Letting patients buy Canadian drugs will only import trouble

Good news for American patients — prescription drugs are effectively on sale.

Drug spending climbed just 2.5 percent in 2013. Drug cost growth has now lagged overall health inflation for four straight years.
Naturally, Washington lawmakers are ignoring the cost problems plaguing the rest of the healthcare marketplace and focusing on prescription drugs. A group of U.S. senators has resuscitated a measure that would allow Americans to import prescription drugs from Canada, in hopes of further driving down their price.

But the scheme would only expose patients to dangerous counterfeits and hamper the development of new, lifesaving medicines in the United States.

American prescription drug spending has been stable for years.

Since 2010, drug spending has increased an average of 2 percent a year. During the same period, hospital costs grew 5 percent, according to the Centers for Medicare and Medicaid Services. Insurance premiums rose 6 percent.

Drugs accounted for 9.3 percent of all health costs in 2013. That’s down from 10.4 percent in 2006. It’s even less than their share of national health costs back in the 1960s, when drug treatments and effectiveness were far more limited than they are today.

Complaints about drug costs ignore the savings they produce elsewhere in the healthcare system by keeping patients healthier.
Take the current bête noire of drug industry critics — the breakthrough hepatitis C drug Sovaldi. Its $84,000 price tag may seem steep. But hepatitis C typically costs more than $200,000 to treat. If treatment fails, a liver transplant can cost more than $500,000 – if a patient can even get one.  Sovaldi cures the disease altogether for a fraction of the price.

The Congressional Budget Office credits Medicare’s Part D drug benefit for keeping seniors healthier — and thereby lowering costs across the rest of Medicare.

But some lawmakers can’t get past the fact that a drug that sells for, say, $187 in New York goes for just $24 in Canada. Those savings look significant. But they augur substantial hidden costs for American patients’ health and wellbeing.

First, prescription drug importation would starve pharmaceutical companies of billions of dollars they’d otherwise spend on research and development — just as the industry is entering a remarkable period of discovery and innovation.

A recent study from Tufts University puts the cost of developing a new drug and bringing it to market at $2.6 billion over a decade. That’s up 145 percent since the 1990s.  After a drug is approved, there are more than $300 million in follow-up costs.
Americans pay those research costs.

Canadians benefit from American research and development. But they don’t pay for it, thanks to the strict price controls their government places on prescription medicines. Indeed, they are “free riders” off the U.S. system.

If Americans import Canadian price controls, research into the next generation of cures will decline precipitously.

Advocates of drug imports also overlook another, more immediate public health concern — the potential for dangerous counterfeits to enter the American supply chain.

The Senate bill says that drug imports would only be allowed from “an approved Canadian pharmacy.”

But counterfeit drug sales are a major problem — even when the meds are supposed to come from Canada. In 2006, for instance, half the shipments seized by federal officials from four countries — Israel, India, Costa Rica, and Vanuatu — were from websites that claimed to be Canadian pharmacies.

Further, the authorities have limited ability to screen websites promising low-cost drugs from abroad. In 2012, the federal officials informed the domain name registrar for www.canadadrugs.com that the site was selling unapproved and misbranded drugs to U.S. consumers.
The registrar shut down the site. But less than a year later, the site was up and running again under a different registrar.

And that’s just one site. More than 3,400 rogue online pharmacies are currently operating.

Federal regulators simply can’t guarantee where or how drugs sold abroad were made, since they have no authority abroad.

Legalizing cheap imports from Canada is a solution in search of a problem. It will, however, create very real problems for our
healthcare system and more importantly, patients.

Pipes is president, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute. Her latest book is The Cure for Obamacare (Encounter 2013).