Florida looks to Canada for cheaper prescription drugs

Earlier this month, Florida became the first state to get FDA approval to import cheaper drugs from Canada.

Will it work?

"I think it's very unlikely that for any given patient, it's going to make any difference in their lives. I think the American people should know that this is political theater," Professor Nicholas Bagley says.

Today, On Point: Political theater and prescription drug prices.

Nicholas Bagley, professor of law at the University of Michigan. Expert on administrative and health law. Author of the article "The Real Reason Drugs Cost So Much — and Do Too Little." Co-author of "Importing Prescription Drugs from Canada — Legal and Practical Problems with the Trump Administration’s Proposal."

Joel Lexchin, retired emergency physician. Professor emeritus in the school of health policy and management at York University in Toronto.

David Mitchell, president and founder of the advocacy group Patients for Affordable Drugs.

Part I

MEGHNA CHAKRABARTI: Back in June of 2019, Florida Governor Ron DeSantis did something no other governor had done before.

NEWS ANCHOR: Floridians could soon gain access to cheaper prescription drugs from Canada under new legislation just signed into law by Governor Ron DeSantis. Americans pay some of the highest prescription drug prices in the world, as much as 190% more than other Western countries.

CHAKRABARTI: This law was something different. It didn't allow individual Floridians to cross the U.S.'s northern border to buy medications. The law authorizes the state of Florida to import drugs from Canada. The state estimates it could save Florida around $180 million just in the first year. But getting the law passed in Florida was just the first step.

The federal government then had to approve the plan. And the FDA sat on Florida's drug importation application for years. So long that in fact, in 2021, Governor DeSantis sued the FDA.

DeSANTIS: It's been under review enough. We have followed every regulation. We've met every requirement that we were asked to meet.

And we want now to be able to get this final approval so that we can finally move forward.

CHAKRABARTI: DeSantis gave those remarks at a speech in an empty warehouse in Lakeland, Florida, a facility the state spent about $30 million on in order to store the drugs they were hoping to import from Canada. That warehouse is still empty.

But earlier this month, after three years in review, the FDA finally approved Florida's drug importation plan. In a statement, Governor DeSantis said, quote, "It's about time that the FDA put patience over politics and the interests of Floridians over big pharma," end quote. So does that mean it will be raining cheap prescription drugs on Floridians anytime soon?

No, unfortunately, no, because many health care experts say it's the state of Florida that might be the one playing politics here. They say the Florida law is aspirational, but it's lacking some critical connections to reality, such as, is Canada even willing to sell its prescription drugs to a U.S. state?

Answer thus far from Ottawa, hard no. In fact, in 2020, the Canadian government even issued an interim order to, quote, "Safeguard Canada's drug supply." Nevertheless, the Florida law is an innovative idea, one born from truthful desperation felt by Americans over the unaffordability of the medications they depend on.

And when states take these kinds of bold steps, it's often because the federal government won't. And that's what we're going to talk about today. And joining us is Nicholas Bagley. He's a professor of law at the University of Michigan. He's an expert on administrative and health law, and he joins us from Ann Arbor, Michigan.

Professor Bagley, welcome back to On Point.

NICHOLAS BAGLEY: I am very happy to be here. Thanks for having me.

CHAKRABARTI: Okay, so first of all, let's talk a little bit about what happened in 2019. What's the story about how Florida passed that law seeking to import drugs from Canada?

BAGLEY: In 2003, Congress created a pathway that would potentially allow for the importation of drugs from Canada, and what Congress said is we'll allow this if the federal government can say that importing the drugs will save money.

And we'll not pose any safety risks. And for a lot of years, the federal government and FDA in particular was not inclined to issue that certification. The reason was that they weren't sure it was going to save any money and they actually had some lingering safety concerns. So fast forward to the Trump administration.

And you have a lot of states clamoring for help on high drug costs, including Florida, and you have a Trump administration that's looking around trying to do something about high drug prices and importing drugs from Canada is something, so they passed a rule, that they adopted a rule that said, "Hey, we're not going to make these certifications that we have to make.

And create a federal importation program. But what we're going to do is allow states to apply. And if they can show that they're going to save money and that these drugs will be safe, they'll be allowed to import those drugs." It's a conditional certification. And that's what the Trump administration did.

And then Florida applied and fast forward to today and you have Florida, poised to roll out its own version of an importation program.

CHAKRABARTI: Okay. This isn't just a Republican Ron DeSantis, obviously the Republican governor of Florida and now ex candidate for president. And the Trump administration, Donald Trump, also a Republican.

But in terms of states seeking permission or wanting to import drugs from Canada individually, it was quite a diversity of states.

BAGLEY: Oh sure.

CHAKRABARTI: I think, you wrote about this in the New England Journal, right? Vermont, Florida, Colorado, Maine, New Mexico. So it's across the political spectrum that states were seeking some kind of solution to reduce their costs.

But let me be clear on one thing. This would be importation, not negotiation, and the cost savings theoretically would come because the states would be importing for their state Medicaid programs?

BAGLEY: It depends. Each state is entitled to craft its own application. So Florida said that what we want to do is import drugs first for people who are in state custody.

So people in the prison system or other sort of state facilities, and then they'd roll it out to their state Medicaid program. Which covers an awful lot of people. But other states have been thinking about trying to set up an importation program that would actually benefit people with private insurance, people who got their coverage through their employers or on the exchanges.

So that's Colorado's approach, for example. So far, of course, Florida is the only state that's received approval to import. So that's what we've got in the mix. You're absolutely right. This is a bipartisan issue. The high costs of drug prices are a concern across the political spectrum.

CHAKRABARTI: Let's focus on Florida a little bit more though, because of, as you said, that unique approval status they have from FDA. We reached out to health officials, state officials in Florida who were part of seeking the FDA approval no one agreed to join us, they all declined, so I'm going to ask you for some of the more, some of the details, Professor Bagley, if I could, because as I mentioned earlier the Florida state government claims that if they are actually able to import these drugs from Canada, they would save more than a $180 million in the first year alone.

Do you have any insight on how they actually came up with that number?

BAGLEY: Sure. The first thing to say is I'll believe it when I see it. The way they came up with the number is pretty simple. You count up the number of drugs that you're going to purchase from Canada, and you compare that to the price of drugs, the same drugs that you would purchase here in the United States.

And you look at the difference and because Canada does negotiate drug prices in contrast to the United States. Drug prices in Canada are quite a bit lower. So if you just compare list prices, yeah, the state of Florida could stand to save a bundle. The trouble is the world is not going to stay fixed and allow Florida just to purchase, hoover up whatever drugs from Canada it wants.

There are going to be two big things that get in Florida's way. Among other things, the first is that Canada isn't thrilled about the prospect of America poaching its drug supplies and exploiting its drug negotiation machinery to benefit American consumers. Canada says if you want to negotiate lower drug prices, there's a way to do that, which is to do it yourself.

The second is that drug manufacturers themselves aren't likely to stand for this. So when you sell a drug to a Canadian pharmacy or a wholesaler, you can place conditions on resale, or you can even limit the amounts that you're selling into Canada to prevent this kind of diversion back into the United States.

We're seeing pharma companies do that already. So all of the savings that Florida anticipates are likely to be gobbled up by those two developments. It's possible they'll save some money. It's possible to get some drugs. I don't want to rule that out. But I think it's very safe to say that the $180 million figure is wildly inflated.

CHAKRABARTI: Just to go back and reference that interim order issued by the Canadian government in 2020, it says expressly in it, any person that holds an establishment license pharmacy, essentially, must not distribute a drug to another person for consumption or use outside of Canada. It's pretty clear.

BAGLEY: Yeah, at least for drugs that are potentially in shortage in Canada. And how the Canadian government goes out defining that is up for grabs.

CHAKRABARTI: Okay. Was Canada ever involved in the, I don't want to say the crafting, but at least getting information from Canada while the Trump administration came up with its idea. Or even while Florida pursued permission from the FDA to see if the source that the state would ostensibly go to, to get those drugs, was even on board.

BAGLEY: Yeah. Canada has been registering its concerns about this approach for ever since this regulation was under development, and indeed before that. Canada's perspective here is pretty reasonable, which is, "Listen, we're not doing anything magical up here. We are negotiating drug prices and using our concentrated market power to drive down the costs of drugs." So what we're saying to the drug companies is if you want to sell your drugs in Canada, here's the price that we're willing to pay.

Nothing stops the United States from taking the same approach. Indeed, that's the approach that's taken across the developed world. The reason our drug prices are so much higher than everybody else's is because we don't engage in that kind of negotiation. So from Canada's perspective, what we're doing is effectively hijacking its machinery. Its regulatory machinery, to drive down drug prices when there's a much more straightforward approach, which is you can negotiate them yourself.

CHAKRABARTI: I was just looking that Canada has a population of 38 million. This was something highlighted to me the other day by our producer, Paige Sutherland.

Canada has 38 million, Florida has more than 22 million people (LAUGHS) and so it's almost the size of Canada. We definitely have states, California, etc., that are much larger than the population of Canada. Yeah, when you say there's nothing that stops the United States from negotiating directly with drug manufacturers and pharma companies.

The only exception I take to that is money and politics. So we're going to talk more when we come back about why taking that next big step into direct negotiation more broadly here in the United States isn't happening, so we'll be back. This is On Point.

Part II

CHAKRABARTI: Professor Bagley, just one more quick question about the nuts and bolts of Florida's plan. Because, so they have FDA approval now. What is the next step for Florida in terms of opening these, let's say, importation talks with Canada?

BAGLEY: Yeah, it's really complicated. Trying to import drugs from Canada sounds good. And then you dig into the details and it gets really tricky, really fast. The first thing they have to do is identify which drugs they'd like to import. And then they're going to have to prove to FDA that the drugs that they're going to get from Canada are equally safe as drugs that they could secure here in the United States.

They're going to have to set up an arrangement with a wholesaler to import those specific drugs from Canada or export those drugs from Canada to a different wholesaler here in the United States, and FDA is going to be watching like a hawk at every stage of these proceedings. So there are a lot more sort of bureaucratic steps that Florida has to take, before you're actually going to start seeing these drugs hit the shelves in that facility that you talked about at the top of the hour.

CHAKRABARTI: Okay. And just to remind folks, we did reach out to Florida's Agency for Healthcare Administration. It's the agency that's overseeing the importation program in Florida. We asked if someone from the agency could join us and they said, "We're unable to provide an interview at this time." Which is honestly unfortunate because I'd love to know more details about what Florida has planned.

But in lieu of that, let's go to Canada and see what the Canadians think about this and joining us now from Toronto is Dr. Joel Lexchin. He's a retired emergency physician. He's also studied pharmaceutical policy for more than three decades. He's professor emeritus in the School of Health Policy and Management at York University in Toronto.

Dr. Lexchin, welcome to On Point.

JOEL LEXCHIN: Thanks for coming to the great white north.

CHAKRABARTI: Are you going to sell us your drugs anytime soon?

LEXCHIN: I doubt it. I think that the Canadian government has been pretty clear on this point that they're not going to allow U.S. states to import any large quantities of drugs from Canada.

We already see shortages of about 10% to 15% of all the drugs that are available in this country on an annual basis. And no federal government is going to make that worse. Politically, it would be suicide.

CHAKRABARTI: Let me ask you a little bit more about these shortages, right? Because sometimes in the U.S. media here, I will admit that we talk about direct government negotiation with drug manufacturers as something of a panacea for drug costs. But I'm hearing you say there are shortages going on in Canada right now. What's driving those?

LEXCHIN: There are not just shortages in Canada. There are shortages in Australia.

There are shortages in Western Europe. There are shortages in the United States. And different factors enter into that. It may be that there's problem with the manufacturing of what's called the active pharmaceutical ingredient. That's the molecule in the drug that actually does the work. So there may be issues with that.

80% of the APIs come from either China or India, where there are problems with quality assurance. There may be problems, unexpected problems, fires or other problems in plants that are making the drugs. There may be drug hoardings in some countries. There also are just unexpected shortages, in the summer and fall of 2022, you couldn't buy children's Tylenol in Canada. People were driving to the United States to go to pharmacies and pick that up. Various reasons for shortages, but they exist. They've been around for at least a couple of decades, and they're probably going to keep going.

CHAKRABARTI: Keep going. Okay. So those are, a lot of the problems you described were separate from the actual price negotiations that happened between Canada and the manufacturers and to just underscore your point, Dr. Lexchin, we've definitely covered many of the reasons for those shortages that are also going on here in the United States.

So your point is well taken, but I want to hear exactly how much some of the differences are between the United States and Canada in pricing. And so first of all, here's an On Point listener. This is Kristen Fowler in Lexington, Kentucky. And so she's going to talk about a particular medication she had to take for postpartum psychosis for years.

She was paying $700 to $1,000 a month until her insurance deductible kicked in. So she looked for some tricks and found them to save money.

FOWLER: The most effective way to offset that cost was to get a manufacturer's coupon, which would guarantee a price like $15 or $25 per prescription, and then that would help get us through until the insurance deductible kicked in, although it also pushes the insurance deductible out.

The other thing I did was to go directly to the prescriber and get samples, which would sometimes get me through a month or two or stretch out the prescriptions that I had so that it wouldn't, was longer before I had to pay that. $700 to $1,000 a month per prescription again.

CHAKRABARTI: So that's Kristen Fowler in Lexington, Kentucky.

Dr. Lexchin, describe to me the process that a Canadian goes through in order to get perhaps let's say some of the more exotic or higher priced prescription drugs that they need for their health care. Does it involve coupon cutting or having to keep an eye on insurance deductibles?

LEXCHIN: There certainly are issues with insurance deductibles. When you're talking both about the public and private insurance systems in Canada, and it varies depending if you're private, if you have private insurance, who you work for, and if you rely on the public system, which province you live in. But I don't hear about coupon cutting. Drug prices in Canada are somewhere around three times lower than they are in the United States. And that's, as you said, and your previous guest said, because we negotiate directly with manufacturers.

CHAKRABARTI: Professor Bagley, again, I just want to get some concrete descriptions around these differences. When we hear that Canada can have drug prices that are a third the amount of the United States.

Do you have any particular medications in mind that that we might compare prices with?

BAGLEY: I don't have the figures available. For a long time, the place that you'd hear the most news and the most noise around this was with insulin.

CHAKRABARTI: Yeah.

BAGLEY: Which prices have been skyrocketing here in the United States for many years.

Those are now capped by law in the Medicare program at $35 a month. And manufacturers have agreed voluntarily to cap their prices for insulin in the private market at that level. But the gap on insulin prices was really quite eye popping for a lot of people, especially, you're a diabetic, you need a lot of it, you're going across, here in Michigan, you can just drive across the river, and suddenly the price would drop to something like a third or even less to purchase your insulin supplies.

CHAKRABARTI: Professor Lexchin, when we keep saying negotiation, practically speaking, how does Canada go about negotiating? And who are they negotiating? Who is the Canadian government negotiating with?

LEXCHIN: How much time do you have?

CHAKRABARTI: (LAUGHS) Unfortunately, not enough. I gather.

LEXCHIN: It's not an easy issue.

So when a new patented drug comes on the market, there's a federal body that looks at the price and compares it to the price in now 11 other countries, and also compares it to similar, the price of similar drugs available in Canada and decides whether or not the price of the new drug is excessive or not.

If it's not excessive, then the next stage is it goes to another federal, provincial body this time. Which does a health technology assessment, in other words, looks at value for money, and tells the provincial governments either to pay for the drug or not pay for the drug. And if they give a positive response, then it goes to a third body, which actually negotiates the final price with the drug company.

So it's a complex problem. It takes a couple of years to go through all those negotiations. If you're going to get your drug covered publicly. Privately, the insurance companies can do whatever they want. They can negotiate further with the drug manufacturers, or they can just take the price that's set by this first federal body in Canada.

And that's what it is. But the problem is that the people without insurance, and that's about 15% to 20% of the Canadian population, get no benefits from either public or private insurance.

CHAKRABARTI: Okay, so they're still paying what, the fully out of pocket?

LEXCHIN: They're paying fully out of pocket.

They do get the benefits of the non-excessive price, but they don't get any of the further benefits.

CHAKRABARTI: Okay. But so this process then takes place for every single drug approved for use in Canada.

LEXCHIN: It takes, the first step is every drug, every new patented drug that's approved in Canada.

And those prices then cannot go up any faster than the rate of inflation until the patent expires.

CHAKRABARTI: The prices cannot go up faster than the rate of inflation? And how long are those patents in Canada?

LEXCHIN: On average, once a drug hits the market, it's got about 10 years of market exclusivity, in other words, its price cannot go up any faster than the rate of inflation for 10 years.

CHAKRABARTI: So at least there's that much predictability for a decade. Okay. Now you said earlier that one of the first steps is that a government, a Canadian government group determines whether the suggested price from the manufacturer is going to be excessive or not. How do they define what's excessive?

LEXCHIN: That's compared to what it sells for in 11 other countries. The U.S. used to be one of those countries, it got removed because its prices were so high. So we're talking about Australia, Japan, and a bunch of Western European countries. And the second way it determines if a price is excessive is by looking at the price of similar drugs that are available in Canada, and it can't be any higher than those prices.

CHAKRABARTI: Okay. And so to be clear, then, this is all going on after all the safety hurdles have been successfully cleared, right? The drug has been approved for use in Canada.

LEXCHIN: That's right.

CHAKRABARTI: Okay. No, go ahead.

LEXCHIN: No, I was just gonna, these processes, the approval, and this first step in negotiation can take place in parallel.

CHAKRABARTI: I see. Okay Dr. Lexchin, speak frankly. Why do you think, from your view, north of the United States' northern border, why, what do you think is stopping the United States from engaging in a similar process? Not just for Medicare patients in this country, but for every American overall?

LEXCHIN: Money. I looked at some of the figures between Canada and the United States.

So our last federal election, which was in 2021, it cost the political parties that ran spent $85 million. In total, that's four different parties, $85 million. Your last federal election, it was $14 billion. It costs, if you want to run for a seat in Canadian Parliament, it costs between $100,000 and $140, 000.

If you want to run for a seat in your House of Representatives, it's $1.2 billion. You've got to raise that money somewhere, and the drug companies are more than willing to give money to American politicians.

CHAKRABARTI: So what you're saying is that scale isn't even the issue here, right? Because there's 38 million people in Canada.

Call it 10 times as many in the United States, but it sounds like you're saying it costs a hundred if not a thousand times more to achieve office in the United States. And it does in Canada, and that money has to come from somewhere, yes?

LEXCHIN: Yeah, I think that's one of the main reasons, plus the fact that, and the reason that the drug companies have so much sway is because the pharmaceutical industry is so much more important to the American economy than it is to the Canadian economy.

CHAKRABARTI: Huh. Dr. Joel Lexchin is a retired emergency physician. He's also professor emeritus in the School of Health Policy and Management at York University in Toronto. And he joined us today from Toronto. Thank you so much, Dr. Lexchin.

LEXCHIN: Thanks for having me.

CHAKRABARTI: Nicholas Bagley, you've been listening very patiently to Dr. Lexchin there. Is there any part of the system of negotiation that Canada participates in that the United States, for practical reasons, could not engage in?

BAGLEY: No, we could duplicate what it is that Canada has. We would have some challenges coordinating the private market, because we cover more people here through the private sector than Canada does, that's a technical challenge and one that we could certainly overcome if we had the political will.

CHAKRABARTI: Do we even have things like that price predictability or linking to inflation for newly patented drugs for a decade? Do we have that here?

BAGLEY: We have the glimmerings of it. So in the inflation reduction act, the Biden administration has started to take steps that kind of moving us down a path of Canadian style negotiation.

So under the law, Medicare is going to pay a much-reduced price for drugs that consume a big chunk of Medicare spending. The hope is that the Medicare program will save about a $100 billion over the next 10 years. And the idea is you basically pick a subset of drugs, 10 of them at first and rising to 20 over the years. And say we're not going to pay as much as we have before. If you want to sell to the Medicare program, you have to agree to a maximum fair price with the federal government. And if you don't well, that's fine, but you have to exit from the Medicare and Medicaid program. You can't sell any of your drugs to the program any longer.

So that's quite assertive of the federal government, but it applies only to a subset of drugs. And it applies only to the Medicare program, so it's still a pretty tentative step, but it is a step down that path.

CHAKRABARTI: Okay in fact, those changes to Medicare in the Inflation Reduction Act, we're going to talk about them in more detail after the break and also hear from someone whose life has changed.

It's going to be directly impacted by those changes. So that's all coming up in just a minute.

Part III

CHAKRABARTI: Today, we're talking about state level efforts to import drugs from Canada in order to reduce prescription drug prices in the United States. It is an aspirational idea backed by a complete lack of adequate federal action here in the United States. Now, all of you know that you probably go through different hoops to try and reduce your out-of-pocket costs for prescription drugs.

Here's one of them. This is On Point listener Christine from Milwaukee. She says she has been able to cut her out of pocket costs in half for her two blood pressure pills.

CHRISTINE: I am now getting my drugs from Mark Cuban and saving a whole lot of money and just a nice, pleasant, easy, efficient way to do it.

Instead of paying the $65 I'm getting my drugs from Mark Cuban and the total is, came to $23.10. And that included a $5 shipping charge.

CHAKRABARTI: Now, when she says she's getting her drugs from Mark Cuban, she is not directly buying them from the billionaire and basketball team owner. He started a company called Cost Plus Drugs, where they sell prescription drugs for perhaps lower costs than you get at your local pharmacy.

Now, the biggest negotiator in the United States for lowering prescription drug costs is truly the entire federal government. It has happened, as Professor Nicholas Bagley has told us, in Medicare specifically, so we want to hear a story about that. And for that, we turn to David Mitchell. Because in 2010, his body suddenly was in profound pain.

It was specifically in his back. And the pain was so bad that David ended up in the emergency room.

DAVID MITCHELL: I thought I had a sore back. And a guy walked in and said, "Hi, I'm Paul Thambi, I'm the oncologist on duty. "And I said, "You're in the wrong place, I have a sore back." And he said, "No, I'm afraid I'm not."

CHAKRABARTI: David was diagnosed with multiple myeloma, an incurable blood cancer. The myeloma attacks your bones, and in David's case, so aggressively, that the cancer literally broke bones in his back. He was 60 at the time.

MITCHELL: They fixed it with a remarkable surgery called a balloon kyphoplasty. And I've been able to walk since that surgical repair.

But it's bad enough for someone to tell you've got cancer. When you find out that the drugs to treat the cancer cost hundreds of thousands of dollars a year and can cost you, even with insurance, tens of thousands of dollars a year, it's a pretty hard thing to handle. David has been on a four-drug combination to help myeloma for years, and the combined list price comes out to more than $1 million a year.

MITCHELL: Just one of those drugs, an oral drug under Medicare Part D, I'm on Medicare, cost me last year more than $16,000 out of pocket.

CHAKRABARTI: $16,000 out of pocket last year alone. However, his payments fell dramatically this year because of the Inflation Reduction Act. Now, in 2022, the Inflation Reduction Act passed both the House and the Senate in a strictly party line vote.

All Democrats voting for, every single Republican voting against. The $780 billion law includes several reforms to Medicare, such as allowing Medicare to negotiate prices on 10 new drugs per year starting in 2026 and beginning this year capping out of pocket costs for Medicare patients, which includes David.

MITCHELL: This year, I did my first fill, and I hit what is called catastrophic and it was $3,308 last week that I had to pay, and I will not pay any more out of pocket for the rest of the year for any of my brand name drugs. So it's a good day, if you're me, because it's a very serious savings. At least $13,000 this year.

Because of the Inflation Reduction Act.

CHAKRABARTI: And David's out of pocket cost caps next year will be even more, down to $2,000. David Mitchell lives in Bethesda, Maryland, and in 2016, he started the advocacy group, Patients for Affordable Drugs, which fights for cheaper drugs in America. Okay Professor Bagley before we get to more detail about the changes that were made in the Inflation Reduction Act to Medicare, I do actually want to go back in time more, because in terms of the long debate over prescription drug costs in the United States, even Medicare negotiating prices for prescription drugs is pretty new.

So can you take us back to when prescription drug coverage was actually even added to Medicare under the Bush administration, the George W. Bush administration, remind us about why that moment wasn't capitalized on and why didn't the federal government say, "Aha, now since we're going to cover prescription drugs, we're going to have Medicare negotiate the prices."

BAGLEY: Yeah, it's really a fact that I think a lot of people don't keep in view that when Medicare was adopted in '65, it didn't cut, 1965. It didn't cover prescription drugs at all. And it took 38 years before in 2003, it was amended to cover prescription drugs. But when it was adopted, the Republicans that controlled Congress and the president decided that they were not going to allow the federal government to negotiate, use its negotiating power.

Instead, what they were going to do was tell everybody to sign up for these Part D drug plans and those individual drug plans would be able to negotiate drug prices on behalf of their customers. The trouble with that approach is that each of these individual plans is so small that they don't have a lot of leverage.

And Democrats at the time were apoplectic. They said, gosh, you're leaving all of the negotiating power on the cutting room floor, Republicans countered that the high drug prices that we pay in this country fuel a lot of innovation. And there's some truth to that. Drugs are wildly expensive to develop on the order of something like $2 billion dollars per drug.

And in order to make the investments that you have to make in order to develop a drug, you need to have some prospect that you'll recoup your costs. And high drug prices in the United States give pharma companies some of that confidence and to a great extent, Americans are subsidizing global development of these new medications, some of which are miracles.

So that's really the tradeoff. You start negotiating down drug prices. And there's a risk, at least, that the speed of innovation in the pharmaceutical sector will go down.

CHAKRABARTI: That was one of the primary reasons, excuse me, why the pharmaceutical companies were successful in keeping negotiation out.

I think everyone is sick these days, so you'll have to forgive me, let me just grab a quick glass of water. Okay. But then, and that was in the administration of George W. Bush, but the fallout from that is that the price of prescription drugs covered by Medicare ballooned, right? You reported in Politico that between 2018 to 2022, Medicare spending on the top, what, 10 selling drugs jumped from $22 billion to $48 billion, so more than doubled in a three-year period.

And was the Medicaid funding or the Medicaid's ability to pay for that, keeping up with that growth rate? Yeah, Medicare is an open-ended entitlement.

BAGLEY: So basically, when Congress sets the rules of the program then, it's the amount of money that's spent on it is on autopilot.

So as Medicare gets more expensive, we just spend and spend. And if that means we run a budget deficit, it means we run a budget deficit. There are long term macroeconomic consequences of a program of that magnitude, of course. The higher drug prices in a way reflect success. Pharmaceuticals have become much more central to medical care over the past few decades than they were back in the day.

And as we get more and more drugs that do wonderful things for us coming on the market, some of them are going to be worth paying for. One of the real challenges we have right now is that many of the drugs that are coming on the market are wildly expensive and not especially effective. And one of the things that we really want to look to do in this country and globally is figure out a smarter way to encourage drug development, not just the next drug that's 1% better, but a thousand times more expensive, but drugs that offer cures or, genuine life extenders those are harder to develop, but we can do better at encouraging their development.

CHAKRABARTI: But so then this most recent action in terms of what was in the Inflation Reduction Act again passed on a party line vote, I think in the Senate, even Vice President Kamala Harris had to issue the tie breaking vote to get the bill to President Biden's desk. We mentioned that it'll cap out of pocket costs for Medicaid, Medicare recipients and it will be, Medicare will be allowed to negotiate on 10 new drugs per year.

But you've also written that's already under threat. Why?

BAGLEY: So right now, there are, last I checked, nine currently pending lawsuits that the pharmaceutical industry has brought, challenging the Inflation reduction Act or its implementation. And they mostly argue, have a lot of arguments, but key argument is that this scheme is unconstitutionally coercive.

That you can't force them to take a lower price for their drugs. Because doing so violates their due process rights or their first amendment rights. Because they're forced to say that they agree to this maximum fair price when it's not really an agreement at all or they say it's a taking of their property without just compensation.

So there's a lot of these constitutional claims being pushed by very high-priced law firms in courts all around the country. And so far, those lawsuits are in their very early stages. It's too soon to tell what the judges are going to do, but I think most folk who've taken a hard look at the complaints and at the briefing in the case think that these are real long shots that pharma is going to do.

Throwing a lot of money at this, but ultimately, the law is very likely to take effect.

CHAKRABARTI: Professor Bagley, you've been covering this and talking about this and studying this for years and years. I feel like we've done a hundred shows of various flavor about why the government won't expand its negotiating power on behalf of all Americans when it comes to prescription drugs.

One of the obvious answers is that the pharma companies donate heavily to campaigns. I was just looking at 2022, just for that one-year packs on behalf of pharma companies donated more than $13 million, just in one year. Completely evenly split between Republicans and Democrats. And STAT has reported that more than two thirds of members of Congress cashed a pharma campaign check back in 2020. So there's a lot of money flowing around. Which carries a massive amount of influence.

But again, I come back to, if ideally, if there's a will, there's a way, and you said that you can't think of a single sort of structural reason why the United States wouldn't be able to more aggressively negotiate drug prices. Does that mean that for as long as there's this heavy lobbying and money influence that there is no actual concrete way forward on something that as Dr. Lexchin told us earlier in the show, every other peer nation in the world already does?

BAGLEY: I don't think I take quite that counsel of despair from the past. I think it is true that the pharmaceutical industry's lobbying might makes them very difficult to beat. But it's not impossible.

And the concerns that Americans across the political spectrum have with high drug prices have put a ton of pressure on politicians to do something and ultimately, we're starting to see, we're starting to see those efforts bear fruit. I think the Inflation Reduction Act, it's a step in the right direction.

It's not getting us all the way there, but it's a really important step. And it's a signal that the political system is not quite so locked up as people may fear. If people want to go get a handle on high drug prices. There is some play in the joints. It's hard. It's a fight. It's not going to be easy.

But I think it is not the case that we're just stuck. Are you sure about that?

BAGLEY: Nope. But what I can tell you is, when you ask, when you go out there and you ask Americans what is on their minds and what they care about, one of the very first things you're going to hear about are prescription drug prices.

And over time, politicians really do respond to that. Pharma dollars count for something, but votes count for more. And if you can get out there and you can credibly say, "I've taken a whack at drug prices," that's going to be a big political feather in your cap. And I think you're going to see the Biden administration bring out these claims about how much they've done to drive down drug prices as a key part of the message going into 2024. And I think it may be effective.

CHAKRABARTI: Yeah. But there's also some claims about we've done something to drive down drug prices that takes us back to the idea of importing from Canada, which had a lot of unanswered questions within those ideas, as well. So political theater, Professor Bagley, if I can borrow your phrase here.