International Drug Sourcing: Where We’ve Been, Where We Are and Where This Is Going

As prescription drug costs continue to rise, especially for brand-name and specialty medications, self-funded employers are being forced to look beyond the traditional PBM and pharmacy model. International sourcing is not the right answer for every medication or every employee, but it has become a strategy that employers should at least understand and evaluate.

The reason is fairly simple. American employers are often paying significantly more for the same or similar medications than purchasers in other developed countries. In many cases, the difference is not a few percentage points. It can be several times more.

For years, patients responded to this pricing imbalance on their own. They crossed the border, purchased medications while traveling or used international pharmacies. Employers, meanwhile, continued paying claims through a system that was often difficult to understand and even harder to challenge.

The frustrating part is that the pharmaceutical supply chain was already international. Many medications sold in the United States, or the ingredients used to produce them, have been manufactured outside the country for years. The real issue has never simply been whether a medication came from another country. The issue is whether it moved through a safe, legitimate and properly controlled supply chain.

That distinction is important. International drug sourcing should never mean sending an employee to an unknown website and hoping a package arrives. A credible program should have licensed pharmacy partners, clinical oversight, physician involvement, product verification, secure shipping, member support and a clear process for handling delays or other problems.

Today, international sourcing programs are becoming more structured. Some vendors work with self-funded employers to identify high-cost medications that may be available through an international channel at a substantially lower cost. They may coordinate with the employee and prescribing physician, verify that the medication is appropriate, manage the dispensing process and help the member through each refill.

For the employer, the potential savings can be substantial. One specialty or brand-name medication can cost a health plan tens of thousands of dollars each year. In some cases, the annual cost can reach well into six figures. When the same medication is available through a legitimate international source for considerably less, it is understandable why employers are paying attention.

However, this is not an area where employers should move forward based only on a vendor’s savings projection.

The regulatory environment is complicated, and the rules surrounding personal importation and formal drug importation programs are not always easy to understand. Employers should not assume that a program is fully approved simply because a vendor uses phrases like “personal importation,” “international pharmacy” or “global sourcing.”

The legal structure matters. The countries involved matter. The medications included in the program matter. The way the medication is prescribed, dispensed, shipped and monitored matters. This is why employers need to involve qualified legal counsel, their TPA, PBM, stop-loss carrier and clinical advisers before putting a program in place.

There is also the practical side of the employee experience. What happens when a shipment is delayed? Is there a domestic backup supply available? Who communicates with the prescribing physician? How are adverse reactions handled? What happens when the employee changes medications or is no longer enrolled in the plan?

Those questions may not be as exciting as a projected savings number, but they are just as important.

Employers also need to understand how the savings are calculated. A lower acquisition cost does not automatically equal the same amount of net savings to the plan. The employer may be giving up rebates or other PBM guarantees. The arrangement may affect specialty-pharmacy revenue, stop-loss reimbursement or contractual terms with other vendors.

The vendor’s compensation should also be completely transparent. Employers should know whether the program charges a per-employee fee, a percentage of savings, a per-prescription fee or some combination of these. Savings should be measured after all fees, lost rebates and other financial impacts are considered.

My belief is that the future of international sourcing may eventually be less about physically shipping medications across borders and more about forcing international pricing into the American market.

That would be a major change.

Rather than requiring an employee to receive medication from another country, manufacturers may eventually offer more direct pricing arrangements that are tied to what the same medication costs internationally. Employers could also see more domestic fulfillment programs, direct-to-employer purchasing arrangements and manufacturer agreements that reduce the price while keeping the medication inside the traditional U.S. distribution system.

We are already seeing more attention being placed on international drug prices as a benchmark. Policymakers, employers and healthcare purchasers are beginning to ask why the United States should continue paying dramatically more than other countries for the same products.

Biosimilars will also play a larger role. As more biosimilar options become available, employers may gain additional leverage over some of the most expensive medications on their plans. Better supply-chain tracking and stronger technology should also make it easier to verify where a medication came from and how it moved through the distribution process.

None of this means international sourcing is a silver bullet.

It does not replace the need for a transparent PBM agreement. It does not eliminate the need for formulary management, specialty-drug oversight, biosimilar adoption, manufacturer assistance, site-of-care strategies or better clinical management.

It is one tool in a broader pharmacy strategy.

The employers that get the most value from international sourcing will be the ones that approach it carefully. They will identify the right medications, ask hard questions, protect the employee experience, coordinate all the vendors involved and measure the actual net results.

For too long, employers have accepted prescription drug prices without fully questioning why they are so much higher than prices paid in other countries. International sourcing has helped bring that issue into the open.

Employers should be cautious, but they should not ignore it.

When a health plan is paying several times more than other purchasers around the world for the same medication, asking questions and exploring responsible alternatives is not extreme.

It is simply good plan management.