New U.S. laws threaten Canada's pharmaceutical drug supply
Lawmakers in 16 U.S. states have introduced bills to make legal the wholesale importation of pharmaceutical products from Canada. Vermont already has a law on the books and governors in Florida and Colorado plan to move forward with legislation—the remaining step is approval from the federal Department of Health and Human Services. The intention is to make lower-priced medicines available to Americans.
Although endorsed by Donald Trump during his election campaign, there’s been little movement on drug importation from Canada by the Trump administration. However, this could change quickly as access to medications should be an important issue in the 2020 presidential election.
Americans importing drugs from Canada is not a new concept. In the early 2000s, many American seniors came to Canada to purchase drugs at lower prices. More recently, in 2017, legislation—the Affordable and Safe Prescription Drug Importation Act—was proposed by federal senate and congressional members that would have allowed American wholesalers, pharmacies and individuals to import prescription drugs from licensed Canadian sellers. Fortunately for Canada, the bill did not pass.
The pressure to take action on prescription drug costs is greater this time around as increasing numbers of Americans are struggling to afford the medications they need. However, instead of directly improving access to medicines in the United States, many politicians see importation from Canada as an easier option, despite opposition from the U.S. Food and Drug Administration on the grounds that it cannot guarantee the quality of such imports.
So cheaper Canadian drugs would help Americans. But what about Canadians?
The large-scale transfer of Canada’s drug supply to the U.S. would rapidly empty Canadian pharmacy shelves and damage our health-care system. A 2010 study on the potential effects of American importation found that if Canadian sources filled 10 per cent of U.S. prescriptions, Canada's drug supply would be exhausted in less than eight months.
Moreover, if the importation of drugs into the U.S. from Canada were to proceed unchecked, Canadian prices would rise. More importantly, drug manufacturers allot sales to a country by assessing the number of people who will take the drug each year based on past practice and a reasonable estimate of likely increases. They would have no incentive to replenish Canada’s drug supply by increasing production or allocating more drugs to Canada from other countries when they know that the drugs will be redistributed by wholesalers to the much larger and competitive U.S. market.
In fact, pharmaceutical companies may outright withhold drugs from Canada. This happened in the early 2000s when supplies were denied to Canadian Internet pharmacies to prevent them from undercutting the U.S. market. Whether manufacturers refuse to restock supplies or simply withhold them, drug shortages in Canada—even worse than current shortages—would be guaranteed.
So clearly, it’s in Canada’s best interest for U.S. politicians to improve drug access in their own country and not attempt to solve the problem by taking advantage of Canada’s health-care system. However, without an appropriate Canadian legal framework to prevent the large-scale exportation of drugs, nothing will prevent U.S. importers from paying Canadian wholesalers a modest premium over the Canadian price to import most—or all—of Canada’s drug supply.
The Trudeau government is presently focused on making prescription drugs more affordable to Canadians, with proposals for tighter price controls and a national pharmacare program that, if implemented, would make Canada a less attractive place to launch new innovative medicines. Tighter price controls in Canada will also widen the gap between Canadian and American drug prices and motivate more U.S. states to attempt wholesale importation initiatives.
With both Democrats and Republicans in multiple states proposing to import drugs from Canada, Ottawa must step up and take immediate action to prevent a massive flow of prescription drugs from Canadian patients to Americans.
Subscribe to the Fraser Institute
Get the latest news from the Fraser Institute on the latest research studies, news and events.