The final rule implements a provision of federal law that allows FDA-authorized programs to import prescription drugs from Canada under specific conditions, according to a report by Kaiser Health News. Prices are cheaper in Canada because the government there caps how much drug makers can charge for medicines, while the free market reigns supreme in the United States.

Even though insulin is not included among the drugs covered by the rule, the Trump administration also issued a request for proposals seeking plans from private companies on how insulin could be safely brought in from other countries and made available to consumers at a lower cost than products sold in the U.S.

Why now?

Congress has allowed drug importation since 2003, but only if the secretary of the Department of Health and Human Services certified it is safe. That had never happened until this year, when Secretary Alex Azar approved an application by Florida, according to a letter he wrote to congressional leaders.

For decades, Americans have been buying drugs from Canada for personal use – either by driving over the border, ordering medication online or using storefronts that connect them to foreign pharmacies, according to Kaiser Health News. Though the practice is illegal, the FDA has generally permitted purchases for individual use.

About 4 million Americans import medicines for personal use each year, and about 20 million say they or someone in their household has done so because prices are much lower in other countries, according to surveys.

How it would work

The administration envisions a system in which a Canadian-licensed wholesaler buys from a manufacturer of drugs approved for sale in Canada and exports them to a U.S. pharmacy, wholesaler or importer that has contracted with the state in which they operate.

To be eligible for importation, a drug would need to be approved by Canada’s Health Canada’s Health Products and Food Branch and needs to meet the conditions in an FDA-approved new drug application.

Essentially, eligible prescription drugs are those that could be sold legally on either the Canadian market or the American market with appropriate labeling.

Under the final HHS and FDA rule, state importation programs will have the flexibility to decide which drugs to import and in what quantities.

The rule also requires drug manufacturers to provide importers with documentation guaranteeing the medications are the same drugs as those already sold in the U.S.

Parts of this report were reprinted from Kaiser Health News.

Drug makers earlier in the year said they would start reducing prices as well as the rebates they pay PBMs to appease lawmakers and the Trump administration, saying it would reduce the cost of medicine for patients.

But not long after the announcement, the nation’s largest PBM, United Healthcare, fired off a letter to drug companies telling them that if they planned to reduce prices and rebates they would have to give seven quarters of notice (that’s 21 months if you’re counting) when they intend to lower prices.

The letter, which was confirmed in news reports in the health care trade press, highlights what many critics say is an inherent conflict of interest among some of the large PBMs operating in the country.

Some background

When PBMs first came on the market, the services they offered were processing pharmacy claims and negotiating discounts on medications for the health insurance companies with which they contracted.

Later though, they found a new way to make money: rebates. They would approach two manufacturers that made similar versions of a drug and play them off against each other to elicit the largest rebate they could. Whichever one offered the larger rebate would have their pharmaceutical placed on the drug plan’s formulary.

The problem is that these large PBMs do not pass on the full rebate to their clients, like health insurance companies and health plan enrollees. Instead, they keep most of the rebate for themselves. As a result, PBMs with this business model are not motivated to include the lowest-priced drug on their formulary, but rather the one for which they can receive the largest rebate check.

The latest

United Healthcare sent out the letter to drug makers after pharmaceutical manufacturer Sanofi S.A. said it would cut the price of its cholesterol-lowering drug Praluent by 60%. It did so after its competitor Amgen Inc. reduced the price of its cholesterol drug Repatha by the same amount.

United Healthcare’s demand that drug companies give 21 months’ notice when they plan to reduce prices has caught many drug makers off guard, since many of them have been looking to cut prices as pressure mounts on the industry from Washington.

The dominance of United Healthcare’s PBM OptumRX and its competitor Express Scripts means that group health plan enrollees are often left at their mercy, as many large health insurers have contracts with them.

If a drug company does not give the rebate that a large PBM demands, it could lose access to patients – and patients lose access to that drug. The only way to play the game is to offer a larger rebate and increase prices, which in turn increases the prices that patients have to pay.

Fortunately, there are a number of smaller PBMs in the marketplace that have different business models that take payers’ needs into consideration and aim to reduce the out-of-pocket costs for patients. They contract with employers and insurers directly to make this happen.

The study, “The Prescription Drug Landscape, Explored,” found that patients are covering the lion’s share of the cost through higher premium outlays, while large pharmacy benefit managers are passing on a larger portion of the manufacturer rebates they receive to insurance plans.

The study found health plan enrollees have largely been sheltered from rapidly rising drug costs due to:

• More of the health insurance premium being dedicated to pharmacy benefits. The percentage of health insurance premiums allocated to pharmacy benefits increased to 16.5% in 2016 from 12.8% in 2012.
• Policies that cap out-of-pocket expenses.
• Cost-sharing assistance from manufacturers (like Medicare Part D coverage gap discounts and copay coupons).

Overall health retail prescription drug spending grew to $341 billion in 2016 from $250.7 billion in 2012. Here’s who spent what:

Patients: $103.8 billion – This includes the percentage of the premium they pay that goes towards drug benefits, in addition to out-of-pocket spending.

Employers: $97.5 billion – The premiums that employers pay that go towards drug benefits.

Government: $139.8 billion – This is both federal and state spending on retail drug coverage through Medicare Part D, Medicaid fee-for-service, and the share of premiums for retail drug coverage in Medicaid managed care.

Employers have grown increasingly concerned by the rapidly increasing cost of medications and the effect on the premiums they and their employees pay.

The National Business Group on Health in 2018 surveyed 170 large employers and found that:

• 14% said the pricing and rebate system needed to be more transparent,
• 35% said rebates needed to be reduced,
• 50% said the pharmaceutical supply chain was inefficient and too complex and needed to be overhauled and simplified.
• 56% said rebates were not an effective tool for helping drive down costs.
• 53% said rebates did not benefit customers at the point of sale.

Tackling drug costs

The National Business Group study also looked at what employers are doing to combat drug costs, including:

• Adopting recently developed capability by pharmacy benefit managers to pull rebates forward at the point-of-sale to benefit consumers.
• Implementing point-of-sale rebates to benefit the enrollees.
• Educating employees about the value of buying generic, so they can save money for you and themselves. According to the Federal Drug Administration, generic medications save more than $150 billion annually.
• Half-tablet programs – These programs aim to reduce the number of tablets participants consume, while still receiving the same strength of the medication. For instance, individuals might need 15 milligrams of daily medication, so they receive a prescription for 30 tablets. With the half-tablet program, individuals would receive a prescription for 15 tablets, with 30mg strength each.
  Instead of taking one daily, they would only take half of a tablet. Despite the higher-strength pills, participants in this program only pay half of their usual prescription copay because they are receiving half the number of tablets. Likewise, individuals who pay coinsurance would be paying a smaller percentage for fewer tablets.

And while most of those efforts are focused on the upfront cost of insurance, co-pays and deductibles, many employers fail to help their employees control the very costs they actually have the most control over and one of those areas is medicine.

Helping your employees become wise consumers of health services can also cut your overall insurance costs as well as help your employees conserve more of their own funds if they have high co-pays and deductibles.

The cost of drugs can vary greatly between pharmacies to a shocking degree. And while your employees may have low co-pays for some drugs, if they go to the most expensive option when the insurance is covering the tab, it basically adds to the cost drivers for your insurance plan.

Here’s how wild the price swings can be. Consumer Reports recently surveyed pharmacies to price out a basket of five popular generic prescription drugs and here are the prices:

• Healthwarehouse.com: $66
• Costco:  $150
• Various independents: $107
• Sam’s Club: $153
• Walmart: $518
• Kmart: $535
• Grocery stores: $565
• Walgreens: $752
• Rite Aid: $866
• CVS/Target: $928

It also pays to shop around from store to store and ask for discounts.

“A Rite Aid store near our headquarters in Yonkers, N.Y., was able to get the price of atorvastatin, the generic version of Lipitor, down to just $18 from $300 through a combination of in-store and external discount programs,” the report states. “But at another Rite Aid, we were told the cost could only be lowered to $127.”

Consumer Reports recommends that your employees:

• Use online discounts. There are a number of websites that can provide you with discount coupons or vouchers for drugs, including:
  • GoodRx
  • Blink Health
  • WeRx.org

On these sites you enter the name of the drug, dosage and quantity and where you live and it will provide coupons or vouchers and identify which pharmacies you can use them at.

• Expand your shopping horizons. As you can see on the list above, prices vary tremendously. And combining shopping around with a good plan for using coupons and your employees can save themselves and your health plan boat loads of money.
  They should also check out their local warehouse discount store as both Costco’s and Sam’s Club’s pharmacies were also quite reasonable.
  Not to be outdone, neighborhood pharmacies and grocery store pharmacies were also much cheaper than the large regional drug store chains. “The absolute lowest prices we found in each city we called were almost always at these kinds of stores,” Consumer Reports wrote.
• Ask pharmacies if they will honor online coupons. Pharmacies will almost always honor them, Consumer Reports found. But Consumer Reports mystery shoppers had to be persistent in getting the pharmacies to use them, since they often run prescriptions through insurance automatically, even when paying the retail cash price and using discount coupons would cost less.

One last thing

Consumer Reports recommended that once someone settles on pharmacy that consistently gives them good deals on pharmaceuticals, they should fill all of their prescriptions there.

That way it’s easier for them to spot “potentially dangerous interactions and other safety concerns.”

But if your employees notice that their pharmacy bills start rising noticeably, it may be time for them to start shopping around again. To stay on top of this requires regular checks to make sure that they are not seeing prices creep up.

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