The U.S. pays 50% more per capita for prescription drugs than Canada. Frustrated by this discrepancy, a handful of states in recent years have developed plans to import cheaper medications from across the border. Florida recently became the first state to get approval from the Food and Drug Administration to do so.
At first blush, the development sounds like a coup for consumers and a potential blueprint for other states saddled with rising drug costs. But, as ever in the U.S. health care market, the devil is in the details.
For more than two decades, U.S. pharmacists and wholesalers have been allowed to import medications from certain countries, including Canada, provided they’re safe and deliver savings to consumers. For now, Florida will import certain drugs for its public programs, including Medicaid, prisons and government clinics. State officials expect savings of as much as $180 million in the first year.
Such figures help explain why the prospect of importing drugs has long been popular. But it bears emphasizing that any such program will face significant practical challenges, starting with the drug industry. Although Florida, according to news reports, will buy medications through wholesale distributors, manufacturers unavoidably control supply. Some have explicit contracts that prevent Canadian wholesalers from reimporting drugs into the U.S. While states could try to negotiate directly with drugmakers, the industry has little incentive to come to the table. Manufacturers thus have a lot of leverage: They can restrict sales to Canadian wholesalers, creating artificial shortages and raising prices, or find new distributors, who will be loath to lose such lucrative business. That’s all before the inevitable barrage of lawsuits.
Canada’s government will also have a say. Officials have said supply is too small to meet U.S. demand and that bulk importation isn’t an “effective solution.” The country already has a rule blocking drug exports if such a program causes or worsens a shortage. Assuming states manage to appease Canada and overcome the wall of industry opposition, they’d then be left to seek FDA approval for each imported drug every two years.
Why Canada pays less for drugs than the U.S. isn’t a mystery. Its government negotiates directly with drugmakers — an authority that Congress deliberately restricted when it created Medicare’s prescription-drug program in 2003, for fear it would stifle innovation. The Inflation Reduction Act, which empowers Medicare to negotiate an initial list of 10 older, widely used drugs, marked a step in the right direction. But the IRA still faces numerous legal challenges.
In this context, Florida’s drug import program probably won’t amount to much. The hard truth is that only the leverage wielded by the federal government is likely to make a dent in drug prices. Although the IRA’s list of negotiated drugs will eventually expand, Congress ultimately will have to consider adding newer, very expensive medications that comprise a growing share of state spending.
Politicians want to show they’re working to lower drug prices. But when it comes to importing medicines, American voters should know they’re being sold a dud.
