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Colorado wants to import prescription drugs from Canada. How it could work, and why it may not.

Gov. Jared Polis and Democratic lawmakers made drug imports a priority, but it will cost $2.8 million just to explore the idea

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Colorado is trying to become one of the first states in the nation to import prescription drugs from Canada, a bid to give consumers relief from soaring pharmaceutical costs.

A bill making its way through the General Assembly with the support of Democratic Gov. Jared Polis would create a program to start importation by 2022. But hurdles abound. Federal approval is required, and in the 16 years since Congress authorized the practice in 2003, no state has ever obtained that permission.

But that may change as a growing number of states are pressuring federal regulators. In Vermont, the legislature last year approved creating an importation program. And President Donald Trump supports doing so in at least some situations, suggesting a path forward on a practice that has long been opposed by federal administrations on both sides of the aisle.

It won’t be a cure-all for America’s prescription drug costs, which have left as many as one in three Coloradans resorting to cutting doses in half or forgoing their medication entirely to make ends meet, according to a recent Colorado Consumer Health Initiative survey. The program would be limited to certain high-cost drugs where the price difference between the U.S. and Canada is the most significant.

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The opponents say it could open the floodgates to counterfeit medications that threaten public health. But supporters insist the program — which will cost $2.7 million to set up — would have adequate safeguards. And they say it collectively could save Coloradans millions on some of the most expensive name-brand drugs that have no lower-cost alternatives in the U.S.

“People are skipping meals or dosages or cutting them in half — and they’re importing directly from Canada now, illegally,” said Sen. Robert Rodriguez, D-Denver, a bill sponsor. “It’s time to go in with a program where we can verify that these drugs are safe.”

Here’s what you need to know about the new program, which faces a key vote Tuesday in the Senate Appropriations Committee:

The Colorado House of Representatives, pictured in September. (Jesse Paul, The Colorado Sun)

How would it work?

If Senate Bill 5 is approved, the state Department of Health Care Policy and Financing, or HCPF, would work with a pharmaceutical sales and international trade expert to identify a list of medications that would provide the greatest cost savings.

The department would also have to figure out the logistics. Either the state or a private entity would serve as the middleman — a wholesaler that would purchase the drugs from Canada and market them to participating Colorado pharmacies for resale in Colorado.

But drugs are significantly more complicated to import than other products. The medications would have to be sampled and tested for purity. They would also have to go through “track-and-trace” protocols to comply with the federal Drug Supply Chain Security Act, which helps ensure drugs aren’t tampered with as they move from manufacturer to the end consumer.

Can this be done legally?

Yes, so long as Colorado can convince federal regulators that the program meets two criteria:

  1. The drugs can’t pose any additional risk to American consumers than medicine the Food and Drug Administration has already certified as safe.
  2. The drugs must provide a “significant” cost savings to American consumers, after all the extra expenses of importing them.

That will be a big ask. So far, there’s no precedent for the federal government signing off on a program like this. Then again, until recently, no one’s ever tried.

Last year, the Trump administration began exploring using imported drugs to combat price gouging. And in recent months, Florida Gov. Ron DeSantis said Trump was not only supportive of his state’s plan to set up an import program, but “enthusiastic.”

Vermont will likely serve as the first test case. Out of the handful of states developing such a program, Vermont’s the furthest along, and the outcome of its petition could serve as a guide to what the federal government will — or won’t — accept.

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What would it cost and how much would Colorado save?

The administration is seeking about $1.4 million annually for two years just to develop the proposal. That money would pay the salaries of five new state employees, cover the cost of legal services and design the computer software to manage the program. It would also budget $700,000 a year for consultants in international trade and pharmaceutical sales.

To state Sen. Jim Smallwood, a Republican from Parker and a health insurance broker, it doesn’t make sense to spend money on a program that the federal government may not approve.

“I can’t possibly be in support of spending (millions) of taxpayer funds when all we need to do is wait a few months to see what happens with Vermont,” said Smallwood, who opposed the bill in committee.

State Sen. Joann Ginal, a Fort Collins Democrat. (Handout)

Sen. Joann Ginal, a Fort Collins Democrat who is sponsoring the bill, sees it differently: the more states that apply, the more pressure it could put on the feds to approve a waiver.

“I believe that we’ve been waiting for a lot of things from the federal government, and we’re not getting them,” she said in an interview. “I think it’s at the state level that we’re going to make things happen.”

The true price tag for the program remains unknown. Officials don’t have an estimate for what it will cost to operate the importation program, or how much Coloradans and the state may save in drug costs.

But Vermont provides some clues. A report commissioned by its legislature identified 17 drugs that would save consumers $1 million to $5 million a year. Colorado’s savings could be much greater, because its population is nine times larger than Vermont’s 629,000 people.

The state may also be able to save on drugs it buys for Medicaid patients and Department of Corrections inmates, but state health officials aren’t sure how much, if anything.

Who would benefit?

The biggest beneficiaries would be consumers covered by private insurance and those who are uninsured, and the savings would vary from drug to drug. In 2017, around 58 percent of Coloradans had employer-based or individual insurance, and 6.5 percent were uninsured, according to the Colorado Health Institute.

A dose of Lyrica, a common treatment for nerve damage, costs $6.04 on average in the U.S. and just $0.63 in Canada, according to the National Academy for State Health Policy, which is assisting Vermont with its proposal. A tablet of Tracleer, used to treat pulmonary artery hypertension, costs $173.09 in the U.S. and $47.18 in Canada. And Harvoni, a Hepatitis C treatment, costs $1,090.35 in the U.S. and $797.62 across the border.

Supporters expect consumers to save at the pharmacy and they argue it could help drive down premiums because health insurance companies would see savings as well.

But Jennifer Jones Paton, the president and CEO of the Colorado BioScience Association, questions whether consumers would see much savings at all. Her organization represents 720 bioscience companies around the state, including the pharmaceutical industry.

Jones Paton points to a nonpartisan Congressional Budget Office fiscal note from 2005, which estimated that a mass importation program would cut prescription drug expenses by only about 1 percent.

The counterpoint: 1 percent of drug costs is still $50 billion nationwide. The savings, the CBO wrote in 2005, “would result principally from the importation of brand-name drugs that are protected by patents in the United States” — precisely the sorts of drugs that Colorado’s program would target.

Keep in mind, American consumers wouldn’t pay the Canadian sticker price. The Vermont study factored in a 45 percent markup to cover the costs associated with importation. It’s not clear what markup Colorado would anticipate.

Ginal insists Medicaid recipients — who make up about 20 percent of the population — will benefit, too. But state officials say that’s unlikely. Medicaid patients buy their covered medicine for copays of just $3 per prescription, and the state can acquire the drugs covered by the program at a steep discount.

The Vermont study, for instance, didn’t identify any savings for those on Medicaid, or the money taxpayers spend to fund the program.

For the 14 percent of Coloradans on Medicare, it’s more complicated, because of the variety of drug plans they are offered. Still, Colorado state officials say they plan to examine both Medicare and Medicaid for potential savings.

Read more health stories from The Colorado Sun

Is it safe to import drugs from Canada?

The biggest concern raised by opponents is whether Colorado can guarantee the imported drugs are safe. But horror stories from imports abound.

Ali Schroer, a child and family therapist from Centennial, said that in 2008 she bought a name-brand allergy medication from an online Canadian pharmacy at the recommendation of her doctor. She said she saved a lot of money, paying about $30 a prescription versus hundreds of dollars for medicine that looked exactly the same. But her savings came at a high cost.

“Within a month I started getting horrible headaches and stomach pains, and almost shock-like symptoms,” she said. It lasted months. She missed work and struggled professionally. And multiple specialists couldn’t figure out what was causing her problems.

Her sister ultimately figured it out, when she learned Schroer was buying drugs online. Schroer stopped taking it, and “within about two weeks I was fine,” she said.

To the bill’s sponsors, Schroer’s tale only highlights the need for a state-run program that can verify the imported drugs are what their labels say they are. Opponents, though, doubt the state can ensure imported drugs move safely through the supply chain without tampering.

And if Colorado can’t rely on Canada or the U.S. government to track and inspect the drugs, “ultimately we’re exposing the supply chain to the possibility of counterfeit drugs,” Jones Paton said.

Federal officials have long shared those concerns. Four of the last five former Federal Drug Administration commissioners recently wrote a letter to Congress opposing importation, citing safety concerns and a lack of inspection staff.

To Adam Fox, the direct of strategic engagement for the Colorado Consumer Health Initiative, “that’s sort of a farcical argument.”

“Many of these drugs are the exact same drugs that are being distributed here in the States — the exact same formulations, we just pay much higher prices for them,” he said.

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