What, exactly, is the Trump government proposing?
U.S. Health and Human Services Secretary Alex Azar unveiled a proposal on Wednesday that contemplates two “pathways” for importing drugs in bulk from Canada.
The first pathway would allow states, pharmacists or wholesalers – the middlemen of the drug supply chain – to apply to Health and Human Services (HHS), the cabinet department that administers health programs, for permission to run a pilot project safely importing some cheaper Canadian prescription drugs into the United States.
At least four states, including Vermont and Florida, have passed laws that would allow them to buy Canadian medications in bulk with Washington’s permission. The first pathway seems designed to grant that permission, albeit in a very limited way.
The second pathway would allow drug makers themselves to import cheaper versions of the drugs they already sell in countries other than the U.S., including Canada. For this option to work, pharmaceutical companies would have to volunteer for a program that would mean undercutting their U.S. profits.
The Pharmaceutical Research and Manufacturers of America (PhRMA,) the chief lobbying group for brand-name drug makers, has already come out against the plan, calling it, “far too dangerous for American patients.”
Are there other hurdles to Trump’s plan?
Yes. The first is timing. Mr. Azar promised Wednesday to issue what is known as a Notice of Proposed Rulemaking that would open the door to the first pathway, which seems likelier to be used than the second.
Such proposed rules require public consultation and normally take more than a year to be finalized, said Rachel Sachs, a drug-pricing expert who teaches law at Washington University in St. Louis.
“Here, there is the added complication that the final rule doesn’t actually do anything on its own,” she said. “What the final rule would do is set up a pathway for states to submit applications for demonstration projects on importation. Those would then need to be reviewed, maybe subjected to edits, and then approved.”
Ms. Sachs said it was “highly unlikely” that process could be completed before the 2020 election.
Another obstacle is the pharmaceutical industry, which can do more than vigorously lobby against Mr. Trump’s importation plan, as it is expected to do. Major multinational pharmaceutical companies could fight the plan in court or at the very least direct their Canadian subsidiaries not to co-operate with states pitching demonstration projects to HHS.
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A lot of media attention has been paid to the high price of insulin in the U.S. Would this plan make cheaper Canadian insulin available to American patients?
Likely not. The proposed first pathway excludes controlled substances, infused drugs, intravenously injected drugs and biologics, which are complex drugs manufactured from living organisms. Insulin is a biologic, as are many of the high-priced drugs that have fuelled American anger over drug prices.
Insulin could be imported under the second pathway, if any insulin maker is willing to play ball.
HHS’s Safe Importation Action Plan points out that, in recent years, “multiple manufacturers have stated (either publicly or in statements to the administration) that they wanted to offer lower-cost versions but could not readily do so because they were locked into contracts with other parties in the supply chain.”
The second pathway offers drug makers a way around those contracts, Mr. Azar said on Wednesday.
If the Trump government’s plan becomes a reality, how big of an impact could it have on the Canadian drug supply?
That’s hard to say, but one U.S. study published last year predicted that if 20 per cent of U.S. prescriptions were filled using Canadian prescription-drug sources, the Canadian drug supply would be exhausted in 183 days.
Shortages of mostly cheaper generic drugs are already a severe and growing problem in Canada, the Canadian Pharmacists Association (CPhA) says. The vast majority of pharmacists say shortages have “greatly increased,” in the past three to five years and Ottawa is currently reporting 1,846 actual drug shortages on its mandatory reporting site.
The reasons for the shortages are complex: They run the gamut from problems at overseas manufacturing plants to a Canadian pricing structure that has prompted some generic companies to quit making drugs that are no longer profitable. But the problem would inevitably become worse if Mr. Trump’s importation plan became a reality.
In that case, what can the Canadian government do to block bulk importation?
Prime Minister Justin Trudeau promised Thursday to protect Canada’s drug supply, echoing an earlier statement from Canada’s Health Minister. The government was not clear on what legal levers it might use to mitigate the U.S. proposal.
Why are Canadian drugs so much cheaper than American drugs?
First, it’s important to understand that the price differences don’t have anything to do with the pills or tablets themselves.
"When Americans are buying a Canadian drug at Canadian prices, really they’re just buying the same drug – just like if you’re buying a Honda car north or south of the border, it’s probably made in the same plant,” said Steve Morgan, a pharmaceutical policy expert at the University of British Columbia.
Canada has a regulator called the Patented Medicine Prices Review Board (PMPRB) that sets introductory ceiling prices for brand-name drugs. It also limits the amount by which the makers of patented drugs can raise their prices every year.
On top of that, Canada’s federal, provincial and territorial drug plans have a formal alliance that negotiates confidential discount deals on new brand-name medications as they enter the Canadian market, meaning the real prices are usually lower than sticker or “list” prices.
The sticker prices for Canada’s brand-name drugs are still among the highest in the world, but they are far lower than prices south of the border.
Aren’t there easier ways that the U.S. could lower its drug prices?
Yes. One straightforward option would be to allow Medicare and Medicaid – the U.S. programs that cover prescription drugs for seniors and the poor – to negotiate prices with drug makers, something prohibited by law.
“That would be an easy fix," said Neil Palmer, a senior strategic adviser at PDCI Market Access and a former policy developer for the PMPRB. “Your biggest customer should be able to negotiate drug prices.”
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