Plan sponsors contemplating arrangements that would cover drugs that are reimported from Canada or other foreign countries should review the issue carefully with legal counsel prior to adopting such a policy.

February 2003 Letter Sets Out Possible Application of Reimportation Ban to Private Employer-Sponsored Health Plans

A private law firm asked the FDA for an opinion on the potential liability of the entities involved in the following fact scenario: A health plan sponsor amends its health plan to include coverage for prescription drugs purchased outside the U.S. and publicizes the new benefit to plan members. The plan excludes coverage for Cipro, "quack" drugs or other controlled substances from sources outside the U.S. A plan member receives a prescription from a U.S. physician and forwards the prescription to a third-party vendor associated with the plan, which performs certain data entry services and forwards the prescription to a licensed pharmacy in Canada. A Canadian doctor rewrites the prescription, the Canadian pharmacy fills the prescription and ships the drugs directly to the plan member. The third-party vendor consolidates the plan and patient co-pays and forwards payment to the Canadian pharmacy.

The FDA letter, which was released in New Orleans, Louisiana on February 12, 2003, sets out its legal framework for analyzing this scenario:

1. Even if a drug is approved in the United States, if it was initially manufactured in the U.S., it is a violation of the FFDCA for anyone other than the U.S. manufacturer to reimport the drug back into the U.S.
   
   
2. Such reimportation may also violate U.S. law if the drugs are not approved by the FDA. Many reimported drugs are unapproved because they are not manufactured by a firm that has FDA approval for the drugs, or, even if produced by an approved manufacturer, the version produced for foreign markets may not meet other standards for FDA approval, such as approved processing methods and container/closure systems.
   
   
3. There is a separate violation of the FFDCA if the drug does not meet FDA-approved labeling standards.
   
   
4. It is also a violation of the FFDCA for a drug to be dispensed by a pharmacist without a valid prescription.**
   
   
5. Congress passed a law in 2000 that would allow drug wholesalers and pharmacists to import drugs if the U.S. Department of Health and Human Services (HHS) were to certify that such reimportation does not place additional health and safety risks on the public and would result in a significant reduction in costs of drugs to the American consumer. This law has not gone into effect because HHS has not made this certification.
   
   

The FDA declined to state whether any specific entity in the fact scenario is liable for any of these violations but emphasized that anyone that caused a prohibited act (including any entity that aids or abets a criminal violation) can be found liable. A violation of the first requirement mentioned above (reimportation by someone other than the original U.S. manufacturer), is a felony. Various civil and criminal penalties exist for the other violations. Although the FDA did not make specific conclusions concerning the parties involved in the fact scenario, it states that, "any party participating in this kind of import plan does so at its own legal risk."

To see this letter, click here.

August 2003 Letter Sets Out Possible Application of Reimportation Ban to Various Public Sector Entities

The California Attorney General's office requested an opinion as to whether various public entities (including a state, county or city program, a public pension plan like CalPERS, or a sovereign Indian Nation) would violate the FFDCA, if it were to reimport drugs from Canada. The Attorney General also asked if the FFDCA would preempt a law passed by California that made reimportation from Canada legal. The FDA answered that reimportation by any of these entities would be illegal, and that any state law that purported to make it legal would be preempted by the FFDCA.

This letter was issued to the California Attorney General's Office on August 25, 2003. The FDA went through the same five-step legal framework in coming to its conclusion as it did in its February letter to the law firm. It set out the same possible penalties and the same possible individuals who can be liable. The letter also adds that public and private entities cannot avoid jurisdiction under the FFDCA by simply "facilitating" the sale of Canadian drugs to California citizens through a third-party Internet service. Thus, a private or public entity may not sell Canadian prescription drugs through a Web site to other California residents.

To see this letter, click here.

FDA Clarifies that Reimportation for Personal Use is also Illegal

Both letters also set out the FDA's position concerning the personal importation of drugs. The FDA states that recent advertisements in U.S. newspapers and on certain Internet sites have implied that consumers can legally import prescription drugs back into the U.S. The FDA clarifies that reimportation for personal use is illegal.*** As a matter of enforcement policy the FDA has decided to focus enforcement on the commercial sale of reimported drugs (as opposed to sale to consumers), but this does not make personal reimportation legal.

Also, the August letter states that persons who import drugs on their person or on a bus also violate the FFDCA. The FDA states that it makes little difference whether the drugs are imported through the mails, delivered by a private shipping company or carried across the border on one's person.

To see this letter, click here.

Status of Reimportation Legislation

As noted above, Congress enacted legislation permitting reimportation of drugs if HHS certified that the process was safe. Neither the Clinton nor Bush administrations would make such a certification so the law never took effect. Legislation is pending in Congress that would permit wider reimportation without prior HHS certification, but the issue is highly political and the chance for success of such legislation is unclear.

Implications for Plan Sponsors

Although these letters do not set out any new law, they provide an important source for guidance on the legal status of drug reimportation for both the private and public sector. For example, it is clear from the letters that those persons and entities that merely facilitate reimportation could be in violation of the law. It is not clear what specific actions on the part of a plan sponsor (e.g., allowing coverage for reimported drugs as opposed to direct involvement in a program to reimport drugs) would be considered facilitating or aiding and abetting a violation of the FFDCA. It could include a plan sponsor merely establishing and maintaining a plan that covers such reimported drugs. Plan sponsors with a contracted vendor that engages in such reimportation may have particular concerns with the FDA's position. In addition, those plan sponsors should be prepared for possible supply problems. In response to reimportation, some U.S. manufacturers have cut back their shipments to Canada. Also, the general policy behind the FDA's reimportation restrictions is that it cannot guarantee the safety of reimported drugs.

The letters discussed in this Capital Checkup indicate an effort on the part of the FDA to get the word out on the reimportation ban. They also reflect the reinvigoration of the FDA's enforcement efforts. The FDA's enforcement attempts are ongoing. In addition, in recent days, the FDA has initiated new enforcement actions. For details about enforcement activity in a region or against a vendor, contact your Segal Consultant or the nearest Segal Company office.