- The Canadian Drug Importation Program, which would focus on lowering prices for state-supported institutions, such as Medicaid and the prison system; and
- The International Prescription Drug Importation Program, which would allow Florida to serve as the middleman between international drug wholesalers and American pharmacies.4
These programs would function behind the scenes, so the average Floridian would be unaware their medications were not originally destined for an American market.
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Explore This IssueAugust 2019
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Florida is not the first state to come up with this idea. Colorado and Vermont have already passed laws allowing the wholesale importation of some of the most expensive drugs from Canada. All three states (FloVeCo) are now working on obtaining federal approval to implement these plans.5
This is no small hurdle. The 2003 Medicare Modernization Act gives the Secretary of Health and Human Services the authority to allow the importation of prescription drugs from Canada. This authority comes with two preconditions: the Secretary has to certify that importing drugs would not place patients at risk. And, of course, it would have to save money.6
No Secretary in four administrations has tried to exercise this authority. The current Secretary of Health and Human Services, Alex Azar, has already spoken out against the idea of importing drugs from Canada, calling the plan a gimmick.7
Although you would think that would be the end of it, these laws have an unusually influential fan: President Donald J. Trump, who has ordered Mr. Azar to work with the Florida state legislature to put this plan into action.8
Who knows if this will go anywhere. In politics, willpower may last only until the next election, and I would imagine a nice-sized payday awaits the lobbyist who can make this all go away. But how did we get to this point, and would importing drugs from other countries really lead to cheaper drugs for more American patients?
Setting Prices or Not
It will surprise no one to learn the U.S. pays more for medications per person than most other countries, even when the use of said medications is about the same. What is everyone else doing that we’re not? Although each country approaches the issue differently, some common themes emerge:
- Aggregated purchasing: As Walmart has demonstrated, prices tend to fall when the purchaser represents a large market share. In some countries, the government serves as the major purchaser; in other countries, a coalition of insurers work together.
- Health technology assessments: Expert panels assess every drug that comes to market to determine its benefits and the costs associated with those benefits.9
Aggregated purchasing and health technology assessments facilitate lower prices through negotiation. In many countries, a panel that represents the aggregated purchaser takes the information provided by these expert panels and determines what any given drug is worth. Because there is essentially one buyer in these countries, pharmaceutical companies are highly motivated to negotiate, knowing only one door into these markets exists.
This process already occurs in the U.S. on a smaller scale. The Veterans Administration (VA) and Kaiser Permanente, which represent millions of patients, can both guarantee lower prices for their patients through such negotiations.
Why doesn’t the U.S. negotiate the prices of drugs on a larger scale? The short answer: the non-interference clause.10 This refers to the law that prevents the Secretary of Health and Human Services from negotiating the prices paid by Medicare directly with pharmaceutical companies. The less charitable among you could probably come up with your own explanations as to how this law came into being. Officially, however, Congress decided the best way to keep drug prices down would be to allow market forces to determine how much each drug should cost.
On the face of it, Congress judged poorly. The law, however, reflects another hard truth: Negotiation only works if you are willing to walk away. Giving the Secretary of Health and Human Services the power to negotiate prices is pointless if we are not simultaneously giving the Secretary the right to say no to certain drugs. Kaiser Permanente famously tried doing this years ago when it refused to pay for the latest blockbuster drug, saying the benefit was not worth the cost. That drug was Viagra.11 Just imagine how long that decision would have stood if we elected Kaiser Permanente’s Board of Directors. Denying our patients any drug that might benefit them, no matter the cost, seems, well, un-American.