As expected, last week the Pharmaceutical Research and Manufacturers of America (PhRMA) filed suit in US District Court for the District of Columbia to block a new federal rule that allows states to import less costly prescription drugs from Canada. Also last week, the Canadian Minister of Health issued an order prohibiting the bulk export of prescription drugs that face shortages in Canada.
The federal importation rule, slated to go into effect this week, requires states to first obtain certification for their importation programs from the US Secretary of Health and Human Services. To achieve certification, a state program must demonstrate it is safe and has the ability to deliver consumer cost savings.
Rather than leave this certification in the hands of the HHS Secretary, PhRMA along with the Partnership for Safe Medicines and the Council for Affordable Health Coverage asked the federal court to stop the rule, arguing state importation programs cannot be safely implemented while raising questions about their cost-savings.
Canada Limits Rx Exports in Short Supply
The Canadian order, designed to protect that country’s domestic prescription drug supplies, applies to controlled substances (which US federal law already prohibits importation of under any circumstances) and other prescription drugs. An analysis (Q&A: The Facts about Canadian Drug Shortages) of past drug shortages in Canada indicates the majority of shortages have involved generic drugs, which are not a primary target for US importation. State programs are designed to focus on high-cost, brand-name medications that would generate the greatest savings.
NASHP analyzed more than 60 brand-name drugs that states have identified and evaluated for potential importation and found that fewer than a quarter of them had ever appeared on Canada’s lists of drug shortages between March 2017 and January 2020, with only two of them appearing on the list as of January 2020.
State Importation Work Continues
Vermont, Maine, Colorado, and Florida had already submitted their initial importation program designs to HHS Secretary Alex Azar before he issued his final rule on Sept. 24, 2020. Florida recently submitted a second proposal that responds specifically to the requirements laid out in the final rule. Two other states, New Mexico and New Hampshire, plan to submit applications soon to meet deadlines in their state’s importation statutes.
Two other recently issued federal rules related to drug pricing are also expected to face legal challenges by the pharmaceutical industry:
- One rule lowers Medicare’s prices for certain drugs to the lowest price available internationally, and
- Another ends exemptions allowed by an anti-kickback law that currently protects drug manufacturer rebates.
States have also faced legal challenges for their new laws that prohibit price gouging, regulate pharmacy benefit managers, require drug price transparency, prohibit industry tactics to delay the introduction of generic drugs, tax opioid manufacturers in order to fund state-level efforts to address addiction, and protect consumers from the high cost of insulin.
Despite numerous industry challenges, states are continuing to implement laws and to create new legislative approaches to curb drug costs. As state legislatures reconvene in January, many will continue to press for relief from high drug prices. In the meantime, all eyes are on the federal transition to the Biden Administration and his agenda for drug pricing. States remain active and are eager to partner with the federal government to achieve savings for consumers.
The future of importation may hinge on the Biden Administration’s ability to work with states and the Canadian government to allow importation to succeed while allaying Canadian fears. Meanwhile, states implementing importation continue their hard work. Some states will watch for results while others are pivoting to new strategies such as establishing international reference rates which, in essence, allows a states to import Canadian prices in lieu of importing drugs.