Canadian Drug Savings on the Slide

The recent decline in the value of the U.S. dollar is delivering another blow to consumers trying to reduce their overall health costs.

While Americans could once expect savings of 50 percent by buying brand-name drugs from Canada, today’s savings are closer to 25 or 30 percent, says Gabriel Levitt, vice president of Pharmacychecker.com, a website that compares drug prices. The reason: The Canadian dollar used to be worth just 75 cents for every U.S. dollar. Today the two currencies are worth about the same.

That situation, coupled with the emergence in 2006 of Medicare Part D—which subsidizes prescription drug costs for older Americans—has cut in half the $1 billion a year they spend on drugs from Canada, Levitt says.

But despite the drop in savings, brand-name drugs remain cheaper in Canada while generics tend to be cheaper in the United States. And many Americans continue to buy from Canada when generics are not available, particularly those under 65 who are uninsured and those who must pay full price for drugs because they fall into the Part D “doughnut hole.” Despite the U.S. Food and Drug Administration’s stance against drug importation, Canadian online pharmacy officials say Americans remain the overwhelming majority of their customers.

“The reason people go to Canada is not that they want to go away,” says Stephen Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota. “It’s because of the price differential. It’s natural market behavior.”