The Decibel - The U.S. states vying for cheaper drugs from Canada

Episode Date: February 6, 2024

In early January, Florida became the first U.S. state to get approval to import wholesale drugs from Canada. The FDA’s decision overrides decades-long objections from drug companies and could save the state millions of dollars. Now, Colorado is looking to do the same.The Globe’s international correspondent, Nathan VanderKlippe went to Colorado to learn about their plan to bring in cheap drugs from Canada, why drugs are so much more expensive in the U.S., and whether Canadians could be facing a shortage in their medications.Questions? Comments? Ideas? Email us at [e-mail]

Last month, Florida got approved to start importing cheaper prescription drugs from Canada, a move that's gotten lots of attention. Well, today the FDA signed off on a program to make Florida the first state in the nation to import prescription drugs from Canada. The approval covers treatments for asthma, COPD, diabetes, HIV and AIDS, and mental illness. But Florida's not alone in looking north for medications. Several other states are also planning to do this. And the next in line is Colorado.

The Globe's international correspondent, Nathan Vanderclip, recently visited Colorado to learn about its plan to bring in drugs from Canada. He's on the show to explain how states are trying to do this, why drugs are so much more expensive in the U.S., and what this could all mean for Canadians' access to medications. I'm Mainika Raman-Wilms, and this is The Decibel from The Globe and Mail. Nathan, thanks for being here. Thanks for having me.

There seems to be a lot of excitement right now about Florida potentially importing drugs from Canada. Can you just explain, though, what exactly was recently approved? and Drug Administration in the United States gave regulatory permission to Florida to import certain prescription drugs from Canada. And this is part of a long process that has been taking place in the United States where there have been legal authorizations. There have been presidents, both President Trump and President Biden, that have pushed for this sort of thing. But states have had to put together programs that would meet a set of regulatory requirements by the Food and Drug Administration in order to import prescription pharmaceuticals from Canada. Florida was one of the first out of the gate on this in terms of making an application. They actually sued the FDA to secure this decision. And in January, the FDA said the Florida program meets its requirements. It's the first time a state has gotten this kind of regulatory approval, but this kind of thing is open to states and

indigenous tribes in the US, which are allowed to import certain prescription drugs from Canada if they can make a program that matches with the FDA requirements. To actually bring drugs in, they will have to get specific approval drug by drug to do so. They have to ensure that they have a testing regime in place to confirm their safety. And then any drugs that are brought in from Canada are going to have to be relabeled for the U.S. market. And so with Florida, this is essentially like wholesale drugs that will be distributed by government programs, right? So it's at that level that they're trying to get the medication in for.

Correct. That's what Florida has done. Other states, and we can talk about this in a moment, are looking at broadening that. But in Florida, they are looking at government-backed programs, the State Department of Corrections, and other government programs that are bringing in pharmaceuticals into the state. Okay, so that's Florida. And Nathan, you were recently in Colorado, which is also looking to get approval from the FDA, similar to Florida. How is their you were recently in Colorado, which is also looking to get approval from the FDA similar to Florida. How is their application different, though? Well, it's different in a couple of ways. One of the reasons I was in Colorado

is because it looks as if they are the beginning of an expansion of what's taking place. I mean, Florida is not an inconsequential player there. The population of Florida is about half the population of Canada. But there are a number of other states, there's about a half dozen states in total, all of which have put together numbers looking at their estimated cost savings if they're able to access Canadian pricing. And in Colorado, they've had an application before the FDA. They are now drafting a new application based on some of the things that they have learned from Florida and what Florida managed to get approval for. That application in Colorado is meant to go imported from Canada into pharmacies in Colorado. So people could, you know, theoretically, the idea is people could go to a pharmacy in Colorado and pick up those drugs themselves. Correct. And just to be clear, I guess people from the States can get drugs from Canada. But I guess how does that work now? And what would

be very different with these new plans? Well, the new plans would allow for really large bulk imports, the sort of thing that is done by wholesalers as opposed to individuals. And Nathan, I know you talk to some people in Colorado. So what did they tell you? How are they feeling about this plan? Right. And so one of the people I spoke with was a state senator there, Sonia Jaquez-Lewis. She's a pharmacist herself and was one of the originators of the legislation that pushed Colorado towards moving for imports from Canada. She says what happened in Florida has given a great deal of optimism to other states about the possibility of doing this. I mean, her words was, you know, the FDA saying they're going to give approval to Florida

tells me the gate has opened. And so there's a real hope that if Florida can gain permission, other states, too, will now be able to gain permission after years of trying. And of course, a lot of this comes down to the money, the cost for drugs. So do we know what is the difference in price between a pharmaceutical drug in Canada and the same kind of drug in the U.S.? We do. Yeah. And again, we're sort of relying on state numbers for this because each of the states have had to make this case. This is from the Colorado application. They've identified 112 drugs and they've assembled some of the differences in prices. And so, for example, for a 0.3 milligram EpiPen, U.S. price $264.89. Import price $91.13. Cyclosporine, dry eye treatment, $6.63 in the U.S., $1.54

to import. Latuda, which is an antipsychotic, $43.44 in the U.S., $4.02 to import. And the differences are really big, but they're especially big when you think about the number of doses that are required. So in the Colorado application, they looked at Latuda in particular. It's used to treat schizophrenia. And they're saying right now someone without insurance in that state would have to pay about $1,500 a month to use Latuda. Canadian prices would bring that down to about $120 per month. So if you sort of factor that out, you can really get a sense of how that kind of change in price would be life changing for someone. And so, you know, you kind of expand these things out. Florida's estimate. And again,

these are state based estimates and they are looking for approval. But their estimate is that they could save $180 million a year by importing drugs from Canada. Colorado is saying $53 to $88 million. And then if you look more broadly at Medicare, which is one of the two big federally backed healthcare insurance programs in the United States, Medicare is primarily for the elderly and some people with disabilities. You know, if there's greater ability to negotiate, again, this is, you know, looking at bringing down the cost of prescription drugs in the U.S. to sort of levels that are more comparable to perhaps other countries. And Medicare, they're talking about a $98.5 billion reduction in spending

on the cost of prescription pharmaceuticals over a decade. So these are really considerable numbers that are being bandied around. We'll be right back. The big question, Nathan, is why do we get different prices for the same drugs? I mean, some of those numbers, the difference is really astonishing. So how is the same drug so much more expensive in the U.S. than it is in Canada? Well, there's a number of reasons for that. But one of them is Medicare. In 2003, Congress expanded Medicare to include coverage of prescription drugs.

But at that time, now more than 20 years ago, there was a specific provision that prevented Medicare from negotiating on the price of those drugs. And so what that has meant is that, you know, there's been an ability to charge some of these government programs very, very high prices without any negotiation. And the US is a very sort of complicated healthcare system with a whole bunch of different players in it. And so Medicare is a big deal. It's 32% of the prescription drug market in the United States. Private insurers make up about 40%. And some of those private insurers have their own negotiations and negotiate their own discounts, rebates with pharmaceutical

manufacturers and guaranteed patient volumes, et cetera, et cetera, et cetera. But some of the big government programs haven't been able to do that. And there's been a series of arguments that have been made and are being made, by the way, by drug manufacturers against negotiation. They're saying, you know, if the government negotiates down drug prices, it's going to harm innovation, which is going to result in less research spending and create less fewer lifesaving drugs. They're saying these sorts of negotiations are going to provide savings to the government as opposed to patients. And they've even made constitutional arguments saying that, you know, the very process of negotiating prices by a program like Medicare would constitute violations of freedom of speech or the taking of private property without just compensation.

And there's a series of lawsuits that have been filed, some of which will undoubtedly end up before the Supreme Court on this broader issue of negotiating on prices inside the United States. But the degree of opposition and the nature of some of those arguments, I think, give you a real sense of why it's been so difficult to achieve negotiation on drug prices in the United States. And by the way, I think we don't always realize just how much the U.S. spends on health care. It's about double per person what Canada spends on health care. Wow, really? Those are some really stark numbers there, some stark differences, Nathan. And I guess let's focus on this idea of the drug negotiation for another couple minutes here, because this seems like a really key part of this. So in the U.S., they don't have this kind

of same ability to negotiate the price of a drug. So how does that work differently in Canada? What do we do here? Well, in Canada, in 2010, there was an agreement by a number of premiers to begin negotiating together on drug prices. And there's something called the Pan-Canadian Pharmaceutical Alliance, which was formed, which is active today. And it takes credit for some fairly substantial savings. Their suggestion is that they believe that they're saving Canadians something like $3.5 billion a year on the cost of some of these pharmaceuticals, both generics and brand name drugs. Again, that's their number, but it's a sense of what can be achieved by negotiating together, which is something that we've had in Canada. We also have some federal regulation on prices in pharmaceuticals. There's federal

intervention on certain pharmaceuticals and the prices that can be charged. Okay. So it sounds like in Canada, I mean, we kind of go to the negotiating table as a single body. You said there's this pan-Canadian pharmaceutical alliance that goes to negotiate with the drug companies together as one unit. But in the States, there's all these different units that are kind of negotiating their own thing. And that's why you have kind of a piecemeal system and different drug costs then. And then you have very, very large bodies like Medicare that have been prohibited from negotiating whatsoever. And so you can imagine if Medicare alone is 32% of prescription drug

spending in the United States, if they are allowed to begin negotiating on some of those prices, you can imagine the degree of change this would be. And actually, there is this thing that might change that, the Inflation Reduction Act, which could allow Medicare to negotiate prices. So, Nathan, can you talk about that? So what the Inflation Reduction Act did was it gave new powers to the U.S. Department of Health and Human Services to negotiate the price of some drugs used by Medicare. And there's been the start has been 10 drugs that are currently under negotiation in terms of price. And there also seems to be optimism around these plans to get drugs from Canada. But I understand there's also some hurdles in that. So Nathan, what are these hurdles? Well, the drug companies. So basically, in order to get drugs from Canada into the United States, you have to be able to secure supply of those drugs in Canada. Many of the drugs, many of the drugs that we use in Canada aren't made in Canada. They're imported into Canada

or they are sold in Canada by international pharmaceutical companies. And many of those pharmaceutical companies have already moved to get in front of this sort of thing. And they have actually created contractual agreements for their purchasers in Canada to prevent those purchasers from reselling drugs from Canada to other markets, i.e. the United States. So there's like clauses in the contracts that we can't sell those drugs to the States then? Correct. Yeah. So I reached out to a number of pharmaceutical companies, a couple of them got back to me and confirmed this on the record. Novartis, for example, said contractually resale of Novartis products outside of Canada are prohibited. GSK and Vive Healthcare said our general terms and

conditions of supply include anti-export clauses. Colorado, the state of Colorado put out a report that was documented some of its efforts to kind of prepare the ground for imports from Canada. This came out in December. Basically, what the state said was what we're going to have to do is we're going to have to get individual drug makers to work with us in order for us to be able to import directly from Canada into Colorado. So they started working on that. And state officials reached out to 23 pharmaceutical companies. Four of them, only four, agreed to have meetings, but at those meetings said that they had no interest in negotiating with Colorado on bringing in drugs from Canada. Nine of them said, nope, we're not meeting you at all. And 10

didn't even respond. The state made multiple requests to meet and they didn't respond. So that gives you a real sense of what is one of the chief obstacles to states like Colorado and Florida to bringing in drugs from Canada. So we've talked a little bit about the feelings in parts of the states and the motivation there, Nathan, but let's talk about Canada. What is the reaction from Canada to these plans? Well, what we've seen is we've seen the current liberal government say that it feels like there are sufficient protections in place to ensure the security of Canadian supply. There are anti-export provisions related to a sufficiency of supply in Canada. Already,

I reached out to the Minister of Health's office and spokesman there said Canada has the tools to make sure that Canadians continue to have access to the medications they need when they need them. But of course, you know, one of the worries has been if you have a state of Florida with 21 million people in it coming to buy from Canada, what's that going to mean in terms of the drugs that are left for Canadians and how much of Canada supply is going to be purchased by some of these states? But the fact remains that at this point in time, such exports from Canada are difficult and constrained, but not illegal. And so this is one of the arguments that's been made by, for example, Ujal Dasanjh, who was a liberal health minister in the Paul Martin administration. And he's been a bit outspoken about this. I spoke with him. He's like, we can't be the drugstore for the United States of America. He's worried that someone somewhere is going to find a way through some

of these obstacles, a loophole or some other way through, and that we are going to start seeing shortages of some of these drugs. And by that point, it's going to be difficult to respond. He's saying, you know, these bulk exports from Canada to the United States should just be made illegal. There should be a law against it to forestall even the possibility of this taking place. So this former minister is advocating for, you know, just a regulation clearly to state that we, you know, we can't do this. But he also talked about loopholes. So, Nathan, it sounds like there are some regulations in place then to prevent this from happening. There are regulations that are designed to protect the sufficiency of pharmaceutical in supply of Canada. So Health Canada prohibits exporting drugs

intended for the market in Canada if the export of those drugs would sort of create or worsen a shortage of those drugs in Canada. So those are the sorts of regulations and they're linked to ensuring that there are sufficient supplies for Canadians. Okay. I'm just curious, Nathan, why is the U.S. looking to Canada to import drugs instead of, you know, any other country, maybe even Europe, where prices are also cheaper? Why Canada? The quick answer is they are also looking at other countries. But, you know, the requirements for bringing in drugs into the United States are that they need to come from a place where they have a comparable pharmaceutical or regulatory environment, which sort of simplifies the whole process. And, you know, and Canada's easy from that perspective. You know, it's close. And from the perspective of

achieving drugs that meet the same safety standards, Canada's pretty easy. I guess, though, given the major hurdles, you know, even after this has been approved by the FDA that we've been talking about, what is the point of trying to get drugs from Canada? Because it sounds like there's a lot of stuff in place to make this not actually happen. So, I mean, in a way, is this actually possible? Is this just a symbolic move? Well, I mean, I put that question to the state senator, Sonia Hackes-Lewis, who I spoke, and she said, no, it's not symbolic. You know, this could be importing drugs from Canada, she said, could be a quick kind of part time solution.

But she's also pretty open to the fact that one of the things that they're hoping to do through this broader campaign to import drugs from pharmaceuticals from Canada is to draw attention to some of these differences in prices, to sort of create the conditions for writing a report, such as the one that sort of outlines the differences in drug costs and that sort of thing. And in so doing, to both shine a light on what pharmaceutical manufacturers are doing in terms of pricing in the United States and to help sort of further pressure on some of these other initiatives to try to negotiate down the price of some of these drugs inside the United States. So there is an element of this that is part of a broader pressure campaign. But there's also an element of it that's born of a frustration that

it's been very difficult to achieve progress in the United States. There's a hope that perhaps Canada and accessing drugs from Canada can form a quicker, easier, simpler kind of end run around some of that stuff. But as we've discussed, it's not clear how much is going to make it through, if anything, will make it through that end run. Yeah. So, Nathan, just lastly, then, I mean, at the end of the day, should Canadians be worried about their access to medications? headlines lately. But it's clear that there are states now that are gunning for pharmaceuticals for Canada, and they're putting both political and bureaucratic capital into making that happen. And that is likely to have implications in some way in the future that we may not even yet fully understand. At the moment, though, I mean, it does seem if you look at the incentive structure, do pharmaceutical companies that supply Canadians with drugs, do they have any incentive to let those drugs go into the United States market?

In purely economic terms, the answer really does seem to be no. Nathan, thank you so much for taking the time to speak with me today. Thanks for having me. That's it for today. I'm Mainika Raman-Wilms. That's it for today. I'm Maina Karaman-Wilms. Our producers are Madeline White, Cheryl Sutherland,

and Rachel Levy-McLaughlin. David Crosby edits the show. Adrian Chung is our senior producer, and Angela Pachenza is our executive editor. Thanks so much for listening, and I'll talk to you tomorrow.