Election Day has come and gone, so once again it is time to handicap the prospects for so-called reimportation legislation—bills that would allow much broader importation of prescription drugs from Canada or other markets where prices are lower than they are in the U.S.That has been a biennial topic for the last four election cycles, ever since bus trips to Canada burst on to the political scene to dramatize the high cost of prescription drugs in the U.S.
Since 2000, every national election has brought a push for action, but so far at least the borders remain closed to wholesale import of drugs from Canada. So it comes as no surprise to see reimportation on everyone's list of issues for industry to worry about heading into 2009.
But we think asking about the prospects of reimportation legislation next year misses the point.
First off, Congress has already enacted legislation that would allow widespread legal importation of drugs from Canada, as long as HHS Secretary certifies that the practice would be safe. Under President Bush, that certification has not happened, but at least in theory an Obama Administration could change importation policy with the stroke of a pen.
We don’t think that is going to happen.
Yes, we have read Obama’s website, which dutifully pledges to "lower drug costs by allowing the importation of safe medicines from other developed countries."
But we’ve also heard what one of Obama’s key health advisors, Dora Hughes, had to say on the subject at a recent generic industry trade conference: In light of the heparin problems, reimportation is just not that high a priority anymore. (You can read more about her remarks in “The Pink Sheet.”)
That also seems in keeping with the sense that reimportation has served its purpose for the Democratic party—a sense that seemed clear to us over a year ago.
Some of this relates to the odd political history of imporation: bus trips to Canada were always an odd national campaign emblem, but they made a kind of sense back in 2000. In that year, the Democrats saw an opportunity to make significant gains in the Senate by targeting a number of Republican incumbents who happened to be up for re-election in northern border states that year. So people like Maria Cantwell (Wash.) and Debbie Stabenow (Mich.) or even Hilary Clinton (N.Y.) all benefited from the national focus on Canadian imports. And once in Washington, they all shared an interest in advancing legislation.
Eight years later, look at the Senate seats that flipped to the Democrats. Virginia. North Carolina. Colorado. New Mexico. Oregon. Not a Canadian border in the bunch. Reimportation just isn’t the issue there. If anything, the danger for pharma is tighter regulation of trade, or even outright protectionism. (The one exception is New Hampshire, where former Governor Jeanne Shaheen brings a track record of drug cost containment to the Senate.)
Here’s the thing: importing drugs from Canada was never the point. Lowering US prices was.
That’s where the new Administration and the new Congress will focus their attention, starting with the unfinished business from the 2006 elections: price negotiation in the federal Medicare program. So if the Democrats want Canadian prices, they can get them--but they don't have to bother with allowing (and policing) wholesale imports, they can simply direct that the US government pay no more than the Canadian price for medicines sold in both countries.
We don't actually think that is how price negotiation will work at first; as we wrote here, Congress is more likely to start with benchmarking against the US Medicaid price for the same drug. But once Pandora's Box is open, its a safe bet that using Canadian prices as a point of reference will be on the table too.
And that's where industry might start to do some importing of its own--not of drugs, but rather of case studies in the impact of Canadian efforts at price controls on investment in that country.
Beyond that, its time to start gathering stories of how the Canadian health care system overall does and does not meet the needs of Canadians. Fifteen years ago, the US health care reform debate triggered a sub-debate about whether Canada's system does or does not work well for its citizens. That debate is certain to recur if and when the health care reform debate begins again in earnest.
So there will be plenty of cross-border trade in 2009--but in the form of a flow of ideas, not prescription drugs.
