Archived Insight | August 1, 2019

Federal Agencies Announce Action Plan on Importation of Prescription Drugs

The U.S. Department of Health and Human Services (HHS) and the Food and Drug Administration (FDA) have released a “Safe Importation Action Plan,” outlining steps they will take to allow the importation of prescription drugs at some point in the future. The goal of this plan is to promote access to safe, lower-cost prescription drugs.

The three-page plan outlines two different pathways that the Trump Administration will pursue to promote this goal:

  • Pathway 1 — The FDA will release a proposed rule to permit state governments, wholesalers and pharmacists to submit plans for time-limited demonstration projects allowing for prescription drugs to be imported from Canada. The rule would be subject to public comment before it is finalized. The proposal will include strict conditions designed to ensure safety of the drugs imported. Applicants would need to demonstrate that their plan would result in a significant reduction in the cost of drugs paid by American consumers.
  • Pathway 2 — Following guidance to be released by the FDA, manufacturers of FDA-approved drugs would be able to import versions of their drugs that they sell in other countries. Manufacturers using this pathway would need to establish that the foreign version is the same as the U.S. version. This pathway would permit manufacturers to sell lower-cost versions of their own drugs in the U.S. under a different National Drug Code (NDC). The press release announcing the action plan states that insulin might be imported under the approach, along with drugs to treat rheumatoid arthritis, cardiovascular disorders and cancer.

Significant concerns exist about whether these proposals will be effective. With respect to the first pathway, importing drugs from Canada may be difficult because there may not be sufficient supply in Canada to meet U.S. demand. On the other hand, plan sponsors interested in exploring importation possibilities may be able to develop applications to permit importation under the standards to be announced in the proposed rule.

With respect to the second pathway, the program would essentially allow manufacturers to re-import drugs formerly intended for foreign markets, relabel them with a different NDC, and sell them for a lower price in the U.S. However, it is unclear whether manufacturers would have the incentive to pursue this option.

Implications for Plan Sponsors

Details about these pathways will need to be announced by HHS and the FDA. We anticipate that pharmacy benefit managers and other service providers may enter the market to operationalize these importation options when rules are finalized. Plan sponsors should consider asking their professional advisors to consider whether these importation options could be available for their plan participants and beneficiaries.

Segal will report on developments as they occur.

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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.

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