For decades, critics of the U.S. drug pricing system have advocated importing drugs from Canada as a convenient shortcut to lower prices. The Food and Drug Administration’s recent release of a proposed regulation to create a process for approving state-sponsored importation plans is one step closer to that goal. A closer look shows that it’s actually a false step.
Career FDA staff, supported by previous FDA commissioners and Health and Human Services secretaries, have long maintained that there is no way to open a drug import channel into the U.S. pharmaceutical supply chain without violating the 2003 law authorizing Canadian drug imports that required the FDA to certify that importation would create no safety risk to the public. Now, with a heavy twist of the arm from President Trump’s strong support for importation, the FDA has been forced to describe a possible pathway for it.
Importation has never been about actually bringing drugs into the U.S. — it’s about bringing their prices here. The drugs that people want to import are not like Caspian Sea caviar, French Bordeaux, or Chilean sea bass. The drugs Americans want are already available in the U.S. in plentiful quantities, and some are even produced or finished in U.S. factories. But the U.S. wholesale price of these drugs is often multiples of what drug companies charge purchasers outside the U.S. Inconveniently, we can only import the prices along with the actual drugs.
Bills in the House of Representatives (H.R. 3) and the Senate (S. 2543) that take direct aim at high drug prices make drug importation from Canada seem like a bit of an anachronism. However, it is an anachronism that enjoys widespread support as a quick fix since these bills are far from certain to advance in the near future. Florida has already advanced a detailed drug import plan, and several other states have taken steps toward devising their own plans. With Florida a likely battleground state in 2020, the president is eager to deliver its voters lower drug prices.
Enter the FDA. Its 44-page proposal, published formally in late December, is serious and well thought through. To ensure the safety of the U.S. drug supply, FDA has set out a detailed, complex, step-by-step process that a state would need to follow if it wishes to import drugs for its Medicaid and other state programs, or for use by private health plans.
To do its best to ensure safety, the FDA proposes allowing only the shortest possible supply chain: manufacturer to exporter to importer to patient. While that makes sense, it also creates a practical problem for the program’s success: Why would a manufacturer sell its drug to anyone who is going to ship it into the U.S. and undercut its prices here?
In other countries with active drug sales across country borders, such as those in the European Union, exporters can buy their drugs from other wholesalers, and even pharmacies, through a process of drug arbitrage in which they find products in low price markets and resell them in high price markets. That would not be allowed if the FDA regulation becomes final.
And then there is the issue of why Canada would participate in this scheme when exports from the country’s small market could create supply shortages that would harm Canadians. Health Canada has already signaled it would “take action to ensure Canadians have uninterrupted access to the prescription drugs they need.” The FDA proposal has given the Canadians an easy path to such action. To serve as a drug exporter, a Canadian entity must have — you guessed it — a license from Health Canada. How quickly would Canada impose a new licensing requirement that prohibits participation in the U.S. import program?
Even assuming that a Canadian exporter can get its hands on enough product to export, and that the Canadian government decides to look the other way in the interest of promoting its own businesses or not angering the Trump administration, the proposed rule raises the very real question of whether the costs of complying with its many requirements are worth the savings.
Here are just a few of the duties an importer would have to agree to:
- screening the drugs for damage and counterfeiting
- relabeling the drug with the U.S.-approved label information
- gaining FDA approval for each shipment
- having samples of each shipment tested at an FDA approved laboratory
- creating a system for collecting and investigating any physician or consumer reports of adverse reactions
- sharing with the FDA detailed records that each requirement has been met
Each of these is costly, and a misstep could lead the FDA to terminate an importer’s ability to do business. Like a regulatory game of Jenga, the FDA has also stipulated that if the courts remove any piece of its process, the entire thing tumbles down and the FDA will terminate this entire importation plan.
And yet the FDA is saying, “If you really want to try, go for it!” Whether anyone takes the agency up on the offer will depend on what the final rules look like. I anticipate that importation proponents will raise objections to some of the requirements in comments that are due by March 9. Based on typical regulatory timetables, the FDA could finalize its rule and be open to considering state applications as early as this summer.
Given the political momentum behind importation, it’s a safe bet that one or more states will take up the challenge and at least initiate the process of gaining FDA approval for its importation plans and start the process of seeking a U.S.-based drug wholesaler or pharmacy partner. But given the approach FDA is proposing, it’s a long shot that states will see significant savings, or even enough to justify the cost of setting up such a program.
If drug importation is not the answer to high drug pricing, it will continue to fall to Congress and the White House to see if agreement is possible on any of the current proposals for the U.S. to directly deal with prices rather than delegating that role to our neighbors to the north.
Ian D. Spatz is a senior adviser with Manatt Health.