Trump administration opens door to importing medicine from Canada

© Reuters. FILE PHOTO: Pharmaceutical tablets and capsules are arranged on a table in this picture illustration taken in Ljubljana

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, an option the companies are unlikely to embrace.

Capital Alpha analyst Rob Smith, in a research note, questioned why manufacturers would voluntarily lower prices in the United States to match those in Canadian or any other foreign country.

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.

Trump also supports bipartisan drug pricing legislation designed to force pharmaceutical companies to give discounts when drug prices rise more than inflation.

Another piece of bipartisan legislation aimed at prices of drugs developed using federal research funds was introduced on Wednesday by Republican Senator Rick Scott and Senator Chris Van Hollen, a Democrat.

The importation idea still 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 up 0.13 percent versus a broader flat market.

STILL FAR AWAY

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 affect 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.

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.

Senate Democrats reacted with caution to the Trump administration moves toward allowing importation of medicines from Canada. "We have to look at the details of this plan to see if it amounts to much," said Senate Democratic leader Chuck Schumer.

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. It would exclude biologics, infused drugs, injected drugs and inhaled drugs for surgery.

The Trump Administration has had 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.