Update on Vermont’s Efforts to Implement Wholesale Importation of Prescription Drugs from Canada 

The COVID-19 pandemic has impacted many state policy efforts over the last year, with state agencies across the U.S. re-deploying their staff towards tracing and vaccination work. This has undoubtedly contributed to less momentum on drug importation efforts at the state and federal level; however, with the new administration in office and new leadership in place at the Department of Health and Human Services (HHS), there will likely be attempts to move these policies forward soon.

This month, Health Policy News reviews and provides an update on the progress of one such drug importation policy—Vermont’s Act 133, “An Act Relating to the Wholesale Importation of Prescription Drugs into Vermont”—as part of our ongoing series highlighting state prescription drug cost control efforts. We have been following the development of the state’s drug importation program for the last few years. Our overview below includes the history of its establishment, as well as subsequent efforts on behalf of the state to study, design and receive federal approval for the program.

Vermont Program History

Vermont has achieved the following program milestones since 2018:

December 2018:

The Agency of Human Services (AHS), with assistance from the National Academy for State Health Policy (NASHP), submitted to the legislature the proposed program design for the “Canadian Rx Drug Import Supply Program.”

  • It is estimated that commercial health insurance carriers operating in Vermont could see savings between 1-5 million dollars by purchasing drugs from Canada. To realize such savings, the state would first have to invest substantially in the operationalizing, licensing, and oversight of an importation program.
  • Health insurance carriers participated in the report to the legislature, detailing the top-spend drugs for the second quarter of 2018 in order to compile a list of the 17 high-cost drugs across all carriers. Next, carriers were asked to calculate savings by detailing net spend for the identified 17 high-spend drugs compared to the cost of the drugs if imported (with a 45% markup on the Canadian cost added to capture administration costs and profits). Even with the markup, carriers reported savings between $2.61-2.82 dollars per member per month, totaling between 1-5 million dollars each year.
  • The next steps for the State, as outlined in the report, included:
    • determining the benefit to Vermonters, including estimates of upfront and ongoing operational costs, and
    • outlining the steps necessary to implement the program, including assessing interest of suppliers, submitting an application to the Secretary of HHS, passing necessary enabling legislation, and releasing appropriations.

October 2019:

Vermont submitted a concept paper to the Office of Management and Budget, further detailing how the proposed program will satisfy the federal Food, Drug, and Cosmetic Act (FD&C Act) cost-saving and safety requirements.

  • The paper compares Vermont’s proposed importation program to those under review in other states, including the Florida model (e.g., while Florida’s program is limited to public payors, Vermont’s targets commercial carriers). Readers interested in further highlights from the concept paper can find them summarized in the short slide deck the state released in November 2019.
  • As outlined in the bill, Vermont was required to submit an application request to HHS by July 2019, with the state receiving approval to delay the application until July 2020 in Act 72 (H. 542) of 2019.

January 2020:

AHS provided an update to the House Committee on Health Care on prescription drug cost control efforts at both the state and federal level, which also outlined the next steps  for Vermont’s importation program. These included:

  • Await final rulemaking by the Food and Drug Administration (FDA) for the “Importation of Prescription Drugs” rule
  • Continue collaborating with the NASHP states’ group working on drug importation.
  • Additionally, AHS outlined the Office of Professional Regulation’s recommendation that the General Assembly amend 26 V.S.A. § 2061to provide that “the Board of Pharmacy, may, with or without the adoption of rules, issue wholesale-distributor-exporter and wholesale-distributor-importer licenses to drug outlets that comply with Federal, State, and Board requirements to import prescription drugs through a program approved by the Secretary of Human Services.”

Barriers to Implementation

September 2020:

The FDA issued a final rule entitled, “Importation of Prescription Drugs” to implement Section 804(b) through (h) of the FD&C Act.

  • As expected, this has been challenged by the courts with Pharmaceutical Research and Manufacturers of America (PhRMA) filing a complaint in an attempt to block the rule that would allow states to import drugs from Canada.
  • Additionally, the Canadian Ministry of Health issued an order in November 2020 that would prohibit exportation of certain drugs to the US that face shortages in Canada.  This order places responsibility on establishment license holders and drug manufacturers to ensure that export would not “cause or exacerbate a shortage of a drug” as well as reporting requirements to ensure that the Health Minister can ensure adequate drug supply levels.

Next Steps

While Vermont’s initial program design has been submitted to HHS, the lawsuit challenging the final importation rule continues. Also ongoing is collaboration at the state and federal level with Canada to ensure the importation programs target high-cost drugs without affecting Canadian residents’ access to medications.

As always, NASHP is working closely with Vermont and other states seeking to implement importation programs, in addition to tracking the progress of prescription drug cost control efforts across the country.

During his campaign, President Biden indicated support for drug importation, but we have yet to see any action from the new administration or HHS on this topic. Given that new HHS leadership was recently brought on board, we may see movement on this topic in the coming months. The administration was granted an extension to reply to the PhRMA complaint on March 24, 2021, with HHS due to file an answer by May 28th, 2021. Health Policy News will continue to follow developments on this topic—including the Biden administration’s response  to the complaint and case resolution, which could determine the outcome of all state efforts towards wholesale drug importation.

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