Magazine article Reason

Cheap Meds from Canada, Eh?

Magazine article Reason

Cheap Meds from Canada, Eh?

Article excerpt

"FOR THE FIRST time in HHS history, we are open to importation," Secretary of Health and Human Services (HHS) Alex Azar told reporters in July. The Trump administration hopes this policy change will lead to cheaper prescription drugs for American consumers. Alas, it's not quite that simple.

The "importation" Azar was referring to, sometimes called "reimportation" or "parallel trade," involves importing drugs to the U.S. that are already available here. That doesn't make a lot of sense until you consider that the Canadian government, a prime target market for parallel trade, negotiates prices with pharmaceutical manufacturers, while in the United States prices are set by a complex interaction between drug makers, insurance plans, and Medicare bureaucrats. The result is that a manufacturer can sell the same cholesterol medication, made in the same type of factory under nearly identical conditions, for more in the U.S. than it can in Canada. To Americans, it can appear that Canadians are better served by their health care system than we are by ours.

While the Food and Drug Administration (FDA) has historically looked the other way when patients import personal amounts of noncontrolled substances, importing any drug from another country's domestic market in wholesale quantities is currently unlawful. The HHS and the FDA argued for years that parallel trade would expose American consumers to counterfeiting and contamination. Drugmakers have made the same argument, though they also have other considerations.

Canadian drug price controls exist because the U.S. doesn't have them. The same could be said for price controls throughout the Organisation for Economic Co-operation and Development (OECD), which are even more stringent than Canada's. Americans indirectly pick up the slack. In 2018, we imported 18.2 percent of prescription drugs globally, more than twice as much as the next largest importer. We also paid the highest prices and spent the most tax dollars on research and development. Put another way, countries with socialized medicine aren't driving or paying for innovation; we are.

American consumers can't do anything about free-riders in the OECD, which is probably why so many seem eager to join them. But even though HHS has supposedly come around to the idea, Canadians know that their discount depends on us paying full freight. …

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