State Pharmaceutical Importation Programs: An Analysis of the Cost Effectiveness

Abstract

Recently proposed legislation in Colorado, Connecticut, Florida, Maine, Missouri, Oklahoma, Oregon, Utah, Vermont and West Virginia aims to reduce spending on pharmaceuticals by importing them from Canada. To examine the cost effectiveness of importation, this study analyzes 24 drugs from an online Canadian supplier, accounting for the cost savings, the cost of testing, the medical consequences of treatment failure, and the cost of treating an adverse medical event. For a “Representative State”, given an adverse medical event, the presumed savings from an online Canadian supplier are exhausted in the treatment of only one patient in the case of Nexium, to 24,318 adverse events for patients in the case of Advair. The analysis shows the cost of testing (99.999% confidence level with 99.999% reliability) exceeds the presumed cost savings in all cases. Pharmaceutical importation plans are politically attractive, but the numbers demonstrate that they fail to deliver cost savings.

Keywords: pharmaceutical importation, drug prices, Canadian pharmacy, cost effectiveness

JEL Classification: F13, F14, H21, I11, I18, L51, L65