Florida to Import Canadian Prescription Drugs: Could this Transform US Healthcare?

Situation Overview

On January 5th, 2024, the FDA allowed Florida the ability to import prescription drugs from Canada on a provisional basis. While many states have filed for similar permissions, the ruling marks a significant deviation from past precedent and may lead to reduced prescription drug costs in the US [1]. Florida estimates the program will save ~$183M in prescription drug spending in the first year following implementation [2].

The decision comes nearly two years after the Inflation Reduction Act (IRA) was signed into law which granted the government the ability to negotiate pricing for certain drugs and establish an annual out-of-pocket cap for Medicare Part D plans.

Prescription drug importation in Florida will be authorized for 2 years contingent on FDA approval of labels and safety/authenticity verification. Florida will be required to submit quarterly reports to the FDA regarding cost savings and potential safety issues [1]. The program will initially roll out care to those under the state of Florida’s coverage and jurisdiction, such as those in the Department of Corrections and the Agency for Persons with Disabilities. The program is also intended to include Medicaid patients in the future. Drugs eligible for importation include those that treat HIV/AIDS, mental health conditions and prostate cancer [2].

Challenges and obstacles to implementation

While this decision is a step towards reducing US healthcare spending, it is not without challenges to implementation, including pushback from CA authorities, litigation from biopharma industry groups, and numerous FDA stipulations.

The decision received significant pushback from the Canadian Drug Health Technology Agency (CADTH) who may aim to impose barriers to exportation to safeguard the supply of prescription drugs within Canada. In 2023, the province of British Columbia placed limitations on the sale of drugs indicated for Type II Diabetes / obesity (e.g., Ozempic, Wegovy, etc.) to the US. Similarly in 2020, as the initial approval for the importation loomed, the Canadian Minister of Health issued a statement preventing pharmaceutical companies from exporting drugs to avoid jeopardizing the Canadian drug supply and increasing time to treatment [2,3].

The decision may also result in litigation from biopharmaceutical manufacturers and other industry groups including Pharmaceutical Research and Manufacturers of America (PhRMA). These stakeholders consider importation of drugs that have not received FDA approval to “pose a serious danger to public health.” PhRMA had previously filed a lawsuit to block Florida’s importation program in February 2023, which was dismissed by the District Court of Columbia, as the industry group lacked standing as its members do not face any concrete risk from the program [4]. PhRMA has filed another lawsuit against the FDA-authorized program citing concerns on “safety and danger to public health” which may have serious implications for the program and could influence the approvals of requests from other states.

Even with FDA authorization, Florida will have to meet additional requirements including submitting a “pre-import request” to the FDA for each drug 30 calendar days before its arrival [1]. Additionally, the FDA expressed significant safety concerns about the import of drugs and emphasized that the importer is responsible for relabeling per FDA standards and conducting rigorous safety testing [6]. This increases the financial burden on the state and is likely to limit the cost savings.

Windrose Take

What is the anticipated impact on the US healthcare system?

The program, currently limited to a small set of indications including drugs for mental health and HIV, is somewhat limited in its cost-savings as it does not include biologics, infused and inhaled drugs which represent a significant source of healthcare spending in the US [2]. A potential expansion could include other products such as monoclonal antibodies or other high-cost therapies that have a larger impact on reducing healthcare resource utilization in the US.

How will this affect manufacturers?

As the program is currently restricted to a few small groups under Florida’s jurisdiction, its current impact is relatively limited.

However, the anticipated rollout to Medicaid will likely have greater implications for manufacturers, particularly as Florida currently has the 4th largest Medicaid program in the US.

The rollout to Florida Medicaid may have implications for price referencing for other state Medicaid programs. If prescription drugs are imported from Canada at a steep discount in Florida, it remains to be determined whether these low prices would count under Medicaid Best Price and therefore have a knock-on impact for statutory rebates in gross-to-net calculations elsewhere. Every state Medicaid program can utilize Best Price offered in different jurisdictions during pricing negotiations. If applicable, manufacturers will need to account for this risk in long-term revenue forecasting and planning.

Additionally, drug manufacturers allocate a specific supply to each country based on population and epidemiology estimates. If a portion of the Canadian supply is reallocated to the US, this will complicate the prediction of revenue impact and utilization within both countries. As a potential mechanism to prevent exportation to the US, manufacturers could consider including clauses in their pricing agreements in Canada which could safeguard the Canadian drug supply as well as mitigate potential revenue reduction.

Citations

WSJ - Florida Is First State Allowed to Import Drugs From Canada in Bid to Reduce Costs - WSJ
KFF Policy Report - https://www.kff.org/poly-watch/what-to-know-about-the-fdas-recent-decision-to-allow-florida-to-import-prescription-drugs-from-canada/
National Conference of State Legislatures - https://www.ncsl.org/health/state-drug-wholesale-importation-programs
Biospace - https://www.biospace.com/article/industry-group-prepares-another-lawsuit-against-florida-s-drug-importation-plan/
Washington Post - https://www.washingtonpost.com/business/2024/01/05/fda-florida-prescription-drugs-canada/
DLA Piper - https://www.dlapiper.com/en/insights/publications/2024/01/fda-authorizes-florida-drug-importation-proposal