This editorial by Dr. Kristina Acri was published by the Fraser Institute on June 13, 2019. Acri is an associate professor of economics and chair of the Department of Economics & Business at Colorado College.
Colorado wants your drugs
According to a Trudeau government advisory council, which released its report Wednesday, Canada should construct a national pharmacare program. The report claims national pharmacare will improve drug coverage for Canadians and save money. But in reality, based on the experience of other countries, national pharamacare can put patients, innovation and innovative industries at risk.
Meanwhile, south of the border, recently proposed legislation in Colorado (similar to legislation in Connecticut, Florida, Maine, Missouri, Oklahoma, Oregon, Utah, Vermont and West Virginia) aims to make pharmaceuticals cheaper for U.S. patients by importing them from Canada. Unfortunately, this strategy won’t work. Worse, it may actually harm patients in Canada.
Although I live in Colorado, and like many Americans at times struggle with the high prices of my prescriptions, I find the legislation proposed by my state to be indefensible. This is why I was compelled to testify before the Colorado House of Representatives against the importation bill. Beyond being a professor of economics at Colorado College, I am also a senior fellow at the Fraser Institute. Other Fraser Institute senior fellows have examined this issue and the problems it poses. As the debate heats up in Colorado, I can’t help but see this issue from the Canadian perspective.
My work on pharmaceutical importation began with my doctoral studies in economics at the University of California, Berkeley more than two decades ago. After 25 years of studying the economic and health impacts of drug importation, the concept of bringing drugs from Canada is not new, and it seemingly addresses the demand for costly therapies with quick and substantial price relief for U.S. patients. But in reality, Colorado’s proposal will not work. Here’s why.
- U.S. demand would quickly outstrip Canadian supply
- Drug shortages are already an issue for Canadian patients
- This isn’t a manifestation of free trade or fair trade
- Difficulty in sourcing drugs would expand a black market
Quite simply, Canada cannot act as a drugstore for the United States. Canada doesn’t have a sufficient supply of drugs to satisfy American demand. Canada’s population is just one-ninth of the U.S. population—37 million people compared to 318 million. Annually, 627 million prescriptions are dispensed in Canada compared to 4.4 billion in the US. If 100 per cent of U.S. prescriptions were filled in Canada, the annual Canadian drug supply would be exhausted in just 52 days. Importing Colorado’s drugs from Canada is not a long-term solution to the rising costs of pharmaceutical treatments and cures.
In addition, drug shortages are already a significant problem in Canada. In a single week in September 2018, 25 drugs were added to the drug shortage list. “As Canada continues to grapple with a relentless stream of drug shortages,” said the CBC, “one in four adults in the country has either personally been affected in the last three years or knows someone who has, according to a survey commissioned by the Canadian Pharmacists Association.”
Of course, some will argue this is a free trade issue. But Canadian drugs are not cheaper because Canadians face lower costs or produce them better, cheaper, faster or smarter. And Canada doesn’t have a comparative advantage in the production of pharmaceuticals. In reality, government regulations and price controls help lower Canadian prices. So advocates of pharmaceutical importation schemes essentially want to import Canadian price controls while putting Canadian patients at risk.
Finally, my years of research on the national and international consequences of drug importation show it poses an acute threat to patient safety, especially as the black market expands. If Canadian policymakers passed legislation to restrict Canadian pharmacies and wholesalers from legally exporting pharmaceuticals to the U.S., the black market in exported pharmaceuticals would certainly increase. Numerous investigational studies establish that many drugs shipped from (or through) Canada to the U.S. actually originate in other countries.
Former FDA Acting Deputy Commissioner Randall Lutter testified before Congress. “Of the drugs being promoted as ‘Canadian,’ 85 per cent appeared to come from 27 countries around the globe,” he said. “Many of these drugs were not adequately labelled to help assure safe and effective use and some were found to be counterfeit.” This would necessitate increased enforcement efforts by Canadian authorities and greater monitoring by the U.S. of the movement of prescription drugs into state importation programs.
Diverting drugs meant for Canadian patients to the U.S. through state importation schemes will create shortages for Canadian patients and increase pressure on potentially unscrupulous suppliers to source drugs from wherever they can, opening the door to counterfeiters. While state policymakers in the U.S. see importation of Canadian drugs as a quick and easy fix to address high drug prices, Canada should be wary of the potential consequences for Canadian patients and prevent these shortsighted policies—and any plans for national pharmacare—from becoming dangerous realities before it’s too late.