How Vermont Will Implement Its Groundbreaking Rx Drug Importation Law

Vermont is the first state in the nation to approve a wholesale program to import lower-cost prescription drugs from Canada, following Gov. Phil Scott’s signing of the landmark law last week. Vermont now begins the task of winning approval from the secretary of the US Department of Health and Human Services (HHS) and implementing its program.

What federal requirements must Vermont’s importation law meet to win approval?

  • The drugs must be tested regularly for safety and purity;
  • The program will not put consumers at greater health risk than they are under the current drug supply system; and
  • The program will yield significant savings to the state’s consumers.

Vermont carefully crafted its importation law to meet federal requirements. HHS allows programs of wholesale importation of drug from Canada, as long as consumers benefit from lower drug costs, drug safety is assured, and opioids are not among the drugs imported.

The new law establishes checks and balances to guarantee it meets the federally-mandated cost savings and drug safety requirements by:

Guaranteeing safety: Vermont can only purchase drugs only from Canadian government-regulated suppliers.

Achieving savings: Vermont will only import drugs that are expected to generate substantial savings for its consumers. The imported drugs cannot be sold outside Vermont.

Sustainable funding: Vermont will charge a nominal fee on each prescription, or establish another financing mechanism, to ensure that the program is funded in a way that does not jeopardize consumer savings.

Careful oversight: The law requires a “robust” audit and oversight process to guarantee cost savings. The state attorney general will monitor the program for “anticompetitive behavior” by industries that are affected by a wholesale prescription drug importation program.

Vermont’s Agency for Human Services is responsible for applying to HHS for approvals needed to initiate the program, and it will begin implementation within six months of getting state funding and federal approval. Its implementation plan includes the following steps:

Step 1: The state will either become licensed as a drug wholesaler itself or it will contract with a Vermont-licensed wholesaler. Next, it will contract with one or more Vermont-licensed drug distributors who will use existing drug supply chains to provide proper distribution of drugs throughout the state.
Step 2: Vermont will create a registration process for health insurance plans, pharmacies, and health care providers that want to participate in the program.
Step 3: The state will work with payers and others to identify which high-cost drugs are expected to yield the greatest cost-savings to consumers if they’re imported from Canada. It then arranges to import those drugs in bulk from licensed Canadian suppliers.
Step 4: To guarantee pricing transparency and accountability, Vermont will publicize the prices of imported prescription drugs widely, create a marketing and outreach plan, and set up a hotline to answer questions and address the needs of consumers, employers, health insurance plans, pharmacies, health care providers, and others.
Step 5: Vermont will audit the program and report annually to the House Committee on Health Care and the Senate Health and Welfare and Finance committees about which drugs are imported and the number of participating pharmacies, health care providers, and insurance plans. The law also requires detailed reporting from insurance plans about their drug costs and the savings achieved through importation.

NASHP will work with Vermont officials and continue to report on Vermont’s application to HHS and its implementation of the landmark importation initiative.

Read NASHP’s model drug importation legislation, on which Vermont’s new law is based.
View an easy-to-read infographic on the steps required to implement wholesale importation.