Posted: 31 Jul 2019 05:38 PM PDT
As we have previously reported (see here, here, and here) four states (Vermont, Colorado, Florida, and Maine) have passed laws to establish drug importation programs. Reversing long-standing policy, the U.S. Department of Health and Human Services (HHS) announced on Wednesday, July 31, 2019 that HHS and the U.S. Food and Drug Administration (FDA) have developed a federal “Safe Importation Action Plan” proposing two pathways to allow for the importation of drugs from foreign countries.
Pathway 1 will allow States, wholesalers, and pharmacists to submit plans to HHS for demonstration projects that allow for the importation of certain drugs from Canada. The demonstration projects must be designed to comply with the federal drug importation laws outlined in Section 804 of the Federal Food, Drug, and Cosmetic Act (FDC Act), 21 U.S.C. § 384. As outlined in the Safe Importation Action Plan, HHS and FDA will publish a Notice of Proposed Rulemaking (NPRM) to address Section 804’s requirements, including those related to drug quality, record keeping, and product testing. States, wholesalers, and pharmacists that participate in the demonstration projects will be required to certify that the drug importation poses no additional risk to the public’s health and safety and will result in significant cost reductions for covered products. Drugs eligible for importation will be limited to drugs for sale in Canada that are versions of FDA-approved prescription drugs; such drugs must be manufactured with active pharmaceutical ingredients (API) manufactured at facilities that also manufacture API for the FDA-approved version. Under the federal drug importation laws, controlled substances, biological products, infused drugs, intravenously injected drugs, drugs inhaled during surgery, and certain parenteral drugs are excluded from importation. HHS and FDA also plan to exclude any drug with a REMS from the importation demonstration project programs.
The future NPRM will seek feedback on how States, wholesalers, and pharmacists can demonstrate that the drug importation programs will result in significant cost reduction for the covered drug products. As we previously reported (see here), when faced with this same question, Vermont found that the costs of implementing a compliant drug importation program may outweigh any savings the state could hope to realize from importing lower cost drugs. The Safe Importation Action Plan says that HHS and FDA will seek feedback on “the best way to identify the expected acquisition cost of the imported drug, the cost of assuring the drug is safely imported, and the mechanism for delivering those savings to the consumer (as opposed to the savings being absorbed by the supply chain).”
Pathway 2 will allow drug manufacturers to import versions of their FDA-approved drugs that are sold in foreign countries, “potentially allowing them to offer a lower price than what their current distribution contracts require.” In order to take advantage of this pathway, manufacturers will need to establish that the foreign version is the same as the U.S. version. A manufacturer who meets the requirements of the pathway will be able to sell a foreign version of a drug product in the U.S. under a different NDC number than the U.S. version. Importation of foreign versions is expected to occur using conventional supply channels, so the pathway will rely on applicable existing safeguards to ensure supply chain integrity.
Pathway 1 will be subject to notice and comment rulemaking, so the timeframe for when interested States, wholesalers, and pharmacists will be able to submit proposals for demonstration projects to HHS is currently unknown. Further, once the rulemaking process is complete, HHS will need to approve any demonstration projects and importation programs before drugs can be imported from Canada. HHS and FDA plan to implement Pathway 2 through guidance, so it is possible that manufacturers may be able to take advantage of this pathway more quickly.
The Safe Importation Action Plan is significant because Pathway 1 appears to reverse decades of opposition to the importation of drugs from foreign countries by pharmacies and distributors. Since the enactment of FDC Act Section 804 in 2003, no administration, Democrat or Republican, has been willing to provide the necessary certification that importation under that section “will pose no additional risk to the public’s health and safety; and will … result in a significant reduction in the cost of covered products to the American consumer.” This Administration is laying the groundwork for such a certification for individual demonstration projects if compliance with the statutory requirements and upcoming regulatory requirements can be demonstrated.
Pathway 2 is also significant because it would establish a new vehicle for the importation of drugs. The Safe Importation Action Plan states that Pathway 2 will offer a way for manufacturers to offer lower cost versions of their drugs where they otherwise could not readily do so because they are locked into contracts with other parties in the supply chain. Certain manufacturers have recently begun to market lower cost versions of their drugs under different NDCs, as an alternative to the existing higher-priced version but unaccompanied by rebates. It is uncertain whether manufacturers who wish to offer lower cost versions of their existing drugs in the U.S. would find Pathway 2 more advantageous than simply introducing a new, lower cost version to the U.S. market (under a new NDC) without importing it.
We will continue to monitor and report on federal and state efforts to address drug pricing issues.
Pathway 1 will allow States, wholesalers, and pharmacists to submit plans to HHS for demonstration projects that allow for the importation of certain drugs from Canada. The demonstration projects must be designed to comply with the federal drug importation laws outlined in Section 804 of the Federal Food, Drug, and Cosmetic Act (FDC Act), 21 U.S.C. § 384. As outlined in the Safe Importation Action Plan, HHS and FDA will publish a Notice of Proposed Rulemaking (NPRM) to address Section 804’s requirements, including those related to drug quality, record keeping, and product testing. States, wholesalers, and pharmacists that participate in the demonstration projects will be required to certify that the drug importation poses no additional risk to the public’s health and safety and will result in significant cost reductions for covered products. Drugs eligible for importation will be limited to drugs for sale in Canada that are versions of FDA-approved prescription drugs; such drugs must be manufactured with active pharmaceutical ingredients (API) manufactured at facilities that also manufacture API for the FDA-approved version. Under the federal drug importation laws, controlled substances, biological products, infused drugs, intravenously injected drugs, drugs inhaled during surgery, and certain parenteral drugs are excluded from importation. HHS and FDA also plan to exclude any drug with a REMS from the importation demonstration project programs.
The future NPRM will seek feedback on how States, wholesalers, and pharmacists can demonstrate that the drug importation programs will result in significant cost reduction for the covered drug products. As we previously reported (see here), when faced with this same question, Vermont found that the costs of implementing a compliant drug importation program may outweigh any savings the state could hope to realize from importing lower cost drugs. The Safe Importation Action Plan says that HHS and FDA will seek feedback on “the best way to identify the expected acquisition cost of the imported drug, the cost of assuring the drug is safely imported, and the mechanism for delivering those savings to the consumer (as opposed to the savings being absorbed by the supply chain).”
Pathway 2 will allow drug manufacturers to import versions of their FDA-approved drugs that are sold in foreign countries, “potentially allowing them to offer a lower price than what their current distribution contracts require.” In order to take advantage of this pathway, manufacturers will need to establish that the foreign version is the same as the U.S. version. A manufacturer who meets the requirements of the pathway will be able to sell a foreign version of a drug product in the U.S. under a different NDC number than the U.S. version. Importation of foreign versions is expected to occur using conventional supply channels, so the pathway will rely on applicable existing safeguards to ensure supply chain integrity.
Pathway 1 will be subject to notice and comment rulemaking, so the timeframe for when interested States, wholesalers, and pharmacists will be able to submit proposals for demonstration projects to HHS is currently unknown. Further, once the rulemaking process is complete, HHS will need to approve any demonstration projects and importation programs before drugs can be imported from Canada. HHS and FDA plan to implement Pathway 2 through guidance, so it is possible that manufacturers may be able to take advantage of this pathway more quickly.
The Safe Importation Action Plan is significant because Pathway 1 appears to reverse decades of opposition to the importation of drugs from foreign countries by pharmacies and distributors. Since the enactment of FDC Act Section 804 in 2003, no administration, Democrat or Republican, has been willing to provide the necessary certification that importation under that section “will pose no additional risk to the public’s health and safety; and will … result in a significant reduction in the cost of covered products to the American consumer.” This Administration is laying the groundwork for such a certification for individual demonstration projects if compliance with the statutory requirements and upcoming regulatory requirements can be demonstrated.
Pathway 2 is also significant because it would establish a new vehicle for the importation of drugs. The Safe Importation Action Plan states that Pathway 2 will offer a way for manufacturers to offer lower cost versions of their drugs where they otherwise could not readily do so because they are locked into contracts with other parties in the supply chain. Certain manufacturers have recently begun to market lower cost versions of their drugs under different NDCs, as an alternative to the existing higher-priced version but unaccompanied by rebates. It is uncertain whether manufacturers who wish to offer lower cost versions of their existing drugs in the U.S. would find Pathway 2 more advantageous than simply introducing a new, lower cost version to the U.S. market (under a new NDC) without importing it.
We will continue to monitor and report on federal and state efforts to address drug pricing issues.
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