Drug Policy

Importing Prescription Drugs From Canada Could Save Vermonters $5 Million a Year—Or Nothing At All

Either way, it won't address the factors driving up prescription drug costs for American consumers.

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Lars Hagberg/ZUMA Press/Newscom

Vermont's commercial health insurers could save anywhere from $1 million to $5 million a year by importing prescription drugs wholesale from Canada, according to a new report from the state's Agency of Human Services (AHS). Yet the report also says insurers—and thus patients—could save no money at all, despite the fact that name-brand prescription drugs cost less in Canada than they do in the United States.

Somewhere between $5 million and zero is quite a range. What explains the big spread? The short answer is federal regulation.

For Vermont, or any other state, to legally import prescription drugs from Canada, it must devise an importation system that the federal Department of Health and Human Services (HHS) will certify. To get that approval, said system must do two things:

  • "pose no additional risk to the public's health and safety," and
  • "result in a significant reduction in the cost of covered products to the American consumer."

"A program that costs more to operate than produces in savings," the AHS noted in its Dec. 31 report to the Vermont legislature, "is highly unlikely to meet the Secretary's criteria for certification."

No state has received HHS certification under Section 804 of the Federal Food Drug and Cosmetic Act to import prescription drugs wholesale from Canada. No state has even attempted to use Section 804. The AHS report shows a few reasons why.

The certification process would require Vermont to devise a system of state regulations that federal drug regulators, who have vastly more experience and money, will sign off on. Vermont would need to hire and train staff who can license and monitor importers in the U.S., exporters in Canada, and any third-party contractors participating at any point in the supply chain. The state would have to physically inspect, either directly or using a third party, Canadian manufacturers, both to grant them export licenses and periodically afterward. Importers would also need to be inspected, drug batches would need to be tested, databases would need to be managed, and all parties would need to be audited regularly. Number crunchers would need to keep track of the savings (or lack thereof).

As of right now, the Vermont Board of Pharmacy is the state's supervising body for the pharmacy industry, and "no sitting member has any experience to speak of in respect to drug manufacturing, the wholesale distribution of legend drugs, or supply-chain security."

If Vermont can do all of that regulating for $800,000 a year, and importation saves the state's commercial insurers exactly $1 million per year, would HHS deem $200,000 a "significant reduction in cost"? What about savings of $500,000? If Vermont feels the savings are significant, and HHS doesn't, who wins? The Federal Food Drug and Cosmetic Act is silent on these questions.

The AHS prepared its report at the request of the Vermont legislature, which voted in May to begin the Section 804 certification process. The AHS surveyed commercial insurers, who forecast savings of "$2.61–$2.82 per member per month," even with a markup as high as 45 percent (that's where the $1 million to $5 million number comes from). The report also tells us that the agency understands broadly what it needs to do to regulate an importation system, but not how much regulating will actually cost, or whether licensing fees will pay for the additional regulation. The agency says it now needs to determine whether "the absolute cost of operating such a program and whether that cost eclipses the savings for participating commercial payers."

Meanwhile, the pharmaceutical industry is vehemently opposed to letting Americans buy prescription drugs from countries with nationalized health care systems, and that industry has a lot of influence with HHS and the Food and Drug Administration (FDA). When Vermont voted to begin the Section 804 process in May, a pharmaceutical lobbyist called the legislature "highly irresponsible." I bet pharmaceutical lobbyists have read the AHS report and are devising their own regulatory suggestions that can be submitted to HHS. While I'm speculating, I'd guess those regulations will be very difficult to comply with (this is assuming the industry doesn't simply argue that no amount of regulation will make importation "safe").

FDA Commissioner Scott Gottlieb is also not a fan of large-scale importation from Canada (or anywhere else). He said last year that no "well-intentioned legislation" at the state level could create "a safe way to check the drugs coming in through these different importation schemes."

This opposition is not surprising. U.S. consumers subsidize prescription drug costs for Canada and nearly all of Europe. Pharmaceutical companies look to the U.S. market, with its highly distorted payment systems, as a way to preserve their profit margins and pay for the cost of getting approval from the FDA and other medicines regulators. It's much easier to block reforms to the U.S. system (and preserve U.S. profits) than it is to roll back nationalization in Canada and the European Union.

The FDA, meanwhile, is a deeply conservative agency when it comes to drug safety, and it generally opposes systems that it cannot supervise and control. While the AHS report suggests that regulatory compliance would be solely Vermont's responsibility, I imagine the FDA would want to play a role as well (beyond certification) and that another layer of fees might be necessary to fund the FDA's new oversight responsibilities. Such fees could further reduce the cost savings of importation. Again, this is mostly speculation, because there's no precedent.

Even with what appears to be excellent model legislation and consultation from the National Academy for State Health Policy and the company FDAImports, I suspect that the odds here favor the status quo. Even if Vermont prevails, Section 804 certification for a population of 600,000 wouldn't address the larger problems of a broken payer system and our obscenely generous drug patent laws.

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  1. Five *million* a year? If that’s not a typo then there’s no point in doing it.

    10 guys and an office would eat that 5 mil up easy. Especially once they start approving perks for themselves.

    1. Exactly what I was thinking. This is a rounding error.

      1. Vermont population: 623,000

        So, like $8 a person per year

        Of course it could be done without bureaucracy by simply recognizing that Canada and Europe are sufficiently advanced enough to have their own substantially equivalent rules when it comes to pharma safety/purity/etc.

  2. Makes me think of that Utah insurance company that, for certain really expensive medications, started offering it’s beneficiaries round-trip plane tickets to Mexico so they could get their prescriptions filled there. [Link]

  3. Import prescription drugs?
    A wonderful idea, especially if their opiods or weed.

  4. What would preclude multiple states from creating and implementing a drug re-importation and inspection process/agency to satisfy federal regulations on behalf of each individual state?

    1. I’m hoping that the Indian Nations can be our avenue to healthcare freedom.

      Do they have any legal autonomy from the FDA?

  5. It will not happen largely because doing so would break the Atlas Shrugged type economy in drugs where the rest of the world is mooching off of the strength of the US economy.

    Canada and Europe will not put up with the threat of having to pay for the full costs of bringing a drug to market.

    1. What is Canada or Europe going to do to us…write a stern letter?

      1. They will not allow the drugs to be exported.

    2. The entire population of Canada is less than 40 million people. And their government health programs do not cover all drugs.

      So re importation would only be useful for the government contracted drugs. But any large scale US operation(s) would quickly distort supply and availability in Canada.

      The companies supplying these drugs to Canada would know almost to a pill what was going where, and would quickly apply supply quotas that the Canadian government would be happy to strictly enforce.

      And it would be pretty much the same for importation from most any other developed country.

      IOW

      It. Will. Never. Work.

      That is the real reason no state has tried it.

  6. easier to call Vermont part of Canada might be cheaper to goto Stowe & Killington too

  7. I thought Trump was gonna fix this?

    1. Not sure, I know he did some work on the Right to Try issue, where patients can get unapproved drugs that have gone through maybe Trial 1 testing.

  8. “A program that costs more to operate than produces in savings,” the AHS noted in its Dec. 31 report to the Vermont legislature, “is highly unlikely to meet the Secretary’s criteria for certification.”

    “The USPS, for example, or — come to think of it — almost *any* government program.”

  9. If all the states did so, they could pretty much end market-rate pricing in meds and probably kill off supply for several important ones.
    We all know how ‘price fixing’ really works wonders, don’t we?

  10. That’s why Canada made the export of such drugs illegal, over a decade ago. Such export is GUARANTEED to skyrocket the prices paid by …. CANADIANS. Mike Riggs’ bureaucratic blather ignores what libertarians have known for at least a quarter century. We call it Market Economics. He never heard of it.

    Our drug prices are so much higher because our FDA approval costs 3-5 times as much and takes 2-3 times longer. If drug companies cannot recover their FDA costs in the American market, they’ll be forced to recover those costs from sales to Canada … from ALL sales to Canada.

    But nobody defends liberty today. So progressives have been winning for decades, even despite so many bellowing goobers on the Authoritarian Right.

    Any questions?

    1. Canada has never made export of such drugs illegal, though it has considered restrictions in the past.

      1. Why? (lol)

  11. This opposition is not surprising. U.S. consumers subsidize prescription drug costs for Canada and nearly all of Europe

    I seem to have stumbled onto Daily Kos..

    1. Fuck off and die, Hihn.

      1. (adoring eyes) That was SO manly.
        NOT

        1. Way to go, Galt.

          Here’s PROOF the foul-mouth thug is full of shit! From the LIBERTARIAN Cato institute, NOT some rightwing wackos.

  12. It’s hilarious to read constant attacks by Canadians and Europeans about the high cost of meds in the US and how they have been able to negotiate such lower prices. As pointed out by the author and other respondents, Americans subsidize the cost of drugs for these same Canadians and Europeans, because we can. Basically drug companies charge the highest prices they can based upon a country’s ability and willingness to pay. If Americans start paying less, these sanctimonious Canadians/Europeans will start paying more (or drug companies will cease their rapid production of new drugs). These people should be thanking us rather than ridiculing us. We can ridicule ourselves for continuing to elect worthless politicians who are bought and paid for by trial lawyers, big corporations and other special interests.

    1. The author is as full of crap as you proggies.

      As pointed out by the author and other respondents, Americans subsidize the cost of drugs for these same Canadians and Europeans, because we can.

      WRONG, lefty.

      As libertarians have known for DECADES, we don’t subsidize shit. Our prices are so much higher because … wait for it … OUR approval (FDA) costs 3-5 times as much as Canada or Europe, and takes 5 times as long. Most famously, the libertarian Cato Institute compared the American lives lost by our average 10 year approval, versus as little as TWO years elsewhere, and concluded that FDA “safety” regulations KILL more Americans than they save

      We can ridicule ourselves

      Or I can ridicule you! BIG PHARMA FORCES POLITICIANS TO MAKE THEM WASTE $10 BILLION OR MORE TO GET THEIR DRUGS APPROVED!! WHO KNEW???? (lol)

    2. Just spent the holidays in Canada. Every time I turned on the television I was bombarded by adds for ‘supplemental’ healthcare insurance – and the marketing specifically mentioned paying for ‘non-covered’ prescription drugs.

      Canada hasn’t lowered their drugs costs by ‘negotiations’ nearly as much as anyone would like you to believe.

      They’ve lowered their drug costs by a combination of excluding coverage for expensive drugs, and drug companies choosing to follow sound business models (mainly incremental pricing – which means selling things for less in places where people have reduced ability to pay.)

  13. The base ingredients for all commercial prescription drugs come from China.

    Chemical plants produce a lot of messy externalities, and any place which seeks to control the waste makes the base chemicals for prescription drugs more expensive to produce. China is happy to help out with low cost production facilitated by dumping the waste into the aquifer.

    China has already leveraged its power as the rx chemical base supermarket of the world against other countries. Perhaps the trade war will soon allow the US to experience some of this power.

    See China Rx; https://www.c-span.org/video/?453982-8

    1. So who tells Trump that his crazy trade war can shut down all our hospitals? How many deaths?

    2. “The base ingredients for all commercial prescription drugs come from China.”

      ORLY?

      Do you have a source for this?

      Never knew China to be a top producer of monoclonal antibodies.

      Or by ‘base ingredients’ do you mean carbon, hydrogen, oxygen, nitrogen, etc…?

  14. “and our obscenely generous drug patent laws”

    Since when does Reason allow the government enabled rent seeking of the medical mafia to be questioned in their articles?

    The Kochs will hear about this! You’re in trouble!

    1. The writer also fuckefd up on the crazy notion that we subsidize prescription drugs all over the world.
      Both based on the same ignorance.

  15. I guess Trump and President was gonna fix this ? expecting soon Telangana Voter List 2019

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  17. It is time to end the “prescription” system. Prescriptions should be used for a very few things. They should be used for the doctor to communicate his medication RECOMMENDATION to the patient and the pharmacist. They should be used to confirm for an insurer that a medication has been recommended by a doctor as medically necessary. And, they should be used to document exactly what the doctor recommended in the case of legal liability. BUT – if the patient already knows what he wants or needs, chooses to pay for his own medication, and is not interested in suing his doctor over it, the patient should be able to purchase his own medication without a prescription. On his own head be it, and out of his own pocket be it. And, if a patient wants to take a chance on a medication mail ordered from the counterfeiting capital of the world, then mark him up for a Darwin Award. It’s his funeral.

    1. The prescription racket is government enabled rent seeking for the medical mafia.

  18. One would need to overlook a mountain of evidence to conclude that pharmaceutical drugs are safer, cheaper, or more effective than vitamins.

    https://youtu.be/wq29rADk9Os

  19. I went online and checked prescription drug prices for the drugs I take and found them to be the same as what I pay here.

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