Health Reform May Begin with Cheap Canadian Drugs, Shouldn't End There

Richard Smith

Canadians spend less on healthcare than Americans do -- and live longer. But not even Canada is perfect.

By Richard Smith

Are you sick and tired of paying high prices for prescription drugs? Ever wish you could just buy your pharmaceuticals from Canada, where they can cost one-third to one-half what the exact same drugs cost in the U.S.? If so, you're not alone. Turns out, several U.S. states wish they could, too -- and they're determined to bring the benefits of low Canadian drug prices to U.S. consumers.

For years, Americans have tried to import cheaper drugs from the north, a practice that the FDA says is illegal. But Vermont state legislator Senator Ginny Lyons says that without government price controls, “People are making choices between food and prescription drugs. We can’t allow that to continue, so we’re trying to take matters into our own hands.”

From 2010 to 2015, for example, Vermont says its spending on insured persons' prescription drugs shot up 35%. Nationwide, Americans spend more on pharmaceuticals than in any other country by a long shot, with prescription drugs accounting for an increasing share of total healthcare spending. According to a 2016 U.S. Senate report, prescription drugs cost Americans some $328 billion annually, a figure that is expected to grow at an average annual rate of 6.3% from 2016-2025.

Fed up with paying such high costs, legislators in Vermont, in Utah, in Oklahoma and West Virginia are now exploring the possibility of setting up state health agencies charged with importing cheaper Canadian drugs to help rein in the costs of providing prescription pharmaceuticals to Medicaid patients and participants in state employee health programs. Meanwhile, in the U.S. Senate, Vermont Senator and former presidential candidate Bernie Sanders has also introduced a bill to allow the import of Canadian drugs on a national scale.

It’s fair to say that Canada has much to teach the U.S. when it comes to keeping drug prices affordable and ensuring quality care. The U.S. spends twice as much on healthcare as Canada and nine other high-income countries, due in no small part to high spending on prescription drugs -- $1,443 per capita versus roughly $843 in Canada. What’s more, despite spending less on healthcare, the average life expectancy in Canada is 82.1 years -- nearly three-and-a-half years more than in the U.S.

Before we all pack our bags and move north, however, we need to acknowledge that the Canadian healthcare system has some major shortcomings, where the U.S. could teach them a thing or two.

For instance, the U.S. healthcare system retains a major edge in the area of "orphan drugs" -- drugs that treat rare diseases afflicting relatively small proportions of the population, and thus less likely to attain "blockbuster" status (i.e. $1 billion in annual sales). Because such drugs are less attractive commercially, in 1983 the FDA established a separate office specifically tasked with promoting such drugs' development through incentives such as tax credits and accelerated review procedures. As a result, over the succeeding 35 years, the FDA Office of Orphan Products Development has grown the stable of orphan drugs available to patients in the U.S. 60-fold, from just 10 to more than 600.

Canada, in contrast, has no official policy promoting the development of orphan drugs. The Harper government had initially announced a framework for a national orphan drug policy in 2012, but since then, the policy has languished and Health Canada has removed all mention of the policy from its website. As a result, while in the U.S. the production and marketing of orphan drugs has ballooned since 1983, far fewer drugs have received approval in Canada. Between May 2013 and June 2017, for instance, Health Canada gave marketing approval to 85 orphan medicines. The FDA approved from 30-45 orphan drugs each year during that period.

As a result, many companies have been slow to bring new drugs to market in Canada, and patients there often contend with red tape and long delays. For example, the FDA approved the breakthrough drug Spinraza in December 2016, and since then the drug has become broadly available through public or private health insurance plans. Spinraza treats the rare neuromuscular disorder SMA, a degenerative and often fatal illness that is the most common cause of death in infants. Health Canada approved the drug for use in 2017, but so far, no provincial healthcare plan has approved coverage, which earlier this week caused activists to descend on Parliament Hill in Ottawa demanding that the government take action. Many of the activists, including SMA patients, said that the treatment they have been waiting for is highly effective. Susi Cander Wyk, executive director of Cure SMA Canada, which helped organize the demonstration, said in an interview with CTV that “Twenty-two other countries have accessed it,” calling the delay in her country “unacceptable.”

So, what's the moral of this story? As good as Canada's healthcare system is, it could still be made better -- and as expensive as America's system is, it could certainly be made cheaper. Both quality and economic efficiency are goals to be desired. Rather than touting one country as "better" than the other, perhaps legislators in both countries would be better advised to learn the best lessons their neighbor has to teach, and work to make their respective healthcare systems the best they can possibly be.