Safety First: The Wellness and Wallet Dangers of Canadian Drug Importation

Rutgers Journal of Law & Public Policy, Vol. 18, Issue 2, 2021

62 Pages Posted: 14 May 2021

See all articles by Kaitlin Hackett

Kaitlin Hackett

Rutgers, The State University of New Jersey - Journal of Law and Public Policy

Date Written: May 1, 2021

Abstract

High drug costs plague the United States. Because of these high costs, patients avoid the doctor, do not take their medication as prescribed, substitute their medication, or even illegally trade medication. Over recent years, drug prices have skyrocketed to even more outlandish costs in the United States, making politicians more eager than ever to be the ones who solve this crisis. In 2019, it is projected that 345.7 billion dollars were spent on prescription drugs in the United States. Patient out-of-pocket costs grew from “$56 billion in 2014 to $61 billion in 2018,” and were expected to be even higher in 2019.

One concrete example of drug costs skyrocketing is insulin. In 2012, the average cost of insulin annually for a type 1 diabetic was $2,864. This price was almost doubled to $5,705 in 2016 for the exact same products, and continued to climb before state legislatures and courts stepped in to stop the insulin manufacturers from price gouging. Due to this major jump, patients in the United States were “rationing… the life-saving medication” which then led to “protests outside company headquarters of insulin makers.”

This major cost issue for all prescription medications is what the Safe Importation Action Plan intends to overhaul. By importing prescription drugs from Canada, the Trump administration projected major cost savings for Americans. Canada was chosen specifically because they, like many countries other than the United States, “regulate prices for drugs… through controls on reimbursement, limits on overall spending, or limits on the rate of return on capital.” As of July 2019, “at least ten U.S. states, including Florida, have passed or proposed laws to allow such imports, but actual shipments would not be legal without federal approval.” The issue of high drug prices and the desire to lower prices is bipartisan, but the Safe Importation Action Plan has sparked quite a bit of conversation regarding its implementation. On one hand, the United States healthcare system cannot have its’ cake and eat it too – unfettered imports may decrease costs, but it will severely impact safety due to the closed United States drug system (discussed more in depth later in this Article). However, the United States closed system allows drug costs to stay high and climb higher because there is no arbitrage in place for manufacturers to fight on pricing (also discussed more in depth later in this Article).

This Article will proceed in two parts: Part I will discuss the controlling Food, Drug, and Cosmetic Act, the Medicare Act, and the process drug companies must take to introduce new medications into the United States market. The Food, Drug, and Cosmetic Act prohibits interstate shipment of unapproved drugs due to the threat of misbranding or adulteration. The Medicare Act, however, authorizes the Secretary of Health and Human Services to import drugs from Canada as long as they can certify that 1) it will pose no additional risk to public health and safety, and 2) it will generate cost-savings for American consumers. Lastly, drugs must go through an extensive application process to receive a track-and-trace number to protect the United States market against adulterated, counterfeit, and misbranded drugs.

Part II will review the Trump Administration’s Safe Importation Action Plan. First, both pathways in the 2019 plan will be discussed. Pathway 1 will allow states, wholesalers, or pharmacists to submit plans for how they will import from Canada. They must show no additional risk to public health and achieve cost savings, and the Secretary must approve through the Medicare Act power. Pathway 2 would allow manufacturers to import versions of FDA approved drugs sold in foreign countries into the U.S. with a new drug coding number. This was expected to allow manufacturers to sell the same drug chemically while foregoing extra costs imposed through patents and other controlling laws and regulations. Lastly, various opinions will be highlighted on both sides of the political isle and on both sides of the two countries’ boarders.

Keywords: Drug, Importation, Canada, Public Policy, Health Policy, Trump, Biden, Pharmaceuticals, Health Law, Safety

JEL Classification: I00, Z18, K00, K30, I10, I18

Suggested Citation

Hackett, Kaitlin, Safety First: The Wellness and Wallet Dangers of Canadian Drug Importation (May 1, 2021). Rutgers Journal of Law & Public Policy, Vol. 18, Issue 2, 2021, Available at SSRN: https://ssrn.com/abstract=3844056

Kaitlin Hackett (Contact Author)

Rutgers, The State University of New Jersey - Journal of Law and Public Policy ( email )

217 N 5th St.
Camden, NJ 08102

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