Florida looks to Canada for cheaper prescription drugs
Earlier this month, Florida became the first state to get FDA approval to import cheaper drugs from Canada.
Will it work?
“I think it’s very unlikely that for any given patient, it’s going to make any difference in their lives. I think the American people should know that this is political theater,” Professor Nicholas Bagley says.
Today, On Point: Political theater and prescription drug prices.
Nicholas Bagley, professor of law at the University of Michigan. Expert on administrative and health law. Author of the article “The Real Reason Drugs Cost So Much — and Do Too Little.” Co-author of “Importing Prescription Drugs from Canada — Legal and Practical Problems with the Trump Administration’s Proposal.”
Joel Lexchin, retired emergency physician. Professor emeritus in the school of health policy and management at York University in Toronto.
David Mitchell, president and founder of the advocacy group Patients for Affordable Drugs.
MEGHNA CHAKRABARTI: Back in June of 2019, Florida Governor Ron DeSantis did something no other governor had done before.
NEWS ANCHOR: Floridians could soon gain access to cheaper prescription drugs from Canada under new legislation just signed into law by Governor Ron DeSantis. Americans pay some of the highest prescription drug prices in the world, as much as 190% more than other Western countries.
CHAKRABARTI: This law was something different. It didn’t allow individual Floridians to cross the U.S.’s northern border to buy medications. The law authorizes the state of Florida to import drugs from Canada. The state estimates it could save Florida around $180 million just in the first year. But getting the law passed in Florida was just the first step.
The federal government then had to approve the plan. And the FDA sat on Florida’s drug importation application for years. So long that in fact, in 2021, Governor DeSantis sued the FDA.
DeSANTIS: It’s been under review enough. We have followed every regulation. We’ve met every requirement that we were asked to meet.
And we want now to be able to get this final approval so that we can finally move forward.
CHAKRABARTI: DeSantis gave those remarks at a speech in an empty warehouse in Lakeland, Florida, a facility the state spent about $30 million on in order to store the drugs they were hoping to import from Canada. That warehouse is still empty.
But earlier this month, after three years in review, the FDA finally approved Florida’s drug importation plan. In a statement, Governor DeSantis said, quote, “It’s about time that the FDA put patience over politics and the interests of Floridians over big pharma,” end quote. So does that mean it will be raining cheap prescription drugs on Floridians anytime soon?
No, unfortunately, no, because many health care experts say it’s the state of Florida that might be the one playing politics here. They say the Florida law is aspirational, but it’s lacking some critical connections to reality, such as, is Canada even willing to sell its prescription drugs to a U.S. state?
Answer thus far from Ottawa, hard no. In fact, in 2020, the Canadian government even issued an interim order to, quote, “Safeguard Canada’s drug supply.” Nevertheless, the Florida law is an innovative idea, one born from truthful desperation felt by Americans over the unaffordability of the medications they depend on.
And when states take these kinds of bold steps, it’s often because the federal government won’t. And that’s what we’re going to talk about today. And joining us is Nicholas Bagley. He’s a professor of law at the University of Michigan. He’s an expert on administrative and health law, and he joins us from Ann Arbor, Michigan.
Professor Bagley, welcome back to On Point.
NICHOLAS BAGLEY: I am very happy to be here. Thanks for having me.
CHAKRABARTI: Okay, so first of all, let’s talk a little bit about what happened in 2019. What’s the story about how Florida passed that law seeking to import drugs from Canada?
BAGLEY: In 2003, Congress created a pathway that would potentially allow for the importation of drugs from Canada, and what Congress said is we’ll allow this if the federal government can say that importing the drugs will save money.
And we’ll not pose any safety risks. And for a lot of years, the federal government and FDA in particular was not inclined to issue that certification. The reason was that they weren’t sure it was going to save any money and they actually had some lingering safety concerns. So fast forward to the Trump administration.
And you have a lot of states clamoring for help on high drug costs, including Florida, and you have a Trump administration that’s looking around trying to do something about high drug prices and importing drugs from Canada is something, so they passed a rule, that they adopted a rule that said, “Hey, we’re not going to make these certifications that we have to make.
And create a federal importation program. But what we’re going to do is allow states to apply. And if they can show that they’re going to save money and that these drugs will be safe, they’ll be allowed to import those drugs.” It’s a conditional certification. And that’s what the Trump administration did.
And then Florida applied and fast forward to today and you have Florida, poised to roll out its own version of an importation program.
CHAKRABARTI: Okay. This isn’t just a Republican Ron DeSantis, obviously the Republican governor of Florida and now ex candidate for president. And the Trump administration, Donald Trump, also a Republican.
But in terms of states seeking permission or wanting to import drugs from Canada individually, it was quite a diversity of states.
BAGLEY: Oh sure.
CHAKRABARTI: I think, you wrote about this in the New England Journal, right? Vermont, Florida, Colorado, Maine, New Mexico. So it’s across the political spectrum that states were seeking some kind of solution to reduce their costs.
But let me be clear on one thing. This would be importation, not negotiation, and the cost savings theoretically would come because the states would be importing for their state Medicaid programs?
BAGLEY: It depends. Each state is entitled to craft its own application. So Florida said that what we want to do is import drugs first for people who are in state custody.
So people in the prison system or other sort of state facilities, and then they’d roll it out to their state Medicaid program. Which covers an awful lot of people. But other states have been thinking about trying to set up an importation program that would actually benefit people with private insurance, people who got their coverage through their employers or on the exchanges.
So that’s Colorado’s approach, for example. So far, of course, Florida is the only state that’s received approval to import. So that’s what we’ve got in the mix. You’re absolutely right. This is a bipartisan issue. The high costs of drug prices are a concern across the political spectrum.
CHAKRABARTI: Let’s focus on Florida a little bit more though, because of, as you said, that unique approval status they have from FDA. We reached out to health officials, state officials in Florida who were part of seeking the FDA approval no one agreed to join us, they all declined, so I’m going to ask you for some of the more, some of the details, Professor Bagley, if I could, because as I mentioned earlier the Florida state government claims that if they are actually able to import these drugs from Canada, they would save more than a $180 million in the first year alone.
Do you have any insight on how they actually came up with that number?
BAGLEY: Sure. The first thing to say is I’ll believe it when I see it. The way they came up with the number is pretty simple. You count up the number of drugs that you’re going to purchase from Canada, and you compare that to the price of drugs, the same drugs that you would purchase here in the United States.
And you look at the difference and because Canada does negotiate drug prices in contrast to the United States. Drug prices in Canada are quite a bit lower. So if you just compare list prices, yeah, the state of Florida could stand to save a bundle. The trouble is the world is not going to stay fixed and allow Florida just to purchase, hoover up whatever drugs from Canada it wants.
There are going to be two big things that get in Florida’s way. Among other things, the first is that Canada isn’t thrilled about the prospect of America poaching its drug supplies and exploiting its drug negotiation machinery to benefit American consumers. Canada says if you want to negotiate lower drug prices, there’s a way to do that, which is to do it yourself.
The second is that drug manufacturers themselves aren’t likely to stand for this. So when you sell a drug to a Canadian pharmacy or a wholesaler, you can place conditions on resale, or you can even limit the amounts that you’re selling into Canada to prevent this kind of diversion back into the United States.
We’re seeing pharma companies do that already. So all of the savings that Florida anticipates are likely to be gobbled up by those two developments. It’s possible they’ll save some money. It’s possible to get some drugs. I don’t want to rule that out. But I think it’s very safe to say that the $180 million figure is wildly inflated.
CHAKRABARTI: Just to go back and reference that interim order issued by the Canadian government in 2020, it says expressly in it, any person that holds an establishment license pharmacy, essentially, must not distribute a drug to another person for consumption or use outside of Canada. It’s pretty clear.
BAGLEY: Yeah, at least for drugs that are potentially in shortage in Canada. And how the Canadian government goes out defining that is up for grabs.
CHAKRABARTI: Okay. Was Canada ever involved in the, I don’t want to say the crafting, but at least getting information from Canada while the Trump administration came up with its idea. Or even while Florida pursued permission from the FDA to see if the source that the state would ostensibly go to, to get those drugs, was even on board.
BAGLEY: Yeah. Canada has been registering its concerns about this approach for ever since this regulation was under development, and indeed before that. Canada’s perspective here is pretty reasonable, which is, “Listen, we’re not doing anything magical up here. We are negotiating drug prices and using our concentrated market power to drive down the costs of drugs.” So what we’re saying to the drug companies is if you want to sell your drugs in Canada, here’s the price that we’re willing to pay.
Nothing stops the United States from taking the same approach. Indeed, that’s the approach that’s taken across the developed world. The reason our drug prices are so much higher than everybody else’s is because we don’t engage in that kind of negotiation. So from Canada’s perspective, what we’re doing is effectively hijacking its machinery. Its regulatory machinery, to drive down drug prices when there’s a much more straightforward approach, which is you can negotiate them yourself.
CHAKRABARTI: I was just looking that Canada has a population of 38 million. This was something highlighted to me the other day by our producer, Paige Sutherland.
Canada has 38 million, Florida has more than 22 million people (LAUGHS) and so it’s almost the size of Canada. We definitely have states, California, etc., that are much larger than the population of Canada. Yeah, when you say there’s nothing that stops the United States from negotiating directly with drug manufacturers and pharma companies.
The only exception I take to that is money and politics. So we’re going to talk more when we come back about why taking that next big step into direct negotiation more broadly here in the United States isn’t happening, so we’ll be back. This is On Point.
CHAKRABARTI: Professor Bagley, just one more quick question about the nuts and bolts of Florida’s plan. Because, so they have FDA approval now. What is the next step for Florida in terms of opening these, let’s say, importation talks with Canada?
BAGLEY: Yeah, it’s really complicated. Trying to import drugs from Canada sounds good. And then you dig into the details and it gets really tricky, really fast. The first thing they have to do is identify which drugs they’d like to import. And then they’re going to have to prove to FDA that the drugs that they’re going to get from Canada are equally safe as drugs that they could secure here in the United States.
They’re going to have to set up an arrangement with a wholesaler to import those specific drugs from Canada or export those drugs from Canada to a different wholesaler here in the United States, and FDA is going to be watching like a hawk at every stage of these proceedings. So there are a lot more sort of bureaucratic steps that Florida has to take, before you’re actually going to start seeing these drugs hit the shelves in that facility that you talked about at the top of the hour.
CHAKRABARTI: Okay. And just to remind folks, we did reach out to Florida’s Agency for Healthcare Administration. It’s the agency that’s overseeing the importation program in Florida. We asked if someone from the agency could join us and they said, “We’re unable to provide an interview at this time.” Which is honestly unfortunate because I’d love to know more details about what Florida has planned.
But in lieu of that, let’s go to Canada and see what the Canadians think about this and joining us now from Toronto is Dr. Joel Lexchin. He’s a retired emergency physician. He’s also studied pharmaceutical policy for more than three decades. He’s professor emeritus in the School of Health Policy and Management at York University in Toronto.
Dr. Lexchin, welcome to On Point.
JOEL LEXCHIN: Thanks for coming to the great white north.
CHAKRABARTI: Are you going to sell us your drugs anytime soon?
LEXCHIN: I doubt it. I think that the Canadian government has been pretty clear on this point that they’re not going to allow U.S. states to import any large quantities of drugs from Canada.
We already see shortages of about 10% to 15% of all the drugs that are available in this country on an annual basis. And no federal government is going to make that worse. Politically, it would be suicide.
CHAKRABARTI: Let me ask you a little bit more about these shortages, right? Because sometimes in the U.S. media here, I will admit that we talk about direct government negotiation with drug manufacturers as something of a panacea for drug costs. But I’m hearing you say there are shortages going on in Canada right now. What’s driving those?
LEXCHIN: There are not just shortages in Canada. There are shortages in Australia.
There are shortages in Western Europe. There are shortages in the United States. And different factors enter into that. It may be that there’s problem with the manufacturing of what’s called the active pharmaceutical ingredient. That’s the molecule in the drug that actually does the work. So there may be issues with that.
80% of the APIs come from either China or India, where there are problems with quality assurance. There may be problems, unexpected problems, fires or other problems in plants that are making the drugs. There may be drug hoardings in some countries. There also are just unexpected shortages, in the summer and fall of 2022, you couldn’t buy children’s Tylenol in Canada. People were driving to the United States to go to pharmacies and pick that up. Various reasons for shortages, but they exist. They’ve been around for at least a couple of decades, and they’re probably going to keep going.
CHAKRABARTI: Keep going. Okay. So those are, a lot of the problems you described were separate from the actual price negotiations that happened between Canada and the manufacturers and to just underscore your point, Dr. Lexchin, we’ve definitely covered many of the reasons for those shortages that are also going on here in the United States.
So your point is well taken, but I want to hear exactly how much some of the differences are between the United States and Canada in pricing. And so first of all, here’s an On Point listener. This is Kristen Fowler in Lexington, Kentucky. And so she’s going to talk about a particular medication she had to take for postpartum psychosis for years.
She was paying $700 to $1,000 a month until her insurance deductible kicked in. So she looked for some tricks and found them to save money.
FOWLER: The most effective way to offset that cost was to get a manufacturer’s coupon, which would guarantee a price like $15 or $25 per prescription, and then that would help get us through until the insurance deductible kicked in, although it also pushes the insurance deductible out.
The other thing I did was to go directly to the prescriber and get samples, which would sometimes get me through a month or two or stretch out the prescriptions that I had so that it wouldn’t, was longer before I had to pay that. $700 to $1,000 a month per prescription again.
CHAKRABARTI: So that’s Kristen Fowler in Lexington, Kentucky.
Dr. Lexchin, describe to me the process that a Canadian goes through in order to get perhaps let’s say some of the more exotic or higher priced prescription drugs that they need for their health care. Does it involve coupon cutting or having to keep an eye on insurance deductibles?
LEXCHIN: There certainly are issues with insurance deductibles. When you’re talking both about the public and private insurance systems in Canada, and it varies depending if you’re private, if you have private insurance, who you work for, and if you rely on the public system, which province you live in. But I don’t hear about coupon cutting. Drug prices in Canada are somewhere around three times lower than they are in the United States. And that’s, as you said, and your previous guest said, because we negotiate directly with manufacturers.
CHAKRABARTI: Professor Bagley, again, I just want to get some concrete descriptions around these differences. When we hear that Canada can have drug prices that are a third the amount of the United States.
Do you have any particular medications in mind that that we might compare prices with?
BAGLEY: I don’t have the figures available. For a long time, the place that you’d hear the most news and the most noise around this was with insulin.
BAGLEY: Which prices have been skyrocketing here in the United States for many years.
Those are now capped by law in the Medicare program at $35 a month. And manufacturers have agreed voluntarily to cap their prices for insulin in the private market at that level. But the gap on insulin prices was really quite eye popping for a lot of people, especially, you’re a diabetic, you need a lot of it, you’re going across, here in Michigan, you can just drive across the river, and suddenly the price would drop to something like a third or even less to purchase your insulin supplies.
CHAKRABARTI: Professor Lexchin, when we keep saying negotiation, practically speaking, how does Canada go about negotiating? And who are they negotiating? Who is the Canadian government negotiating with?
LEXCHIN: How much time do you have?
CHAKRABARTI: (LAUGHS) Unfortunately, not enough. I gather.
LEXCHIN: It’s not an easy issue.
So when a new patented drug comes on the market, there’s a federal body that looks at the price and compares it to the price in now 11 other countries, and also compares it to similar, the price of similar drugs available in Canada and decides whether or not the price of the new drug is excessive or not.
If it’s not excessive, then the next stage is it goes to another federal, provincial body this time. Which does a health technology assessment, in other words, looks at value for money, and tells the provincial governments either to pay for the drug or not pay for the drug. And if they give a positive response, then it goes to a third body, which actually negotiates the final price with the drug company.
So it’s a complex problem. It takes a couple of years to go through all those negotiations. If you’re going to get your drug covered publicly. Privately, the insurance companies can do whatever they want. They can negotiate further with the drug manufacturers, or they can just take the price that’s set by this first federal body in Canada.
And that’s what it is. But the problem is that the people without insurance, and that’s about 15% to 20% of the Canadian population, get no benefits from either public or private insurance.
CHAKRABARTI: Okay, so they’re still paying what, the fully out of pocket?
LEXCHIN: They’re paying fully out of pocket.
They do get the benefits of the non-excessive price, but they don’t get any of the further benefits.
CHAKRABARTI: Okay. But so this process then takes place for every single drug approved for use in Canada.
LEXCHIN: It takes, the first step is every drug, every new patented drug that’s approved in Canada.
And those prices then cannot go up any faster than the rate of inflation until the patent expires.
CHAKRABARTI: The prices cannot go up faster than the rate of inflation? And how long are those patents in Canada?
LEXCHIN: On average, once a drug hits the market, it’s got about 10 years of market exclusivity, in other words, its price cannot go up any faster than the rate of inflation for 10 years.
CHAKRABARTI: So at least there’s that much predictability for a decade. Okay. Now you said earlier that one of the first steps is that a government, a Canadian government group determines whether the suggested price from the manufacturer is going to be excessive or not. How do they define what’s excessive?
LEXCHIN: That’s compared to what it sells for in 11 other countries. The U.S. used to be one of those countries, it got removed because its prices were so high. So we’re talking about Australia, Japan, and a bunch of Western European countries. And the second way it determines if a price is excessive is by looking at the price of similar drugs that are available in Canada, and it can’t be any higher than those prices.
CHAKRABARTI: Okay. And so to be clear, then, this is all going on after all the safety hurdles have been successfully cleared, right? The drug has been approved for use in Canada.
LEXCHIN: That’s right.
CHAKRABARTI: Okay. No, go ahead.
LEXCHIN: No, I was just gonna, these processes, the approval, and this first step in negotiation can take place in parallel.
CHAKRABARTI: I see. Okay Dr. Lexchin, speak frankly. Why do you think, from your view, north of the United States’ northern border, why, what do you think is stopping the United States from engaging in a similar process? Not just for Medicare patients in this country, but for every American overall?
LEXCHIN: Money. I looked at some of the figures between Canada and the United States.
So our last federal election, which was in 2021, it cost the political parties that ran spent $85 million. In total, that’s four different parties, $85 million. Your last federal election, it was $14 billion. It costs, if you want to run for a seat in Canadian Parliament, it costs between $100,000 and $140, 000.
If you want to run for a seat in your House of Representatives, it’s $1.2 billion. You’ve got to raise that money somewhere, and the drug companies are more than willing to give money to American politicians.
CHAKRABARTI: So what you’re saying is that scale isn’t even the issue here, right? Because there’s 38 million people in Canada.
Call it 10 times as many in the United States, but it sounds like you’re saying it costs a hundred if not a thousand times more to achieve office in the United States. And it does in Canada, and that money has to come from somewhere, yes?
LEXCHIN: Yeah, I think that’s one of the main reasons, plus the fact that, and the reason that the drug companies have so much sway is because the pharmaceutical industry is so much more important to the American economy than it is to the Canadian economy.
CHAKRABARTI: Huh. Dr. Joel Lexchin is a retired emergency physician. He’s also professor emeritus in the School of Health Policy and Management at York University in Toronto. And he joined us today from Toronto. Thank you so much, Dr. Lexchin.
LEXCHIN: Thanks for having me.
CHAKRABARTI: Nicholas Bagley, you’ve been listening very patiently to Dr. Lexchin there. Is there any part of the system of negotiation that Canada participates in that the United States, for practical reasons, could not engage in?
BAGLEY: No, we could duplicate what it is that Canada has. We would have some challenges coordinating the private market, because we cover more people here through the private sector than Canada does, that’s a technical challenge and one that we could certainly overcome if we had the political will.
CHAKRABARTI: Do we even have things like that price predictability or linking to inflation for newly patented drugs for a decade? Do we have that here?
BAGLEY: We have the glimmerings of it. So in the inflation reduction act, the Biden administration has started to take steps that kind of moving us down a path of Canadian style negotiation.
So under the law, Medicare is going to pay a much-reduced price for drugs that consume a big chunk of Medicare spending. The hope is that the Medicare program will save about a $100 billion over the next 10 years. And the idea is you basically pick a subset of drugs, 10 of them at first and rising to 20 over the years. And say we’re not going to pay as much as we have before. If you want to sell to the Medicare program, you have to agree to a maximum fair price with the federal government. And if you don’t well, that’s fine, but you have to exit from the Medicare and Medicaid program. You can’t sell any of your drugs to the program any longer.
So that’s quite assertive of the federal government, but it applies only to a subset of drugs. And it applies only to the Medicare program, so it’s still a pretty tentative step, but it is a step down that path.
CHAKRABARTI: Okay in fact, those changes to Medicare in the Inflation Reduction Act, we’re going to talk about them in more detail after the break and also hear from someone whose life has changed.
It’s going to be directly impacted by those changes. So that’s all coming up in just a minute.
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