September 29, 2020 Tara O'Neill Hayes
Executive Summary
·
The Trump Administration recently finalized a rule to allow for
the importation of certain prescription drugs from Canada.
·
There are myriad reasons this policy is unlikely to result in any
significant increase in access to more affordable medications, including
Canada’s limited supply, drug manufacturers’ ability to prohibit exportation to
the United States, and the fact that some of the most expensive drugs are
excluded from the importation policy.
·
Policymakers could better serve the American people by working on
proposals that have a better chance of producing meaningful results.
Background
As part of its efforts to reduce drug costs, the
Trump Administration has been working on a proposal to allow for the
importation of drugs from foreign countries, since drugs are typically much
cheaper abroad than they are in the United States. This effort reached a new
milestone last week when the Food and Drug Administration (FDA) issued a
long-awaited final rule, along with accompanying guidance and two requests for
proposal (RFPs) on how to broaden the scope of the rule. The rule allows for
the importation of certain prescription drugs from Canada, while the RFPs seek
input on how individuals and manufacturers might also be able to import drugs,
including insulin, from other countries.
Previous research from the American Action Forum
noted the numerous ways in which such an endeavor was likely to be unsuccessful,
all of which still apply today. Specifically, the Canadian population is
one-ninth that of the United States, and fewer Canadians use prescription drugs
than Americans, both of which mean their drug supply is significantly smaller
than ours; Canadian authorities have an obligation to provide an adequate
supply to their citizens and have already expressed an unwillingness to allow
exports; drug manufacturers have no reason to provide an excess supply; the law
prohibits the importation of much of the most expensive medicines; and Canada
does not have access to more than half of the new medicines Americans do. In
short, relying on Canada for access to more affordable medicines is a fool’s
errand. In fact, in May 2018, Health and Human Services (HHS) Secretary Azar
referred to importation plans as a “gimmick” that the Congressional Budget
Office on numerous occasions has declared would have no meaningful effect.[1] Azar
went on to explain that “Canada’s drug market is simply too small” and “drug
companies won’t sell Canada or Europe more just to have them imported here.”[2]
Nonetheless, the administration, under Secretary
Azar’s direction, has issued a final rule to allow for importation that
will be effective at the end of November.
Summary of the Rule
This rule will allow for the establishment of
Section 804 Importation Programs (SIPs)—so-named for the section of the Food,
Drug, and Cosmetics Act (FD&C Act) which allows for drug importation). SIPs
will be time-limited programs (up to two years) authorized by the FDA for the
importation of drugs from Canada, by a state or Indian tribe, pharmacists, or
wholesale distributors (or a combination of such entities).
Any imported drug must be legally available for
sale in both the United States and Canada (and FDA labeling requirements must
be met before sale to the consumer but not required prior to importation). The
following products, however, are prohibited from importation by law: biologics,
intravenous drugs, controlled substances, infused and parenteral drugs, and
drugs inhaled during surgery. Drugs must be tested for authenticity,
degradation, and compliance with established specifications and standards.
Manufacturers must provide the importer with whatever protocols necessary to
support required testing, including a validated stability-indicating assay to
test for degradation. Testing will be subject to FDA review and acceptance.
A SIP proposal must initially identify a single
seller and importer, but over time, if the sponsor can demonstrate consistent
accordance with program rules, the sponsor will be eligible to add additional
sellers and importers to the program. The Canadian seller must be licensed to
sell wholesale drugs by Health Canada and registered with the FDA as a Foreign
Seller, and the importer must be a U.S.-licensed wholesale distributor or
pharmacist. The rule establishes supply chain security requirements with which
all parties must comply. Unique identifiers will be used to track each shipment
and case of drugs. Importers must request approval for an importation at least
30 days in advance of the shipment’s arrival, which must come through a Customs
and Border Protection port of entry.
SIP sponsors will be required to report to the
FDA and to the manufacturer any adverse events, field alerts, and other reports
as necessary. Any necessary recalls are the responsibility of the SIP sponsor.
The SIP sponsor must also report to the FDA regarding consumer cost savings, as
importation is only allowed under the FD&C Act if doing so provides
“significant reductions” in costs to consumers.
Cost and Burden
Considerations
It is worth noting several relevant aspects of
the rule’s implementation plan and the administration’s official expectations
for the rule. The administration is choosing to have each state submit its own
plan and administer its own program, each responsible for ensuring compliance
from its partners and with drug testing and labeling requirements, rather than
have a single federally run importation plan. There will be significant waste
and inefficiency as a result of this state-by-state approach.
There are several escape hatches for the agency
to terminate review or authorization of a SIP, including when “continued
monitoring of the SIP imposes too much of a burden on FDA or HHS resources…or
is inconsistent with FDA or HHS prioritization of resources.” This outlet may
very well come into play in those instances (which are likely to be many) in
which a SIP is unable to identify a Foreign Seller, which the rule allows a SIP
to do after its plan has already been submitted for approval. The FDA would
likely be better off not allowing a plan to be submitted until all necessary
steps have been taken, including identifying all necessary stakeholders.
Finally, the rule states that the administration
is unable to determine the amount of possible savings. In fact, the rule is
declared to be not economically significant, which indicates the government
does not believe it will have an economic effect of at least $156 million (the
current threshold after adjusting for inflation). This finding is surprising,
however, given how strongly the administration has touted this plan as a key
pillar in its strategy to bring down drug prices. This finding also suggests
that the rule may not be able to be implemented, as the law allowing for drug
importation requires that doing so provide “a significant reduction” in costs
to consumers.
Guidance on Manufacturer
Importation of Certain Drugs
Additionally, the FDA finalized guidance for drug manufacturers on how
they can import certain drugs, including biologics, originally intended for sale
in other countries. This authority is granted under Section 801 of the FD&C
Act, which allows drug manufacturers to choose to import their own drugs into
the United States under certain conditions. Such drugs must be FDA-approved,
authorized for sale in the United States, and appropriately labeled according
to FDA guidelines. Any drugs imported under this authority will receive a
National Drug Code (NDC), which is used to identify a particular drug, separate
from the NDC given to the same drug manufactured and originally intended for
sale in the United States.
The stated intent of this guidance is to create
a new pathway for manufacturers to introduce drugs to the U.S. market free from
existing pricing contracts. This pathway could allow manufacturers to offer
their products at a lower price without violating rebate contract agreements
with pharmacy benefit managers (PBMs) or
insurers. It is unclear, however, whether any manufacturers are interested in
doing so; as a result, this guidance is expected to have little, if any,
impact.
Individual Importation
The FDA is also seeking proposals
regarding waivers for individual prescription drug
importation programs. These waivers would allow individuals, rather than
states, to order imported prescription drugs for themselves from the following
countries: Australia, Canada, countries in the European Union or the European
Economic Zone, Israel, Japan, New Zealand, Switzerland, South Africa, and the
United Kingdom. To help ensure patient safety, individuals would not be able to
purchase and receive the drug directly; the drugs would be delivered to a
licensed U.S. pharmacy for dispensing to the individual, assuming the
individual presents in-person the waiver approval granted by HHS.
In order to receive approval, applicants would
be required to show an ability to maintain supply chain security and safety, to
ensure the drug is FDA-approved and was manufactured in an FDA-licensed
facility, to ensure the drug is properly labeled, and to ensure the drug does
not enter the U.S. wholesale market, identifying the specific pharmacy to which
the drug will be sent for dispensing, and any other requirements FDA imposes.
Further, the applicant will have to show that importation will result in a
significant cost reduction to the individual. All the same exclusions on the
types of drugs that may be imported will apply as under the Canadian
importation plan. HHS would set up an online portal through which those seeking
a waiver may apply.
Reimportation of Insulin
In recognition of the fact that the exclusion of
biological products includes a prohibition on the importation of insulin along
with a declaration that the rising price of insulin constitutes an
emergency, the FDA is also seeking proposals to make use of an allowable
exception for the reimportation of insulin. Under Section 801 of
the FD&C Act, insulin products may be reimported (meaning they
were made in the United States originally), but only by the manufacturer. Only
when required for emergency medical care is reimportation by a third party
allowed.[3]
A new study conducted by the RAND Corporation
found that the United States consumes 31.6 percent of insulin by volume
worldwide and accounts for 83.8 percent of sales in U.S. dollars; both of these
figures are outliers relative to other countries’ population size, but
particularly the sales value.[4] For
all insulin types combined, U.S. prices are 8.1 times greater than those in all
non-U.S. OECD countries combined; this finding does not account for rebates
that reduce the net price, however, which RAND notes may reduce the price
differential by 50 percent.[5]
While millions of patients could benefit from
lower drug prices, the prospects of finding supplies available for
reimportation are as slim as the prospects for importing drugs more generally
from Canada, for the exact same reasons. The manufacturers control supply to
other countries and have no incentive to provide excess supply if they know it
can be reimported at a lower price. While a small number of individuals may
have success for some time, it is imaginable that manufacturers would amend
their contracts with other countries to condition their supply on an agreement
to not allow reimportation to the United States.
Of course, no action can be taken regarding
either of these RFPs until the Secretary certifies to Congress that this
process will not pose a risk to the public’s health and safety and consumers
will see a significant cost reduction.
Conclusion
The administration has finally released its
long-awaited importation rule, but it is too soon to declare any victory in the
effort to lower drug prices. Besides the fact that this rule will not take
effect for 60 days, there are numerous legal, economic, and logistical reasons
why this plan is unlikely to result in any meaningful increase in access to
lower-cost medicines. The administration even acknowledges that the rule is not
likely to be economically significant, and, if importation cannot produce
significant savings, it cannot legally be permitted. The administration could
better serve the American people by focusing on efforts with a greater likelihood
of success.
[1] https://www.hhs.gov/about/leadership/secretary/speeches/2018-speeches/remarks-on-drug-pricing-blueprint.html
[2] https://www.hhs.gov/about/leadership/secretary/speeches/2018-speeches/remarks-on-drug-pricing-blueprint.html
[3] https://www.hhs.gov/sites/default/files/insulin-reimportation-programs.pdf
[4] https://aspe.hhs.gov/system/files/pdf/264056/Comparing-Insulin-Prices.pdf
[5] https://aspe.hhs.gov/system/files/pdf/264056/Comparing-Insulin-Prices.pdf
Disclaimer
https://www.americanactionforum.org/insight/the-challenges-facing-the-trump-administrations-drug-importation-plan/#ixzz6a4eKFbD4
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