Drug Reimportation Schemes Will Turn Out to Be Clunkers

In the automobile business, what’s known as a “lemon” can’t truly be fixed. A new set of tires or a fresh coat of paint won’t make a difference if the machinery under the hood is poorly designed. The government policy world has its share of “lemons” too, and few have been as enduringly disappointing as the idea of importing prescription drugs from other countries with the hope to bring cheaper medications to patients and taxpayers.

There are several state-level efforts to pursue prescription importation, but new reports find that they’re significant administrative undertakings unlikely to deliver savings for Americans.

Seventeen years ago, federal law authorized states to import prescription drugs for privately financed and taxpayer-funded health care programs, but only if the U.S. Health and Human Services Secretary certified such a practice to be safe and cost-effective. Neither Democratic nor Republican HHS secretaries ever did so, and for good reason. As the Congressional Budget Office noted, the savings to taxpayers from this scheme would be “small,” which is not surprising because Medicare, Medicaid and other government programs already get very low prices in the drug market.

That bipartisan wisdom didn’t stop President Donald Trump’s HHS secretary from finalizing a rule in September enabling states to import medications on a wholesale basis from Canada. Six states have already authorized plans to do so pending Food and Drug Administration approval, but no others should follow this road. 

Wyoming is among those states currently exploring prescription importation proposals. However, as a report from the Wyoming Department of Health demonstrates, the prospect of huge savings from wholesale importation of Canadian drugs is an illusion. Each of those medications selected to be brought here would have to be tested for safety, relabeled to meet FDA standards and repackaged. The importer would also have to bear the considerable burden of liability insurance overhead. Once those steps are all factored in, the presumed savings to consumers quickly evaporate. 

Wyoming officials estimated that up to $10 million might be saved for the state employees’ health insurance system, assuming a 100 percent switch to imported drugs. But importing other countries’ price controls such as Canada’s would have far worse drawbacks in return. Artificially low prices cause research and development funds for cures to dry up. The result is fewer blockbuster drug discoveries, which would be able to cut hospital stays and other therapies that cost taxpayers more over the long run. 

Still, some bills to taxpayers would come due much sooner. Canada has no track-and-trace system matching that of the United States to monitor the safety of its drug supply chain. Unlike in Canada, every container of medicine made here is assigned its own serial number. In an age of global drug counterfeiting, policing this system against counterfeits coming over our side of the border would, according to other researchers, entail major taxpayer expense.

For its part, Canada would be an unwilling partner in this venture, given its population of 37 million. There are nearly 330 million residents in the United States, more than 20 million of whom live in Florida — another state that has authorized an importation plan. A recent Florida Times-Union editorial put it best by concluding that importation “will have limited impact under even the most optimistic scenario … the Canadian government told the U.S. government that there aren’t enough prescription drugs to spare.” 

It is little wonder, then, that no company to date has accepted Florida’s offer of $30 million in tax money to run the state’s importation operation. As an analyst with Wyoming’s Health Department put it during a legislative hearing, “at the end of the day, it is not a sustainable system.”

That’s why, from Wyoming to Florida (and other states), it won’t be just the opposing party shooting holes in importation plans as they inevitably break down. It’s worth remembering that in 2017, a proposal was brought before the U.S. Senate to authorize wholesale drug importation. A majority of Republican senators voted against it. 

Many smart steps can be taken to contain drug costs, ranging from bolstering the drug approval process to negotiating better trade deals with other nations. Fiscal conservatives should be driving policy in those directions and driving the latest importation proposal to where it belongs: the scrap yard. 

Pete Sepp is the president of the National Taxpayers Union.


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