October 19, 2017

An Open Letter to Senate Conservatives: Oppose S. Amdt. 1227 to H. Con. Res. 71
Drug Importation Will Hurt, Not Help, Taxpayers and the Economy

Dear Senator:

On behalf of our thousands of supporters across America, National Taxpayers Union (NTU) and Council for Citizens Against Government Waste (CCAGW) urge you to oppose S. Amdt. 1227, sponsored by Senators McCain and Klobuchar, to initiate an importation process for prescription drugs from Canada. Contrary to its advertised purpose, the amendment would fail to appreciably reduce prices, even as it would harm taxpayers with higher costs and expand government control over the economy.

From a fiscal standpoint, importation is a terrible risk. Prescription drugs have long represented, and will continue to represent approximately 10 percent of total health care spending in the U.S. These expenditures offset other costs in the system by shortening hospital stays or obviating the need for surgeries. Taxpayers benefit as a result – for example, according to the National Bureau of Economic Research, every dollar spent on prescription drugs leads to a $2.06 reduction in Medicare expenditures. Policymakers should be loath to tamper, even at the edges, with this elegantly balanced system of free-market drug development in the United States that encourages innovation and investment while generally working to stabilize prices at their lowest level possible.

In November of 2003 the Congressional Budget Office concluded that the savings to the federal government from importation would be minuscule, “because those programs generally already pay among the lowest prices on the market.”

Drugs are less expensive in Canada because they utilize price controls, which has also adversely affected innovation, research, and development.  The Winter 2016 edition of R&D Magazine proves that point.  The U.S. leads the world in pharmaceutical/biotech research at 56 percent, followed by Germany at 16 percent, and then the U.K at 7 percent.  Canada does not even register on the chart.

The amendment also assumes Canadian sellers will not increase the costs of their price-controlled drugs or that pharmaceutical companies would sell more drugs to a country than its population needs.  Furthermore, as the FDA has pointed out, importing drugs can be dangerous for several reasons: other countries have different regulations and standards compared to the U.S.; drug dosages may be different; claiming that an internet website is a Canadian pharmacy does not make it so; and, importation invites counterfeiting and adulteration.

These threats are of direct concern to taxpayers. Creating a network to sufficiently police the supply of drugs under an importation scheme, even a limited one, could amount to billions of extra dollars in federal spending each year. The enormity of this task was illustrated on October 17, when federal prosecutors announced a series of indictments against a ring of conspirators who sought to bring adulterated fentanyl into the United States. Law enforcement resources are already struggling to deal with this sort of criminal activity. Adding importation to the mix would create massive new headaches for authorities as well as taxpayers.

A 2016 CAGW report, “Pharmaceutical Price Controls: A Prescription for Disaster,” pointed out that throughout history price controls never work as they distort the marketplace and end up causing shortages. An NTU analysis last year warned that “importing self-destructive policies from abroad causes collateral damage here at home. That damage extends to, but is not limited to, our own exports, our workers, our shareholders, our efforts to liberalize and strengthen standards of international commerce, and the long-term savings that innovative drug therapies deliver for taxpayer-funded health care programs.” Fiscal conservatives should vote “No” on S. Amdt. 1227.

Sincerely,

Tom Schatz
President, CCAGW

Pete Sepp
President, NTU

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