Drug Reimportation from Canada––The Drug Industry Loves It

Well, the illegal kind of reimportation anyway.

For many years we have been debating the issue of drug reimportation--the importation of American drugs from other nation's, such as Canada, at much lower prices which their government-run systems enable their pharmacies to charge.

Drug reimportation was never going to be much of a solution to America's high drug price problems--just how many excess American drugs were going to be available from these countries anyway?

In the past, I have called drug reimportation one of the goofiest health policy ideas ideas that has ever come along. Think about it. Believing that our drug affordability problems could be solved by manufacturing a drug in Kansas, shipping it to Canada, and bringing it back at a price much lower than we pay here because of the way Canada regulates its drug markets.

Now, that hits the issue head-on.

But the notion of drug reimportation seems to be dieing a natural death.

In the Senate this month, sponsors failed to get even close in a vote to add it to a major FDA bill--largely because the Bush administration said it would veto the important FDA bill that reauthorized key drug and medical device programs for the FDA if a reimportation amendment were added to it.

A recent Toronto Globe and Mail article reported that drug reimportation sales from Canada to the U.S. are half what they were in 2004--now about $500 million (Canadian) per year. The article also pointed out that the number of online Canadian pharmacies has fallen from 55 in 2004 to 30 today. According to the Globe and Mail, many of the U.S. city and state reimportation programs that garnered so much publicity a few years ago, as politicians were quick to call press conferences announcing they had the courage to defy federal reimportation laws, have just faded away victims of administrative costs that were higher than actual savings.

While I always thought these reimportation schemes made little policy sense, I have believed the Congress would pass a reimportation bill anyway. The polls told us it was a popular idea in great part because so many of us know friends and family that have used Canadian drugs as a lifeline when U.S. prices were too high.

More than anything, the new Part D Medicare senior drug plan has hurt the reimportation business and its political fate. That family member who needed the Canadian drug lifeline in 2004 is now probably getting their drugs for a $20 co-pay through Part D. The increased use of generic drugs in the U.S. has also taken a lot of pressure off--generics are a lot cheaper here than in Canada.

But, on the surface, it still sounds like a good idea--an easy way to get cheaper drugs. In fact, Hillary Clinton included it in her recent speech on how to contain health care costs.

While the Congress is no longer likely to pass a reimportation bill--in part because most of the pressure to do so is off and in part because President Bush would veto it anyway--don't look for the feds to aggressively enforce existing laws to kill what's left of the Canadian drug reimportation business.

Here's the incredible irony when it comes to reimportation--allowing the illegal trade is in the best interest of the pharmaceutical industry!

While Part D has solved the senior's portion of drug price angst, there are still 45 million uninsured in the U.S. They can still benefit from the Canadian pharmacies. Being uninsured, they aren't much of a market for the drug companies anyway. With Canadian shipments now down to only $500 million a year, reimportation isn't hurting the huge drug industry and it keeps the uninsured lobby quiet.

With employers paying most of the pharma cost for the insured, seniors taken care of by Part D (both benefiting from managed care discounts), and many uninsured getting their drugs from Canada, when was the last time you heard anyone complain about higher U.S. drug prices?

So who is benefiting most from this modest amount of illegal drug reimportation? The drug industry.

Don't look for any big enforcement actions against the Canadian online pharmacies any time soon--at least the ones that are left.