U.S. drug price controls could kneecap DeSantis’ Canada prescription import plan

U.S. House to debate allowing Medicare to negotiate medication prices

By: - August 12, 2022 7:00 am

Credit: John Moore/Getty Images

It’s been one year and nine months since Gov. Ron DeSantis applied to the U.S. Department of Health and Human Services to import cheaper pharmaceuticals from Canada. That was after his patron Donald Trump lost his reelection but was still in the White House.

The response thus far: mostly crickets.

Now, with the U.S. House of Representatives poised to take up the Democrats’ Inflation Reduction Act as soon as Friday, the rationale behind the Canada plan looks distinctly shaky.

That’s because the legislation would allow Medicare to begin negotiating cheaper drug prices with pharmaceutical companies starting in 2026, achieving price drops without piggybacking on similar pricing negotiations long practiced in Canada — or the need to persuade the Canadians to go along.

Gov. Ron DeSantis addresses the press on May 28, 2021, at a warehouse operated by LifeSciences Logistice LLC to house imported Canadian pharmaceuticals — if the Biden administration and the Canadian government give the go-ahead. Source: Screenshot/Florida Channel

“So, why would they participate in that unless they have plenty of capacity and they can move some drugs over and make some more money, I guess. But, as far as I know from the Canadian side, they don’t have them [to spare],” Louisa McQueeney of Florida Voices for Health told the Phoenix, an advocacy organization, in a telephone interview.

McQueeney added of the import plan: “To me it’s more like talking points — I’m doing this to lower your drug prices. But, in reality, it doesn’t do anything because it’s not going to happen.”

Nevertheless, state government has been proceeding as if the plan is going to work. For example, in June 2021, the governor held a press conference in a massive Lakeland warehouse operated by LifeSciences Logistics LLC to announce the state had contracted with the company to manage the pharmaceutical import supply chain. The state even hired a consultant in Canada to work on the project.

It’s true that one month following that event President Joe Biden directed the Food and Drug Administration to look into the importation scheme. But not a word has issued from the federal government about the state’s request since then.

Section 804

The importation program implicates Section 804 of the Federal Food, Drug, and Cosmetic Act, approved by Congress in 2003 but never implemented. It allows states and tribal governments to submit protocols for acquiring pharmaceuticals in Canada and to test, relabel, and distribute them for distribution here.

Normal people would not immediately benefit. Instead, the beneficiaries would be patients under the care of state agencies for conditions including asthma, COPD, diabetes, HIV/AIDS, and mental illness. The Florida Department of Health would distribute these drugs to county health departments to supply to clients; pharmacies servicing Medicaid patients; Department of Corrections inmates; state disability center clients; and patients in state mental health treatment centers.

The state estimated savings of between $80 million to $150 million per year — a broad range reflecting the fact that there’s no way to know how well the program would contain costs, if at all.

PhRMA, the Pharmaceutical Research and Manufacturers of America, has filed suit to block the plan and the case is pending before the U.S. District Court for the District of Columbia. Florida has filed an amicus brief opposing the industry in that case.

Tellingly, the Biden administration argued in May 2021 that the complaint was moot because imports were “overly speculative and not imminent,” Kaiser Health News reported.

(PhRMA also has hinted at filing a lawsuit if the IRA becomes law, according to a Politico report.)

Asked for comment, the U.S. Food and Drug Administration provided much the same answer it gave when the Phoenix inquired last year:

“The FDA generally does not comment on the status of a pending proposal but will notify an entity in writing when we have decided to authorize, or not authorize, a Section 804 Importation Program proposal. At this time, the FDA has not authorized any Section 804 Importation Programs. Additionally, the FDA does not comment on proposed or pending legislation.”

Same for the Canadians, who drafted an administrative rule blocking “the distribution of Canadian-labelled drugs for consumption or use outside of Canada if doing so could cause or worsen a shortage,” the Health Ministry said in a written statement this week.

“Drugs intended for the Canadian market can continue to be sold for consumption outside of Canada, if the sale will not cause or exacerbate a drug shortage in Canada. Drugs that are not intended for the Canadian market and are manufactured solely for export are not included in the scope of the prohibition,” the ministry said.

Some individual Americans order drugs overseas but this is of ambiguous legality, although the FDA “does not generally enforce violations of drug importation for personal use” unless dangerous counterfeits are at issue, according to a Florida legislative analysis.

The IRA

The IRA is an omnibus bill with provisions targeting climate change, taxation, and more. Significantly, the bill would allow Medicare to negotiate pricing beginning in 2026 for some drugs covered under Part D.

That’s the program’s prescription drug plan. The number of drugs subject to price negotiations would increase until it hits 20 in 2029, including those available under Medicare Part B, which are dispensed by doctors.

The bill doesn’t identify specific drugs; Medicare would identify them based on pricing trends. However, drugs on this list compiled by the AARP are strong candidates; they represent drugs Medicare spent the most on in 2020 and whose prices increased this year:

Eliquis, a blood thinner; Revlimid, a cancer drug; Xarelto, another blood thinner; Januvia, for diabetes; Trulicity, also for diabetes; Imbruvica, for cancer; Jardiance, for diabetes; Humira, for rheumatoid arthritis and plaque psoriasis; Ibrance, for cancer; and Symbicort, for asthma.

Participants’ out-of-pocket drug costs would be capped at $2,000 a year, beginning in 2025, and the program would supply free vaccinations. The bill has lost language that would have required pharmaceutical companies to pay rebates if their prices exceed inflation.

The implications are significant, since 64 million people — older Americans and those with disabilities — participate in Medicare. Nearly 49 million take part in a prescription drug plan of some kind.

The nonpartisan Committee for a Responsible Federal Budget estimates the legislation would save the government $320 billion.

“While these policies do reduce the cost of Medicare, they do so by lowering prescription drug costs, not by cutting benefits,” the organization wrote in a position paper.

“In fact, we estimate the policies as a whole would improve benefits by lowering premiums and out-of-pocket costs — including through a $2,000 annual cap on out-of-pocket costs. In addition to saving the government nearly $300 billion, the IRA would save American families nearly $300 billion more.”

According to the Kaiser Family Foundation, 50 percent of the 3,343 drugs covered under Medicare Part D and 48 percent of 568 drugs dispensed under Part B saw price increases in excess of inflation between July 2019 and July 2020.

“Across all Part D drugs with price increases greater than inflation, the median price increase was 5.6 percent; for Part B, the median price increase was 5.4 percent,” Kaiser reported.

ACA

The legislation would extend the premium tax credit for participants in Affordable Care Act insurance exchanges for three years. The credit helps exchange members pay ACA premiums if their income is less than 400 percent above the federal poverty line (which is $26,500 for a family of four) or the tax filer or spouse drew unemployment benefits for at least one week during a year.

“These policies will save millions of Americans thousands of dollars a year,” Michael Womack, state director for Protect Our Care Florida, said during a recent Zoom news conference. He called it “the greatest health care achievement since the Affordable Care Act.”

U.S. Rep. Darren Soto, Democrat from Central Florida. Credit: U.S. House website

“This is a huge win for Florida,” Florida U.S. Rep. Darren Soto said during the same conference.

“We have the largest federal ACA exchange in the nation — 2.7 million Floridians; a whopping 2.7 million Floridians — get their care from the ACA exchange, more than 10 percent of Florida.”

That, he said, is because of the many small businesses and self-employed people who lack access to employer-provided insurance.

“The ACA was made for states like Florida,” Soto said.

“The cap on out-of-pocket expenses is critical. At $2,000 a year in out-of-pocket expenses we could see seniors saving anywhere from $1,500 to over $7,000 among your average senior in Florida,” he said.

“Sadly, the Republicans in the Senate blocked a $35 cap on insulin for the rest of Americans. We will continue that fight,” Soto said.

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Michael Moline
Michael Moline

Michael Moline has covered politics and the legal system for more than 30 years. He is a former managing editor of the San Francisco Daily Journal and former assistant managing editor of The National Law Journal. He began his career covering the Florida Capitol for United Press International. More recently, he wrote for Florida Politics.

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