Wyoming is one of many states that decided to examine if importing drugs would provide significant savings to its citizens. In a refreshing turn, legislators in the Cowboy State and staff at the Department of Health did not immediately see Canadian drug importation as the easy solution that many advocates claim it is. In a hearing in August and a report released today, they took a critical look at the issue and the Department of Health recommends that the state not pursue the idea for several key reasons:

Drug importation will likely not create sustainable savings

The state of Wyoming found that applying basic economic theories shows fundamental problems that would make Canadian drug importation unsustainable. Drug importation would rely on a form of arbitrage, which is where a trader takes advantage of the differences in price for the same good across different markets to make a profit. However, differences are temporary and savings would soon disappear.

The more states the merrier makes drug importation less feasible

Drug importation exploits the difference in drug prices between the U.S. and Canada, but any savings will disappear once multiple states start to take advantage of the price difference. A state like Florida and its 21 million residents could easily suck the Canadian drug market dry, leaving no savings for any other states.

Medicare payment actors could suck up all the savings

Because savings would be entirely dependent on actions taken by Medicare part D plans, Wyoming found that savings for Medicare recipients to be elusive and “no easy task”. They even said savings might be zero if the insurers marked up the cheaper Canadian drugs back to U.S. prices and kept the profits for themselves. 

Canada does not support having its drug supply raided

A letter from the Canadian Consulate General to the director of Wyoming’s Department of Health stated that if states continue to pursue Canadian drug importation: “Canada would be forced to respond to any actions that could endanger the health and safety of Canadians by threatening the supply of prescription drugs or causing the costs of prescription drugs for Canadians to increase.”

A lot of promise, but no guarantees

The state of Wyoming found that Canadian drug importation sounds great on paper, but that is where the fantasy ends. Implementation would involve numerous resources and costs to administer a program without the state being able to guarantee significant consumer savings.

Should we import brand name products when cheaper generics are available in the U.S?

The Dept. of Health listed two tables of medicines in a list of medicines they say price differences between Canada and the U.S. But they also listed a brand name for which there’s a generic available: Advair Diskus. This is a common flaw of importation programs, where they’re so excited to show they’re saving money on brand name medicines that they ignore cheaper generics.

Bypassing community pharmacies

One of the distribution methods discussed would bypass Wyoming’s existing retail pharmacy network and shift patients who wanted these medications to-mail order. While we’re always interested in cost-savings, pharmacists are a critical part of the patient care team, and experimenting with a new foreign medicine supply-chain that excludes the pharmacy practitioner that sees the patient the most seems absolutely unwise.

There were also a number of things not included in the report that should be a part of any comprehensive analysis of this topic by a state

Regulatory challenges abound

While the report estimated the cost of setting up a program, it didn’t dive into the challenges of actually running one. As Minnesota found out with its own now-shuttered importation program, you can’t really regulate an entity that you aren’t legally allowed to enter, and you don’t have the power to shut down when they endanger patient safety. The final FDA regs say that Wyoming would have to conduct all the inspections and regulatory compliance for the Canadian vendor they work with, despite not having a legal right to enter the premises on foreign soil, and with no authority to withdraw their wholesale license and shut them down if they find serious compliance issues. How can you possibly regulate an entity you can’t inspect or sanction?

Canada has no track-and-trace system

The report did not once mention the safety issue of track-and-trace, which cannot be glossed over. Every unit of U.S. medicine made today has to have a serialized number. No Canadian medicines have this. Finished medical products bought from the Canadian market will be inherently less safe. You can learn more about this in this article by Adam Fein and Dirk Rodgers 0n DrugChannels.

Cost of testing, repackaging and relabeling

The report says that costs of repackaging and relabeling will be $200k / year, and medicine testing will be $100k / year. These seem low, and the testing estimate is definitely low. Federal law requires statistically sampled testing. Dr. Kristina Acri née Lybecker has found that testing costs for these programs are so high they eliminate any savings. You can read her peer-reviewed paper on this topic, “State pharmaceutical importation programmes: an analysis of the cost‐effectiveness.” 

No guarantee of Canadian pricing

Another issue left out of this report is the fact that American buyers of Canadian medicine aren’t entitled to Canadian price-controlled pricing. This fact upends the entire economic model of importation because Canadian wholesalers could just charge near- U.S. prices and then you still have to have costs of repacking, relabeling, and testing.

No rebates for Canadian medicine

Medicines bought from Canada aren’t entitled to rebates. The true price any healthcare entity pays for any medicine is the cost minus the manufacturer’s rebates they get. Medicaid programs in CO, VT, and ME have all raised concerns that without rebates, Canadian medicines would be MORE EXPENSIVE than the medicines they get today with rebates

Final thoughts

We’re pleased that the Wyoming agency staff conducted the fairest and most thorough analysis of this to date. All states should be so lucky to have such expertise advising them.