Policy Background

A 2005 study in the Annals of Internal Medicine found that Americans save approximately 24% per unit of drug if they purchase through Canadian Internet pharmacies. Prices in other countries are even lower; a 2004 Boston University School of Public Health study found that in 2000 Americans paid 60% more on average than other industrialized countries. Even U.S. government studies confirm that prices are substantially lower in other industrialized countries. Opening the U.S. market to drugs from Canada and Europe will likely lead to lower prices, based on the European experience. Within Europe, parallel trade comprises about 10 to 20% of the market share by value in higher priced European markets; based on this experience, if legalized, parallel trade could account for net savings to U.S. health plans and consumers in the range of $2.4 billion to $7.2 billion per year, according to the Congressional testimony of West Virginia University Professor Kevin Outterson.

Congress has debated legislation for several years without enacting a clear directive to the FDA to allow importation beyond limited personal-use imports. Several states have passed resolutions memorializing Congress to allow importation, and a number of other states have taken it into their own hands to facilitate importation programs without waiting for action by Congress. The Governor of Illinois plans to expand the existing I-SaveRx drug importation program to include state workers. Wisconsin, Kansas, Missouri and Vermont also participate in this Internet-based program, which accesses pharmacies in Canada, the United Kingdom, Australia and New Zealand. Rhode Island and Nevada have taken a different approach, licensing Canadian pharmacies for business with their state’s residents. Several states have unsuccessfully sought federal waivers in order to legally import medicines, with Vermont appealing the federal government’s refusal in court - also without success. In spite of the murky legal issues, the volume of Internet purchases from Canada in 2005 was about $600 million per year, a figure which doesn’t include cross-border bus trips and individual automobile trips. The prescription drug interdiction campaigns by the Food and Drug Administration and the Border Patrol, and the requirement that Medicare beneficiaries sign up for the new Part D prescription benefit or be penalized financially in the future, negatively affected these sales in 2006.

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