Insider's Rx For Drug Costs

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.