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    2020 Update Regarding the Importation of Prescription Drugs: Pathway to Importation from Canada Initiated, Risk Remains

    By Ronald Friedman, Esq., Karr Tuttle Campbell, Seattle, WA

    Over the past two years there has been considerable political interest in finding a way to lower the price of prescription drugs to U.S. residents.  This interest has been expressed by both Houses of Congress2 and by the President.3  Numerous bills have been advanced by both chambers and both political parties, suggesting various mechanisms to achieve price reduction. These include imposing price limits on drugs for patients where the payor is the federal government, and tying U.S. drug prices to an international index of the average price of the drug in multiple foreign countries.4  Each of these bills faces opposition, and it is hard to predict passage of any one.  

    At the same time, the current terrain has shown clear movement, as the Executive Branch has forged ahead with a plan involving the Department of Health and Human Services (HHS) and the Food and Drug Administration (FDA) to affirmatively allow for the lawful importation of certain prescription drugs from Canada.  This development, further discussed below, could well be a watershed event which will alter the current landscape where importation is severely restricted, and where, in most instances, it is a violation of the federal criminal law to import drugs from a foreign source into the United States for commercial distribution.5  While it is far too early to tell, it does seem as if a shift is under way.  Nevertheless, and especially since the pace of federal prosecution for unlawful importation of prescription drugs carries on unabated, one is wise to continue to be prudent and to avoid causing the importation of foreign drugs for commercial distribution unless it is shown to be valid under state law and is part of a specifically endorsed FDA program.

    Federal Importation Action Plan and Notice of Proposed Rulemaking

    On July 31, 2019, the Administration announced the “Safe Importation Action Plan,”6 indicating that HHS and the FDA would be taking affirmative steps “to allow the safe importation of certain drugs originally intended for foreign markets” into the United States in order to achieve lower cost drugs to consumers. This Action Plan would involve two independent pathways to lawful importation:

    • Under Pathway 1, a Notice of Proposed Rulemaking (NPRM) would rely on the authority in the Federal Food, Drug, and Cosmetic Act (FD&C Act) section 804 to authorize demonstration projects to allow importation of drugs from Canada. The NPRM would include conditions to ensure the importation poses no additional risk to the public’s health and safety and that it will achieve significant cost savings to the American consumer.
    • Under Pathway 2, manufacturers could import versions of FDA-approved drug products that they sell in foreign countries that are the same as the U.S. versions. Under this pathway, manufacturers would use a new National Drug Code (NDC) for those products, potentially allowing them to offer a lower price than what their current distribution contracts require.7

    Pathway 2 is not without its shortcomings.  For one, the efficacy of Pathway 2 depends upon the willingness of the manufacturer of the drug to import its foreign-made equivalent and offer it to U.S. customers at a lower price, which willingness would appear to conflict with the natural desire of drug manufacturers to maintain or increase profits.  Moreover, even if a manufacturer wanted to offer a lower price, it is unclear why the manufacturer would pursue Pathway 2 rather than introduce a lower cost version of its drug product domestically to U.S. customers.  While it has been opined that some manufacturers might choose to import lower-cost versions of their drugs in order to free themselves from the higher prices required under existing distribution contracts,8 it does not appear that any manufacturer has sought to take advantage of Pathway 2 to date.  Accordingly, although the FDA has recently released draft guidance discussing the process by which manufacturers could obtain an additional NDC for the drug to be imported,9 it is hard to predict Pathway 2’s utility.

    Pathway 1 is the more interesting provision and has generated far more discussion.  On December 18, 2019, the Administration issued an NPRM to help make it a reality.10  Should it become law, this proposed rule would add implementing teeth to Section 804 of the FD&C Act,11 which has existed since 2003 and provides general authority for regulations to be passed in the future allowing for the importation of prescription drugs from Canada.  Under the NPRM, “States or certain other non-federal governmental entities would be able to submit importation program proposals to FDA for review and authorization.”12  Drug wholesalers and pharmacies in the United States could serve as co-sponsors.13  In these importation proposals, the applicant would be required to demonstrate how it proposes to import the prescription drugs at issue from Canada in a manner which “will pose no additional risk to the public’s health and safety,” which would include product testing, tracking of the product, and protections against counterfeiting.14  In addition, applicants will have to demonstrate how “their program would be expected to result in a significant reduction” in cost to the U.S. consumer.15 

    The rule contains various restrictions as to those drugs which may be considered for importation.  First, any such plan may only request importation of drugs which Health Canada’s Health and Food Branch (the FDA’s regulatory counterpart in Canada) has already approved for sale in Canada, which are the Canadian version of drugs that the FDA has already approved for sale in the United States, and are, in fact, currently for sale in the United States.16  Second, various types of prescription drugs are expressly excluded from consideration for importation, including “controlled substances, biological products, infused drugs, intravenously injected drugs, [and] drugs that are inhaled during surgery,” as well as those drugs subject to a risk evaluation and mitigation strategies (REMS), such as those utilized to treat serious conditions like HIV, cancer, or hepatitis.17

    The NPRM contains extensive requirements relating to the tracking and tracing of products, such as that the drug must flow directly from an approved manufacturer in Canada to an approved wholesaler in Canada to an approved pharmacy or wholesaler in the United States.18  The wholesaler in Canada would have to register with the FDA.19  All participants in the importation process would be subject to FDA regulation and enforcement, utilizing “FDA’s usual compliance and enforcement tools.”20  A representative sample of the product would have to undergo quality and authenticity testing in a “qualifying laboratory” in the United States before the drug could be dispensed.21  The product would need to obtain a new NDC and bear required labeling.22  Any violation of the detailed requirements of the new regulation would subject the participants to potential civil and criminal liability, as the importation may then be deemed unlawful under the FD&C Act.23

    Whether any particular importation proposal would be approved is up to the “discretion” of the FDA, and would include considerations as to whether any projected customer savings is “significant enough” in the FDA’s view to justify the proposal, and as well, the FDA’s view of the time and resources it would take the FDA to oversee the proposal “in light of other resource demands.”24  Any permission to import that is granted by the FDA is limited to a two-year period (subject to potential renewal), and may be revoked by the FDA “at any time for any reason in FDA’s discretion.”25

    This NPRM is subject to a comment period of 75 days before a final rule may issue.

    Various states have already passed legislation in anticipation of this rule, authorizing the design of state-specific programs to permit importation of prescription drugs from Canada.  These states include Colorado,26 Florida,27 Maine,28 and Vermont.29

    Evaluating the Proposed Rule

    At this point, it is hard to know just how effective this pathway will be, and to what extent stakeholders, including manufacturers, wholesalers, and pharmacies will want to take advantage of it.  Will potential manufacturers, wholesalers, and pharmacies on both sides of the border be willing to provide the necessary attestations and engage in the additional burdens imposed by the proposed rule?  Assuredly, this will depend in substantial part upon considerations of cost, profit, and risk for all concerned.  Will importation proposal proponents be able to demonstrate significant enough savings at the consumer level to satisfy the FDA that their proposed program is worthwhile?  How will this even be measured?  Will stakeholders be willing to engage in what will undoubtedly be an expensive and time-consuming process to prepare and submit an application knowing that all is subject to the unbridled discretion of the FDA to approve or disapprove at any time?  Will stakeholders be willing to accept the potential civil and criminal exposure that could flow from such importation?  This is currently unknown.

    However, a chorus of objections has already arisen to the proposed rule, including from the American Pharmacists Association (APhA) and Canada itself.  In a press release responding to the proposed rule, APhA commented that the “proposed scheme would allow the introduction of risky product into our secure U.S. drug supply chain” and the “lack of clarity around unknown, unproven cost savings does not justify jeopardizing U.S. supply chain integrity and patient safety.”30  In addition, the Canadian government has already expressed serious concern for its own drug supply and potential shortages which might be caused by any importation project to the United States.  Canada could easily take steps to forbid such importation if it perceived such plans to be against its national interest.31  In addition, manufacturers could limit their drug supplies to Canada in a manner which also undercuts any potential importation program.   

    Enforcement Actions and Criminal Prosecutions Continue

    In the meantime, the U.S. government has not stopped taking legal action against those currently involved in the unlawful importation of prescription drugs from any source country, including Canada.32  For instance, online companies involved in importing drugs, ostensibly from Canada, have received warning letters from the FDA to cease and desist for violating U.S. law.33  An FDA warning letter has also been issued to a foreign physician and organization involved in facilitating the importation of drugs utilized to terminate pregnancy.34  Multiple recent criminal prosecutions have gone forward against those involved in importing for commercial purposes.35

    Guidance Recommendation

    While much excitement has been generated by prospects of a pathway for the commercial importation of prescription drugs into the United States, that pathway awaits a final rule.  Even when that rule comes to fruition, however, its success will depend upon the willingness of manufacturers, wholesalers, and pharmacies on both sides of the border to engage in the process, and for the Canadian government to allow it.  In addition, it will depend upon the FDA being satisfied that any importation proposal is safe and secure, and that real cost savings will be achieved.  Accordingly, at this juncture it is hard to predict the volume of prescription drugs that may end up being imported under this pathway and what actual savings to U.S. consumers will accrue.  Therefore, whether the proverbial cat is indeed out of the bag in regards to importation of prescription drugs is hard to definitively say.

    Moreover, even if a rule is passed and state-specific plans are approved, such plans are unlikely to alter the current impetus that exists among many to unlawfully import prescription drugs.  As indicated above, various categories of high-priced drugs, such as biosimilars and HIV drugs, will not be included in the plans.  In addition, under the pathway, the only lawful source country is Canada, whereas drugs are illegally imported from a great variety of countries, including China, India, Mexico, and Russia.  It is estimated that “close to 1 million people in California alone cross to Mexico annually for health care, including to buy prescription drugs” in order to take advantage of cheaper prices.36  So long as the price differential exists, market demand will continue to drive unlawful importation.

    Medical providers, facilities, and consumers should remain wary and aware of the legal consequences of importing non-FDA approved prescription drugs, and healthcare entities and practitioners should avoid becoming involved in importing drugs of any kind for commercial purpose unless they have ensured that the drugs are FDA-approved and are being imported in conformity with law.  

    1. This is the third installment in a series discussing the legal risks and status of importing prescription drugs into the United States.  See ABA Health eSource, Vol. 14 No. 8,  April 2018, Update Regarding the Importation of Prescription Drugs: Canadian Importer, President Plead Guilty, by Ronald J. Friedman, https://www.americanbar.org/groups/health_law/publications/aba_health_esource/2017-2018/april2018/update/; and  ABA Health eSource, Vol. 14 No. 7, March 2018, Importing Prescription Drugs remains Risky Busines Due to FDA and DEA Regulation, by Ronald J. Friedman, https://www.americanbar.org/groups/health_law/publications/aba_health_esource/2017-2018/march2018/importing.html.
    2. Grassley: Deal To Lower Drug Prices Moving Forward Very Soon, The Hill (July 11, 2019), https://thehill.com/policy/healthcare/452660-gop-chairman-deal-to-lower-drug-prices-moving-forward-very-soon; and Speaker Nancy Pelosi Unveils Plan To Lower Prescription Drug Costs, National Public Radio (Sept. 19, 2019), https://www.npr.org/2019/09/19/761954160/speaker-nancy-pelosi-to-unveil-plan-to-negotiate-prices-of-250-prescription-drug.
    3. President’s Blueprint To Lower Drug Prices, May 11, 2018, https://www.whitehouse.gov/briefings-statements/president-donald-j-trumps-blueprint-lower-drug-prices/.
    4. H.R.-3:  Lowering Drug Costs Now Act of 2019, https://www.congress.gov/bill/116th-congress/house-bill/3; H.R.-465: Prescription Drug Price Relief Act of 2019, https://www.govtrack.us/congress/bills/116/hr465; H.R.-2376: Prescription Pricing For The People Act of 2019, https://www.govtrack.us/congress/bills/116/hr2376; H.R.-2375: Preserve Access To Affordable Generics and Biosimilars Act, https://www.govtrack.us/congress/bills/116/hr2375; H.R.-4398: Affordable Prescriptions for Patients Through Promoting Competition Act of 2019, https://www.govtrack.us/congress/bills/116/hr4398; S. 657: Drug Price Transparency Act, https://www.congress.gov/bill/116th-congress/senate-bill/657/titles; S. 658: Accelerated Drug Approval for Prescription Therapies Act, https://www.congress.gov/bill/116th-congress/senate-bill/658?q=%7B%22search%22%3A%5B%22s.+658%22%5D%7D&s=1&r=1; and S. 660: Efficiency and Transparency in Petitions Act, https://www.congress.gov/bill/116th-congress/senate-bill/660?q=%7B%22search%22%3A%5B%22s.+660%22%5D%7D&s=3&r=1.
    5. Title 21 U.S.C. §§ 331(a), 333(a)(1) and (2); For a fuller discussion of the current law regarding importation, see ABA Health eSource, Vol. 14 No. 7, March 2018, Importing Prescription Drugs remains Risky Busines Due to FDA and DEA Regulation, by Ronald J. Friedman, https://www.americanbar.org/groups/health_law/publications/aba_health_esource/2017-2018/march2018/importing.html.
    6. Safe Importation Action Plan, https://www.hhs.gov/sites/default/files/safe-importation-action-plan.pdf.
    7. Ibid.
    8. Ibid.
    9. Importation of Certain FDA-Approved Human Prescription Drugs, Including Biological Products, under Section 801(d)(1)(B) of the Federal Food, Drug, and Cosmetic Act: Draft Guidance for Industry (Dec. 23, 2019), 84 Fed. Reg. 70557 – 70559); https://www.federalregister.gov/documents/2019/12/23/2019-27475/importation-of-certain-food-and-drug-administration-approved-human-prescription-drugs-including.
    10. Importation of Prescription Drugs (Dec. 23, 2019), 84 Fed. Reg. 70796 – 70839; https://www.federalregister.gov/documents/2019/12/23/2019-27474/importation-of-prescription-drugs.
    11. 21 U.S.C. § 384.
    12. Importation of Prescription Drugs (Dec. 23, 2019), 84 Fed. Reg. 70796  https://www.federalregister.gov/documents/2019/12/23/2019-27474/importation-of-prescription-drugs.
    13. Ibid.
    14. Ibid.
    15. Ibid.
    16. Importation of Prescription Drugs (Dec. 23, 2019), 84 Fed. Reg. 70797, 70804  https://www.federalregister.gov/documents/2019/12/23/2019-27474/importation-of-prescription-drugs.
    17. Importation of Prescription Drugs (Dec. 23, 2019), 84 Fed. Red. 70804  https://www.federalregister.gov/documents/2019/12/23/2019-27474/importation-of-prescription-drugs.
    18. Importation of Prescription Drugs (Dec..23, 2019), 84 Fed. Reg. 70797  https://www.federalregister.gov/documents/2019/12/23/2019-27474/importation-of-prescription-drugs.
    19. Ibid.
    20. Importation of Prescription Drugs (Dec. 23, 2019), 84 Fed. Reg. 70811  https://www.federalregister.gov/documents/2019/12/23/2019-27474/importation-of-prescription-drugs.
    21. Importation of Prescription Drugs (Dec. 23, 2019), 84 Fed. Reg. 70797  https://www.federalregister.gov/documents/2019/12/23/2019-27474/importation-of-prescription-drugs.
    22. Importation of Prescription Drugs (Dec. 23, 2019), 84 Fed. Reg. 70810  https://www.federalregister.gov/documents/2019/12/23/2019-27474/importation-of-prescription-drugs.
    23. Importation of Prescription Drugs (Dec. 23, 2019), 84 Fed. Reg. 70806  https://www.federalregister.gov/documents/2019/12/23/2019-27474/importation-of-prescription-drugs.
    24. Importation of Prescription Drugs (Dec. 23, 2019), 84 Fed. Reg. 70807  https://www.federalregister.gov/documents/2019/12/23/2019-27474/importation-of-prescription-drugs.
    25. Importation of Prescription Drugs (Dec. 23, 2019), 84 Fed. Reg. 70810-70811  https://www.federalregister.gov/documents/2019/12/23/2019-27474/importation-of-prescription-drugs.
    26. Colorado Senate Bill 19-005, An Act Concerning Wholesale Importation of Prescription Pharmaceutical Products from Canada for Resale to Colorado Residents, And, In Connection Therewith, Making An Appropriation, https://leg.colorado.gov/bills/sb19-005.
    27. Florida House Bill 19, An Act Relating To Prescription Drug Importation Programs, https://trackbill.com/bill/florida-house-bill-19-prescription-drug-importation-programs/1697155/.
    28. Maine L.D. 1272, An Act To Increase Access To Low-Cost Prescription Drugs, https://legislature.maine.gov/bills/getPDF.asp?paper=SP0392&item=1&snum=129.
    29. Vermont Senate Bill 175, An Act Relating to the Wholesale Importation of Prescription Drugs Into Vermont, https://legislature.vermont.gov/bill/status/2018/S.175.
    30. APhA Alarmed by HHS/FDA Drug Importation Plans (Dec. 18, 2019), https://www.pharmacist.com/press-release/apha-alarmed-hhsfda-drug-importation-plans
    31. Canada Warns U.S. Against Drug Import Plans, Citing Shortage Concerns, Reuters (July 18, 2019), https://www.reuters.com/article/us-canada-pharmaceuticals-exports-exclus/exclusive-canada-warns-u-s-against-drug-import-plans-citing-shortage-concerns-idUSKCN1UD2LN.
    32. For a fuller discussion of the current law regarding importation, see ABA Health eSource, Vol. 14 No. 7, March 2018, Importing Prescription Drugs remains Risky Busines Due to FDA and DEA Regulation, by Ronald J. Friedman, https://www.americanbar.org/groups/health_law/publications/aba_health_esource/2017-2018/march2018/importing.html.
    33. FDA Warning Letter to CanaRx Services, Inc. (Feb. 26, 2019), https://www.fda.gov/ICECI/EnforcementActions/WarningLetters/ucm632061.htm.
    34. FDA Warning Letter to Dr. Gomperts and Aidaccess.org (March. 8, 2019), https://www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/warning-letters/aidaccessorg-575658-03082019
    35. Pennsylvania Doctor Pleads Guilty to Fraud and Drug Importation Charges, USAO E.D. PA Press Release, Dec. 17, 2019, https://www.justice.gov/opa/pr/pennsylvania-doctor-pleads-guilty-fraud-and-drug-importation-charges; Scottsdale Arizona Man Sentenced to Prison for Selling Illegally imported and Misbranded Rx Drugs to Western PA Consumers, USAO W.D. PA Press Release, Nov. 7, 2019, https://www.justice.gov/usao-wdpa/pr/scottsdale-arizona-man-sentenced-prison-selling-illegally-imported-and-misbranded-rx; Hermitage Man Sentenced for Importing and Selling Drugs Not Approved by FDA, USAO W.D. PA Press Release, Oct. 8, 2019, https://fdadaily.com/2019/10/08/hermitage-man-sentenced-for-importing-and-selling-drugs-not-approved-by-fda/; and U.S. v. Abdelrazzak (Seattle man sentenced for illegally importing prescription drugs), Sept. 20, 2019, U.S.D.C. W.D. WA No. 2-19:CR-00105-BAT.
    36. American Travelers Seek Cheaper Prescription Drugs In Mexico And Beyond, National Public Radio, Feb. 11, 2019, https://www.npr.org/sections/health-shots/2019/02/11/691467587/americans-seek-cheaper-meds-in-mexico.

    About the Author

    Ronald Friedman is a shareholder at Karr Tuttle Campbell in Seattle, focusing on regulatory compliance in the food and pharmaceutical sectors.  Mr. Friedman regularly represents clients in proceedings before the Food and Drug Administration, Drug Enforcement Administration, and state boards of health.  Prior to entering private practice, Mr. Friedman served as a federal prosecutor in Seattle for 22 years.  He may be reached at [email protected].