The Prescription Drug Crisis: Why the U.S. Cannot Pass the Buck to Its Northern Neighbor

A pharmacist assisting a woman with her prescription. Photo courtesy of Tbel Abuseridze.

An unlikely bipartisan effort has emerged in the form of a prescription drug price regulation policy, headed by an even more surprising leader, Florida Governor Ron DeSantis. In November 2020, Florida was the first state in the country to submit a proposal under the federal Section 804 Importation Program that would allow states to import prescription drugs from Canada. Canada’s prescription drug prices are substantially cheaper than the United States’ partly because it has a federal agency, the Patented Medicine Prices Review Board, that reviews prescription drug prices to make sure they are not excessive. Several states, including Vermont and Colorado, soon followed with their own applications. Florida estimates that the program could save its residents 80 to $150 million in prescription drug costs in the first year alone. Governor DeSantis believes his constituents will benefit from the program because it allows the state to bypass drug industry middlemen who he claims exacerbate the drug pricing issue. Under Section 804, each state would be responsible for maintaining their own drug supply and distribution. Both former President Donald Trump and President Joe Biden have expressed their approval for the program, and in July 2021, President Biden issued an executive order for the U.S. Food and Drug Administration to enforce the program. 

However, two years later there is still no legal green light for the program to proceed, and for the sake of both American and Canadian consumers, this is for the best. Despite its bipartisan support, the Canadian prescription drug importation program is a costly and short-sighted solution, and its implementation would be an unethical attempt at circumventing the byproducts of the United States’s own healthcare system. If the U.S. allowed its states to implement the Canadian prescription drug importation program, it would put Canadian citizens at risk while still coming up short at solving the root of America’s issue with prescription drug regulation.

In 2020, the Canadian government released a statement stating that Canada’s drug market was too small to provide for both American and Canadian consumers and doubted that the program could have any substantial impact on high prescription drug pricing in the U.S. Canada also expressed concern that implementing the program could aggravate drug shortages for its residents. The Canadian government also issued an order, a month after the FDA authorized the importation program, prohibiting companies and pharmacies from distributing drugs outside of Canada that could cause or exacerbate a drug shortage, a prevalent problem for the country. Canada reports that a shortage of Tier 3 drugs—preferred brand name drugs that do not have a generic equivalent—would have the greatest impact on their health care system. In 2017, Canada passed legislation requiring drug shortages and discontinuations to be reported to a third-party website, and, as of December 2022, over 18,000 shortages and discontinuations were documented. Supply-chain issues, manufacturing capabilities, and emergency stock depletions are contributing factors to the drug shortages.

If U.S. lawmakers and health policy officials were to push this proposal through, it would cause catastrophic consequences for hundreds of millions of people, both in the U.S. and Canada. For instance, during the COVID-19 pandemic, Canada’s drug supply was nearly exhausted, and the country had to pass its own interim legislation that allowed drugs to be imported from countries that they deemed to have satisfactory regulatory reviews. Doctors were forced to prescribe second or third-line medications meaning patients had to switch to a different brand or change their dosages. In March 2022, the interim measures were made permanent. Passing Section 804 would force many American consumers to become reliant on the Canadian drug supply and create an unstable situation, as Americans will always be second in line to receive their prescription under the program’s design. No matter on which side of the American-Canadian border they reside, people’s lives will be put at risk.

 Beyond the potential for drug shortages, experts are skeptical about the projected 80 to $150 million in savings figure when taking into account the types of drugs that would be offered under this proposal and the initial investment into the necessary infrastructure. For instance, Colorado, a proponent of the program, released a list of prescription drugs that would not be imported, and it includes biologic products such as insulin and Humira. Biologic products tend to be more expensive than other medications because they are generally derived from living culture systems or blood, while other medications are synthesized or purified from plants. The lack of biologics in the proposal is a major blow to the effectiveness of the program since insulin is one of the drugs most commonly targeted by price gouging in the U.S. Similarly, in 2021, Humira was the top-selling drug in the U.S. Humira treats different types of diseases such as rheumatoid arthritis and Crohn’s disease and, without insurance, costs nearly $7,500 for a one-month supply. The savings may also vary depending on whether or not a public or private company is utilizing the program. For example, while Florida’s proposal would only allow wholesalers or pharmacists to dispense on behalf of government entities like Medicaid, Vermont’s proposal would allow wholesalers to import prescription drugs on behalf of public and private companies. It is uncertain whether or not states that allow private companies to import prescription drugs from Canada will enact policies that require these companies to then sell their drugs for a lower price. 

The requisite infrastructure to sustain the program will also require a substantial initial investment. Florida is contracted to pay LifeScience Logistics, a prescription drug warehouse company, $39 million over two and a half years, a price tag which does not include the price of the drugs themselves. The money would go towards stockpiling, packing, and distributing the prescription drugs. The American Medical Association also released a statement to the F.D.A. with concerns that increased administrative burdens and the introduction of new drug coding outside what may be currently covered under patient-insurance company contracts could further raise drug prices. While the initial investment is high, it may be worth it if the model is sustainable and reveals to pharmaceutical companies that American consumers will no longer pay the egregious price tags for their necessary medications. However, that seems unlikely given the Canadian government’s negative response to the program proposal. 

A more effective solution to the current prescription drug pricing regulation crisis would be to reform the healthcare system in the U.S. While a single-payer healthcare system may be too divisive in the current political landscape, the U.S. has other options to increase accessibility to affordable healthcare. For instance, when the Affordable Care Act was passed, it expanded Medicaid coverage to adults with incomes up to 138 percent of the Federal Poverty Level (as of 2023, $20,120 for an individual), but, currently, fourteen states have not approved this expansion, leaving 4.4 million people uninsured. For the middle class, many Americans fall into a coverage gap where they are unable to afford private premiums, especially if they are without employer-sponsored coverage. An approach to ameliorate this issue could be to target high cost-sharing, the amount of out-of-pocket spending the insured person agrees to with the insurer as part of their plan. Federal assistance could be implemented for subscribers with incomes at a certain level above the federal poverty line to reduce out-of-pocket spending. States such as Massachusetts and California require private plans to meet specific cost-sharing and benefit guidelines stricter than the ones outlined by the Affordable Care Act. For instance, these states offer plans that exclude certain services from a patient’s deductible, the amount of money the insuree must self-pay for medical services before his or her insurer begins covering any expenses. These are often called standardized plans, and they allow their residents to compare plans more easily because they have similar out-of-network costs. Thus their residents can choose one based on their desired network within their state.  

The U.S. could also look to Canada for healthcare reform assistance. In its response to the importation proposal, the Canadian government cited some of its successful strategies in keeping prescription drug prices fair, including international and internal price referencing, which involves setting prices after comparing similar drugs within comparable countries and within the same drug class. Canada also suggests using the government’s purchasing power to negotiate bulk discounts which the U.S. would most likely find more effective if it used a single-payer healthcare system. While the U.S. does not have a single-payer system, the federal government does negotiate prescription drug prices for their Medicaid and Medicare beneficiaries which allows them to purchase drugs at a much lower price than private insurance holders. Since the Affordable Care Act was passed, the federal government has assisted states in expanding access to Medicaid and Medicare, but ten states have resisted expansion—Florida being one of them. 

The U.S. should not expect to reap the benefits of another country’s healthcare system as a means to combat a shortcoming of its own system while continuing to uphold the structures that allow pharmaceutical companies to overcharge consumers. Section 804 is not a sustainable solution to the current prescription drug pricing crisis due to the necessary infrastructural and maintenance expenses as well as the pushback of the Canadian government. For the safety of their own consumers, the Canadian government has clearly and strongly opposed the proposal by citing its own recent drug shortages to illustrate the capacity of their drug market. Continuing with the proposal would put American and Canadian lives at risk if the unthinkable happened—a catastrophic drug shortage pushing the Canadian drug market to its breaking point. 

Instead of taking resources from its northern neighbor, the U.S. should work with their Canadian counterparts to implement strategies that integrate elements of socialist healthcare with the U.S.’ free market, such as by increasing federal assistance to private insurance plans for middle-class individuals and expanding access to government-based insurance for low-income Americans. While the U.S. can look to Canada for guidance, the responsibility of examining the sustainability of the current health system and conceptualizing solutions ultimately rests on its own shoulders, and time is ticking for Americans who can neither afford their medications nor wait for an alternative path. 

Kristy Wang is a Staff Writer for the Columbia Political Review and a senior in Columbia College studying political science and biology. Kristy can be reached at kw2933@columbia.edu.