Will Canada soon be sending cheap drugs to the U.S.?

Opinion

Hey there, time traveller!
This article was published 18/03/2024 (568 days ago), so information in it may no longer be current.

The outstanding Canadian political economist Harold A. Innis — he of the staples theory of economic development — once remarked that Canada is comprised of “hewers of wood and drawers of water.”

There may indeed come a time when Canada is exporting or diverting substantial sums of Canadian fresh water southward. As the negative implications of climate change unfold and even accelerate, and the U.S. Midwest continues to suffer from a “hot drought,” there is likely to be future pressure on a Canadian government to approve the life-sustaining quenching of our neighbour’s thirst.

As for softwood lumber, it now appears the U.S. still needs it, but does not want our timber imports to displace lumber workers and mills in various parts of America. In early February, the U.S. Department of Commerce — as it has been doing for decades on the softwood lumber file — boosted a combined anti-dumping and countervailing duty rate on Canadian producers from eight per cent to almost 14 per cent. So much for Canada-U.S. free trade, I guess.

What about a U.S. need for rare Earth minerals from Canada? During U.S. President Joe Biden’s March 2023 official visit to Canada, he made a direct pitch to Canadians: “We don’t have the minerals to mine, you can mine them.” Wonderful.

Is Canada now about to add highly-coveted pharmaceuticals to Innis’s turn of phrase: to wit, hewers of wood, drawers of water and enablers of drugs? Would we be totally surprised?

It is not exactly a new issue in Canada-U.S. relations. In 2019, the state of Colorado (population of six million) sought the authorization of the U.S. Food and Drug Administration to allow wholesalers and pharmacists to purchase cheaper Canadian drugs — and they are back at it again. In early 2024, Florida (population of 22 million) was actually given approval by U.S. regulators to import drugs from Canada.

It is important to note that U.S. Congressional legislation effectively prohibits federal and state governments from directly negotiating drug prices with major American pharmaceutical manufacturers. In Canada, though, provincial governments can negotiate price discounts on bulk pharmaceutical purchases, while Ottawa regulates (or tries to hold the line on) drug costs through its Patented Medicine Prices Review Board.

Both Florida and Colorado, and a handful of other U.S. states, are obviously hoping to benefit from lower-cost Canadian drug imports. Florida expects cost savings for state-backed pharmaceutical programs to reach roughly US$180 million a year. And Colorado estimates its citizens could save somewhere between US$53 million to US$88 million annually.

Not surprisingly, the Canadian government has sought to get out in front of these U.S. drug requests before they spread to other states.

The Trudeau Liberals have made it very clear that they will not permit bulk export of drugs — especially if it could lead to acute shortages in Canada — to the U.S.

Health Canada’s spokesperson André Gagnon said Ottawa would impose stiff penalties on anyone engaging in such exports — including the cancelling of licences to Canadian sellers and distributors.

At the same time, Canada’s own drug industry has indicated serious misgivings about any potential pharmaceutical exports to the U.S. “Canada simply can’t supply drugs to Florida, or any other U.S. states, without significantly increasing the risk and severity of drug shortages nationwide,” said David Renwick, the interim-president of Innovative Medicines Canada.

It could very well be that these U.S. efforts to import lower-priced Canadian drugs are really directed at U.S.-based pharmaceutical operators like Johnson & Johnson, Pfizer Inc. and Eli Lilly & Company.

The hope of state governments is to use the threat of imports from Canada to name and shame U.S. drug manufacturers and to create legislative momentum to pressure these same companies to lower their prices.

However, it may turn out that Canada will actually be rescued by the U.S. drug industry itself.

Indeed, the U.S. Pharmaceutical Research and Manufacturers of America (PhRMA) has strongly disapproved of the drug importation idea on safety grounds, indicating that it is considering “all options” and is threatening possible legal action.

In the words of PhRMA president Stephen Ubl: “Ensuring patients have access to needed medicines is critical, but the importation of unapproved medicines, whether from Canada or elsewhere in the world, poses a serious danger to public health.”

Be that as it may, Canada doesn’t want to find itself either in the middle of such a squabble or used by U.S. state governments. Nor does it want to end up having to bend to U.S. pressure to fall into line.

As Ujjal Dosanjh, a former federal health minister and B.C. premier, recently explained: “We can’t be the drug store for the United States of America.”

All of this may eventually fall off the Canada-U.S. radar screen as the time horizon extends beyond a year or two.

Still, I can’t help but wonder, if he were alive today, what would Harold Innis think?

Peter McKenna is professor of political science at the University of Prince Edward Island in Charlottetown.