Americans want prescription drugs from Canada

Legislation that would allow Floridians to import cheaper prescription drugs from Canada is moving forward in the Florida state legislature. If the Canadian drug import program is adopted, Florida would then submit the program for approval to the United States government. If approved there, the program could be in place within a year. At the same time, 12 other states, including Colorado and Vermont, are considering similar schemes.

It’s questionable whether Washington will approve Florida’s drug import plan. The Department of Health and Human Services has the authority to permit or deny the importation of prescription drugs. To date, no such permission has been granted. Perhaps revealingly, Alex Azar, the Secretary of Health and Human Services, has characterized Canadian import plans as a gimmick, saying Canada’s drug market is too small to bring down prices in the U.S.

Nevertheless, the Health and Human Services Committee in Congress introduced a bill earlier this year that would create programs for the purpose of safely importing cost-effective prescriptions from Canada and other countries. And Florida Governor Ron DeSantis is a personal friend of President Trump and might try to leverage that friendship for approval of Florida’s import plan.

If Americans were legally allowed to import prescription drugs from Canada, it would certainly drive up the cost of those drugs for Canadians. U.S. spending on prescription drugs is more than 10 times the amount Canada spends. In this context, it’s very unlikely that Ottawa and the provincial governments would permit the re-exportation of drugs originally imported into Canada from the U.S. or elsewhere or even the exportation of drugs manufactured in Canada.

However, if the Canadian government passed legislation restricting Canadian wholesalers from legally exporting prescription drugs to the U.S., the action would expand a black market in exported drugs, necessitating increased policing efforts by Canadian authorities.

U.S. drug companies would also need to spend more money on monitoring the movement of prescription drugs into the U.S. to ensure the safety of their international supply chains, especially if black market activity in their products intensified. They could also be expected to demand higher prices from Canadian and other foreign purchasers given increased costs and risks that re-exportation of drugs from Canada and elsewhere would produce.

Alternatively, if both the U.S. and Canadian governments allowed exports of drugs from Canada to the U.S., pharmaceutical manufacturers in the U.S. might substantially reduce their sales in Canada. Newer prescription drugs with relatively high price-cost margins would become particularly scarce in Canada, as U.S. drug companies sought to prevent international price arbitrage through exports from Canada to the U.S.

Even if exports of prescription drugs from Canada to the U.S. are legally and effectively prevented by government actions, it’s increasingly clear that U.S. politicians in both political parties are intent on lowering the cost of prescription drugs. Initiatives to achieve that goal are likely to result in reduced research and development expenditures by U.S. drug companies with a resulting decrease in the rate of new product innovation. As a consequence, the availability of new health-enhancing—perhaps life-saving—drugs will be reduced for patients everywhere.