Prescription Drug Marketing Act of 1987

During the mid-1980’s many brand-named drug patents were expiring and the FDA published “The Orange
Book” that evaluated all available generics to the brand-named drugs with which to gain FDA’s
approval generics had to prove to the FDA their “equivalence to the brand drug”.

Brand drug manufacturers started to fear they’d lose all their business as most of the brands were
reaching patent expiration. As this happened they all “tweaked” drug patents to retain business,
the most common “Tweak” was making them last 24 hours, marketing the resultant form with 400%
increased prices to be easier to “remember to take your medicines.” Hospital had moved on to
looking at therapeutic “classes of drugs” comparing all drugs that “did the same thing” so a
generic within a class could replace several brand-named drugs. Medicaid plans drug costs had
rapidly grown and they were trying to do the same “class of drug equivalence switching process”. If
Medicaid could do this, drug manufacturers feared all consumers would.

After heavy state and Federal lobbying, and some individual states agreeing to allow brand drug
manufacturers to “meet the price”, Congress passed the Prescription Drug Marketing Act (PDMA) in
1987 “to establish legal safeguards for prescription drug distribution ‘to ensure safe and
effective pharmaceuticals’”. Designed to discourage sale of counterfeit, adulterated, misbranded,
sub potent and expired prescription drugs; it was passed in response to what brand manufacturers
claimed was the development of a wholesaler sub-market (known as “diversion”) of prescription
drugs. It prohibited Reimportation of pharmaceuticals made in the U.S., except by the original
manufacturer. The term “Reimportation” was devised to portray manufacturers producing patented
drugs in America, exporting them abroad, where they had to be repackaged with identification
numbers of the importing countries and could then be sold back at half their U.S. prices.

PDMA prohibited these drugs from returning for sale here enabling their manufacturers,
to double U.S. brand drug prices and their company profits. The board of IMS Health then stopped
collecting utilization data for government programs only gathering insurance and cash data, as
Medicaid became the default “unreported” data. Medicare recipients and those without a drug plan,
taking expensive drugs saw their prices quickly double and some drove to Canada where prices
quickly became 33% less, not realizing in Europe or Mexico they are 50% lower.

To protect Government purchases, brand manufactures gave the VA 60% discounts and all other
government drug purchasers’ 50% discounts, not Medicaid or Medicare whose recipients used the most
drugs. To control any government diversions, they used the wholesaler Depot System I devised in
1981 using “charge backs”, to control diversion for a “red herring”. As other nations pushed prices
down, the Reimportation Act allowed brand drug manufacturers to raise our prices to compensate. Now
with “new biological drugs” this process is making these very expensive drugs to be unavailable in
America, except to the poor on Medicaid, while pushing other nations costs up as well now. Medicaid
has grown to 75 million the 50 million Medicare recipients will soon face large, menacing “donut Holes”,
unless they are poor and can get them free too!

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