In a monumental development, the Food and Drug Administration (“FDA”) has given Florida the green light to import millions of dollars worth of medications from Canada. This marks a significant policy shift in the United States, with potential far-reaching effects on the pharmaceutical industry and, notably, the pharmacies that serve as crucial intermediaries in the distribution of medications.
The FDA’s decision allows Florida to import medicines in bulk from Canadian wholesalers for various public health programs, including Medicaid, government clinics, and prisons. This move has the potential to reshape the pharmaceutical landscape in the United States, and other states are closely watching as they consider implementing similar programs.
Florida anticipates saving up to $150 million in the first year through this program, importing essential medications used to treat conditions like HIV, AIDS, diabetes, hepatitis C, and psychiatric disorders. However, significant obstacles remain. The Pharmaceutical Research and Manufacturers of America (“PhRMA”) is poised to challenge the Florida plan legally, as it has done with previous importation efforts. Additionally, some drug manufacturers have pre-existing agreements with Canadian wholesalers not to export their products, and the Canadian government has taken measures to prevent the export of prescription drugs facing shortages.
Several other states, including Colorado, Maine, New Hampshire, New Mexico, North Dakota, Texas, Vermont, and Wisconsin, have passed laws allowing state drug importation programs and are seeking FDA approval. However, challenges may arise from drug manufacturers in Canada, who have contracts with shipping companies prohibiting deliveries to the United States.
It is important to recognize that while importation from Canada may offer some relief in drug pricing, it does not directly address the root causes of high drug prices in the United States, such as manufacture rebates that have been retained by PBMs and their wholly-owed rebate aggregators, Ascent Health Services, LLC (Cigna Corp./Evernorth), Emisar Pharma Services, LLC (UnitedHealth Group, Inc./Optum), and Zinc Health Services (CVS Health). Rebate aggregators provide services to other PBMs. For example, Humana Pharmacy Solutions and Prime Therapeutics utilize Ascent Health Services for rebate aggregation. Vertical integration and the horizontal partnerships among PBMs deter competition and increase drug prices and out-of-pocket expenses. It is also worth noting that the gross-to-net bubble exceeded $250 billion in the calendar year 2023. The term “gross-to-net bubble” refers to the dollar gap between gross sales at brand-name drug list prices and drug sales at net prices after rebates and other reductions. The gross-to-net bubble expands when manufacturers pay rebates to PBMs. PBMs do not reveal the percentage of drug manufacturer rebates that are retained at the PBM level, instead of being passed through to plans.
The impact of this decision on pharmacies across Florida and potentially the entire nation is substantial. Pharmacies play a critical role in the distribution of medications to consumers. As drug prices become more competitive through importation, pharmacies may experience changes in their supply chain dynamics and profitability. Adapting to these shifts will be crucial for pharmacies to continue providing essential healthcare services to their communities.
How Frier Levitt Can Help
Frier Levitt is closely monitoring the recent approval and the impact on overall drug pricing as well as drug spend for Plan Sponsors. Frier Levitt’s Plan Sponsor Practice Group works with Plan Sponsors to ensure they understand the full panoply of their rights under their contracts and applicable law and to ensure that PBMs comply with their contracts and applicable law. If your organization is a Plan Sponsor, contact us today.
