Uncertainty Clouds States' Plans to Import Prescription Drugs From Canada

States are receiving mixed messages from the federal government and have unanswered questions about their plans to lower drug prices.
by | May 1, 2019 AT 5:29 PM
Pills lay strewn about on an electronic tablet as the Google search engine awaits further entry.
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Two states often on opposite sides of the political spectrum have landed on the same solution to rising drug prices: import prescriptions from Canada.

Florida is poised to become the second U.S. state to pass a drug importation bill. Vermont passed its legislation last year, and Florida lawmakers sent theirs to Gov. Ron DeSantis, who is expected to sign it, on Tuesday.

Thirteen other states have proposed importation bills this year, according to the National Academy of State Health Policy, though most haven’t moved beyond committees.

But patients in Florida and Vermont shouldn't expect lower drug prices just yet. The states need approval from the federal government to make their vision a reality. Even if they get it, there's uncertainty over whether this idea would work.

The United States has the most expensive prescription drugs in the developed world. Retail prescription costs per capita in the U.S. tally $1,100, compared to $669 in Canada. To put that into perspective, the cost of Lipitor, a cholesterol drug, can be more than $150 in the U.S. but just $50 in Canada.

Drug prices are a popular talking point among Democrats running for president. Several candidates support policies that would lower drug prices. But the issue is gaining traction with Republicans. U.S. GOP Sen. Chuck Grassley co-sponsored a bill this year with Democratic Sen. Amy Klobuchar, a presidential contender, that would crack down on some rising drug costs.

 

Mixed Messages

U.S. Health and Human Services Secretary Alex Azar came out against Canadian drug importation last year, calling it "a gimmick" with "no meaningful effect." Earlier this year, the federal Food and Drug Administration (FDA) urged consumers to stop using prescriptions from our northern neighbor. (Hundreds of public and private employers across the country have been helping their employees buy drugs from Canadian companies since the early 2000s.)

But Florida officials are getting a different message from the White House.

"I spoke personally to President Trump ... about this. He's not only supportive, he's enthusiastic," DeSantis said in February.

Many other developed countries pay a lot less for prescription drugs because they have an oversight organization that negotiates a fair rate. In the U.K., the federal government is the buyer; the Netherlands has an alliance of private insurance companies; and Canada has a "semi-judicial" governmental body that controls prices on the provincial level.

Apart from the Veterans Administration, the U.S. doesn't have this sort of federal oversight to clamp down when drugmakers raise their rates. The high cost of drugs in America can also be attributed to the slow process for approving generic drugs and a patent that allows manufacturers to have a monopoly on drugs, according to a 2016 study in the Journal of the American Medical Association.

"We need more of a system in place where we can say to manufacturers, 'We’re not going to pay that price.' We need more leverage on the national scale," says Shawn Bishop, vice president of the Controlling Health Care Costs program at the Commonwealth Fund.

Opponents of the idea -- pharmaceutical groups, in particular -- argue that importing prescription drugs could be dangerous. According to the FDA, around 80 percent of ingredients in prescriptions used in the U.S. are already manufactured outside the country. And during the 15 years since some employers started allowing employees to use Canadian drugs, the FDA has had no reports of any harmful side effects, according to Kaiser Health News.

 

Unanswered Questions

Once DeSantis signs the bill as expected, Florida plans to submit two importation proposals to the federal government: one for public agencies, including Medicaid and the corrections department, and one for commercial pharmacies run by the state’s Department of Business and Professional Regulation. If approved, both proposals wouldn’t go into effect until 2021 at the earliest.

In Vermont, state officials aim to have their proposal to the federal government by July 1. It hasn't yet been decided when it would go into effect or if it would be for public and commercial use.

It's unclear, however, whether Canadian drug manufacturers will agree to supply the U.S. on this scale, and if they can handle the needs of a state as populous as Florida.

"In Vermont could they pull that off? Sure. But Florida is a really big state," says Bishop. "Can Canada supply Florida, or will there be shortages?"

Even the people pulling together the proposal in Vermont concede that there are more questions than answers right now.

"What will be the context of the federal government’s permission? I doubt it’ll be a slip that says ‘do it.’ With Vermont being so small, is there a viable business for that [importation]?" asks Al Gobeille, the state’s human services secretary. "We don’t want to look too far down the road."

Still, the state plans to task a state agency with becoming a licensed drug wholesaler or to contract with a licensed drug wholesaler that would be responsible for importing, repackaging and ensuring the drugs are up to FDA standards.

The state estimates that importing drugs from Canada could save between $1 million and $5 million a year for commercial insurance plans. But significant savings aren't likely for Medicaid because drugs paid for through the Medicaid Drug Rebate Program already come with a steep discount. There's currently no estimate for how much it would cost to establish the program.

Despite Vermont's caution, drug pricing experts appear optimistic.

"I’ve thought for a long time that states could do this," says Jane Horvath, a consultant on state drug cost containment policies. "We have a global supply of manufacturing now, and over the past 20 years, manufacturing has largely moved overseas. This is not a stretch to do anymore, particularly for a state."

 

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