At a Glance
- Florida has become the first state with FDA authorization to import prescription drugs directly from Canada.
- The program is intended to give Florida access to cheaper drugs for its public health insurance programs, including Medicaid.
- Canada’s commitment to preventing drug shortages for its patients means that Florida’s may have limited success in accessing Canada’s supply.
- Drug prices will remain a key issue through the 2024 US presidential election and the entire health care sector can expect continued political scrutiny of costs and behavior.
The Issue
An important historic precedent was set earlier this month when the FDA authorized Florida to be the first state to import prescription drugs directly from Canada. This program granted authorization for two years during which Florida’s health department must also provide a quarterly report to the FDA on the types of drugs imported, cost savings, and any potential safety and quality issues.
The ostensible purpose of this legislation is to permit access to lower drug prices in Canada, which are in large part the result of drug price control policies there. Florida plans to import drugs only for public health insurance programs, including Medicaid.
Will it Work?
Drug prices are often lower in Canada—though this can differ greatly by product—so in principle it may allow some access to cheaper medicines. The Canadian drug market, however, is just one-tenth the size of the US market and the supply of drugs there is directed to meet the needs of Canadian patients. Canada’s Minister of Health has already spoken on this point and noted that Canada does not have the capacity to supply the US market. It is even possible that Canada could consider measures to staunch the outflow of medicines meant for Canadian patients, as its previous Minister of Health did in November 2020 to prevent drug shortages. This means that the practical effects of the Florida action could very well be quite limited.
Will it set a Precedent?
Other states may indeed see it attractive to copy Florida’s model. Of course, that would only accentuate the supply problems and availability from Canada. Of course, importation from countries other than Canada could be considered—particularly from Europe—but the FDA has generally frowned on that because of the difficulty in assessing the safety and quality of medicines from the 27-member European Union.
Political Implications
Because Florida Governor and presidential candidate Ron DeSantis supports this action, it indicates that he sees political benefit from “doing something” about drug prices. President Biden has already taken a series of actions on drug pricing—including both the Inflation Reduction Act and further regulatory actions in 2023—and Donald Trump also has a history of being tough on drug pricing. In short, both parties see advantages from appearing tough on drug pricing, a sign that it will likely be an issue in the 2024 presidential campaign and that it is not going away any time soon.
Industry Implications
Any company involved in drug development, manufacturing, distribution or the supply chain could be impacted by these trends—no one is exempt from targeted political action. In fact, the entire health care sector, including doctors and hospitals, can expect continuation of the trend toward greater political scrutiny of costs and behavior. Now more than ever, companies need to be proactive in ensuring that policymakers and the public at large understand how their business works and be able to justify their business models. Developing alternative solutions to simplistic proposals is also important. EGA has the expertise to help health care companies navigate these increasingly treacherous waters.
