An Analysis Of New Mexico's Draft Canadian Drug Importation Plan

Eight states are in the process of planning their Canadian importation plans and New Mexico has published a draft of the plan they will send to HHS by December 15th. We analyzed what this plan will mean for the pharmacists of New Mexico. And since this is likely to resemble other states’ plans, no matter where you’re a pharmacist, this is what you have to look forward to when your state does Canadian drug importation.

Don't have time for a seven-minute video? Watch our two-minute summary with the most important concerns.

Watch our Drug Importation in New Mexico page for more updates.

Imported Drugs Will Require Additional Inventory Management

Pharmacies that participate in the 340B program or other discount programs already know the additional requirements to manage two stocks. Any prescription drugs imported by New Mexico or any other state will receive their own unique National Drug Code (NDC) number, which means that some pharmacies will end up having to manage three different stocks. People have many reasons for becoming a pharmacist, but a passion for managing multiple stocks is not one of them.

Potential Non-compliance with Wholesaler Contract

Many pharmacies have contracts that require a specific percentage of medicines to be purchased from a single wholesaler to lock in the best pricing. Medications imported as part of a state’s drug importation program, however, are not likely to come from a pharmacy’s contracted wholesaler. The three major pharmaceutical wholesalers in Canada (AmerisourceBergen, Cardinal Health, and McKesson) have all said they will not participate in any drug importation program and no major U.S. wholesaler has agreed to serve as the importer the final rule requires. Distributing a large number of imported medications risks pushing any pharmacy towards non-compliance with their current wholesaler. This is yet another way in which this program is terrible for pharmacies and pharmacists.

No Guaranteed Dispensing Fees

There is no escaping the fact that any business must cover its basic operating expenses to stay in business. A pharmacy is no different, and one of the ways that a pharmacy ensures it continues to operate is by earning a dispensing fee for every prescription. For years, pharmacists have seen those fees being chipped away. A 2020 study says that dispensing fees for non-specialty drugs should be about $12.45, but pharmacists aren’t getting paid that now, and the New Mexico drug importation plan does not guarantee a dispensing fee. The reality for pharmacists is that any imported medications will likely cause downward price pressure that will minimize dispensing fees.

Imported Drugs Are Not Traceable Back to the Manufacturer

The Drug Supply Chain Security Act (DSCSA) of 2013 requires that all medication distributed in the U.S. receive a unique serial number that enables it to be tracked from where it was manufactured through the entire supply chain until it is dispensed to a patient. The U.S. established its track-and-trace system in response to thousands of small wholesalers buying and selling medicine in a virtually unregulated secondary market that allowed diverted drugs into the U.S.’s secure drug supply chain. 

Canada has a much smaller prescription drug market and no track-and-trace system. Any imported medication would receive a unique serial number once in the U.S., but that means that imported drugs could only be traced back as far as when that barcode was applied. State importation programs would just need to trust that nothing happened to the medication before then. A licensed Canadian pharmacy sold counterfeit cancer medication that reached American patients before, so that seems naive at best.

No Liability Shield If a Pharmacist Dispenses Counterfeit Medicine

The draft of New Mexico’s plan does not provide additional liability protections for pharmacies or pharmacists in the event that an imported medication dispensed to a patient turns out to be counterfeit. In the past, pharmacists who dispensed counterfeit or diverted medications have faced lawsuits even when they purchased their stock from a licensed wholesaler. Litigation is an expensive endeavor that would likely end in bankruptcy if a pharmacy’s insurance will not cover the settlement. It is not yet clear whether insurance companies would pay these costs: no insurance company has stated that they will.

Nothing Stops PBMs from Spread Pricing These Drugs

New Mexico’s draft plan does nothing to prohibit health insurance plans or Pharmacy Benefit Managers (PBMs) from marking up the price of imported medications. This means that patients might see no cost savings, which would violate one of the two stated federal requirements for a state to operate a drug importation program.

Can The State Handle Adverse Event Reporting and Recalls? Isn’t That a Conflict Of Interest?

Handling all medical adverse events and any recalls linked to imported drugs presents New Mexico with two problems. First, the state will need to basically create its own miniature Food and Drug Administration. This is a new responsibility for them and patient safety will be the victim as they conquer the learning curve Second, allowing the state to sponsor the drug importation program while also being the entity responsible for reporting any issues with the program is akin to letting the fox guard the henhouse. New Mexico has a vested interest in seeing this program succeed and evidence of safety issues will provoke the FDA to shut it down. Given that the state has rebuffed experts who have stated that importation will not save money safely, It doesn’t seem wise to create that conflict of interest in the program.

Drug Importation Will Not Benefit The Most Needy

Programs that help the neediest in New Mexico obtain the medicine they need - Medicaid and the 340B program - already receive deep rebates on the drugs they dispense. Drugs imported by the state would not be eligible for those discounts, leaving the neediest in New Mexico with no benefit from a drug importation plan. Thirty-four percent of New Mexico residents are covered by the state’s Medicaid or Children’s Health Insurance Program (CHIP) and drug importation will not help them. The same is true for any patient who received their medication from a pharmacy participating in the 340B program. 

Testing Plan Is Dangerously Vague

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) requires that patients must see substantial savings without additional risks from the imported drugs. Testing is the only way to verify that the imported drugs pose no added harm to patients, and the state of New Mexico did not present a detailed plan for testing in its draft plan. They failed to name a vendor to do the testing, or to estimate costs. 

State Pharmaceutical Importation Programmes: An Analysis of the Cost-effectiveness,” a research paper by Dr. Kristina M.L. Acri née Lybecker published in the Journal of Pharmaceutical Health Services Research, Dr. Acri concluded that the testing costs to ensure safety and quality of any imported drug would far exceed any possible savings to the consumer. If a single patient were to receive a counterfeit or substandard drug, the state’s drug importation program could see months, years, or decades’ worth of savings wiped out to cover the cost of just a single event. This research study demonstrated that drug importation plans can be cheap, or they can be safe, but they cannot be both.

Due to the pandemic, New Mexico is facing a record budget shortfall for 2022 of nearly $1 billion. If the state cannot or is not able to test all imported medicines to a level of statistical certainty that would guarantee safety, counterfeits could slip in, endangering the patients who receive the medicine and the pharmacists who dispense it.

Publicly Shaming Non-participating Pharmacies

One of the most troubling passages in the draft plan is on page 15, where it states that the state and health plans would inform enrollees and residents about which pharmacies were not dispensing imported medications so patients could avoid those pharmacies. States have attempted drug importation programs in the past, and they have failed by endangering patients, not showing patients significant savings or both. The state of New Mexico has not proven that it can import drugs safely while delivering significant savings. Until they can do so, they should not be threatening pharmacies and pharmacists that continue to put patient safety first.

Is Now the Right Time to Try Drug Importation?

Of course, there is the giant elephant in the room: COVID-19. At a time when states are struggling to contain the pandemic and resources are stretched to the breaking point, is now the time that the state of New Mexico should be dedicating time, resources, and taxpayers’ money to an unproven idea that has been discouraged by four former FDA commissioners and overtly opposed by the federal government of Canada? It seems clear that the residents of New Mexico would be better served by the state purchasing more personal protective equipment, ensuring that students who cannot attend classes in-person have access to the Internet, or expanding testing capacity to identify individual cases before they mushroom into a local epidemic. 


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