10 FAQs on Prescription Drug Importation
The high cost of prescription drugs continues to be a top concern for the public. Policymakers at the federal and state level are pursuing a range of options to lower drug prices for Americans, one of which would allow for the safe importation of prescription drugs from Canada and other countries, based on evidence showing that people often pay more for medications in the U.S. than elsewhere. This proposal is supported by President Trump and presidential candidate Joe Biden, with bipartisan support among the general public (Figure 1).
Current law allows for the importation of certain drugs from Canada under defined, limited circumstances, and only if the Secretary of the United States Department of Health and Human Services (HHS) certifies that importation poses no threat to the health and safety of the American public. As recently as 2017, four former FDA commissioners signed a joint letter voicing concerns about the ability of HHS to assure the safety of drugs imported from other countries. Nevertheless, many federal and state lawmakers have continued to press for legislation to allow for the importation of prescription drugs from Canada and other countries.1 More recently, in September of 2020, HHS Secretary Alex Azar certified that importation of prescription drugs poses no risk to public health and safety and would result in significant cost savings. Also in September, the Trump Administration issued a final rule and final FDA guidance, creating two new pathways for the safe importation of drugs from Canada and other countries.
These FAQs provide information about recent efforts to import prescription drugs from abroad. In addition, they provide background on the history of drug importation in the U.S., explain why previous efforts to carry out importation proposals have faced challenges, and describe how current proposals, including recent ones from the Trump Administration, seek to address those concerns.
1. Why is importation of prescription drugs from Canada being considered as a way to lower drug costs in the U.S.?
Many studies have shown that people in the United States often pay more for their prescription drugs than in other developed countries, including Canada. According to one analysis of a subset of single-source brand-name drugs, Canadian drug prices are about 28% of the price in the United States, while another analysis of the 200 top-selling single-source brand-name drugs found Canadian prices are 35% of those in the United States.
Canada’s drug prices are generally lower than those in the United States because the Canadian government has various mechanisms to lower the cost of prescription drugs. Since 1987, the Patented Medicine Prices Review Board (PMPRB) has regulated the price of patented (i.e., brand-name) drugs in Canada to ensure that they are not excessive. The PMPRB reviews the prices charged for drugs, and if the Board determines the price of a drug is excessive, it can order a patentee to lower the price of a drug, including requiring a monetary payment for the excess revenue earned from the drug.
2. How does current U.S. law regulate the importation of prescription drugs from other countries?
In order for a drug to be marketed in the United States, it must first receive FDA approval and meet standards set forth in the Food and Drug Cosmetic (FD&C) Act of 1938. Any drug that is “unapproved,” meaning it does not meet these standards, is not eligible for importation. Currently, the only type of legally imported drugs are those that are: 1) manufactured in foreign FDA-inspected facilities, the subject of an FDA-approved drug application, intended for use by U.S. consumers, and imported into the U.S. by the drug manufacturer, and 2) those that are U.S.-approved and manufactured in the U.S., sent abroad, then imported back into the U.S. under rare circumstances such as for emergency medical purposes or in the case of product recalls.2 These importation regulations pertain only to the drug product itself, and are not related to the cost of imported products.
In 2000, Congress enacted the Medicine Equity and Drug Safety (MEDS) Act, which added Section 804 to the FD&C Act, to allow pharmacists and wholesalers to import prescription drugs directly from certain industrialized countries, including Canada, subject to specified limitations and safeguards. The MEDS Act allows such importation, subject to an important requirement: to do so, the HHS Secretary must demonstrate that the program: “poses no additional risk to the public’s health and safety,” and “results in a significant reduction in the cost of covered products to the American consumer.”
The Medicare Modernization Act of 2003 (MMA) amended the Section 804 importation language that was added by the MEDS Act. The MMA specifies that wholesalers and pharmacists can only import prescription drugs from Canada, not other industrialized countries. The MMA also authorizes the Secretary to terminate such importation programs if they do not meet safety standards or result in a significant reduction in costs for consumers. The MMA also requires the HHS Secretary to issue regulations that would grant waivers to individuals to import drugs for personal use under certain circumstances.
Importation of prescription drugs under conditions set forth first by the MEDS Act, and then by the MMA, could allow wholesalers and pharmacists to obtain FDA-approved drugs at lower prices than are available in the U.S. by purchasing them from foreign sellers, and pass these savings on to U.S. consumers.
3. What are the safety concerns related to importation of prescription drugs and why hasn’t it been implemented before?
Up until the Trump Administration’s final rule authorizing importation of prescription drugs from Canada, no previous HHS Secretaries have certified an implementation plan for importation, primarily due to safety concerns. According to the HHS taskforce report on drug importation issued in December 2004, the drug distribution network for prescription drugs in the U.S. is a “closed” system that provides the American public with multiple levels of protection against receiving unsafe or poor quality medications. Importation, according to the taskforce report, would create an opening in this closed system that would increase the opportunity for counterfeit, substandard, or unapproved products to enter the supply chain, introducing additional risks to American consumers.
The report also noted some potential risks and challenges with legalizing importation, including but not limited to: the increasing difficulty of monitoring and ensuring the safety of imported drugs; the additional cost and resources needed for ensuring safety, which may reduce potential savings; the possibility that total savings would be significantly less than international price comparisons suggest; and the likelihood that there would be a reduction in research and development of new drugs. Furthermore, many former HHS Secretaries and FDA commissioners have voiced concerns in recent years about FDA’s ability to assure the safety, effectiveness, and quality of imported drugs. According to a 2017 letter to Congress signed by four former FDA commissioners:
“…Allowing importation of drugs purported to be manufactured overseas in FDA-inspected facilities and drugs purported to be manufactured domestically for export to other countries and reimported from those countries to the United States cannot meet the requirements under the existing closed drug manufacturing and distribution system because the drugs could not be tracked and certified by the manufacturer…Such a program would be very different from importation of consumer products like watches or clothing, where consumers can more easily discern quality and where there are no health consequences of fake products. It could lead to a host of unintended consequences and undesirable effects, including serious harm stemming from the use of adulterated, substandard, or counterfeit drugs. It could also undermine American confidence in what has proven to be a highly successful system for assuring drug safety.”
4. What pathways to importation has the Trump Administration finalized?
In December 2019, the Administration outlined two pathways for the importation of prescription drugs. In July 2020, President Trump issued an executive order to direct the HHS Secretary to complete the rulemaking process in regard to the first pathway, and in September 2020, the Administration finalized these two pathways. The first pathway, which was first described in a Notice of Proposed Rulemaking (NPRM), and then in a final rule, would authorize states, territories, and Indian tribes, and in certain future circumstances wholesalers and pharmacists, to implement time-limited importation programs, known as Section 804 Implementation Programs or SIPs, for importation of prescription drugs from Canada only. States, territories, and Indian tribes could submit proposals to the HHS Secretary to manage these SIPs and act as SIP sponsors.
In order for a proposal to be approved by HHS, a SIP sponsor would need to specify: the drugs it seeks to import; the foreign seller in Canada that would purchase the drug directly from its manufacturer; the importer in the U.S. that would buy the drug directly from the foreign seller in Canada; the re-labeler or re-packager of the drug itself that would ensure the drug meets all labeling requirements in the U.S.; the qualifying lab that would conduct testing of the drug for authenticity and degradation; and steps that would be taken by the SIP to ensure the supply chain is secure. SIPs would initially be authorized for 2-year periods with the possibility of 2-year extensions.
Each SIP sponsor would also be subject to post-importation requirements, including providing FDA with data and information on the SIP’s cost savings to American consumers.
The second pathway, proposed by the Trump Administration in an FDA draft guidance in December 2019, and finalized in September 2020, outlines how manufacturers can import and market FDA-approved drugs in the U.S. that were manufactured abroad and intended to be marketed and authorized for sale in a foreign country. Using this pathway, a manufacturer may be able to obtain an additional National Drug Code (NDC) for drugs imported into the U.S. The rationale, according to the Administration, is that “in recent years, multiple manufacturers have stated (either publicly or in statements to the Administration) that they wanted to offer lower cost versions but could not readily do so because they were locked into contracts with other parties in the supply chain. This pathway would highlight an opportunity for manufacturers to use importation to offer lower-cost versions of their drugs.”
5. Which drugs would be covered under the Administration’s importation plan?
Under the first pathway, which allows states and other entities to facilitate importation of drugs from Canada, only drugs that are currently marketed in the U.S. would be eligible for importation. As under current law, certain types of drugs would be excluded from the definition of a prescription drug eligible for importation including: controlled substances, biological products (including insulin), infused drugs, intravenously injected drugs, and inhaled drugs during surgery. Furthermore, drugs that are subject to risk evaluation and mitigation strategies (REMS), which are high-risk products with serious safety concerns, such as opioids, are not eligible for importation.
Under the second pathway, which allows manufacturers to import drugs to the U.S. that were manufactured and intended for sale in other countries (not limited to Canada), prescription drugs, including biological products excluded under the first pathway, could be imported and made available to patients. These drugs must also currently be marketed in the U.S. to be eligible.
6. What is the estimated savings from the Administration’s importation plan?
The potential cost savings from the first pathway are unknown. In the final rule itself, and in FDA’s full final regulatory impact analysis, the Administration did not provide an estimate of the expected savings. The preliminary analysis noted that responses by other stakeholders, such as Canadian regulatory agencies and drug manufacturers, could impact the potential benefits of such a program. The analysis also noted that if the Administration’s pending proposed rule on international reference pricing, known as the International Pricing Index Model, is finalized first, it has the potential to limit the potential benefits of importation under this pathway, depending on whether drugs eligible under both proposals overlap.
The Administration did not release an estimate of potential savings for importation under the second pathway outlined in the FDA guidance for industry.
7. What are states currently doing regarding importation?
Some states have been actively pursuing legislative action to promote the importation of prescription drugs. Several states, including Florida, Vermont, Colorado, Maine, New Mexico, and New Hampshire have enacted laws establishing importation programs for prescription drugs from Canada. In order for any importation plan to go into effect, the HHS Secretary must certify that it meets the safety and cost saving requirements set forth in Section 804 of the FD&C Act. Under each state’s respective laws to establish an importation program, they are required to submit a proposal to HHS to demonstrate how its program will meet those safety and cost saving requirements. Thus far, no plan has been certified.
Florida, Vermont, Colorado, and Maine have taken action to become the first states to implement importation plans. In August 2019, Florida officially submitted its importation proposal to HHS. Under Florida’s importation plan, the program would be overseen by the state’s Agency for Health Care Administration through a vendor who would handle the operation of the program and ensure importers are following all state and federal laws relating to importation. Eligible importers would be limited to wholesalers or pharmacists who dispense prescription drugs on behalf of public payers, including Medicaid, the Department of Corrections, and the Department for Children and Families. In June 2020, the AHCA released an “Invitation to Negotiate” for the state’s vendor bid system, for assistance with implementation of the importation program, with an anticipated award date of December 2020. The state projects savings of over $150 million dollars annually when the program is in full effect.
Vermont submitted its importation proposal to HHS in November 2019. Vermont’s plan primarily differs from Florida’s in that wholesalers would import drugs on behalf of both commercial plans and public payers, rather than just public payers. Colorado and Maine have also submitted importation plans for HHS approval. All states are awaiting feedback from HHS on their plans. New Mexico and New Hampshire are also in the process of developing importation plans for HHS approval. According to their states’ respective laws, New Mexico has until December 15, 2020 and New Hampshire has until February 1, 2021. Other states are also considering legislation that would facilitate importation from Canada.
Florida, Vermont, Colorado, and Maine submitted plans to HHS prior to adoption of the Administration’s final rule authorizing SIPs. In theory, states could move forward with an importation plan if their proposal meets the requirements laid out in Section 804 of the FD&C Act and is certified by the HHS Secretary. However, according to Secretary Azar’s letter to Congress, his certification that importation poses no additional risk to the public’s health and safety and will result in cost savings to the consumer, is limited to implementation of importation through the final rule, so HHS could require states to move forward only through the newly finalized pathway.
8. Under what circumstances can individuals legally import drugs from other countries, like Canada?
In most circumstances, it is illegal for individuals to import FDA-approved drugs from other countries for personal use. However, based on changes enacted by the MMA, personal importation of prescription drugs that have not been approved by the FDA for use in the U.S. is permitted on a case-by-case basis. Under this statutory authority, FDA has put out guidance that lays out certain circumstances where importation of non-FDA approved drugs for personal use might be allowed. For example, personal importation is generally allowed if the treatment is for a serious condition, there is no effective treatment available in the U.S., and there is no commercialization of the drug for U.S. residents. Typically, only a three-month supply is allowed, and individuals most confirm in writing that the drug is for personal use and provide information about the physician responsible for their treatment.
There appears to be little enforcement by the FDA of the ban against importing FDA-approved drugs for personal use. Even if the personal importation of a drug is technically illegal, current law directs the FDA to exercise discretion in permitting personal importation of drugs when the product is “clearly for personal use, and does not appear to present an unreasonable risk to the user,” which is reinforced in FDA guidelines.
The Administration’s executive order from July 2020, which directed the HHS Secretary to finalize rulemaking in regard to states importing certain drugs from Canada, also directed HHS to take action to allow individuals to import prescription drugs from foreign countries as well as permit insulin products that were manufactured in the United States and sent abroad to be reimported to the United States. In response, the Administration issued two requests for proposals. The first proposal would grant individuals waivers to import certain FDA-approved drugs from Australia, Canada, the European Union or a country in the European Economic Area, Israel, Japan, New Zealand, Switzerland, South Africa, or the United Kingdom. Under the MMA, the HHS Secretary is permitted to grant individuals waivers that allow them to personally import prescription drugs, but like other importation programs, in order for the Secretary to issue these waivers, they must meet the requirements that importation poses no additional risk to the public’s health and safety, and must result in a significant cost reduction to the American consumer. The second proposal seeks to authorize the reimportation of certain insulin products. Under the FD&C Act, as described above, drugs that are manufactured in the US and sent abroad cannot be imported back into the US except under emergency circumstances. This pathway seeks to use this statutory authority to allow reimportation of certain insulin products based on the premise that insulin is required for emergency medical care and therefore meets the requirements of the statute. HHS and FDA started accepting proposals for these two pathways on September 24, 2020.
9. If there were concerns about the safety of importation before, why are the Administration and states implementing it now?
According to the Administration, FDA in the past has not been asked to evaluate importation in the way HHS has recently authorized in the final rule – solely through SIP programs managed by states and tribal and territorial entities. Furthermore, the Administration believes that the importation requirements laid out in the final rule enables states and tribal and territorial entities to facilitate importation of drugs in a way that poses no additional risk to public health. Some of these requirements include: criteria for which drugs are eligible for importation, traceability of drugs in the supply chain, the relabeling of eligible drugs with U.S. labeling, and testing eligible drugs for authenticity and degradation. As required by law, these programs must also demonstrate significant cost reductions to the American consumer.
Furthermore, the Trump Administration as well as Florida, Vermont, Colorado, and Maine in their proposals, have noted that since the early 2000s, additional regulations have been put in place that better safeguard the drug supply chain. They say that these regulations, many of which were enacted in the Drug Supply Chain Security Act (DSCSA) in 2013, strengthen their ability to protect the public’s health under an importation program. That legislation also outlines steps to build an electronic, interoperable system to identify, trace, and verify drugs in the supply chain, which should be established by 2023.
10. How do stakeholders and the public view these importation proposals?
Many stakeholders have expressed reservations about the feasibility of the Trump Administration’s importation proposal. Prime Minister Trudeau recently stated that ensuring the safe and adequate supply of prescription drugs for Canadians is his first priority. However, he also said the Canadian government will take into account the actions of the United States and may be able to provide help to the US and other countries. Earlier this year, the Government of Canada stated that it would be unable to meet the needs of the U.S. market without impacting access to medications for Canadians. The Canadian government also expressed concern that this policy would create drug shortages in Canada, which could potentially lead to higher prices for Canadian consumers.
Industry groups such as PhRMA and BIO say that importation could expose Americans to substandard and counterfeit drugs, and that the additional resources required to ensure the safety of drugs from abroad could outweigh any potential savings for patients. The American Pharmacists Association (APhA), in partnership with seven major pharmacy organizations,3 has also expressed concern about the Administration’s proposal, citing potential risks to patient safety without any clear evidence of cost savings.
Some organizations also submitted comments for the Administration’s second importation pathway described in the FDA guidance. Despite their support for the flexibility to sell drugs under different NDC codes, PhRMA had specific concerns with guidance, including that NDC flexibility alone is not enough to lower prices for consumers. The American Medical Association (AMA) and APhA also expressed concern with the FDA guidance, noting the potential for unintended consequences, including increased costs for patients and patient and pharmacy confusion, leading to disruptions in patient care.
Other stakeholders, however, have expressed support for allowing prescription drug importation, including AARP, the AMA, National Federation of Independent Business (NFIB), and Patients for Affordable Drugs Now, although some of these groups expressed concerns about specific aspects of the Administration’s proposal. Patients for Affordable Drugs Now said it was pleased the Administration had opened the door for importation, but noted that it is not a solution for lowering drug prices for the majority of Americans.
The American public is generally in favor of importation. According to KFF polling from October 2019, 78% of the public favors allowing Americans to buy prescription drugs imported from licensed Canadian pharmacies. This proposal has broad support across party lines – 75% of Democrats, 82% of Independents, and 75% of Republicans favor drug importation from Canada (Figure 1). However, it not clear to what extent public opinion would shift if presented with arguments for or against importation.
The American public also supports virtually all proposals to lower prescription drug costs, including the government negotiating with drug companies, and believes lowering prescription drug prices should be a top legislative priority for Congress.