New taxes on prescription drugs imported from Canada could affect about 400 different drug products, according to a new analysis published in the Journal of the American Medical Association.
Mina Tadrous and two colleagues estimate that adding a 25% import tax, or tariff, to Canadian drug prices could increase U.S. prescription drug spending by about $750 million per year.
Import taxes on Canadian drugs might increase overall annual U.S. drug spending by only about 0.13%, but the researchers show in an appendix to the paper that the new import taxes could have a bigger effect on employer plan participants taking a few drug formulations made only in Canada.
Those include one type of bupropion, the antidepressant used in Wellbutrin; a formulation of the hormone testosterone; and two formulations of nimodipine, a calcium channel blocker used to treat people who have suffered from an “aneurysmal subarachnoid hemorrhage,” or brain bleed.
“The effects may differ for brand-name and generic drugs, with high-cost brand-name drugs likely absorbing short-term cost increases, but the long-term effects remain uncertain,” Tadrous and her colleagues write. “Historically, minor shifts in supply chains create shortages, particularly when manufacturers lack rapid production scalability to meet demand.”
The impact on the U.S. prescription drug market could be bigger if new import taxes end up applying to drug imports from other markets, the researchers write.
What it means: Any new import taxes could complicate employers’ efforts to cover prescription drugs.
The backdrop: The administration of President Donald Trump has talked about the possibility of imposing new import taxes on drugs and other goods, such as cars, made in Canada.
The administration has indicated that it might make an announcement about new import taxes on Wednesday.
Earlier this year, Black Book Research reported that 82% of the 200 health care executives it surveyed believed that imposing new import taxes could increase hospital and health care system costs by at least 15%.
Fitch Ratings suggested last week that new import taxes could hurt the credit profiles of some of the health care organizations it rates.
JAMA paper details: The new JAMA paper focuses on Canadian drugs. Canadian manufacturers produce only 173, or 5.6%, of the 3,099 drugs on the U.S. market, according to Tadrous and her colleagues.
Canadian manufacturers produce 411, or 1.9%, of the 22,082, drug products available on the U.S. market.
But Tadrous, a professor at the University of Toronto’s pharmacy school, and her colleagues found that Canadian manufacturers accounted for 50% or more of the supply of 52 separate U.S. drugs and were the sole sources of 28 U.S. drug formulations.
Manufacturers in India, China and the European Union make about 83% of the active ingredients in prescription drugs sold in the United States, according to the U.S. Pharmacopeial Convention.
The researchers emphasized that imposing import taxes on drugs from India, China and the EU could lead to much bigger effects on the U.S. pharmaceutical market than imposing import taxes on drugs just from Canada.
Import taxes on drugs from countries with bigger pharmaceutical manufacturing operations could worsen U.S. supply disruptions and lead to pressure for efforts to exempt pharmaceuticals from the import taxes, the researchers write.