Managing High Drug Prices through Importation: We Can Get to “YES”

There is growing public pressure to find an effective way to address the rising prices of prescription drugs. Multiple drug price bills await action in Congress and more than 80 bills have been introduced in state legislatures in 2017.

Among the variety of approaches aimed at managing drug prices, importation from other countries is an approach that comes up repeatedly. There are lots of analyses about how the cost of drugs is much lower in Canada (see table below) and that the Canadian regulatory approach to manufacturing is as good and as safe as the U.S. system.

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The public supports the idea of importation from Canada, so why can’t we import drugs from Canada? Actually, we can. Federal law does allow the Secretary of Health and Human Services (HHS) to approve personal and wholesale importation from Canada if certain standards are met. To date, no one has been able to meet those standards.

The NASHP Pharmacy Costs Work Group believes there is a way for the federal government and states to get to ‘yes’ on a program of wholesale importation. The diverse group of state officials who comprise this Work Group have developed a model wholesale drug importation program that would meet the two major federal law criteria that the HHS Secretary must certify in order for a program to move forward:

  • Consumer safety on par with the U.S. drug supply chain system and
  • Significant consumer cost savings.

The model program also addresses and resolves the administrative burden concerns of the Food and Drug Administration (FDA).

What does this model bill do?
In brief, the model creates a state-administered system of wholesale importation and distribution, limited to pharmaceuticals from Canada. States could decide whether to purchase lower cost drugs for public programs only, or to expand to include commercial health plans. The program would be safe and produce savings because a state would:

  • Select the Canadian supplier that is otherwise licensed and regulated under Canadian law (and could be licensed under state pharmacy or wholesaler law, as well);
  • Select the drugs to be imported that are otherwise approved for the Canadian market;
  • Solicit the voluntary participation of distributors, pharmacies and other dispensers, and health plans. Participants would agree to purchase and reimburse drugs at the import price and patient cost sharing would be based on the import price as well. Publicly post the imported products and the acquisition costs to create greater transparency for consumers;
  • Ensure that the imported products are distributed in-state only; and
  • Monitor/audit the system for compliance, safety and savings.

The Importation Model Act  and explanatory document contain more operational detail. Although a state could select another country or expand the number of countries from which imports are purchased, the Work Group selected Canada because its regulatory approach is on par with the regulatory approach of the U.S.

Critics may argue that this model imports price controls. To that point, it is worth noting that the Canadian Patented Medicines Price Review Board seldom has to act to set the price of a drug[1]. Instead, drugs tend to come to market in Canada at more modest prices, seemingly by virtue of the Board’s existence and authority.

Concern about drug pricing is at an all-time high. Drug importation is high on the list of solutions the public wants to pursue. The time is right for new thinking and novel solutions on the issue. This model act resolves all three major concerns raised by the FDA: costs/savings, safety, and agency administrative burden. Until we can arrive at a U.S. system that encourages pricing that is both affordable and reflects the value of biopharmaceuticals, states can advance innovative approaches that can inform the national policy debate.

What are the next steps?
NASHP Pharmacy Costs Work Group will encourage, support, and assist states wishing to advance wholesale importation programs, just as we have with states advancing drug price transparency legislation. We continue to update the resources and information relevant to state officials through our  website. State officials who are interested in this model legislation will have access to a legislator’s guide and additional background materials. Please contact Jennifer Reck to receive this state-only material.

[1] According to the records published by the Canadian Patented Medicine Prices Review Board, of the 86 new drugs eligible for review in 2015, only five drugs required Voluntary Compliance Undertakings (VCUs) from patentees. Of the 103 new drugs eligible for review in 2014, only five drugs required VCUs. A VCU “is a written commitment by a patentee to comply with the Board’s Guidelines, including adjusting the price of the patented drug in question to a non-excessive level and offsetting any excess revenues that may have been received as the result of having sold the patented drug at an excessive price in Canada. Patentees are given the opportunity to submit a VCU when Board Staff concludes, following an investigation, that the price of a patented drug product sold in Canada appears to have exceeded the Guidelines.” (