Americans consistently spend more on prescription drugs than anyone else in the world. That spending reached new heights last year, jumping 13.1 percent to $373.9 billion. That works out to $995 per person, according to an April report by the IMS Institute for Healthcare Informatics, triple the amount Americans spent in 1995 when adjusted for inflation.
Maine residents, who spent more than $1.5 billion last year to fill prescriptions at pharmacies, lost their best short-term option earlier this winter for avoiding those stifling prescription drug costs. U.S. District Court Judge Nancy Torresen in February invalidated a 2013 state law that allowed licensed pharmacies in Canada, the U.K., Australia and New Zealand to dispense drugs to Maine residents.
Short of a federal solution to the U.S.’s prescription drug cost problem, this law was a logical and safe way to help Mainers save some money on needed treatments. But, Torresen determined, it flew in the face of federal law, which bars prescription drug imports from foreign pharmacies for personal use. (Attorney General Janet Mills declined to appeal Torresen’s ruling, citing the need for federal action.)
Rep. Chellie Pingree from Maine’s 1st District is proposing a partial solution, introducing legislation that would allow Americans to order drugs from licensed Canadian pharmacies. Sen. John McCain, R-Arizona, is sponsoring identical legislation in the Senate — Maine Sen. Susan Collins is a co-sponsor.
Specifically, the Pingree-McCain legislation would require the federal government to develop the rules necessary to make it happen within six months of the bill passing. That’s because the federal government has had the authority to allow prescription drug imports from Canada since 2003 and hasn’t acted on it without the force of a deadline in the law.
The prohibition on personal prescription drug imports is nonsensical. It’s about time Congress eliminated it. Drugs from licensed Canadian pharmacies are no less safe than drugs purchased from American pharmacies, and there’s no reason to deprive Americans of a simple way to lower their prescription drug costs.
But allowing imports from Canada is just the start of changing a system that keeps Americans paying unnecessarily higher prescription drug prices than everybody else. Americans pay nearly $1,000 per capita on prescription drugs, but Canadians — who pay the second most per capita — spend about 40 percent less. For name-brand drugs, the prices paid by Americans generally are at least double the prices one would find in the U.K. or Australia.
Part of the reason is that the U.S. imposes no price controls on prescription drugs, unlike every other nation in the Organization for Economic Cooperation and Development. Plus, Americans often have some of the earliest access to new, name-brand drugs — many of which simply are modifications of existing drugs that aren’t substantially better — soon after FDA approval, raising U.S. spending on prescription drugs when they are most expensive. Further, the U.S. doesn’t allow one of its largest prescription drug purchasers, Medicare, the ability to leverage its enormous buying power into lower prices. Private insurers can negotiate lower prices, as well as the Department of Veterans Affairs, but this leaves the negotiating to a fragmented market of many, relatively small payers.
Many have argued lower drug prices in the U.S. could translate into substantially less capital available for the research and development involved with bringing new drugs to market. But this argument ignores the fact that the vast majority of the research that leads to meaningfully different drugs — new molecular entities — is done in academic centers and sometimes in nonprofit and government research labs. A 2001 study in the journal Health Affairs found that just 15 percent of the research cited in drug patent applications to the FDA was done by industry. Further, a 2012 study in journal BMJ found pharmaceutical companies spent just 1.3 percent of their revenues on research into new molecular entities while spending at least a quarter on marketing.
If Americans’ exorbitantly higher prescription drug prices were needed to fund important medical breakthroughs, that would be one thing. But that’s not what the higher prices are paying for, meaning a key reason against allowing Medicare to negotiate better drug prices for its members, much less allowing Americans to purchase cheaper drugs from Canadian pharmacies, simply doesn’t stand up.
