Recent legislative committee hearings in Maryland, Florida, and Illinois provide a national snapshot of states’ diverse and innovative proposals to reign in drug costs.
Maryland’s drug affordability review board: Earlier this month, Maryland’s House Health and Government Operations Committee and Senate Finance Committee held lengthy hearings on an innovative bill that creates a state prescription drug affordability review board (see NASHP’s model legislation here.)
The board would review drugs whose price increases met or exceeded a certain threshold and set an upper payment limit if the board found the drug cost to be excessive. During the committee hearings, constituents stressed the urgency of finding a solution for increasing drug prices, and many shared their struggles of choosing between paying bills and purchasing necessary medication. There was also testimony from pharmaceutical industry representatives who voiced their concerns about the bill and said it could hamper innovation.
The committee hearings gave legislators the opportunity to hear details of the proposed bill. One Maryland state senator questioned how the upper payment limit established by the affordability board differed from the state’s anti-price-gouging law that was found to be unconstitutional last year, based on the claim that it regulated commerce beyond state borders. Supporters explained that an affordability review board would not encounter the same legal challenge because it clearly defines its jurisdiction over only drugs sold in the state. Another representative asked whether all drugs would fall under the purview of the board. The sponsor explained that only drugs that meet certain price increase thresholds would be subject to board review. As seven other states explore similar legislation, NASHP has compiled a Drug Affordability Review Board Legislation Q&A that answers many legislators’ questions.
Florida’s drug importation bill: Florida lawmakers are considering implementation of a wholesale drug importation program. Bills filed in both the Florida House and Senate would allow the state to import high-cost drugs from Canada at a lower price. Florida’s legislative process often requires that bills pass through two or three committees before a floor vote, giving lawmakers, stakeholders, and constituents ample time to consider a bill. In March, three House committees met to ask questions about the bill and learn more about importation. During hearings, the bill’s sponsor explained that more than 30 Canadian drug manufacturers are already registered by the US Food and Drug Administration to produce drugs for US markets, and that safety standards in Canada are comparable to those in the United States. Lawmakers had additional questions about cost savings and the supply chain. For more information about importation legislation, read NASHP’s importation Q&A.
Illinois’ prescription drug committee action: The Illinois House of Representatives created a Prescription Drug Affordability and Access Committee to address bills designed to curb drug costs. The committee is currently reviewing 17 bills, including legislation to create a drug affordability review board, similar to Maryland’s, and a wholesale importation program. It is also reviewing a bill that requires health insurers to ensure that at least 25 percent of their plans apply a pre-deductible, flat-dollar copayment structure to their entire drug benefit component. The committee is also considering a proposal to tax drug price increases that exceed the inflation rate. This tax would be paid by businesses that make the first sale in the state and could not be passed through to consumers. Any money collected from the tax will be deposited into a new fund dedicated to prescription drug cost fairness.
To date, the Illinois committee has met multiple times for informational sessions to learn how the drug pricing system works and to hear from consumer advocates and stakeholders. Establishing a specific committee dedicated to identifying solutions to the rising cost of prescription drugs indicates how important this issue is as the state legislature tries to help constituents afford medication and balance the state’s budget.
NASHP is tracking state legislative action across the country as lawmakers schedule more hearings on prescription drug costs. To find out the status of any state’s drug pricing legislation as they move toward enactment, explore NASHP’s Rx State Legislative Tracker. To learn more about NASHP’s prescription drug work, visit its Center for State Rx Drug Pricing.
*Updated Oct. 15, 2018
Despite a short legislative season, state lawmakers across the country introduced an unprecedented 174 bills to stem the rising cost of prescription drugs and have enacted 45 into law — with seven state legislatures still in session. Last year, state legislatures introduced 100 Rx cost control bills and passed 27.
States are pursuing a range of strategies to tackle drug costs and below is a summary of their 2018 action to date.
Pharmacy Benefit Managers (PBMs)
Last year, a handful of states passed PBM bills, including Nevada’s Chapter 592, that defined new standards for PBM business practices. These laws addressed their fiduciary responsibilities and banned PBM gag clauses that prevent pharmacists from sharing lower cost drug options with consumers. This year, 36 states drafted PBM legislation and 31 were enacted. These new generation of PBM bills included requirements for more drug cost transparency and disclosure, as well as increased regulation and licensure requirements. For example, Tennessee enacted H.B. 1857 that requires PBMs to obtain a license to operate from the state’s Department of Commerce and Insurance.
Many state legislatures also sought to improve consumer protections by removing gag clauses in contracts between PBMs and pharmacies and pharmacists. Mississippi enacted H.B. 709 to prevent a PBM from prohibiting or penalizing a pharmacy or pharmacist from informing a patient of a lower cost treatment or payment option, including simply paying cash for the drug. Colorado’s H.B. 1284 goes further by banning gag clauses completely and prohibiting PBMs from charging a copayment that exceeds the total charges submitted by the network pharmacy.
Wholesale Drug Importation from Canada
In 2018, eight states introduced wholesale drug importation legislation and Vermont became the first state in the nation to enact a law authorizing wholesale drug purchasing from Canada. The first wholesale importation bill to gain traction occurred last year when Utah’s legislature considered H.B. 163, which would have created a program and reporting requirements for safely importing certain prescription drugs at lower costs from Canada. Despite passing the House, the bill fell short of the necessary votes in the Senate. However, the bill did gain bi-partisan interest and as a result, legislative leadership requested a study from the Utah Department of Health on how to make drug importation work for the state in advance of the next legislative session.
Vermont passed S175 and has become the first state to enact a wholesale prescription drug importation program to purchase some lower-cost prescription drugs from Canada to benefit all Vermont residents. Vermont’s new law is carefully crafted to meet federal requirements by establishing checks and balances to guarantee it meets the federally mandated cost savings and drug safety requirements. Before the state can implement its importation program, Vermont’s Agency for Human Services must seek approval to do so from the US Secretary of Health and Human Services. The state is currently developing its program and will construct a proposal for federal approval.
Twenty-six bills were introduced in 2018 to make prescription drug pricing more transparent and five became law in 2018. Examples include Oregon’s H.B. 4005 and Connecticut’s H.B. 5384, both of which require drug manufacturers to provide additional data justifying price increases over specified thresholds. (Click here for NASHP’s national chart comparing states’ reporting requirements for state transparency laws.) While mandating transparency is a first legislative step to understanding drug pricing , by itself it does little to control prices. NASHP is working with states that enacted transparency laws in 2017 and 2018 to encourage cross-state collaboration and action.
Anti-Price-Gouging and Rate-Setting Legislation
Transparency helps states understand how the pharmaceutical industry sets prices, but anti-price-gouging and rate-setting legislation are two strategies states are exploring to make information gleaned from transparency laws useful in efforts to protect consumers from excessive price increases imposed by pharmaceutical manufacturers. Maryland enacted the nation’s first anti-price-gouging law designed to address excessive price increases and give the state the power to seek civil penalties and fines for unconscionable increases. Though the pharmaceutical industry has challenged Maryland’s law in federal court, across the country states introduced 13 anti-price-gouging bills. Despite strong support, no other state has passed an anti-price-gouging bill to date. Illinois’s version, H.B. 4900, did pass in its House of Representatives, and as of Oct. 15, 2018, the New Jersey state legislation was still considering its anti-price-gouging bill.
A bill in New Jersey was still under consideration as of October 15, 2018.
NASHP’s Rate-Setting Model Legislation goes beyond transparency and anti-price-gouging laws to protect payers from high drug costs by limiting how much payers can pay for a drug. Similar to a public utility commission or hospital rate-setting, a state can establish a payment rate for certain high-cost drugs and require all payers to pay no more than that ceiling. Minnesota and Maryland proposed rate-setting bills this session but were unable to enact them into law. A bill in New Jersey was still under consideration as of July 24, 2018.
NASHP tracks state legislative and executive branch efforts to control prescription drug prices and spending and will continue to develop resources to help states curb rising prescription drug costs. To get a complete overview of newly-enacted laws, visit NASHP’s Center for Rx Drug Pricing website.
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?
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.
Vermont is the first state in the nation to approve importation of less-costly prescription drugs from Canada.
For the first time in the United States, obtaining low-cost prescription drugs from Canada is one step closer to reality today following the Vermont state legislature’s landmark enactment of S.175. Vermont Gov. Philip Scott signed the bill into law on May 16, 2018.
Based on the National Academy for State Health Policy’s (NASHP) model importation legislation, S.175 creates a wholesale importation program to purchase high-cost drugs through authorized wholesalers, who will purchase the drugs in Canada and make them available to Vermonters through an existing supply chain that includes local pharmacies.
The bill passed the Vermont House by a 141-2 vote and the Senate unanimously approved it yesterday.
Vermont Senate President Pro Tem Tim Ashe commented, “It is outrageous that a commonly used medicine like Lipitor costs 46-times more per pill in the United States than in Canada. In fact, legislative staff determined that importing just two diabetes drugs from Canada would save the state’s teacher health insurance plan more than $500,000 each year.
State Sen. Claire Ayers and state Rep. Bill Lippert and Ashe worked to carefully shepherd the bill through both houses. The bill requires Vermont’s Agency for Human Services, in consultation with stakeholders and the federal government, to design and submit an importation proposal to the state legislature on or before Jan. 1, 2019 and further requires the agency to submit its proposal to the federal government on or before July 1, 2019, for final approval. The importation program must be operational within six months of approval of the financing strategy, certification, and federal government sign-off.
The proposal will identify the high-cost drugs to be imported from Canada and detail how the program will be implemented. The legislation directs the agency to recommend a financing mechanism, either through a per-prescription charge or another method, to ensure the program is funded in a manner that does not jeopardize the significant consumer savings that are expected. Based on that recommendation, the legislature will enact a funding mechanism during its next session.
Giving the Agency for Human Services time to develop an implementation plan guarantees the legislature will have the information needed to establish the funding mechanism and address questions that arose during legislative deliberations, including what provisions can be in adopted to make sure that Vermont’s eligibility for the federal 340B drug discount program, which requires drug manufacturers to provide outpatient drugs to eligible health care organizations at significantly reduced prices, is not jeopardized.
“In the absence of federal action to control the cost of prescription drugs, states can’t wait, they need to control drug costs now for all of their citizens,” said NASHP Executive Director Trish Riley. “Vermont’s legislature has taken an important step in lowering prescription drug prices that we hope will serve Vermonters well and inform the federal policy debate.”
Across the country, a total of nine legislatures introduced drug importation bills this year. While Utah did not enact its proposed importation law, its legislature requested the state’s executive branch to develop a proposal so the legislature could, based on the proposal, re-introduce a wholesale importation bill next session. Utah’s study and Vermont’s implementation planning process are similar in their design and approach.
NASHP is working with states to advance wholesale importation programs that can be approved by the federal government and implemented to generate savings and guarantee safety to the citizens they serve.
For more information on drug importation, read Is It Safe and Cost-Effective to Import Drugs from Canada?
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.
States are considering importing prescription drugs from Canada, but is it safe? Will it save money? Can it be done? Three, easy-to-read infographics explain what state leaders need to know if they’re interested in drug importation legislation.
1. Is it safe to import drugs from Canada? Yes, 40 percent of all drugs sold in the United States are already imported and 80 percent of active ingredients used in US drugs come from abroad.
2. Will states save by importing drugs from Canada? States and their consumers can reap large savings by paying Canadian prices. For example, Lyrica costs $6.04 in the United States and 63 cents in Canada, Xarelto cost $12.44 here compared to Canada’s $2.11 price, and Eliquis costs $6.21 compared to $1.60 north of the border.
3. How does a state implement a drug importation program? The federal government can authorize importation if it is safe and saves consumers money. NASHP has crafted model importation legislation and clarified the steps state policymakers can take to initiate drug importation.
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.