In July 2019, after four states including Florida, Vermont, Colorado, and Maine, passed bills allowing the states to create a wholesale importation program to purchase drugs from Canada, the U.S. Department of Health and Human Services and FDA released a safe importation action plan. With Vermont being the only state with a laid-out importation plan, the idea, if successful is expected to take effect not before late 2020.
Safe importation action plan by HHS and FDA
As states form a consortium for a united move toward drug importation into their territories, a nod from the Administration is required for the agenda to materialize. Recently, HHS released a guidance document with two “pathways” for importation to gain FDA and HHS clearance, which is still a big “if”.
The first pathway would authorize states, wholesalers, or pharmacists to propose demonstration projects to import eligible drugs that are versions of FDA-approved drugs. Controlled substances, biological products, infused drugs, intravenously injected drugs, drugs inhaled during surgery, and certain parenteral drugs would be excluded from this pathway.
The second pathway would allow manufacturers to import versions of FDA-approved drugs sold in foreign countries that are the same as the U.S. versions. They would use a new National Drug Code that allows for lower pricing than required under current distribution contracts. The manufacturer would need to obtain FDA clearance for its foreign version of the FDA-approved drugs. Uptake of the second pathway could be strong given that manufacturers would have an out from U.S. contracts blocking them from offering lower-cost versions of their drugs.
Why import drugs from Canada?
Prescription drugs in Canada cost on average 30 percent less than in the United States. Unlike the United States, the Canadian government can directly negotiate prices with drug makers. Cholesterol-lowering drugs like Crestor cost $40 in Canada for a month’s supply, while the drug costs $300 in the United States. Also, many Americans travel to Canada to purchase insulin, which costs roughly one-tenth of what it costs in the United States.
Key challenges and impact of importing drugs from foreign markets
Though initial deterrents were expected to be the cost of laying supply chain channels and determining safety and quality of import, the following could be substantial roadblocks for drug importation:
- Undermining the track-and-trace system, a regulatory system designed to stop counterfeit drugs from entering the U.S. supply chain.
- FDA warnings about the risk of counterfeit and contaminated products.
- The existing state laws and HHS directive do not side with importation of biologics and insulins. Pharmaceutical manufacturers, however, could import their own biologics or insulins, though it’s doubtful how interested drug makers would be in importing their own products and increasing their manufacturing capacity to sell at a lower price.
- Wholesalers could act as purchasers, but historically any such attempt has been soiled by pharmaceutical lobbying.
- The Canadian healthcare industry has vociferously opposed importation, anticipating pressure on existing shortages in the Canadian drug market. In addition, there is a lack of wholesalers willing to participate in an export or import arrangement.
- If this plan moves forward, it could potentially elevate Canadian drug prices and eventually negate any U.S. consumer savings as prices find equilibrium.
- S. drug manufacturers could restrict exportation from Canada by modifying contracting agreements.
- Support from U.S. pharmacies for filling these prescriptions without any benefits also seems unlikely.
A plan inundated with variables
With Canadian elections coming up, teamed with supply deficits in the country, Canada is far from a promise of drug export. The Canadian Health minister is worried, like most other stakeholders, that Canada will be unable to meet the demands of a country 10 times more populated. Exporting from Canada, where allotment of drugs is predetermined and managed based on historic use, will not be easy.
With only a guidance from HHS in place, states await the secretary’s approval to initiate the process of importation. HHS Secretary Azar was not in direct support of drug importation in the past, often citing numerous roadblocks. As 2020 Congressional elections are due, among many other policies, drug importation’s life hangs in the balance.