Drug Importation Has Wide Spread Implications on Access
By Vidya Ramesh and Sandip Shah
Senator Bernie Sanders just introduced a bill that would enable Americans to import medicines from our northern neighbor.
The bill's proponents argue that importing drugs from Canada would compel U.S. companies to lower their own drug prices. Unfortunately, that argument falls apart under scrutiny. Importation would expose Americans to drugs that have not been as stringently regulated as the current status quo, and curb future medical innovation.
For starters, importation wouldn't save Americans much money. The Surgeon General's office estimates savings of just one to two percent of total U.S. prescription drug spending.
Why such comparatively minor savings? One reason is that Canadian drug prices aren't as low priced as they appear. Consider Crestor, a cholesterol medicine that Sanders said cost roughly five times more in America than it does in Canada.
The assessment compares U.S. list price to the actual price paid by the Canadian government-run health insurers. In America's market-based pricing system, private insurers and pharmacy benefit managers negotiate steep discounts off drug list prices. In the case of Crestor, discounts take 60 percent off the list price.
Importing Canadian drugs wouldn't considerably impact patients' medical bills -- co-pays and patient contributions towards drug costs are largely determined by insurers and pharmacy benefit managers -- but it would have an extreme impact on their safety.
Canada only monitors the safety of drugs intended for Canadian consumption. Its government admits that it cannot guarantee that medicines shipped to the United States are safe.
That's cause for alarm -- especially considering that many drugs from "Canadian" pharmacies actually originate in countries with less stringent safety controls. Such drugs can be inaccurately labeled or transported at improper temperatures.
Sanders' bill tries to address this problem by only permitting imports from registered Canadian pharmacies that receive a stamp of approval from the U.S. Department of Health and Human Services. But if demand from American consumers proves overwhelming, even legitimate Canadian pharmacies may be tempted to cut corners and source potentially counterfeit drugs from developing countries.
Importation also threatens Americans' future health.
The United States is a world leader in drug development because our free-market pricing system rewards innovation. Of the 252 drugs approved by the FDA from 1998 to 2007, 117 were developed in the United States, according to a report from a former federal health official. The second-place country, Japan, developed 23 drugs.
Most other nations, including Canada, artificially limit the price of medicines. If the United States were to permit widespread importation, it would effectively import price controls. The resulting reduction in revenues could compel firms to cut back on new research projects.
That would result in fewer new drugs -- and more unnecessary deaths. New treatments are responsible for 86 percent of the decline in cancer deaths in recent decades.
Undercutting research firms could have dire economic consequences too. Pharmaceutical firms directly support over 850,000 U.S. jobs and generate $1.2 trillion in economic activity.
Americans need to consider the broader ramifications of a short-term decision to artificially lower drug prices. Importation risks forfeiting future cures and compromises the safety of the drug supply. Canada doesn't hold the solution to our healthcare challenges.
Sandip Shah is the founder and president of Market Access Solutions. He spent nearly three decades working at large pharmaceutical firms, where he developed pricing and reimbursement strategies. Vidya Ramesh is an associate director at Market Access Solutions, with multiple years of experience in market access and pricing/reimbursement.
