By Michael Erman
(Reuters) – The Trump administration took a step Wednesday toward allowing importation of medicines from Canada, an action the president has advocated as a way to bring cheaper prescription drugs to Americans, but the pharmaceutical industry was quick to resist the move.
The U.S. Department of Health and Human Services (HHS) said it and the Food and Drug Administration will propose a rule that will allow it to authorize states and other groups to pursue pilot projects related to importing drugs from Canada.
The agency also said it would allow drugmakers to bring drugs that they sell more cheaply in foreign countries into the United States for sale here, potentially enabling them to sell below their contracted prices in the United States.
The announcement comes as President Donald Trump aims to address the world’s highest drug prices ahead of the 2020 elections and after several high-profile policy failures.
Reuters has previously reported that the administration is considering broadening its plans to link the cost of some drugs for the government Medicare program to an international pricing index.
The importation idea needs to be proposed and then finalized by Health and Human Services. The largest U.S. pharmaceutical and biotech companies said they opposed the idea of importation through their lobbyists PhRMA and BIO.
“There is no way to guarantee the safety of drugs that come into the country,” PhRMA Chief Executive Officer Stephen Ubl said.
Drug industry shares were slightly higher, with the NYSE Arca Pharmaceutical Index <.DRG> up 0.2 percent versus a broader flat market.
HHS Secretary Alex Azar said he has had prior discussion with Canada about importation and that it would be up to the states, pharmacies and distributors, who are expected to pursue the importation through trial models, to navigate the issues.
“There are hurdles of course, but the hurdles now are known. They are being laid out and they are surmountable,” Azar told reporters on a conference call.
The Canadian health minister’s office said in a statement that it will work to understand the implications for Canadians and to ensure it does not negatively effect supply or cost.
Earlier this month, Health Canada said the U.S. market is too large to rely on Canadian imports as a solution to the high cost of drugs.
Many drug purchase agreements in Canada forbid the re-export of drugs to other countries, according to a Canadian government memo obtained by Reuters.
Any implementation is still far away given the technical steps of rule making and that the proposals will face challenges, Evercore ISI analysts Ross Muken and Michael Newshel said in a research note. For instance, they said, while Democrats like importation, most Republicans in Congress oppose it.
The first part of the proposal would allow states, wholesalers or pharmacists to submit plans for pilot projects for Canadian drugs if their raw materials are manufactured in the same plant as the U.S. version and are in line with FDA approval. It would exclude biologics, infused drugs, injected drugs and inhaled drugs for surgery.
The Trump Administration has experienced recent setbacks in efforts to bring down drug prices. Its plan to make drugmakers disclose list prices in TV ads had to be scrapped after the companies won a legal challenge, and it abandoned efforts to force pharmacy benefit managers to pass discounts onto Medicare recipients.
Drug pricing is an important election issue for Trump and for Democrats, many of whom have said they would support importing medicines to lower costs for U.S. consumers.
(Reporting by Manas Mishra in Bengaluru, Michael Erman in New York and Allison Martell in Toronto; Writing by Caroline Humer; Editing by Steve Orlofsky and Bill Berkrot)
