The United States cannot solve its prescription drug insurance problem through Canada’s back door. That’s the conclusion of this AIMS’ health care paper on drug re-importation. 

“We should be concerned when American politicians start using re-importation of Canadian drugs as a political smokescreen. A policy of controlling US drug costs by shipping drugs north to Canada and hoping that they will still be cheap when they come back into the United States is on a par with asking the tooth fairy to provide a national dental service on the grounds that it will be self-financing. Not only would it disrupt our market, but by going along with it we would be abetting a fraud perpetrated on American consumers by American politicians,” writes Brian Ferguson, author of Drug Re-importation in North America and Europe: An overview, AIMS Fellow in Health Care Economics and a professor of economics at the University of Guelph.

Drug Re-Importation concludes that Canadians will be the losers if re-importation on a large scale is allowed. Ferguson says the Canadian government should make it quite clear that the cost to Canadian consumers of large scale re-importation of pharmaceuticals by local and state government plans would far outweigh the benefits to US consumers.

Drug Re-Importation explains that while drug re-importation from Canada into the United States has been a quiet issue of late, there are indications that it will heat up because of an odd design in the Medicare Part D program in the United States. It sets conditions on the type of coverage that an insurer can offer, so that for the first $2250 of expenditure on prescription drugs there is a 25 per cent co-insurance rate. For expenditure in excess of $5100 there is a 100% co-insurance rate. However, that $2850 in the middle has to be paid 100% by the insured person. It’s called the “Medicare donut hole”.

“It has been estimated that seven to 10 million Medicare beneficiaries will fall into the donut hole, but the ones who really matter, from the point of view of the re-importation debate, are the low income elderly with chronic illness,” says Ferguson.

“They are the ones who will be looking to Canada for cheap drugs, and since their plight will make good TV news, we can expect it to spur a revival of interest in re-importation, especially among politicians who are up for re-election.”

He says Canadians should not worry about Americans driving across the border to have their prescriptions filled at Canadian pharmacies. Neither should Canadians worry about individual Americans making purchases from the websites of legitimate Canadian pharmacies. However, Ferguson says Canadians should be concerned about a disruption in our market when American politicians start proposing that government plans make large-scale purchases in Canada.

To read the complete paper, click here.

This research was made possible through the generous support of the Lotte and John Hecht Memorial Foundation.