The Drug Importation Debate: Much Ado About Nothing?

With health care making up an estimated 16% of United States Gross Domestic Product , increasing competition has been touted as a key mechanism for reigning in skyrocketing costs as the US congress debates health care legislation. That includes competition for health insurance and prescription drugs. However, although everyone agrees that competition is a cornerstone of any capitalist economy, the debate has been rigorous with even President Barack Obama flip-flopping on his previous support for prescription drug importation.

As a presidential candidate, President Obama supported drug importation as a way to give Americans access to lower cost prescription drugs and even co-sponsored legislation in the Senate in 2007. He has since backed off, and Food and Drug Administration commissioner Margaret Hamburg sent a letter to Senators arguing that the importation of FDA-approved drugs from countries like Canada would be logistically challenging and could endanger the U.S. medicine supply.

So why the opposition? It’s easy to see why Senators from New Jersey oppose drug importation, since there is such a large drug industry presence there. But why would Obama oppose it?

Since announcing that a health care system overhaul would be his top domestic priority in 2009, Obama has courted support from the health care industry in order to avoid the industry pressure that derailed the Clinton attempt at health care reform 15 years ago. Drug companies have been a valuable ally for Obama, and have spent millions on television and print ads to support the reform legislation. If an amendment to the health care reform bill allowing drug importation were to pass, it could jeopardize drug industry support and ultimately the entire bill.

So is Obama allowing Americans to pay more for prescription drugs than any other country because it’s politically advantageous? Not exactly. According to a study by the non-partisan Congressional Budget Office, drug importation would produce “at most a modest reduction in prescription drug spending” in the US, by $40 billion over 10 years or about 1%. If the US only allowed importation from Canada, the reduction would be negligible. [Download PDF of CBO report]

Meanwhile, Obama claims to still support drug importation in the long term. Linda Douglass, spokeswoman for the White House Office of Health Reform, reported that Obama proposed $5 million in his 2010 budget for the FDA to develop import policies. She said the agency will continue working on ways “to create a pathway to importing safe and effective drugs.”