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Will Health Insurance Plans Allow Prescription Drug Imports?

A new wrinkle in the healthcare reform debate involves prescription medications. Such drugs are one of the primary factors driving the cost of health insurance plans higher. Brand-name medications are far more expensive in the United States than they are in nations that have enacted price controls. Many individuals have chosen to acquire their medicine through Canada and bring it back to the U.S., although the legality of that method is questionable. Recently, a bipartisan coalition of senators–counting both Democrat Bryon Dorgan and Republican John McCain among their ranks–has proposed that drug importation be allowed. It is a relatively uncontroversial amendment, and the idea is generally popular with a public frustrated by rising co-payments.

There is no doubt that importing cheaper medication from other nations has the potential to save health insurance plans, whether public or private, billions of dollars–currently, the annual cost of many precriptions can reach into the hundreds or thousands of dollars. However, many prominent supporters of healthcare reform have not expressed the full-bodied support for the legislation that one would expect. President Obama, for one, supported similar legislation when he was in the Senate. Now, his administration is less strident on that point. The legalization of imported prescription drugs was intact in Obama’s initial budget proposal, but he has traded that for what some refer to as a “deal with the devil”. The deal with the major pharmaceutical firms is worth $80 billion over the next decade; in effect, it buys their support for reform with a promise to avoid further industry cutbacks while persuading them to pay more taxes and charge health insurance plans lower prices for certain medications. Their lobbyists are already set to attack Democratic supporters hailing from states with a large research and pharmaceutical company presence.

Was the Faustian bargain struck earlier this year worth it to avoid a handful of extra attack ads? Early results show that this appeasement strategy may have backfired: even before any legislation has taken effect, the prices of other drugs have increased. Most likely, some of the most popular medications will not be included in the negotiated discounts. Health insurance plans will have to pay more for those medications, and pass the cost onto consumers in the form of higher premiums. Drug companies also use Americans to make up for the profits lost in countries with price controls. According to them, allowing imports would result in less money for product research; and therefore fewer innovations and discoveries to improve health outcomes.

In fact, while pharmaceutical firms have done much good and found cures for formerly fatal diseases, many of their current inventions serve as a way to chase after federal patent expirations as opposed to being genuine innovations. This is because once a medication’s patent expires, generic manufacturers are able to use its formula and sell it at a discount. The majority of health insurance plans then choose the cheaper, chemically identical generic over the more expensive brand name. In order to regain market share, many drug companies create a slightly modified formula; for example, a capsule that takes a different length of time to be absorbed into the bloodstream. These products have limited usage, but have exclusive patents that allow them to be marketed with a new brand name at a premium.

The Food and Drug Administration released a statement that expresses its worry over the safety and effectivacy of imported medications. The letter to the Senate claims that the FDA lacks the ability to prevent contaminated or counterfeit medications from making it past American borders and into the hands of patients. Proponents of the amendment largely brush off the agency’s statements as cover for the White House refusing to take a strong stand on this issue. Of course, some certification from U.S. Customs or Health officials for reimported drugs would be extremely important. The bill states that medications would only be imported from foreign countries with safety and manufacturing regulations similarly stringent to those in the United States; including the nations of Western Europe, Canada, Japan, Australia, and New Zealand. Most providers of health insurance plans would probably jump at the chance to reduce their supply costs.

Allowing the ability to import drugs from countries with more cost-effective supplies has wide appeal. Fiscal conservatives can appreciate the increased trade, which removes some of the fetters from the free market; meanwhile, liberals worried about the millions of Americans without health insurance plans will applaud the greater access to essential medication and blow to the profits of one of the pillars of the healthcare industry blamed for fattening up with profits at the expense of consumers’ health. It seems like a no-brainer, but several factors have come together to prevent such reform from happening. The drug companies have escaped a large share of the blame for the high cost of health insurance plans, which has been heaped upon everyone from the CEOs of health insurance companies to obese Americans. With both parties ramping up the fight, though, it looks more doubtful that pharmaceutical manufacturers will come out of the healthcare reform battle unscathed.

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