New Hampshire’s Canadian conundrum

Wearing red shirts denouncing pharmaceutical greed, retirees turn out in support of the bills to lower costs.

It was a rare bipartisan moment in Concord. In a packed hearing room on Jan. 21, Sen. Dan Feltes, the Democratic majority leader and a candidate for his party’s gubernatorial nomination, introduced a bill he is sponsoring that would enable the state to import drugs from Canada.

Moments later, Gov. Chris Sununu, the Republican Feltes hopes to challenge, strode in, past retirees wearing red shirts denouncing pharmaceutical greed, and testified in favor of this bill and two other bills sponsored by Democrats, all designed to “bend the cost curve” of prescription drugs.

Both quoted from the same talking points — affordability, accessibility, transparency — citing some of the same statistics: New Hampshire has some of the highest drug prices in the country; the average annual cost of drugs rose nearly 60% between 2012 and 2017 in New Hampshire (to $1,152 per person, the eighth highest amount in the United States, according to the Health Care Cost Institute, a Washington think tank), and that more than a fifth of New Hampshire patients can’t afford to fill their prescriptions.

It was “common sense,” both Feltes and Sununu said, to import drugs from Canada, where consumers could save on average 65%, according to Drugwatch. It is also a bipartisan solution.

Bernie Sanders has long brought busloads of his constituents over the Canadian border to illegally buy prescription drugs and President Trump is trying to ease federal rules to make it legal.

Surging prices

But the truth is that it won’t happen anytime soon, and it probably won’t happen at all. Indeed, it is far more likely that a number of other bills, two of which Sununu endorsed, and others that he did not, will actually lower drug costs. That’s because to import drugs from Canada, Canada must be willing to export them.

The surge in prescription drug prices since 2012 has catapulted to accounting for 19% of allowed claims in the fully insured markets in New Hampshire, according to the state Insurance Department’s report on healthcare costs released last November. That’s as much as facility fees for hospital stays.

The good news is that price rises slowed down in 2018 (the latest data available). Prescription drug prices went up about 2.2% that year, and that increase is almost totally a result of high-priced specialty drugs. The cost of more common drugs — both generic and brand names — went down.

But while group plans have kept costs low, the allowed drug claims on the individual market jumped by 20% from 2016 to 2018, according to the report.

All this was reflected in some of the testimony given at the aforementioned Jan. 21 hearing — stories like that of Krista Gilbert, vice president of the New Hampshire Rare Disorders Association, who can’t breathe when hit by sudden allergic attacks, but can’t afford the cost of an EpiPen she was prescribed. “So I take a calculated risk,” she said, that someone will rush her to the emergency room the next time it happens.

Gov. Chris Sununu testifies at a legislative hearing in support of a trio of bills sponsored by Democrats that are designed to “bend the cost curve” of prescription drugs.

Or Bev Cotton, an AARP volunteer and a former registered nurse, who talked of one patient whose elderly parents had to take a second mortgage on their home to pay $13,000 a month for leukemia medication.

Importation bill

Bipartisan support for the bills and the packed hearing room were no accident. They were orchestrated by a diverse coalition, lead by AARP of New Hampshire, New Futures, a health advocacy organization working with some 20 other New Hampshire organizations, from the Heart Association to the Medical Society, according to Holly Stevens, New Futures’ health policy coordinator. They came together to “market” three bills to both sides of the aisle, but it was the importation bill’s hearing that led off — the one that Sununu testified at — and it was the one that captured media attention.

Under Senate Bill 685, New Hampshire would empower a state agency, or a third party, to buy drugs wholesale from Canada, following in the footsteps of Maine, Vermont, Florida and Colorado, which have all passed similar laws.

But no drugs are being imported yet — at least legally — until the federal government issues regulations, which it is doing while working with Florida as a pilot program.

That actually could have happened a long time ago.

Congress passed a bill back in 2003 allowing it, but only if the Secretary of Health and Human Services could attest to the supply chain’s safety. No secretary would, including the current one, Alex Azar, at least at first. But under President Trump’s direction, Azar has published a rule allowing states to do so. The public comment period ends at the end of March.

“Rather than wait for the federal government, why don’t we get in on the ground floor so we will be ready to go on Day One?” said Stevens.

Drug manufacturers are sure to challenge the rule, which may delay any importation plan for years. In addition, most distributors in Canada are subsidiaries of companies that do business in the United States, so manufacturers can exert pressure on them not to export here.

Already, two drug distributors and two Canadian industry groups that between them represent all of the potential suppliers named in a proposal published by Florida have said they’re not interested, according to Reuters.

That’s good news as far as John Adams is concerned.

Adams, who also testified at the hearing, is chair of the Best Medicines Coalition, which represents Canadian patients and said the country doesn’t have enough drugs to supply a market nine times its size. In fact, Florida alone spends more on drugs than Canada, he said.

Canada keeps its costs down through a combination of national price caps and provincial bulk buying. But the country already suffers from shortages of some 2,000 out of 13,000 medications.

Canadians would love to help their neighbors in explaining how they keep drug prices lower, Adams said, “but we can’t help you with supply.”

Even if the distributors do go along with it, would the Canadian government permit it?

“Drug manufacturers and distributors have to get a license, and if they are exporting drugs to the United States and don’t have enough for Canadians, they could lose their license,” Adams told NH Business Review. “The only way this could work is the Canadian government would have to look the other way. That will jeopardize the health of Canadians, and that makes this a national security issue.”

The Canadian government is a bit more diplomatic.

“It’s still too early,” Marc Dumas, who handles consular economic and political affairs for the Canadian consulate in Boston, told NH Business Review. “Our top priority is to make sure drug prices are affordable to Canadians. We can see what we could do, as long as it doesn’t affect patients in Canada.”

New Hampshire, of course, has a much smaller population then Florida, points out Stevens of New Futures, but she also realizes that the Granite State isn’t alone. “One bridge at time,” she said.

Global market

Jane Horvath, a consultant to many states on prescription drug cost containment, has been spreading the word about the 2003 importation law. But the law has its limits, thanks to pharmaceutical industry lobbying. It does not include more expensive biogenic drugs, such as insulin. And it is only limited to Canada, which she acknowledges is far too small to serve the United States.

“That’s why all these laws are stuck on Canada,” she said. “That’s not too hard to fix. All you need is a comma — add EU, Japan and maybe now Great Britain.” Not only are their prices lower, but that’s where the manufacturers are.

Pharmaceuticals are a global market anyway, she said. Some 70% of the drugs we buy are imported. It is just that they are sold cheaper everywhere else but in the U.S., she said.

Her hope is that the pressure will move Congress to take action, and that is possible, since bipartisan support isn’t only at the state level. “Everybody loves this. There are lot of Repubs on bills. It’s kind of crazy.”

In the short term, she said, there is “not much that can be done on the state level. Our toolbox is limited.”

But that doesn’t mean it’s empty.

Last session, lawmakers passed a bill regulating pharmacy benefit managers, or PBMs, the middlemen insurers and large self-insured health plans contract with to control costs, but they often end up driving costs up, often at the expense of patients and pharmacists. Another bill that was enacted allows patients to file for exceptions if a drug they need is removed from an insurer’s formulary — not just for medical reasons, but for cost considerations. And finally there was a bill that ended the gag rule, which prevented pharmacies from informing customers it might be cheaper to buy the medication outright rather than paying through their insurance plan.

This year’s bills go further. Senate Bill 690, also backed by the governor, would prevent insurers from removing drugs from their formulary or bumping drugs to a more expensive tier midstream.

But that bill “goes too far,” said lobbyist Heidi Kroll, who represents the trade group America’s Health Insurance Plans. Manufacturers could simply jack up the price and know that insurers and PBMs would be helpless.

Peter Bragdon, representing Harvard Pilgrim Health Care, testified that, because many of subscribers’ years start on different months, insurers will have to have multiple formulas for different patients.

And Sam Hallemeier, a lobbyist for the Pharmaceutical Care Management Association, a PBM trade group, said it would prevent his members from taking ineffective or dangerous drugs off a formulary once their problems have been discovered.

But it’s doctors’ responsibility to decide which drugs are effective and safe, not insurance companies, responded Dr. Angela Shepard, president of the New Hampshire Rare Disorders Association. Besides, patients sometimes choose an insurance plan based on the cost of drugs under that plan.

“They enter into a contract, and it is inappropriate that insurance companies could change that arrangement,” she said.

Other measures

SB 687, the transparency and accountability bill — the third measure backed by Sununu — steps up the oversight of PBMs, though it “is more to get our foot in the door,” said Stevens.

It sets up a drug affordability board to determine annual payer spending targets for prescription drugs by “public payors,” including municipalities, retirement plans and school districts. After getting data from the drug companies, including advance notice when a price rises more than 20%, the board could set up a common formulary with the hope of getting the price down with bulk purchasing.

According to Horvath, the drug pricing consultant, the bill doesn’t go as far as some states, which are considering putting “more authority” in their bills, by “rate-setting” — determining a fair price that public entities would pay, similar to the way utility regulators do with energy rates. It isn’t price control, she argued, because the manufacturers still have their list price and can sell the drugs for as much as they want elsewhere.

There are a number of other bills out there that the governor hasn’t signed on to at this time. (The governor’s press office did not respond to an email asking his stand on other legislation.)

SB 686 would require that any rebates (often offset by list price increases) negotiated by a PBM with manufacturers fully go to the consumer or help lower premiums and not be pocketed by PBM or the insurer. It also would require that a PBM’s fiduciary duty lies with the insurer, and it requires that patients — when copays, deductibles and copayments are taken into consideration — are charged the lowest price.

The bill might even get more far-reaching. A number of unions and patient groups are united behind an amendment that would set up a “reverse auction” process for the state to award contracts to PBMs. Following the example of New Jersey, the auction would require that the PBM engage over successive and transparent rounds of bidding.

Stevens also highlighted HB 1280, which would cap copayments for insulin at $100, based on a bill from Colorado.

“The price of insulin has skyrocketed in recent years, and many diabetics are struggling to afford it,” said Rep. Garret Muscatel, D-Hanover, the bill’s sponsor. The House Commerce Committee is expected to vote on it on Feb. 4.

While drug importation would have more of an impact in the long run, it is bills like these “that will make the biggest difference once the ink comes off the paper,” said Muscatel.

“I agree,” said Horvath. “they will bring some immediate relief,” but she added that insurers and PBMs are not behind the rising costs of drugs. Regulating them “is treating the symptoms of the problem and not the problem.”

Bob Sanders can be reached at bsanders@nhbr.com.