Riding the Rx Highway

Published September 1, 2003

Almost everyone has heard about Americans, many lacking prescription drug insurance coverage, boarding buses to Windsor, Niagara Falls, Quebec City, New Brunswick, and Vancouver, all to do what is every American’s God-given right–hunt for bargains.

And oh, are there bargains to be had. Lipitor, the anti-cholesterol drug, which can cost up to $250 in the United States, can be purchased in Canada for as little as $134. Ninety tablets of the breast cancer treatment drug Tamoxifen, which can cost $127 in the U.S., can sell for as little as $18 in Canada.

While not all bargains are of that magnitude, in general prescription drug prices run substantially less north of the border than in the lower 48–or in Alaska or Hawaii, for that matter.

Traffic Runs Both Ways

Border crossings, though, are a two-way street. Not only do Americans go north, but Canadians are regularly heading south–not for lower prices, but to take advantage of medical care they can’t get up there.

In July 2002, a Canadian consumer organization–Consumer Advocare Network (CAN)–put 14 Canadians aboard a bus so they could get health care services in Bangor, Maine–services that Canada’s single-payer system, with its emphasis on price controls, makes unavailable in a timely manner there.

Tony Lordon of Saint John, New Brunswick is a 17-year family physician. He said the patients he put on that bus are but a small sample of thousands of Canadians who annually come to America. They can afford to pay for better services; they cannot afford the delays Canada imposes in getting them. As Lordon says, “health care delayed amounts to health care denied”–especially to ill patients who may die while waiting for the right drug or advanced treatment.

One example is a 57-year-old male with hyperlipidemia (high cholesterol) and a family history of early death from heart attacks. He has tried the approved drugs in Canada, but suffered bad side effects; the drug Niaspan might not produce those effects, but he can’t get it in Canada. So he travels to Bangor.

Another is a 65-year-old woman with type 2 diabetes. She shifted from a private health plan to her provincial health care plan for retirees. She used Avandia for years under the private plan because it didn’t produce the side effects of weight gain and hypoglycemia she suffered from another drug. But Avandia isn’t on the province’s approved drug list, so she’d have to take the one with the side effects–or come to the United States to buy Avandia.

Similarly, a 44 year-old female with anxiety disorder and panic attack needs time-released Paxil. It’s not approved in Canada, so she’s boarded the bus, too.

Other Canadian patients are coming to the U.S. for other treatments often delayed by Canada’s cost controls.

A 45-year old woman, for example, is going blind from what appears to be a fungal eye infection. It will take her eight to nine months to get a referral to an ophthalmologist in Canada, because price controls have induced a shortage of physicians, particularly specialists. Her appointment in Maine came in a couple weeks.

A 76-year-old heart disease patient suffers disabling angina that external counter pulsation could relieve. His condition isn’t critical, though, so the Canadian government will keep him disabled rather than give him the treatment he’ll get in the U.S. when the bus reaches Bangor.

Dying to Get Care

Dr. Lordon noted that Canada’s health care administration is ready to step in when a patient is dying or critically ill. But “why should you have to wait until you are dying?” he asks.

“We have triage here (in Canada) to decide which cases are most in need of care,” echoed Durhane Wong-Rieger, chairperson of CAN. “The problem is the people at the end of the line who have to wait six to eight months for care urgently need it now, not when they are desperately ill.”

The good news for all these Canadians–and for the Americans crossing the border into Canada–is that the pills, physicians, and treatments are available. But as Wong-Rieger points out, they are available only because the health care system in America has a more generally free market that promotes innovation.

Biting the Hand that Feeds

Some U.S. politicians and self-styled consumer advocates dismiss the innovation that characterizes U.S. health care, all in the name of getting their constituents a price break on drugs or medical care. For example, the U.S. House has passed, and the Senate is considering, measures to promote the reimportation of drugs sold by American pharmaceutical companies to Canada back to pharmacies and patients in the United States. That proposal would undermine incentives here for innovation, ultimately importing Canadian price controls to the United States.

Proponents of reimportation claim it will save American consumers 35 percent on their drug costs. Given that pharmaceutical company profits amount to less than 20 cents on a dollar of sales, that suggests the pharmaceutical companies and their investors will be satisfied with losses of 15 percent. Not likely.

The reason Canada has lower prices has a lot to do with other differences between the two nations. For example, Canada not only imposes price controls on drugs, but also caps the liabilities of drug companies, something the main proponents of reimportation in the U.S. refuse to do. Canadians also have a lower standard of living than we enjoy in the U.S., which means they often substitute more labor-intensive treatments for higher-tech ones. Will Americans be willing to spend more time in the hospital rather than treat their illnesses at home with drugs? Would that really save any money?

Free Riders

Most of all, though, as Wong-Rieger points out, the proponents of reimportation ignore the reality that Canadians represent 2 to 3 percent of the prescription drug market; Americans, 65 percent. “We get a free ride on the research and development of the American market,” she noted.

The Canadians are much like wait-listed passengers at airline ticket desks. They are few in number, and it is profitable to sell discounted tickets to them in order to fill the plane … but only so long as a sufficient number of other passengers pay full fares.

If you insist that all passengers be given the discounted fares offered to wait-listed passengers, you’ll have fewer flights and more airline bankruptcies. In the case of drugs, you’ll see fewer new and innovative therapies, and perhaps pharmaceutical firms closing up shop.

Indeed, that’s exactly what Europe today is facing. On July 10, European Union health ministers met in Rome to discuss reforms that would allow drug companies to offer their drugs at any price they want. The reason: Under a regime of price-fixing by governments over the last decade, innovation in the U.S. drug industry has outpaced Europeans by more than two to one. Employment in the U.S. pharmaceutical industry has neared 200,000, while it’s fallen below 100,000 in Europe.

“Europe has really lost out in this area over the last 10-15 years because it was so much focused on cost and prices,” Thomas Cueni, general secretary of Interpharma, a Swiss-based trade association, has noted. Switzerland does not control prices and is home to three of the world’s largest biotechnology companies. “By and large, growth is driven by innovation, and pharmaceuticals are an extremely important part of that.”

American politicians may think they’re doing their constituents a huge favor through reimportation, but in the end, their constituents will have fewer new and innovative drugs to buy. And unlike the Canadians who come to the U.S. for better care, Americans will have no place to go.

Duane Freese is a columnist for Tech Central Station http://techcentralstation.com and former editorial writer for USA Today. His email address is [email protected].