As states pursue a wide range of legislation to address rising drug costs, four more states have joined Utah and Vermont to introduce bills to import prescription drugs from Canada through a state-run, wholesale operation.
This market-based approach to providing more affordable medicines from Canada, where prescription drugs cost on average 30 percent less than in the United States, is appealing to a politically diverse group of states, and is currently under review by legislators in:
- Colorado (S 80);
- Missouri bill studies the creation of an importation program (SB 722);
- Oklahoma (SB 1381);
- Utah (HB 163);
- Vermont (S 175); and
- West Virginia (HB 4294).
A fiscal analysis recently completed in Utah indicated the potential for millions in reduced spending due to the significant price differences between certain products sold in the United States and Canada. This month, NASHP is convening state legislative sponsors to share information and expertise about the importation policies in their states. Many of the importation bills currently under review are based on National Academy for State Health Policy’s (NASHP) model legislation.
If an importation bill passes in a state legislature and is signed into law by the governor, the next step is to seek certification from the US Health and Human Services Secretary Alex Azar by proving that the state’s importation program meets federal requirements to ensure both product safety and consumer savings.
NASHP’s model legislation was designed to meet federal requirements by taking the form of a state-administered system of wholesale importation and distribution limited to pharmaceuticals from Canada. States can decide whether to purchase lower-cost drugs for public programs only, or to expand the importation initiative to also serve commercial health plans.
The program’s imported drugs would be safe and would produce savings because a state would:
- Select only Canadian suppliers who are licensed and regulated under Canadian law;
- Select only drugs to be imported that are already approved for the Canadian market;
- Provide the drugs only to distributors, pharmacies and other dispensers, and health plans, that volunteer to participate in the program. Participants would agree to purchase and reimburse drugs at the import price and patients would share the cost savings and pay the import price as well. The imported drug costs would be made publicly available to create greater drug pricing transparency for consumers;
- Ensure that the imported products are distributed in-state only; and
- Monitor/audit the system for compliance, safety, and savings.
Salt Lake City, Utah: Today, Republican state legislator Norman Thurston introduced groundbreaking legislation to create a safe, state-run prescription drug importation program that would import high-cost drugs from Canada, where prescription drugs cost 30 percent less than in the United States.
The proposal for a whole-sale importation program of select, higher-cost drugs that are already licensed for sale in Canada would be among the first in the nation and promises to generate significant cost savings for the state of Utah and its consumers. The Utah bill closely follows model legislation developed by the National Academy for State Health Policy (NASHP), a nonpartisan group that works closely with state policymakers to develop state legislative and regulatory strategies to rein in pharmaceutical costs.
For more than a decade, Thurston, a respected health care advocate and member of NASHP’s Pharmacy Cost Work Group, has worked tirelessly to reduce state spending on prescription drugs. Aware of his “red” state’s concerns about regulations and the complexity of drug price transparency legislation implemented in other states, Thurston took a different approach to rein in drug costs by proposing drug importation.
“Utah will control which drugs are imported and will monitor this program so the savings make it all the way down to consumers when they fill prescriptions,” said Thurston. “The State of Utah pays for drug benefits for a quarter of its population, including state and local government employees and retirees, teachers, and Medicaid enrollees. At some point, we need to ask ourselves, ‘as a major drug purchaser, why aren’t we getting a better deal?’ Other major purchasers such as Canada and Europe get a much better deal than us.”
“The time is right for a well-run state importation program, considering the US drug market already relies heavily on pharmaceutical drug importation,” observed NASHP Executive Director Trish Riley. Currently:
- 80 percent of raw ingredients for drugs made in the United States are imported from China and other countries;
- 40 percent of finished drugs used in the United States are manufactured in other countries;
- The U.S. Food and Drug Administration (FDA) has had a cooperative agreement addressing drug regulatory matters with Canada for years, more than 30 Canadian drug manufacturers are FDA-registered to produce drugs for US markets; and
- About 20 percent of drugs licensed for the Canadian market are made in the United States.
“Consumers continue to be outraged by the price of necessary prescription drugs, and the federal government has not acted to stem the cost of drugs,” noted Riley. “States can be great laboratories for innovation and this is a great opportunity for Utah to be a national leader and develop new approaches that can be adopted by other states and ultimately by the federal government.”
Early in 2017, Thurston convened a working group of Utah stakeholders, including state agencies that pay for prescription drugs, commercial health plans, pharmacists, community clinics and others, to outline how a Utah wholesale importation should operate. The Utah work group tailored the bill closely after NASHP’s model.
The group’s recommendation culminated in the bill Thurston introduced today. Thurston developed the bill in compliance with federal regulations governing drug importation that require guarantees of drug safety and consumer savings. The legislation also requires federal approval from the Secretary of the US Department of Health and Human Services. Thurston and members of his stakeholder group indicated they are confident the federal government will approve the Utah program.
The legislation will safeguard the quality and safety of imported drugs by:
- Contracting with licensed, regulated drug wholesalers and distributors in Utah and Canada;
- Importing only drugs licensed for sale in Canada;
- Testing imported products for purity on a sample basis if needed; and
- Limiting distribution of imported drugs to only Utah.
The legislation will deliver significant consumer savings by:
- Monitoring market competition among Utah wholesalers;
- Ensuring that consumers pay similar prices to those charged in Canada; and
- Widely publicizing the prices of the imported products so consumers know what they can expect to pay.
Utah is one of several states currently considering drug importation legislation.
NASHP’s Center for State Drug Price Action: Provides technical and strategic assistance to states to reduce their prescription drug spending and regularly convenes its Pharmacy Costs Work Group to address policy and strategic issues. The work group is made up of leaders from governors’ staff, state legislatures, Medicaid programs, public employees, attorney generals’ offices, state-based insurance exchanges, comptrollers’ offices, and corrections departments. The group explores new approaches to limit pharmaceutical costs by examining the many levers state governments have as policymakers, regulators, and purchasers.
About NASHP: The National Academy for State Health Policy (NASHP) is an independent academy of state health policymakers. It is dedicated to helping states achieve excellence in health policy and practice. A non-profit and non-partisan organization, NASHP is the “United Nations of state health policy,” providing a forum for constructive work across branches and agencies of state government on critical health issues.
For more than a decade, Utah State Legislator and Director of the Office of Health Care Statistics Norman Thurston has worked to reform his state’s health care system, including its Medicaid program, and is considered one of the state’s “go-to” health care policymakers.
Thurston, a Republican, has worked to reduce state spending on prescription drugs and is a member of the National Academy for State Health Policy’s (NASHP) Pharmacy Cost Work Group and its Health Care Access and Financing Committee. Sensitive to his state’s aversion to regulations, he is taking a unique approach to reining in drug costs by proposing legislation to import prescription drugs from Canada.
Recently, NASHP caught up with Thurston at its 30th Annual State Health Policy Conference in Portland, OR, to ask him about his prescription drug initiative.
How did you get interested in health care policy?
When I was in graduate school for applied microeconomics looking for field of emphasis, someone suggested I look into heath care because of the expected growth in health economics research. It turned out to be excellent advice. (Thurston, a Utah native, has a masters and PhD in economics from Princeton.)
How did you come to work for lower prescription drug costs?
NASHP suggested that states look at this. In the health care statistics world we are of course always looking at costs, and I love looking at data, so this was naturally an interesting question.
You have sponsored a bill to import drugs from Canada, where most prescription drugs cost a fraction of what they do in the United States. Why did you choose that approach instead of proposing a bill to regulate drug costs?
First, federal law already allows importation of drugs to happen, and passing a rate-setting bill (with a cost control commission that regulates drug costs like a public utility) may be fine for some blue states, but it’s not very appealing to a red state like Utah. We decided to look at something creative, and importing drugs fit our abilities.
Utah is unique in its politics and approach. We’re dealing with an industry that has a lot of market power, and you need to address market power with market power. The State of Utah pays for drug benefits for a quarter of its population (including state and local government employees and retirees, teachers, and Medicaid enrollees.) At some point, we need to say, ‘as a major drug purchaser, why aren’t we getting a better deal?’ Other major purchasers such as Canada and Europe are getting a much better deal than us.
Where does the bill stand today?
We’re drafting it now and working with stakeholders, including payors, public employee health plans, regional health carriers, retail pharmacists, and pharmacy benefit managers. Drug manufacturers are interested too, though perhaps not in the way we want them to be just yet.
The constituency I worry the most about in terms of how they will react to this idea is the free market conservatives, many of them are not sure how to react. Drug manufacturers are given a patent on their product and they have a monopoly. So how much latitude should we give someone as a monopolist? How should we approach this and talk about it?
Then why not take a rate-setting approach toward this monopoly?
Politically, it wouldn’t fly in Utah, far more people would have a problem with it and would wonder how would state government would know what’s a fair drug price? But when it comes to importing drugs from Canada, there are drugs that cost more in Canada and there are some that cost 10 percent of what they cost here. We need to figure out what they are and how to gain some real savings.
What’s the hardest aspect about convincing Utah to import drugs from Canada?
Most of it is logistics, how do we get them here, labelled correctly, and distributed to patients? It’s a logistics issue, not a philosophical one, and there are ways of addressing it. Our next session starts in late January. I’d like to have a solid draft of the bill in mid-December and start circulating it for comment and feedback.
Could you have done this without NASHP?
I think some things would have happened without NASHP, but NASHP has found a way to bring us together and move the dial forward and ramp it up. I like the 11-point report we produced on drug price controls that has gotten a lot of people’s attention and I’m surprised at the number of states that are doing things.
Thurston can be both a state lawmaker and employee because, he explained, the Office of Health Care Statistics performs objective tasks such as collecting and analyzing data about health care cost and quality and therefore avoids any conflict of interest when it comes to policymaking.
- As of July 1, 2011, there were 269,643 beneficiaries enrolled in the state’s Medicaid program, 268,984 of whom were enrolled in some form of managed care.
- Physical health services were delivered through a commercial managed care organization (MCO), a Medicaid-only MCO, a primary care case management program, or a prepaid ambulatory health plan (depending on geography). As of 2014, Utah is served by four managed care plans providing physical health benefits; the state now refers to these health plans as “Medicaid accountable care organizations.”
- Mental health and substance use disorder benefits are provided to Medicaid beneficiaries through 10 Prepaid Inpatient Health Plans that together enroll 225,761 beneficiaries.
- Children living in select counties are required to select a dental plan (Delta Dental or Premier Access). Children living outside those counties receive oral health services through fee-for-service Medicaid.
- All Medicaid beneficiaries are enrolled in a transportation-only prepaid ambulatory health plan.
The Utah Administrative Code (R414-1-2) defines medical necessity for Medicaid.
“‘Medically necessary service’ means that:
|Initiatives to Improve Access
|Reporting & Data Collection||
The Utah Medicaid program produces Health Plan Quality of Care Reports based on both Medicaid and commercial health plan performance on HEDIS measures. Metrics tracked for Medicaid managed care organizations include measures of:
In key findings from the reports, the state noted that in 2013 “Medicaid HMOs performed above national averages on childhood and adolescent immunizations.”
Developmental screening and screening for possible mental health needs is expected to be a part of well-child visits in Utah. The state’s Medicaid provider manual recommends that physicians use the following tools:
The Child Health Evaluation and Care provider manual also includes directions to physicians for referring children with suspected mental health needs to mental health providers for additional assessments.
|Support to Providers and Families||
Support to Families
Utah Medicaid hosts a Children’s Health and Evaluation Care website that offers families information on well-child care.
A Medicaid Member Guide offers more information about covered services.
Medicaid partners with local public health agencies, which use public health nurses to notify families when children are due for well-care visits and can help families schedule appointments.
Support to Providers
A Child Health Evaluation and Care provider manual informs physicians of services covered under the EPSDT benefit and lists billing codes for related services.
Utah’s Medicaid agency is using a CHIPRA Quality Demonstration Grant in collaboration with public and private partners to support implementation of the medical home model in both primary care and sub-specialty pediatric practices. This work includes embedding “Medical Home coordinators” in practices to support care coordination for children.
||Utah’s Medicaid program reimburses providers for the application of fluoride varnish to children (up to age 3) during a well-child visit. Physicians are asked to use a billing modifier to indicate fluoride varnish was applied during a well-child visit.|
The eight states participating in the Maximizing Enrollment program aimed to simplify and streamline enrollment and renewal policies, systems and processes for Medicaid and CHIP and prepare for ACA implementation. These state profiles offer a snapshot of the states’ work within the program by highlighting the following:
- Where states started;
- Major Simplifications Implemented as a result of Maximizing Enrollment; and
- Lessons Learned
|New York||2.1 MB|
Utah is actively building medical homes for children through a Children’s Health Insurance Program Reauthorization Act (CHIPRA) quality demonstration grant. The $10,277,361 grant was awarded to an Idaho-Utah partnership and runs from February 2010 through February 2015. It is supporting the Utah Children’s Healthcare Improvement Collaboration (CHIC) in hosting learning collaboratives, increasing pediatric practices’ use of health information technology, and helping 12 Utah practices become medical homes. The practices, which together serve more than 80,000 children, will be asked to focus on improving care for children with special health care needs. According to the project’s CHIPRA proposal, payers will share the non-CHIPRA covered costs in proportion to market share.
In March 2010, Utah’s governor signed into law HB 397 entitled “Medicaid Program Amendments.” Having passed the state house and senate without objection, HB 397 included a requirement for the Department of Health to “determine the feasibility of implementing a three year patient-centered medical home demonstration project in an area of the state using existing budget funds.” The Department of Health, Division of Medicaid and Health Financing fulfilled this requirement with a December 2010 report. The report concluded that, “without additional funding, and given the many components of a medical home, it would not be feasible to launch a medical home demonstration within existing funding.” The report recommended concentrating on the CHIPRA project.
- Children’s Health Insurance Program Reauthorization Act (CHIPRA) quality demonstration grant.
- Utah receives support from the Agency for Healthcare Research and Quality (AHRQ) for evaluation purposes.
Key Children’s Healthcare Improvement Collaboration (CHIC) partners include:
Participating practices are expected to include a family partner in their practice teams.
|Defining & Recognizing a Medical Home||Recognition: Practices will be expected to attain National Committee for Quality Assurance (NCQA) medical home recognition.|
|Aligning Reimbursement & Purchasing||Utah’s Children’s Health Insurance Program Reauthorization (CHIPRA) proposal anticipated payments of $40,000 for each participating pediatrician in primary care, and payments of $40,000 for each pediatric subspecialty practice. Over the course of the project, increasing shares of compensation will depend on practice performance. A project budget is included on page 8 of the proposal.|
|Supporting Practices||Practices participating in the Children’s Healthcare Improvement Collaboration (CHIC) will receive support through in-person learning sessions (one or two annually), site visits (three to six times per year, with a practice coach and/or peer mentor), and conference calls (six to ten annually).|
|Measuring Results||Utah’s Children’s Health Insurance Program Reauthorization (CHIPRA) proposal included funding for an independent evaluation. Utah anticipates that the evaluation will focus on:
Project leaders anticipate drawing on Utah’s all-payer claims database to use other practices as controls.
Under construction–NASHP is continuing to populate this resource so please check back!
If you have any resources about the Medicaid benefit for children and adolescents in your state that you would like to share, please email firstname.lastname@example.org.
The topic of this meeting will be using innovative technology in eligibility and enrollment. We are looking forward to seeing in person their E-Find and MyCase systems as well as their use of online chat and text messaging to communicate with applicants and enrollees.
|Click for the eBook||7.6 MB|
By December 14, 2012, each state establishing a state-based exchange will submit a blueprint to HHS, capturing the most detail yet available regarding keys aspects of the exchanges. States participating in a partnership exchange must submit their blueprints before February 15, 2013. In this webinar, we heard from three state leaders: Peter Lee of California and Colleen Burns of Illinois, who provided inside looks at their blueprints and at the policy decisions and visions behind them. And panelist Norm Thurston of Utah, a state that has not yet declared its intent, described factors the state is considering in coming to its decision, and what choices state leaders have made so far.
(Moderator) Elizabeth Cronen,
Community Manager, National Academy for State Health Policy
Sarabeth Zemel, Program Manager, National Academy for State Health Policy
Rachel Dolan, Policy Analyst, National Academy for State Health Policy
Peter Lee, Executive Director, California Health Benefit Exchange
Colleen Burns, Special Counsel for Health Policy, Illinois Department of Insurance
Norm Thurston, Health Reform Implementation Coordinator, Utah Department of Health Care Finance