[A] plan to import prescription drugs from Canada could save Vermont insurers millions of dollars annually, a new study says.
The Agency of Human Services report – which follows the state Legislature’s endorsement of a Canadian drug bill earlier this year – also sketches out a plan for licensing and safety within a new system of prescription importation.
But the report does not calculate the state’s costs for starting and operating a system that would be the first of its kind in the United States. Officials say that will be a key question to answer before moving forward.
“We’re supportive of the (concept), and we’re trying to make sure we don’t end up doing something that actually doesn’t work financially,” Human Services Secretary Al Gobeille said.
The rising cost of prescription drugs is squeezing consumers and driving up insurance premiums, and it is a major policy issue at both the state and federal level.
In the 2018 session, the state Legislature took a novel approach to the problem by approving S.175, which calls for Vermont importation of cheaper prescriptions from Canada.
Gov. Phil Scott signed the bill in May. But both Scott and Gobeille have said there are no guarantees that the program will become reality.
That’s partly because Canadian drug importation, while allowed under federal law, requires special approval from the secretary of the U.S. Department of Health and Human Services. Among other things, federal law requires that imported drugs pose no risk to health or safety and “result in a significant reduction in the cost of covered products to the American consumer.”
Also, it hasn’t been clear whether importing prescription drugs might save money, or how such a program might operate.
The new state report attempts to answer those questions, at least in part.
It was prepared with pro bono assistance from the National Academy for State Health Policy, which touted one of the study’s key findings: Two Vermont insurers – Blue Cross and Blue Shield of Vermont, and MVP Health Care – could save between $1 million and $5 million annually by bringing in drugs from Canada.
That conclusion is based on a limited analysis: Officials compared Canadian and U.S. prices for 17 importation-eligible drugs that both insurers identified as “top spend” during the second quarter of 2018.
The drugs were for treatment of conditions including diabetes, hepatitis C, cancer, and HIV/AIDS.
Even when including a 45 percent markup on the Canadian drugs, the study found that the insurers could save $2.61 to $2.82 per member, per month.
“Importantly, these savings are a very conservative estimate,” said Trish Riley, the National Academy for State Health Policy’s executive director. “Our team added an additional mark-up, including a profit margin for the supply chain, which we think is very high, but we wanted to show the minimum savings and be as conservative as possible in assessing those savings.”
Notably, the study considered only private insurers and left out the state’s Medicaid program. That’s because the Department of Vermont Health Access “determined that drug importation from Canada would not provide net savings to the state or individuals because Medicaid’s existing prescription drug rebate program already yields substantial savings,” the report says.
However, officials say they’re not yet ruling out some sort of Medicaid participation in an importation program.
In addition to examining potential savings, the study also made recommendations on how importation should work in Vermont.
Officials envision drugs flowing from Canadian suppliers to a U.S.-based wholesalers that should be licensed by Vermont but would not necessarily need to be based here. Both suppliers and wholesalers “must pass an inspection/audit conducted by the state of Vermont or third-party contractor or another U.S. state or a federal regulatory agency to obtain the appropriate Vermont license,” the report says.
While Vermont could fall back on federal regulations to ensure the safety and integrity of the importation process, officials say the state would be responsible for inspections, drug testing and audits to ensure compliance with those regulations.
The study also says the state Office of Professional Regulation‘s Board of Pharmacy could create new wholesaler licenses for Vermont’s importers and Canadian suppliers. But officials say the Agency of Human Services should be responsible for overall administration of a drug-import program.
The cost of that administration is still unclear, though the study says it will be “substantial.”
“Before a program of prescription drug importation can be recommended, the state needs to determine the cost of operating such a program and whether that cost eclipses the savings for participating commercial payers,” the study says. “A program that costs more to operate than (it) produces in savings is highly unlikely to meet the (federal government’s) criteria for certification.”
The state study is a “first step” and offers a “lay of the land” for future work on the importation project, said Ena Backus, Vermont’s director of health care reform.
“This is a completely novel idea and program that we would be looking to set up,” Backus said.
While both Gobeille and Backus raised the possibility of working with other states on drug importation, Vermont appears to be at the forefront at this point. The National Conference of State Legislatures says Vermont was “the first to pass such legislation,” while states including Colorado, New York, Louisiana, Oklahoma, Utah and West Virginia all considered but failed to approve importation measures last year.
Gobeille said officials are still trying to determine what additional actions the Vermont Legislature might need to take during the upcoming session regarding Canadian drug importation. Officials also have to undertake more analysis of potential savings and costs from importation.
The next major deadline in the project is July 1, when the state must submit its Canadian-importation request to the federal secretary of Health and Human Services. Gobeille said he couldn’t hazard a guess on the outcome of that process, which is “really beyond our control.”
“No one has asked him that question yet, and I just don’t know,” he said.
