US patients again look to Canada in quest for affordable medication

Patricia Leahy — call her Pat — has a brain tumor. She's lived with it for 40 years now and can even joke about it. Forget something? Must be the tumor. She can laugh because the tumor is benign and isn’t growing. But Leahy, 63, does have ongoing headaches and balance problems, and as she grows older, other health issues are starting to creep up.

Like many older Americans, she needs two hands to count her prescriptions: hydrochlorothiazide, amlodipine and potassium chloride for high blood pressure; Prilosec for heartburn; Advair for asthma; diazepam for vertigo; ciprofloxacin for diverticulitis; and Fiorinal with Excedrin for migraines.

“This is the little old lady segment of the program,” Leahy said.

But things get more serious when it comes to how much those meds cost. When she worked full time, Leahy’s insurance covered the costs of the whole regimen, more or less. Now, retired and self-insured with no drug coverage on her plan, she found herself paying out of pocket — and it’s not cheap.

“Just the Advair alone ran me $300 to $350 a month,” she said.

Combined, her prescription regime could put a real strain on her finances.

But because she lives in Maine, Leahy doesn’t have to pay list prices for meds anymore. Last month a law went into effect permitting residents there to buy mail-order drugs from certain foreign countries, including neighboring Canada. The so-called Importation Law is the first of its kind and has ignited an intense debate, pitting the pharmaceutical industry against labor, insurers and local government, with federal regulators caught uncomfortably in the middle.

Everybody wants Canadian drugs for one reason: Brand-name meds are cheaper there. A 2012 report found, for example, that a 30-day supply of Cymbalta (used to treat depression or chronic pain) typically costs $149 in the United States, compared with $113 in Canada; Nasonex (used for allergies) was $105 in the U.S. and only $29 in Canada.

These price differences are due to the unique way that the U.S. handles its pharmaceutical marketplace. In most other countries, governments either set pricing caps or negotiate lower prices directly with drugmakers. In the U.S., pricing is determined by market competition among pharmaceutical companies, which have little incentive to keep prices down.

When accused of price gouging in the U.S. market, the companies claim that the high costs are required to pay off sunken research and development costs — averaging over $1 billion per drug, according to Pharmaceutical Research and Manufacturers of America. The claim has been debated, with some studies estimating the cost at more like $50 million to $75 million. Regardless, because other countries force pharmaceutical companies to sell drugs cheaply abroad, U.S. residents are stuck with the bill, essentially subsidizing the affordable prescription drugs in other countries.

On the plus side for U.S. citizens, that means more studies on the diseases that affect them.

“There is a reason we do all this work on Alzheimer’s, obesity and cardiovascular disease, and no work on malaria,” said Dana Goldman, director of the Schaeffer Center for Health Policy and Economics at the University of Southern California. “Malaria kills 500,000 people a year, and yet it took the Gates Foundation coming in for anyone to do any work on that disease.”

But when the check comes, it hits hard: According to the IMS Institute for Healthcare Informatics, in 2012 the average U.S. resident spent $892 on prescription drugs, while the average Canadian spent only $420. Europeans spend, on average, $375.

State governments and representatives have attempted to push back on the status quo, at both the state and federal levels, but to this point have not found much success. Since 2003, at least 15 states have attempted, fruitlessly, to import prescription drugs.

At the federal level, in 2004 a bill was introduced in Congress that would allow the reimportation of American-made drugs from Canadian pharmacies; it was never enacted because of Republican opposition. In 2007, a bill proposed by Democrats to allow Medicare to negotiate lower drug prices was quashed in the Senate, creating a prohibition against any future negotiation.

When he was drafting what would eventually become the Affordable Care Act, President Barack Obama considered adding a section that would enable Medicare to negotiate drug prices. However, he gave that away as a bargaining chip to gain the overall support of the pharmaceutical industry.

To date, the White House has remained silent on Maine's Importation Law.

But Maine is moving forward even as the rest of the U.S. stands still. Instead of paying list prices in the pharmacy, Leahy now goes online and, with a few keystrokes, gets the same name-brand asthma medication for a fifth of the price. For individuals like her, the savings can be significant, and for large employers — like the state of Maine — they can be huge.

Earlier this year the Maine State Employees Association helped negotiate a contract that would allow its members to purchase drugs from the Canadian company CanaRx. The deal will save the state an estimated $3 million annually and provide cheaper drugs for up to 40,000 covered individuals, according to the MSEA.

Employers, insurers and Maine residents are overjoyed, but not everyone in the state is so thrilled. A collection of pharmaceutical industry groups (many are Maine-based, but the group is led by the national PhRMA) have already sued state Attorney General Janet Mills, claiming that imported drugs put residents at risk of serious harm.

The Food and Drug Administration agrees, having stated time and again that it cannot guarantee the safety of drugs coming from foreign countries. In June 2007, the agency’s Operation Pangea VI seized 9,600 websites and more than $41 million worth of “illegal medicines worldwide.” Many of the sites were based in Canada — or so they claimed (a sting operation in 2005 found that only 15 percent of drugs claiming to be “Canadian” were actually from Canada; the remaining 85 percent came from 27 different countries around the world). More recently, the Justice Department prosecuted a Canadian citizen for selling counterfeit prescription drugs to American consumers.

But for many individuals, price trumps any doubt.

“I was a little trepidatious in the beginning,” Leahy said about ordering drugs online. But now, after working closely with her doctor, she feels comfortable placing online orders.

“Sometimes they do come from India,” she said. “But if they come from a reputable place, that’s fine with me. My doctor looks them over, and he knows what they are.”

“We’re not concerned about safety at all,” said Mary Anne Turowski, the MSEA’s director of politics and legislation. “If you got sick in Canada or England and you saw a doctor who gave you a prescription, you wouldn’t think twice about getting it filled there.”

In addition, for people in Maine, importing cheap drugs from Canada isn’t new. According to Turowski, back in the 1990s the MSEA worked with Democratic U.S. Rep. Chellie Pingree (then in the state Senate) to organize bus trips for seniors into Canada to buy cheap brand-name drugs. In 2005, Maine passed a bill that allowed those over 62 and those with disabilities to buy prescription drugs from outside the country. City employees in Portland, Maine, have been buying drugs from CanaRx since 2006 without a single reported problem.

That’s why, in Turowski’s opinion, the court challenge isn’t about protecting consumers. “If the pharmaceutical lobby was really concerned about safety, they would have done something seven years ago,” she said. “This isn’t about safety. It’s about profit.”

A win in court would be a big coup for the MSEA and would provide a sense of security for the thousands of Mainers who get their drugs from Canada. It would also set the agenda for the rest of the country; most experts believe that other states are likely to follow Maine’s lead.

But is importing drugs really the right solution to lower costs for the average health consumer?

Goldman agrees with the people of Maine that the current system is broken. But it’s not the high prices themselves that are the problem, he said; it’s the public health impact they have. What we need to figure out, he said, is not how to get people to pay less, but how to get more people to take the drugs they need.

Goldman proposes reframing the discussion completely by looking at drugs as intellectual property and not goods, and suggests that we consider how other intellectual property situations have solved pricing problems. For example, when you purchase a piece of software, such as Microsoft Word, you pay a one-time licensing fee — and then get to use it as much as you want.

In the case of prescription drugs, if you needed, say, Advair for your asthma, you would pay an annual licensing fee to your insurance company, which in turn would pay the manufacturer for the license. Ideally, everyone wins: You get all the Advair you need, your insurance company helps pay the (relatively) low cost of drugs to keep you out of emergency care, and the manufacturer still gets its cut.

“The point is to figure out a way to reward the innovator while keeping a low per-unit cost in order to encourage people to take and adhere to their medication,” Goldman said.

But it could take years to get all the stakeholders to agree to such a dramatic shift in pricing models. Until then, people will need their meds, and they'll find a way to get them.