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Drug Importation Proposals Gain Traction but Raise Cost and Operational Questions

Summary

The costs of ensuring the safety and efficacy of imported drugs and preventing the entry of counterfeit products are among the many factors that must be weighed against any potential savings from a drug importation program.

Scrutiny of the price of medicines in the US compared to other developed countries has intensified in the last year, culminating in a proposal by the Department of Health and Human Services (HHS) to introduce international reference pricing in Medicare. Federal attention to the issue has also increased; the first days of the 116th Congress have seen several bills that tackle the drug price differential, including a bipartisan bill to permit importation of pharmaceuticals for personal use.

While federal action would likely move slowly, if at all, states are also pursuing options to access lower-cost pharmaceuticals from abroad as a way to relieve pressure on strained budgets. In 2018, Vermont became the first state in the nation to enact a law calling for the design of a wholesale program to import drugs from Canada. As state legislatures now convene their 2019 sessions, at least 5 states have introduced bills to explore wholesale importation from Canada with the aim of generating savings.

States must design wholesale importation programs within parameters established by the Medicare Modernization Act of 2003, but specific program design could differ substantially from one state to another. For example, states have the flexibility to determine which drugs to import and whether to make them available outside of state programs. The cost of implementing and administering a wholesale importation program would vary widely based on the program design, as would the potential savings.

As states like Vermont assess the potential expense of setting up and operating a wholesale program, there are a number of direct and indirect costs to evaluate, including:

  • Testing and Monitoring Safety of Imported Products: An infrastructure to test and monitor product safety and efficacy would need to be developed as part of any state-level wholesale importation program.
  • Relabeling and Repackaging of Drugs: Imported prescription drugs would need to be labeled and packaged in accordance with US Food and Drug Administration (FDA) standards. Some of these costs may be borne by manufacturers, but states would also incur expenses (e.g., to provide oversight).
  • Safeguarding the Supply Chain from Counterfeiters: States will need to take steps to minimize the potential for counterfeit products to enter the supply chain.
  • Increasing Law Enforcement: In addition to preventing counterfeiters from interfering with the drug supply chain, any state that designs an importation program would have to step up enforcement efforts to ensure that imported drugs are not sold or distributed outside of state lines.
  • Program Administration: States would need technology platforms and processes not just to track imported drugs, but also to keep records, register participating pharmacies and plans, communicate with stakeholders, and monitor costs and inventories.
  • Reporting to the FDA: Any state that designs an importation program would likely have to partner closely with FDA and report data to demonstrate compliance.

In addition to these functions, the volume and nature of the drugs that the state decides to import would be key to determining the potential savings. Moreover, estimating differences in drug prices between the US and Canada is a challenging task—the 2 countries have different spectrums of approved drugs, sold in different doses, and with different utilization levels by patients. Finally, factors beyond a state’s control, such as international trade relationships, Canadian policies, and private sector behavior, could have a significant impact on the ability of importation programs to achieve states’ goals.

Notably, wholesale state importation programs would require federal HHS approval before moving forward with implementation to certify that such importation does not pose risks to public health and safety, and it can generate savings to American consumers. While some limited precedent exists for the short-term importation of products as a result of shortages and other disruptions, to date no HHS Secretary has certified a state importation program for the purposes of increasing competition in the US.

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