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States Are Using Drug Importation to Lower Costs and Provide Safe Access to Drugs

Importation used by states to lower costs for drugs

Florida Governor Ron DeSantis just signed legislation that allows the state to import lower-cost prescription drugs. In a show of support, the Trump administration directed Secretary of Health and Human Services (HHS) Alex Azar to help Florida create its program. Colorado and Vermont have also enacted importation laws.

These state laws will be important test cases of how to legally permit safe importation of lower-cost prescription drugs by entities other than manufacturers or the Food and Drug Administration (FDA). Existing law permits both wholesale and personal importation of prescription drugs from Canada with the approval of the HHS Secretary. State and federal policymakers increasingly see importation as a way to improve market functioning through increased price competition.

Drug Importation in the United States

Since about 2010, the federal government (through the FDA) has facilitated the limited importation of medically critical drugs that are in short supply until domestic manufacturing reaches adequate capacity to end the shortage. Years before this, hundreds of private and nonfederal government employers in the U.S. began to encourage their employees to import lower-cost drugs using a Canadian company to find the lowest-cost drugs from Canada, Australia, and the United Kingdom. More recently, the FDA finalized guidance for using imported, lower-cost biologics to serve as comparators in studies of similar products seeking approval in the U.S. market. In addition, the Trump administration has directed the FDA to import generic drugs in situations where there is sufficient supply of a given drug in the U.S. but a lack of price competition.

Importation and Safety

Currently, at least 40 percent of the prescription drugs used in the U.S. are manufactured abroad and considered safe. Former FDA Commissioner Scott Gottlieb has noted that any drug manufactured overseas for the U.S. market is made in the same FDA-registered plant that makes the drug for markets in other countries. In congressional testimony, he noted that FDA concerns have more to do with Internet pharmacies than with drugs manufactured, licensed, and managed by regulated entities in other countries.

Many improvements to the safety and security of the drug supply chain have occurred as the pharmaceutical industry has become global. New U.S. laws are driving technology that creates more secure distribution systems, even as those distribution systems become international. The most important piece of federal drug supply safety legislation in recent years is the Drug Quality and Security Act (DQSA) of 2013. Title II of DQSA — the Drug Supply Chain Security Act — is designed to improve detection and removal of potentially dangerous drugs from the supply chain. Overall, the DQSA is forcing development of an interoperable electronic system to identify and trace pharmaceuticals from the pharmacy back to the point of origin.

U.S. standards for manufacturing and handling of prescription drugs are similar to those of many other countries. Because of that alignment, the European Union and the FDA will accept each other’s inspection findings for manufacturing plants within their borders. The U.S. also has a long-standing reciprocity agreement with Canada for sharing information about manufacturing issues and compliance.

Recommendations for Safe and Effective Importation

State-administrated wholesale importation programs can provide price competition, relieve cost pressures on residents, and maintain safety and savings in a way that a national, commercial importation program cannot. Importation programs at the state level also solve the problem of overburdening the FDA with a large-scale national program.

However, to achieve these benefits, state-administered prescription drug importation requires new administrative structures to assure that the policy does not put the public at greater risk than our existing drug supply system. The importation system has to achieve consumer savings as well, after accounting for new administrative costs that may result. In order to meet these goals, state-administered importation programs should:

  • Adapt and apply existing federal laws, regulations, and standards that enable safe, controlled approaches to importation.
  • Avoid significantly adding to FDA workload.
  • Finance any added FDA workload and state staffing through new or increased licenses and fees for participating supply chain vendors.
  • Be managed or overseen locally by states or nonprofits to relieve resource pressure on the FDA.
  • Directly impact patient drug costs. Savings cannot be converted into profits for the supply chain and insurers. The mark-up on the imported products should be managed in part through transparent pricing throughout the supply.
  • Permit the importation of costly biologics, which are driving U.S. spending growth but are excluded from importation under current federal law.

State-administered importation, when implemented safely and effectively, is one part of a larger strategy needed to increase price competition.

Publication Details

Publication Date: June 27, 2019
Author: Jane Horvath
Citation:

Jane Horvath, “States Are Using Drug Importation to Lower Costs and Provide Safe Access to Drugs,” To the Point (blog), Commonwealth Fund, June 27, 2019. https://doi.org/10.26099/ec0a-at24

Experts

Jane Horvath
Health policy analyst and policymaker