FDA approves Florida proposal to import drugs from Canada

January 15, 2024

The Food and Drug Administration (FDA) approved the state of Florida’s plans to import a limited set of Canadian medications for use for state funded health plans. This decision is a long time coming; Congress authorized drug importation from Canada two decades ago, but this is the first time the FDA has approved the importation as ‘safe.’ Over three quarters of Americans support such drug importation, and brand name drugs in Canada generally cost less than half as much as in the US. Rebates are sometimes not included in the analysis of US drug prices, though which may make US drug prices appear higher than they really are.

This FDA decision is not likely to have a large impact on the price of drugs for US employers. There are a limited number of drugs that Florida plans to import (mostly for behavioral health diagnoses and HIV), and Florida will only be able to import drugs for the incarcerated, Medicaid recipients, and those in mental health facilities. Importation will be complex; the state will have to use a single wholesaler on each side of the border, and will have to relabel drugs to be consistent with FDA labeling requirements. The Canadian government opposes this approach, and pharmaceutical companies may attempt to refuse to sell drugs to any wholesaler which plans export to the US. A number of states wish to follow Florida, and it will likely be hard to “scale” this approach. Canada does not manufacture a significant number of medications, so export of medications to the US could cause shortages. PhARMA, the trade group representing the pharmaceutical industry, sued to prevent this FDA decision, and is likely to litigate this further.

Canada, and all other developed countries, have lower brand name drug prices because they regulate those prices. In the US, the FDA is prohibited from considering drug prices when it approves new drugs. Medicare price negotiations required by the Inflation Reduction Act could establish lower prices in the commercial market, but these new negotiated prices don’t go into effect until 2026.

Seven states, including Colorado and Vermont, have commissions in place to determine maximum allowable prices. This is likely to be subject to litigation, as the federal government generally is responsible for regulating interstate commerce. One pharmaceutical company threatened to withhold medications from Colorado, which decided not to set a ceiling price for that company’s drugs.

Implications for employers:

• The potential to import lower-cost drugs could increase the pressure on the pharmaceutical companies to lower prices, but employers should not expect importation itself to offer substantial price relief.

• Employers can continue to pressure lawmakers to address high drug prices

• Other actions this week which will increase use of biosimilars have the potential to lead to shorter-term cost savings for employers.
  
  

Here is a link to FDA guidance on personal drug importation.

Here’s a link to a new KFF Policy Brief on drug importation, published on Friday.

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