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Modern telecommunications and shipping networks have simplified buying almost anything over the web from overseas, yet it remains illegal to import medicines without explicit authorization from the Food and Drug Administration. While the US government does not generally enforce this prohibition for cases involving limited personal use, the restriction remains, and the practice is widely discouraged. Under the banner of patient safety, industry-backed lobby groups have advocated for and caused search engines such as Google and Bing to discourage people from buying overseas. Further, payment organizations such as Mastercard, PayPal, and Visa and delivery companies such as FedEx and the US Postal Service are being pushed by government bodies to make purchasing and delivery from foreign sites more difficult.
This problem has worsened because of recent responses to the opioid epidemic that are fueled in part by the pharmaceutical industry, the same group that benefits from the current restrictive system. However, a growing body of evidence, including empirical evidence in this report, demonstrates that foreign pharmacies credentialed by independent groups sell safe medicines. Furthermore, as high drug prices increasingly come to dominate conversations on health reform, politicians on both the left and right are beginning to see the benefits of limited personal importation.
This report argues that rather than advancing patient safety, the main reason importation is illegal is economic. By arguing that the same logic justifying global price discrimination for pharmaceutical products applies within countries and among them, I show that it is both equitable and efficient for underinsured (usually low-income) Americans to pay less than they currently do and, further, that personal importation achieves this aim without overhauling America’s existing drug framework or compromising patient safety.
Unlike much of the industrialized world, drug companies maintain significant control over drug prices in the US market. While convoluted distribution systems and governmental programs complicate the system—where prices are capped in some way—free pricing is central for most of the market.1 The result has been higher prices for most drugs in the US than any other large developed country.
However, unlike the US, Canadian authorities through both the Patented Medicine Prices Review Board and provincial health plans frequently use their regulatory authority or buying power to lower drug prices they consider excessive.2 For decades, American patients—mainly seniors with chronic conditions—would take bus trips with seniors groups or ones organized by politicians and travel to Canada to buy medicines at prices substantially lower than their American equivalents. Much of this was political theater, but medical tourism was a significant business, largely driven by cheaper drug prices in Canada.
In the late 1990s, and accelerating through the early years of this century, online pharmaceutical sales have greatly surpassed physical trips to Canada to buy medicine.3 As drug prices continued to rise, this practice increasingly became a viable tool to help reduce drug prices for underinsured Americans. However, according to expert opinion, importation may have peaked due to pressure against the practice.4
In 2003, as part of the Medicare Prescription Drug, Improvement, and Modernization Act, US patients, pharmacies, and wholesalers were authorized to import prescription drugs from Canada provided that the secretary of Health and Human Services certified that such imports would pose no additional risk to the public’s health and safety.5 However, no such certification has ever been made. There is substantial importing of pharmaceuticals in the US by pharmaceutical companies that take advantage of cheaper foreign ingredients and manufacturing abroad. While imports of lower-cost drugs are federally prohibited under most circumstances, in practice, the general public is essentially permitted to import a limited personal supply without fear of prosecution. Furthermore, the Supreme Court has diminished intellectual property barriers to importation.6
Defenders of this system will argue that imported products may be inferior or even dangerous, but in reality, the question comes down to economics. Consider these two contrasting viewpoints by former Food and Drug Administration (FDA) Commissioner Scott Gottlieb.
On February 27, in a hearing for the House Committee on Appropriations regarding FDA funding, Rep. Chellie Pingree (D-ME) asked Gottlieb for his thoughts on drug importation from Canada, noting that people from Maine could buy much lower-cost medicines across the border. Gottlieb asserted that people who buy medications while in Canada are safe. In contrast, Gottlieb voiced his “deep concerns” with online pharmacies “purporting to source their drugs in Canada or other First World markets but are not.” “We are seeing a lot of counterfeit drugs being sold through those channels,” asserted Gottlieb, going on to say that there is “a lot of investigative activity and some fairly egregious things [the FDA] are finding when we look at these websites . . . so we have deep public-health concerns.”7
In other words, one was OK buying medicines while in Canada, but using the web was risky. The idea here is that while we should view Canadian authorities and pharmacies as well functioning, web traders may be dangerous criminals. Of course, when one goes into a pharmacy in Toronto, the investment in the bricks and mortar is obvious. This provides confidence that the Ontario authorities have regulated this establishment to ensure it can handle medicines. Compare that experience to some organizations (criminal in some instances) selling on the web. There is validity to the arguments questioning if web sales are genuine.
But many web sellers are either working with, or indeed are, those very same physical entities we can walk in to. Simply because the US has no direct authority over these entities in Canada does not mean they could have no influence. The FDA approves thousands of facilities worldwide for export to the US, many of which it frequently inspects, but some of which it has not visited in over a decade.
On average, the FDA inspects fewer than 1 percent of foreign FDA-registered drug manufacturing facilities.8 It could oversee a subset of a few dozen foreign pharmacies with ease. The reason it does not is due to politics, not an inability to do so. I suspect most people in the FDA and other entities of the US government know this to be the case. The few I have spoken with certainly do. They may object to drug importation for various reasons, but they generally believe it poses a minimal risk to safety.
This report evaluates the effect of permitting limited drug importation. First, this report articulates the economic case for global price discrimination for pharmaceutical products. Second, it argues that the same logic that stipulates that drugs in developing countries should be priced differently than their industrialized neighbors holds true within countries as much as it does between them. Next, it explains why a limited form of importation via the web is both equitable and efficient and why it does not undermine price discrimination or the profit that innovator companies make from the US and require for research and development (R&D). The report then provides an empirical case for the safety of imported drugs from accredited sites, arguing that concerns over quality of imported products are substantially overstated. Finally, it explains why personal importation has not accelerated in practice and what competing efforts are underway to increase and decrease it.
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