Proposal to Import Prescription Drugs Faces Criticism

The high price of many prescription drugs in the United States remains a top concern for American voters. Candidates and legislators from both parties have pushed for measures to lower prices, but one strategy in particular faces increasingly fierce criticism: a proposed rule by the U.S. Food and Drug Administration (FDA) to allow the importation of certain prescription drugs from Canada. If finalized, this rule would create a process through which states could submit importation program proposals to FDA for authorization. The proposal is the most recent step taken to lower drug costs via Canadian importation, a goal the Trump Administration has pursued since last summer. Under pressure from the White House, FDA and the U.S. Department of Health and Human Services (HHS) last July released a plan to create a process through which state governments, pharmacies, and drug manufacturers could submit importation program proposals for FDA approval. HHS Secretary Alex Azar announced that, “for the first time in history, HHS and FDA are open to importation as a means to lower drug prices.” This statement departs from Azar’s own earlier views against the idea—in 2018, he rejected importation as a “gimmick.” It also departed from FDA’s historical opposition to the importation of prescription drugs from other countries. As recently as 2017, in response to President Donald J. Trump’s support for importation, four former FDA commissioners advised Congress against importation, citing safety concerns. The current proposal provides detailed procedural instructions for states seeking FDA approval to import Canadian prescription drugs. To address FDA’s safety concerns, the proposal allows only limited supply chains of three entities: one manufacturer shipping to one foreign seller via one importer. FDA proposes that the foreign seller must be licensed by Health Canada as a wholesaler and registered with FDA as a foreign seller, and that the importer must be a wholesaler or pharmacist licensed to operate in the United States. In effect, two paths to importation would exist under the final rule: States, pharmacists, or wholesalers could import certain drugs from Canadian sellers, or pharmaceutical manufacturers could import “identical foreign versions of their U.S. products.” Both paths, however, face significant obstacles. The first path requires support from the Canadian government, which has already stated its opposition to “any U.S. plans to buy Canadian prescription drugs” that might pose a threat to Canada’s drug supply or result in increased drug prices for Canadians. The U.S. pharmaceutical market dwarfs Canada’s drug supply. The U.S. has 330 million residents and represents 44 percent of global pharmaceutical consumption, compared to Canada’s 37 million residents and 2 percent of global pharmaceutical consumption. One 2010 study concluded that if Canada filled just 10 percent of U.S. prescriptions, Canada’s drug supply would run out in 224 days. As a result, the Canadian government and Canadian medical, pharmacy, and patient groups worry that large-scale importation to the U.S. would create serious risks of drug shortages in Canada. One commentator remarked that the Canadian government could easily prohibit participation in the proposed U.S. importation program by imposing new licensing requirements. The second path to importation under the FDA proposal relies on drug manufacturers to import identical foreign versions of their brand-name products. But pharmaceutical companies have cited safety concerns in opposing the FDA proposal. Of course, some observers highlight the fear of losing profits as the main reason behind their opposition. One policy analyst commented that the proposal “would effectively require drugmakers to compete with themselves on certain products.” Trump Administration officials, however, deny that this would occur, citing instances in which the complexity of health insurance contracts could actually cause drugmakers to benefit from importation. Critics of the proposal also doubt that it would yield many cost savings. FDA would require an importer to carry out several additional actions, including but not limited to relabeling drugs with the required FDA-approved label information, testing samples of each shipment at an FDA-approved laboratory, and obtaining FDA approval for each drug shipment. Each of these additional steps would cost money, increasing the drug’s price. The proposal faces strong opposition from other groups—especially the U.S. pharmaceutical industry and Canadian patient advocacy organizations. The Pharmaceutical Research and Manufacturers of America submitted a comment to the public docket for the proposed rule, demanding that HHS withdraw its proposal. Indeed, of the 1,210 total comments the proposal received, the vast majority voiced opposition based on safety concerns, marginal cost savings, and the insufficiency of Canada’s pharmaceutical supply chain compared to U.S. demand. But the proposal does have some support from state leaders of both parties who see importation as “an easy strategy to save money for American consumers,” as one commentator noted. Despite the proposed rule’s potential practical problems, it is not yet out of the running in the political competition to lower U.S. drug prices. Similarly aimed efforts include a bill in the U.S. House of Representatives to establish a fair price negotiation program with pharmaceutical companies and a bill in the U.S. Senate to require drugmakers to issue rebates for certain drugs. Yet, none of these efforts are likely to progress in the coming months. In the meantime, over ten states—including Florida, Maine, Colorado, Wyoming, and Vermont—have formally begun pursuing the implementation of importation programs under FDA’s proposed rule.

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