Canadian drug importation is not the answer

For those with a subscription to JAMA – A Perspective on US Drug Reimportation – written by two Canadian physicians. I know the senior author very well, and greatly respect his intellect – especially as pertains to economic issues.

Since most do not have access, I will quote several key paragraphs:

Arguably, drug reimportation from Canada is safe for Americans and may not threaten new (important) drug innovation. Reimportation may be an attractive short-term solution for US consumers and politicians, and selling drugs to Americans may have short-term economic benefits for some Canadians—sales of drugs by Canadian pharmacies to Americans were estimated to have been $650 million in 2003.45 Nevertheless, importing drugs from Canada is not a viable long-term strategy to address America’s prescription drug problem.

Canada accounts for only 2% of worldwide pharmaceutical sales, whereas the United States accounts for nearly 50%. If the practice of drug reimportation is adopted on a large scale, it is highly doubtful that there will be enough drugs in Canada to adequately supply the US market. In fact, since the threats by some pharmaceutical companies to limit or cut off the supply of drugs to Canadian pharmacies that sell drugs to Americans have already successfully altered the practices of these pharmacies, there appears to be little slack in the Canadian pharmaceutical market.

It is unclear whether drug companies can be compelled to provide increasing supplies to Canadian pharmacies, although proposals before the US Senate attempt to do so. The Pharmaceutical Market Access and Drug Safety Act of 2004 proposes to explicitly prohibit drug companies from restricting supplies to entities that export drugs to the United States. The Reliable Entry for Medicines at Everyday Discounts through Importation with Effective Safeguards Act of 2004 proposes to amend the Internal Revenue code to remove tax deductions for advertising expenditures of a drug manufacturer that does not certify that it has not taken any action to prevent authorized importation.This bill also proposes an increase in the tax credit for research activities for a drug manufacturer that makes such certification.

I have often blogged about the “tipping point” in importation. This strategy cannot work for large numbers; it only makes sense for small numbers of patients!

In contrast, programs based on preferred drug lists and incentive-based formularies, with tiered co-payments or reference-based pricing, appear to hold significant promise to control both prices and expenditure if these programs are properly designed. In particular, the experience of the VA would seem to be a significantly more viable model than that offered by drug reimportation from Canada.

In summary, Americans are concerned about their ability to access affordable medications, and buying drugs from countries with lower prices has arisen as an intuitively reasonable option to deal with this problem. Opponents to reimportation argue that drugs from other countries are unsafe and will eliminate incentives for drug companies to develop new drugs. We contend that even though these concerns appear to be overstated, the responses of foreign governments will limit the benefits of arbitrage. Accordingly, difficult choices must be made to balance the competing policy objectives inherent to the prescription drug market. Fundamentally, the United States must decide how to simultaneously maintain access and innovation. Unfortunately, it is clear that reimporting drugs from Canada is not the answer.

Canadian importation sounds like a quick easy fix. It sounds too good to be true – because it is! We need a better approach to controlling drug expenditures.

Unfortunately, I do not see either party addressing the real issues. They both posture and try to satisfy their constituents. Neither party tries to solve issues.