? How many busloads? According to Ipsos-Insight data collected in January 2004, only 1% of Americans purchased a prescription from Canada in the past six months. So why all the fuss?
The re-importation of drugs--which is unlawful--has not been heavily enforced by U.S. officials. U.S. manufacturers sell drugs to Canadian companies at a lower price than they do to American companies. The Canadians then turn around and sell them at a lower price to Americans. And still make money. By some estimates, prescription drugs cost about half as much in Canada as they do in the U.S. Even though not all drugs from Canada that find their way into the U.S. are FDA-approved, they are cheaper.
Under pressure to keep costs down, savvy governors and other political leaders are lobbying Capitol Hill to permit prescription drug fulfillment from Canada for state and local government employees. Major corporations and health insurance companies are sure to follow. If you're the governor of a state, that kind of savings can free up millions of dollars for other programs. Or possibly even reduce taxes. Americans like that.
This does not bode well for the pharmaceutical manufacturers, further confounded by powerful lobbying muscle from organizations like AARP (American Association of Retired Persons) pressuring the U.S. government to permit re-importation. Bulk purchasing by these groups could force pharmaceutical manufacturers to offer deeper discounts and lower their costs and overhead, including money spent on research and development.
The globally-minded, informed consumer will increasingly have the power of choice--between generic and name brand drugs, between filling a prescription online or in-person, and between American and Canadian (or other) pharmacies and physicians. Pharmaceutical companies will have to become better at marketing and sales in the new pharmaceutical landscape in order to survive and prosper. Thus pharmaceutical companies need to re-assess their marketing strategies in light of the fundamental changes to sales, distribution channels, pricing, and the empowered consumer.
The pharmaceutical industry will need to be prepared to move swiftly as events unfold, and anticipate change by tracking and understanding consumer OTC and Rx purchasing trends, measuring the effectiveness of promotion campaigns, evaluating different pipelines, assessing the marketplace, and building better brands.
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