Legislative Memo

Lev Ginsburg
Director of Government Afairs
T 518.465.7511 x207


S.1645 (Diaz) / A.7666 (Dinowitz)



Authorizes Executive Director of State Office for the Aging to create a NYS prescription medication cost containment program



June 17, 2009


The Business Council of New York State opposes this legislation, which would authorize the Executive Director of the State Office for the Aging to establish a program that would allow EPIC-eligible New Yorkers to fill prescriptions through a Canadian mail order company.  This legislation presents both patient safety concerns as well as legal and potential liability issues for public entities.

The Medicare Prescription Drug Improvement and Modernization Act of 2003, Public Law 108-173 (MMA) gives the Secretary of Health and Human Services (HHS) the authority to implement a system in the United States for the importation of Canadian prescription drugs.  However, Section 1121 of MMA permits the Secretary to implement this system only if he is first able to certify to the Congress that it would be safe and cost-effective.  To date, no Secretary has been willing to make this certification for the importation of prescription drugs by individuals, as there is no system for double-checks on accuracy, no counseling, and no one to call if questions arise. 

An April 2004 Congressional Budget Office report titled, “Would Prescription Drug Importation Reduce U.S. Drug Spending?” concluded that permitting the importation of foreign distributed prescription drugs would produce a minor reduction in U.S. drug spending - around one percent  - over a 10-year period.  If the importation was limited to Canadian prescription drugs, the cost savings would be even less significant.  The HHS Task Force on Drug Importation also found that importation would not result in significant cost savings for consumers, concluding the administrative costs of a government importation program would reach $3 billion annually.

In addition to highly questionable cost savings, there are significant safety concerns related to importation.  These concerns relate to the inherent complications of tracking drugs exported to the U.S. to ensure safe handling and to prevent damaged and/or counterfeit drugs from being imported.  The World Health Organization has estimated that 8-10 percent of the world's drug supply is counterfeit.  Opening the gates to importation would result in more counterfeit drugs making their way to the U.S. and difficulty maintaining the safety of the drug supply chain for U.S. consumers. 

The potential for problems is particularly serious where U.S. citizens are ordering their prescriptions online.  The prescription ordered via the internet from what is purportedly a Canadian pharmacy may in fact not be supplied by a Canadian pharmacy at all.  Additionally, mail order importers require patients to waive their rights of protection under U.S. law before filling a prescription.  Under most state laws, if a state provides Canadian and other foreign drugs directly or facilitates their distribution, as this bill would authorize, any number of causes of action may apply including: negligence; strict liability/break of implied warranty of merchantability; failure to warn; and fraud or misrepresentation.

New York State is not in a position to effectively monitor any such importation program on behalf of its citizens.  That no federal Secretary of HHS has been willing to use authority provided under federal law to establish a means of importation should not be lightly dismissed.  Cost savings can be achieved through many other appropriate means that would not compromise patient safety nor require a citizen to waive his rights.

Moreover, The Business Council is concerned about the potential negative effect of this legislation on economic development in New York and the ability to attract and retain jobs in the biopharmaceutical sector.  The biopharmaceutical industry directly employs 55,446 people and is responsible for a total of 130,464 jobs in New York.  The industry is responsible for $845.6 million in federal and Social Security taxes and $121 million in state taxes.  In 2008, New York was second in the nation with 5,053 clinical trials in the State.  New York should foster policy environment that supports innovation and encourage the growth of jobs and investment in this industry in New York State.

For these reasons, The Business Council opposes S. 1645-A/A.7666.