Trump administration moves to allow importation of cheaper drugs from Canada

The move comes amid frustrations that the U.S. spends more on drugs than any other developed nation

By Shira Tarlo
Published July 31, 2019 6:15PM (EDT)
President Donald Trump; Health and Human Services Secretary Alex Azar  (Getty/Chip Somodevilla)
President Donald Trump; Health and Human Services Secretary Alex Azar (Getty/Chip Somodevilla)

The Trump administration announced on Wednesday a move to permit the importation of cheaper prescription drugs from Canada as part of a larger effort to lower the costs of medications across the U.S.

The Department of Health and Human Services (HHS) issued a plan detailing two "pathways" that would allow states, wholesalers and pharmacists to submit drug importation programs for approval.

Under one option, the Food and Drug Administration (FDA) and HHS will use their authority to set up pilot projects from states or wholesalers detailing how they would import certain drugs from Canada that are versions of FDA-approved drugs.

Under a second option, manufacturers could import versions of FDA-approved drugs from foreign countries and sell them at a lower cost than the same U.S. versions.

The announcement represents a major policy shift, marking the first time in HHS history that the federal government is open to drug importation.

"The door was closed," Secretary of Health and Human Services Alex Azar said Wednesday. "What we are saying is, 'We are open. There is a pathway. We can be convinced.'"

Trump has appeared eager to tout a legislative victory in the lead up to the 2020 election, and polls have indicated a majority of voters across the political spectrum support a range of federal policies aimed at curbing prescription drug costs. Vowing to reduce costs, the president has repeatedly railed against high drug prices throughout his White House tenure.

The new response to the years-old debate about formally allowing Americans to access drugs from Canada, where prices are significantly lower, also comes amid growing frustrations from Americans consumers, who spend more on prescription drugs — average costs are about $1,200 per person per year— than anyone else in the developed world. This is in spite of the fact that generics represent roughly 84 percent of the U.S. market — the greatest proportion among high-income countries.

Lee Branstetter, an economics and public policy professor at Carnegie Mellon University who served on former President Barack Obama's Council of Economic Advisors, explained to Salon that prices are higher in the U.S. because the country does not employ the same policies approaches to lower drug prices used by many other developed countries, including price controls, reference pricing and cost-effectiveness thresholds.

"In many advanced industrial countries, there is a national health insurance system that is effectively the dominant purchaser of pharmaceuticals in the country, and that purchaser deliberately uses its monopsony power to try and bargain down international pharmaceutical companies to something close to the lowest price they would accept to be able to sell their drug in that economy," Branstetter told Salon. "The United States doesn't do this."

Indeed, most high-income countries have adopted price control strategies, such as centralized price negotiations, national formularies and comparative and cost-effective analysis for setting price ceilings to limit how much drug manufacturers can charge.

Additionally, federal law currently prohibits the HHS secretary from negotiating drug prices for Medicare Part D recipients, an exception which has spurred an incredibly heated public policy debate. Only Congress has the power to change this law.

A growing number of lawmakers and health policy experts have argued that granting the HHS secretary the authority to negotiate drug prices on behalf of millions of Medicare Part D beneficiaries would compel drug manufacturers to bring down costs and decrease out-of-pocket expenses.

"Pharmaceutical companies, often with a monopoly, come to the table knowing that Medicare is legally required to cover this drug. That means that Medicare can't get up and walk away from the table if it doesn't like the deal the pharmaceutical company is offering," Rachel Sachs, an expert on drug pricing and regulation at Washington University in St. Louis, told Salon. "If we put the bargaining power all in the pharmaceutical industry's hands, we can't be surprised when they use that power to set really high prices."

The push for drug importation has come amid mounting scrutiny by pharmacists and drug manufacturers, who have warned that the practice could increase the chances Americans get their hands on counterfeit or adulterated medications with life-threatening consequences.

Stephen J. Ubl, president and CEO of the Pharmaceutical Research and Manufacturers of America (PhRMA), denounced the plan as "far too dangerous for American patients."

"There is no way to guarantee the safety of drugs that come into the country from outside the United States’ gold-standard supply chain," Ubl said in a statement Wednesday. "Drugs coming through Canada could have originated from anywhere in the world and may not have undergone stringent review by the FDA."

Azar, a former top executive at the drugmaker Eli Lilly who has called drug importation a "gimmick" that would "have no meaningful effect," explained on Wednesday that he changed his tune on the issue.

"The landscape and opportunities for safe linkages of the drug supply chain have changed," he said. "That is part of why, for the first time in HHS's history, we are open to importation. We want to see proposals from states, distributors and pharmacies that can help accomplish our shared goal of safe prescription drugs at lower prices."

Azar acknowledged Canadian health officials have expressed concerns about sending their drugs to the U.S. but noted that supply chain questions would be addressed.

"There are hurdles, of course, but we think those hurdles are surmountable and this can be done," Azar said. "We are open-minded. We are open for business."

The battle over how to lower drug prices in the U.S. — and how to revamp the nation's health care system more generally — has moved to the forefront of the 2020 presidential race, as Trump has repeatedly vowed to "bring down drug prices" and several Democratic presidential candidates have unveiled proposals targeting the rising costs of prescription drugs.

In addition, Sen. Chuck Grassley, R-Iowa, chairman of the panel overseeing Medicare, and Democratic presidential candidate Sen. Amy Klobuchar have introduced legislation to bring down the cost of of prescription drugs and to permit importation.

During Tuesday night's Democratic presidential debate, Sen. Bernie Sanders, I-Vt., noted the disparity in U.S. and Canadian prices, stating: "I took 15 people with diabetes from Detroit a few miles into Canada, and we bought insulin for one-tenth the price being charged by the crooks who run the pharmaceutical industry in America today."

Shira Tarlo

MORE FROM Shira TarloFOLLOW @shiratarlo

Related Topics ------------------------------------------

Alex Azar All Salon Department Of Health And Human Services Donald Trump News & Politics