Springfield to Exit Canadian "Club"

August 28, 2006 (PLANSPONSOR.com) - Three years after becoming the first city in the United States to buy drugs from Canada, Springfield, Massachusetts is heading in a different direction.

When the city announced plans to import prescription drugs from Canada for city workers and retirees in 2003, the Bay State’s third largest city projected it could realize savings of $4 million to $9 million a year on these costs, which currently total $18 million annually, according to published reports (see Springfield, Mass. Pushes Canadian Drug Order Program ).

Despite threats of intervention from the Food and Drug Administration (FDA) that never materialized, the city says the move saved the city $3 million annually by purchasing drugs in Canada that were priced lower than in the United States. Now, though there were no problems encountered with the program, according to the Boston Globe, the city has decided to stop offering its own health insurance coverage – including the Canadian drug importation plan. Instead, officials say they hope to save the city up to $5 million a year by enrolling workers and retirees in the state’s health plan, run by the Group Insurance Commission, starting January 1.

National Attention

Springfield gained national attention when former mayor Michael Albano launched the drug-import plan in 2003 in defiance of the federal government, which said it was illegal and potentially dangerous because of the risk of counterfeit or adulterated products. In the wake of that controversial announcement, a number of other states and municipalities made similar announcements (see Boston Hops On Canadian Drug Train ).

However, the Globe reports that Canadian drug imports never topped $1 billion a year nationwide, citing industry analysts, and the introduction this year of the federal Medicare Part D prescription drug benefit has also reportedly blunted demand for the Canadian imports, by as much as 40%, according to the report. Additionally, declining currency-exchange rates over the past two years have eroded much of the savings once realized by ordering from Canada, while stepped up seizures of prescription drugs, and a plethora of drug safety warnings from the pharmaceutical industry and the FDA have doubtless dampened demand as well (see FDA: Canada Drugs Not Necessarily Cheaper ).

Ironically, this past summer the US Senate approved legislation that would create a loophole excluding Canada from the Food and Drug Administration’s ban against importing prescription drugs into the United States as part of a $31.7 billion Homeland Security Department spending plan (see Senate Opens Gate for Prescription Drugs from Canada ). In 2004, the US House of Representatives passed a measure last year barring the Food and Drug Administration (FDA) from spending funds to enforce its prohibition of drug reimportation (See US House Gives Thumbs Up to Drug Reimport Measure ).