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How Realistic is the U.S. Importation of Canadian Drugs?

On July 31, 2019, the White House announced an iterative healthcare plan that would allow the importation of Canadian drugs to give American citizens a lower-cost option. With oversight from the Food and Drug Administration (FDA), U.S. providers would be able to import medications safely and effectively through drug wholesalers and pharmacists acting as intermediaries, effectively providing drugs to patients at a lower cost than domestic prices allow. The plan would put most of the regulatory legwork on individual state governments, who must draft their own proposals for safe importation and submit these for federal approval. If approved through regulatory review (which could take anywhere from a few months to a few years), the plan would be a pilot operating on a state-by-state basis with implications of eventual national scale-up. President Trump has vocally supported similar plans such as the HB 19 signed by Florida governor Ron DeSantis and recent laws passed by Colorado and Vermont, which all support giving citizens access to imported drugs.

The Administrative Stance: Value and Transparency

As his for-the-people platform begins to bleed into a re-election campaign, Trump continues to solidify his stance on transparency and value in healthcare despite numerous setbacks. Earlier this month, the administration withdrew a proposal to ban drugmaker rebates to pharmacy benefit managers within government healthcare programs, and courts later struck down another proposed rule that would require drugmakers to disclose prices on direct-to-consumer television advertising. Most immediately, the administration voiced support for a bipartisan bill that would cap Medicare costs and penalize biopharma companies if the rate of their price hikes exceeds inflation rates.

Not Beyond Shadows of Doubt

The current plan faces both legislative and economic hurdles. Its supporters, including Democratic presidential candidate Senator Bernie Sanders, firmly believe that international drug imports would increase healthy competition and lower American drug prices substantially. But consumer safety concerns arise, as the FDA currently prohibits importing foreign drugs due to the inability to screen and approve these foreign substances.

Perhaps most critically damaging to the plan’s trajectory, Canadian officials have voiced fierce opposition to U.S. drug import plans. Many cite concerns that attempting to fill American demand for prescription drugs would destroy the industry in Canada, whose government-run healthcare system already experiences shortages and struggles to keep prices low. Canada’s population (and consequent ratio of drug supply) amounts to less than 1/8 of the American population, and according to a 2018 study, the Canadian drug supply would run dry in less than a year if just 20% of American drug demand were to be filled with Canadian imports.

Former FDA Commissioner Mark McClellan emphasizes that even if American patients were to gain access to Canadian prescription drugs, U.S. prices would remain largely unchanged while Canadian prices would likely jump due to increased demand. This surplus demand and subsequent price hike could drive business to online pharmacies, exacerbating the risks of counterfeit, illicit, or ineffective medications. Most importantly, the hypothetical logistics burden placed on the FDA would require immense scaling-up of the agency’s resources as the plan necessitates FDA input at every step of the international supply chain.

A Cloudy Landscape: Will Business Needs Shape Imminent Policy?

On July 26, 2019, the aforementioned bill to cap Medicare costs was advanced by committee with a vote of 19-9, and is set to face a full Senate debate in September. The FDA also made promises to issue advice to drug companies on importing drugs made in foreign facilities, in hopes to bring them on board with the proposed plan’s controversy. While it’s still unknown how deeply the import plan would cut into profits, the administration has made it clear that affordability is a priority.

In a CNBC interview, Health and Human Services secretary Alex Azar explained that Americans pay too much “out of pocket” compared to their European counterparts in more socialist healthcare systems. When asked if the administration would consider the import plan’s effect on business’ bottom line and future research and development funding, Azar countered: “Whether it hits the bottom line or not, is not so much relevant to us. It’s what’s good for the American patient. It’s putting them at the center of the system…in control of their own health.”

While the administration’s attitude towards patient-centricity and quality of care might convey popular support, the economic and logistic implications the import legislation carries makes it unclear how quickly the plan will move forward. However, as the current administration untangles the web of domestic drug legislation and works to gain Canadian support, drug companies should work strategically to educate consumers and legislators about the necessary costs and time involved in quality drug production.

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Coauthor and contributions by Kyleigh Andries

Tags: Strategy & Compliance