How FDA Ruling Could Unravel Big Pharma's Stranglehold on US Drugs

At the start of January, the Food and Drug Administration (FDA) authorized the state of Florida to import prescription drugs from Canada—meaning, for the first time, a state will be able to procure cheaper medications imported from outside the United States.

It was a change that advocates have wanted for decades, in the hope it would drive the high price of medicines in the American market—which has long been dominated by U.S. pharmaceutical companies—down for patients.

As of 2018, prescription prices in the U.S. were on average 256 percent more than in 32 comparable countries, and as of 2021 were more than three times the cost in Canada. The high price of American drugs has pushed many to acquire their own from Canadian pharmacies, while others who cannot afford them simply go without, risking worsening health conditions.

While there are early signs that Florida's authorization may lead to an expansion of drug imports across the U.S., the approval given by the FDA is limited in its scope, expansion of the policy is likely to be slow, and it is also unlikely that U.S. pharma companies will cede their market share quietly.

But even though importation of foreign drugs could still face pressures from the Canadian government and lobbyists, experts who spoke to Newsweek said the FDA's announcement could be the first chink in the U.S. pharmaceutical industry's erstwhile unbroken hold on the domestic prescriptions market.

"Certainly, the momentum is going on this initiative and certainly, I think we will see an expansion of this going forward—but I don't think it's going to be an end-all," Jay Patel, a pharma industry analyst at GlobalData, said.

What the FDA Ruling Means

The FDA authorization allows the Florida government to procure Canadian prescription drugs for a select number of illnesses—including diabetes, HIV and asthma—which can only be disbursed to certain people, including prisoners, the elderly and Medicaid recipients.

While it is estimated that the program will save taxpayers up to $183 million a year, activists saw it as only the first step on the road to lower prescription costs, as people with private healthcare were unlikely to see the immediate benefits.

"We're talking more about the poorer and disadvantaged sections of society, which are benefiting more, but this isn't the bulk of patients who mostly receive drugs," Patel said.

Even though Florida's health administration will have to test the drugs it imports, report to the FDA regularly and relabel them to be in line with FDA regulations, the U.S. pharmaceutical industry argued that the decision risked patient safety.

Stephen J. Ubl, CEO of the Pharmaceutical Research and Manufacturers of America (PhRMA), the industry's representative trade body, described the authorization as "reckless," adding: "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."

But Jeffrey B. Simon, a trial attorney who in 2022 successfully negotiated a $1.8 billion settlement on behalf of Texas with major drug companies over the opioid epidemic, suggested these concerns were disingenuous.

"They're economically protectionist about it," he told Newsweek. "They raise objections that sound legitimate on their face—and time will tell whether they are—but my inclination is they are not."

He noted that the act of Congress that allowed for the FDA to make its authorization stipulated that drug imports must be cost-saving for patients and carry no additional risk—so whether the PhRMA argument bears out would depend on how Florida executes the policy.

"There's a difference between a strategy and its execution," Simon said. "But the idea that, inherently, FDA supervision and safety regulation is going to be subverted here simply doesn't appear to be true on its face."

"As far as the pharma industry goes, they're clearly not supportive of it and they've been vocal about that," Patel said. "The fact this was allowed was certainly a blow to their interests."

Newsweek approached PhRMA via email for comment on Thursday.

The authorization offered to Florida, though, does open the door for other states to request similar approval for Canadian drug imports. Eight other states—Colorado, Maine, New Hampshire, New Mexico, North Dakota, Texas, Vermont and Wisconsin—have passed laws to seek drug importation programs, though New Hampshire's has been rejected and another two have been bogged down in the application process.

"The White House did say that they could pave the way for other states applying for importation plans," Patel said. "That kind of signals an openness to approving them, and I think that that will also incentivize states to apply for this, because it's clearly quite popular with a lot of state governments."

But Simon suggested Florida would likely serve as a "canary in the coalmine" for other states to determine whether to pursue their own import authorizations.

"I can imagine that they're waiting to see how Florida does with this," he said, noting that Florida's health administration would have to manage many of the regulatory responsibilities that drug companies have, while it was yet to be seen whether there would be additional adverse health events.

Pharma Firms 'Will Try To Exert Enormous Political Influence'

Importing prescription medications from Canada has widespread public support, and this has translated into broad bipartisan support.

A July 2023 poll of 1,327 U.S. adults by KFF found 82 percent thought drug prices were unreasonable, while 78 percent wanted to be able to buy medicines imported from Canada as of October 2019.

The Biden administration has called Florida's authorization "a step in the right direction," while the state's Governor Ron DeSantis hailed the announcement as a win for "patients over politics and the interests of Floridians over Big Pharma."

The path was cleared by former President Donald Trump's administration, which in 2020 certified Canadian imports as safe, and in 2021 Joe Biden signed an executive order directing the government "to lower the prices of and improve access to prescription drugs."

"It's definitely a popular policy; it's definitely a policy that affects a lot of ordinary voters in America," Patel said. "It's going to be something that, at least as an idea, will have a tremendous amount of popular support from both parties.

"That's why I think that the focus by the pharmaceutical industry will be more on the technicalities, rather than the grand scheme of things—because they know that people support the idea of importing drugs from Canada. I think they'll try and limit the scope of it, and keep it as tight as possible to reduce the impact on the market share."

Progress to reach this point has been grindingly slow: the Food, Drug and Cosmetic Act that allowed for Canadian imports was first passed in 2000, but acting on it has been delayed by lobbying from the pharmaceutical industry—which is expected to continue through the 2024 election.

"I know for a fact that they will try to exert enormous financial resources and political influence to maintain a status quo," Simon said, adding that both Republicans and Democrats recognized that it was "unacceptable and unsustainable" that Americans should continue to pay more. "But that is not to underestimate the power, influence and wealth of the drug industry in the United States."

Patel said that "certainly [pharmaceutical lobbyists] can make their influence felt during this election," suggesting they may choose to target individual members of Congress rather than presidential candidates who were more in the spotlight, or federal appointees in the next administration.

Regardless of lobbying or who wins the White House, the industry analyst saw it as unlikely that any expansion of the importation policy would occur until early next year, when a new federal government was in place.

Expansion of the program could also face roadblocks from Canada, whose government has long opposed large-scale drug exports to America over concerns about domestic drug shortages. The nation's health minister, Mark Holland, told CBC that he had the power to prohibit sales outside Canada if they were to threaten supply.

The two markets are of a wholly different scale: California alone has a higher population than Canada, meaning it would unlikely be able to service the entirety of America's prescription needs in the near-term.

As the Canadian government negotiates on behalf of consumers on drug prices, Patel said U.S. pharmaceutical companies might start demanding higher prices from Canada to pressure it into imposing restrictions on exports.

The FD&C Act allows only for drug imports from Canada, so circumventing these issues by authorizing supplies from other countries would need further legislative action. While Patel said this would require Congressional approval, Simon suggested Biden's executive order could be a baseline legal mandate for a broader interpretation of what could be authorized.

Will It Make Prescription Drugs Cheaper?

The FDA authorization is expected to make the cost of prescription drugs lower for the Florida government, but private healthcare patients will still have to carry on paying the same amount for their medications, for the time being. But Simon noted Biden's executive order was "not nearly as restrictive," leaving the possibility for enlargement.

However, there are still a number of possibilities that could leave drug prices higher for consumers—not least if pharmaceutical companies negotiated higher drug prices with Canada, mitigating the effectiveness of importing into the U.S. market.

Another eventuality is a polarization in drug prices: if U.S. pharmaceutical companies start losing their share of the government prescription market to imported drugs, they may seek higher margins on those sold to the privately insured.

"They might try to make more money off the share of the market they have left," Patel said. "So it's hard to necessarily predict what they're going to do with the private customers."

"This is an unprecedented policy, so it's hard to necessarily predict what will happen, but I wouldn't say that we can necessarily say for sure that it's going to reduce prices for private consumers," Patel added. "It could go either way."