Is Drug Importation the Answer to High Drug Prices?

In last week’s blog post, I discussed some of the legislation being considered in an attempt to control drug prices. I concluded that piece indicating that this week’s blog piece would address another proposal that President Trump has talked about – allowing for the importation of drugs from other countries as a way to make medications more affordable for Americans. I also indicated that, in my opinion, it is unlikely to work. Here’s why.

There is no question that Americans can cross the Canadian or Mexican borders and purchase their medications at much lower cost than those medications are available in the U.S. That is not what we are talking about when the President and a number of states propose drug importation. In those cases, they are referring to large scale importation of medications by the state or a state agency to lower the costs of drugs for their Medicaid programs, and in some cases, wholesalers and pharmacies could also import medications to offer them at a lower cost. The most common proposal is to import these medications from Canada.

There are a number of reasons I think this is unlikely to work.

  1. Insufficient supply

One only needs to consider that the population of Canada is about 1/10th of the population of the United States. In fact, the population of California alone is a tad more than the population of all of Canada. There simply would not be enough supply of medications in Canada to supply both Canadians and any significant portion of the U.S. Further, fearing drug shortages themselves in response to the discussion here in the U.S., Canadians are already pressing lawmakers to prevent the export of medications to the U.S.

  • Why would drug makers cooperate?

I cannot imagine that drug makers would increase the supply of medications to neighboring countries just so that they can turn around and sell those medications less expensively to Americans. Further, one can imagine that drug makers would create contractual obligations on foreign purchasers of their medications not to sell those medications outside of their country. And, it seems extremely likely that drug makers would legally challenge any legislation or rule here in the U.S. that allowed for drug importation. Finally, even if Canadian exporters could access the medications needed and legally export them, it must certainly follow that drug makers would increase the prices of those medications in these countries to make up for decreased revenues in the U.S., and foreign governments would have to respond to the pushback of their own citizens at increasing drug prices, and importation would make less and less economic sense.

  • Current U.S. proposals are likely to exclude many costly medications

While there is no new legislation or rule allowing for importation, it is considered very likely that certain medications that require special temperature controls and handling would likely be excluded, such as insulin and biological drugs. In addition, not wanting to exacerbate our current opiate problem in the U.S., it is suspected that many controlled substances might also be excluded from importation. In fact, with the added cost of the regulatory obligations that likely would be imposed to help decrease the chance for importation of counterfeit drugs, two states that have seriously looked at importing drugs have concluded that only a couple dozen drugs would likely save the states significant costs.

  • The threat of counterfeit medications is real

CanadaDrugs.com, which appeared to be legit and have the appropriate documentation was sentenced to pay $34 million in fines and forfeitures in 2018 for introducing misbranded drugs into interstate commerce. That is just one company. There is a black market for drugs and many more will enter the fray if the opportunity to distribute their fake or adulterated medications is facilitated by a change in U.S. policy concerning drug importation.

So far, four states have enacted laws or are considering laws to allow for drug importation if the U.S. adjusts its policy to allow for it – Colorado, Florida, New Hampshire and Vermont.

There are other, more effective ways to reduce drug prices. Importation is not likely to do so.

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