Medicare Benefit Cuts Demand for Canadian Rx

Published April 1, 2006

According to the Canadian International Pharmacy Association (CIPA), the new Medicare Part D prescription drug plan, launched January 1, has alleviated U.S. demand for cheap drugs from Canada.

CIPA found some U.S. seniors saved more money through the Medicare drug plan than they would buying their drugs from Canada, according to a February 21 Boston Globe article, “Fewer seniors turning to Canada for prescriptions.”

Some analysts see this as good news, while others claim the CIPA report is not accurate. Still others argue the report’s findings do not justify the expensive new drug benefit, because they perceive Medicare Part D as directly contradicting President George W. Bush’s plans for greater ownership and responsibility in health care.

Canadian Numbers Disputed

It is too early to determine the impact of Medicare Part D on drug imports from Canada, according to CIPA President Andy Troszok. “Medicare [Part D] is so new,” he said; “we’re only into March.” Troszok noted gathering data on the program remains very difficult, and he cautioned against drawing premature conclusions from his organization’s report.

In particular, Troszok warns against relying on the report’s estimated 30 percent reduction in Canadian pharmaceutical sales to Americans. Troszok believes cross-border drug sales probably fell by something between 10 percent and 30 percent. He also said the data are completely “anecdotal” and therefore “definitely not accurate.”

Troszok also suggested the reported drop in drug sales could be a “seasonal issue.” For some American seniors, Canada is still the cheapest bet for drugs; a resurgence of drug orders from Canada appears to have begun by early March.

Canadian pharmacies continue to market to Americans and hope the bad press surrounding the launch of the new Medicare plan will sustain American loyalty to cheap Canadian drugs.

Ramy Attalla, director of services at the Canadian pharmaceutical company ADVCare, said the firm’s own analysis of hundreds of patients shows Canada offers a better deal 75 percent of the time. On the firm’s Web site, Attalla criticized AARP for recently “misleading” American seniors with a study of an inexpensive Medicare mail-order plan. The study found that in four of five cases, recipients saved anywhere from $300 to $1,400 more using Medicare than they would if they bought drugs from Canada.

Rx Benefit Has Wrong Incentives

John R. Graham, senior fellow in health care at the Pacific Research Institute, is pleased to see the attractiveness of international drug importation may be falling. Nevertheless, he considers the Medicare prescription drug benefit a high price to pay for reaching that goal. Although the media have focused on the drug program’s temporary complications, Graham believes Americans should be more concerned about its long-term drawbacks.

In a February 2006 report for the institute, “Republican HillaryCare: The Medicare Drug Benefit’s Prescription for Perverse Incentives,” Graham writes, “The complexity and confusion of the Medicare Part D drug benefit, where the media focuses its attention, is actually a relatively insignificant part of the problem posed by the new entitlement, which accelerates a vicious circle of bad incentives for politicians, citizens, and providers.”

Under Medicare Part D, the U.S. government now finances more than one-fourth of the nation’s pharmaceutical supply. Contrary to the Bush administration’s recent effort to promote individual responsibility and ownership in health care, Medicare Part D sends the message that citizens have a right to receive prescription drugs through Medicare after retirement. Graham notes Medicare Part D “is far from the responsible, independent approach to health care that the president outlined in his State of the Union speech.”

In addition, Medicare Part D is deterring some U.S. drug makers from providing their own discount programs to low-income seniors. Graham quotes a spokesperson for AstraZeneca PLC, a global drug maker, as saying, “our program always has been able to provide access for people with no other coverage; now they will qualify for a government program.”

Proponents of Medicare Part D attribute potential savings under the new drug program to its free-market approach. But, Graham writes, “Medicare Part D might operate through private insurers, but seniors’ savings are coming at the taxpayers’ expense.”

Diana Ernst ([email protected]) is a policy fellow at the Pacific Research Institute.

For more information …

Visit the Web site of the Canadian International Pharmacy Association at

John R. Graham’s February 2006 report for the Pacific Research Institute, “Republican HillaryCare: The Medicare Drug Benefit’s Prescription for Perverse Incentives,” is available online at