Backgrounder on Importation
The FDA, due to the current state of their regulations, has taken the position that virtually all
shipments of prescription drugs and certain other products imported from a Canadian or other
foreign dispensary by a U.S. consumer may violate the law.
Many legal experts, however, disagree with this position. These legal experts have observed that
such importation is permitted under federal law as practiced. The FDA itself provides guidance
to the public on how to accomplish such importation. The FDA authorizes a 90 day supply of
prescriptions to be imported, for personal use, delivered to the consumer’s home (see the FDA
Official Statement in another attachment). No individual has ever been prosecuted by the FDA
for importing non-controlled prescription drugs for personal use from a certified member of the
Canadian International Pharmacy Association.
Global Health Management’s prescriptions are fulfilled by a member of CIPA, for Canadian
fulfillment and all prescriptions from Canada are approved by Health Canada, which is Canada’s
version of the FDA. Our pharmacy partners in Australia, New Zealand, England and India are all
government licensed pharmacies, operated by government licensed pharmacists and whose
prescriptions are approved by their national level versions of Health Canada. Global Health
Management’s clients exercise their choice of which country they wish their prescription to be
President Clinton signed into law, the legalized importation of prescription drugs, from Canada,
Australia, New Zealand, England and Switzerland, Israel and 16 Countries in the European
What has not happened, is that the FDA has refused to do the work to certify the safety of the
drug supplies within those countries not withstanding the formal statement by the Government of
Canada that guarantees the safety of importation from Canadian Pharmacies.
President Clinton signs drug reimport bill
By Dickinson, James G
Publication: Medical Marketing and Media
Date: Friday, December 1 2000
Denouncing it as "ineffective" because of built-in loopholes for drug manufacturers, President
Clinton on October 28 nevertheless signed into law the prescription drug reimportation bill as
part of the FY 2001 Agriculture Appropriations Act. Clinton sharply downplayed the provisions
real effect on consumers - "I am concerned that the bill contains an ineffective provision
regarding importation of FDA-approved prescription drugs that represents little more than a false
promise to the American public." He charged that the measure "contains several loopholes that
effectively render the provision meaningless." He said that under the provision, drug
manufacturers can deny importers access to FDA-approved labeling that is required for
wholesalers to sell reimported drugs.
President Clinton’s Law on Reimportation – 28 Oct 2000
By Michael D. Dalzell
President Clinton signed the bill on Oct. 30, after it sailed through the House and Senate on 340–75
and 86–8 votes respectively. Much has been made about pharmaceuticals' lower cost abroad — a
realization burned into American consciences by footage showing busloads of elderly people traveling
to Canada to fill prescriptions. Not surprisingly, some of reimportation's strongest supporters were
legislators in border states where pressure to reduce drug prices is acute: Sanders and Sen. Jim
Jeffords of Vermont, and Sens. Slade Gorton (Washington), Byron Dorgan (North Dakota), and Paul
What finally passed allows pharmacists and wholesalers to reimport FDA-approved prescription drugs
from Australia, New Zealand, Japan, Canada, Israel, South Africa, Switzerland, and the 16
countries of the European Union. (Though grammatically incorrect because it implies that a product
has been imported into the U.S. once already, reimported is industry jargon for U.S.-made products
that are exported but returned to the U.S. for sale.) Reimporters must provide the FDA with detailed
records that demonstrate where each batch of drugs has been and that each passes tests for
authenticity and safety. Before allowing reimportation to begin, the Department of Health and Human
Services must demonstrate to Congress that it poses no additional risk to public health, and that it will
result in "significant" cost savings for consumers. (Editorial Note – the FDA has refused to do so).
Rector finds the pharmaceutical industry's exhortations about safety disingenuous. Rector
notes that under the 1988 Prescription Drug Marketing Act, which gave manufacturers sole
right to reimport their own products, drug companies brought almost $14 billion worth of
prescription drug products back into the U.S. last year — nearly 20 percent of the market
(see chart at end of story). "On one hand, they were trashing imported products, but on the
other they're bringing them in ever-increasing numbers — including an 800-percent
increase in imports from 1992 to '99 from Mexico, the country they disparaged the most."
It's fair to say that the 106th Congress will never be known for its decisiveness in the health care
realm. To the consternation of some and the delight of others, issue after issue became mired in
partisan quicksand: Medicare reform, HMO liability, the Patients Bill of Rights, restoration of Balanced
Budget Act funding cuts, a prescription drug benefit in Medicare, collective bargaining for providers —
the list goes on. Acting on many of these would have forced Congress to take on some entrenched
lobbies — pharmaceutical companies and insurers among them.
So it is worthy of mention that something — prescription drug reimportation — became law, albeit in a
left-handed way: as an attachment to an agriculture appropriations bill. A widely held belief is that
reimportation was an easy way for Congress to deal with a political hot potato — prescription drug
prices — and save the tough stuff for another day. "Congress has to go home and say, 'We did
something,'" Alixe Glen Mattingly, then-senior vice president for the Pharmaceutical Research and
Manufacturers Association (PhRMA), told a group of health plan medical directors in California in
September. "They have to hold up one trophy, and Medicare drug benefits are too complicated to deal
with [before the end of the session]."
The issue survived despite fierce opposition from PhRMA and doubts from the Food and Drug
Administration. On the other end, the National Community Pharmacists Association, which represents
independent pharmacies, and some consumer groups kept needling Congress. The health plan
industry was uncharacteristically silent throughout.
If the law does what its backers say it will — reduce the nation's collective prescription drug expense
— wouldn't it figure that health plans would take an interest in it? Clive Riddle, who once ran Tenet
Healthcare's California HMO and is now president of Managed Care On-Line, says they do.
"Health plans see an opportunity for savings, but the view is that those savings will be incremental,
not radical," he says. "Many, though, are just in a wait-and-see mode."
MCOs are skeptical, he says, because a lot of ground must be covered before a reimportation program
can take effect. Regulations could take two years or more to forge, with such issues as product
tracking, testing, and labeling; foreign export laws; and liability to be settled along the way. Moreover,
there is a deep suspicion among many observers that the pharmaceutical industry got enough leeway
in the final bill to allow it to prevent effective implementation. "If I was a major manufacturer, I'd see
an awful lot of opportunity in the law to create barriers and delays," says Patrick McKercher, Ph.D.,
director of the newly established Center for Medication Use, Policy, and Economics at the University of
Michigan College of Pharmacy.
Still, health plans should start to formulate a strategy for this now, says Terry Gaffney, a lawyer with
the Winston-Salem, N.C., firm of Womble, Carlyle, Sandridge, & Rice. "If I'm an MCO, I want to start
thinking how I can use this bill to improve the cost and quality of my prescription benefit."
President Clinton signed the bill on Oct. 30, after it sailed through the House and Senate on 340–75
and 86–8 votes respectively — but not before he accused Republican legislators in the House of
emasculating it. Vermont Independent Rep. Bernie Sanders, an early champion of reimportation,
similarly lamented that the final legislation was full of "loopholes that will prevent us from
accomplishing our goal: lower prescription drug costs."
The consumer-centric issue of drug prices drove reimportation through Congress, but for health plans,
price plus increased consumption is a double whammy. The Segal Co., a New York-based benefits
consultant, estimates that health plans will experience a near-20-percent increase in pharmacy benefit
costs next year. Insurers are passing that expense along, sending some employers into sticker shock.
Next year, health plan premiums are going up 12 percent, by Milliman & Robertson's estimates; 13
percent, according to Hewitt Associates.
Much has been made about pharmaceuticals' lower cost abroad — a realization burned into American
consciences by footage showing busloads of elderly people traveling to Canada to fill prescriptions. Not
surprisingly, some of reimportation's strongest supporters were legislators in border states where
pressure to reduce drug prices is acute: Sanders and Sen. Jim Jeffords of Vermont, and Sens. Slade
Gorton (Washington), Byron Dorgan (North Dakota), and Paul Wellstone (Minnesota).
What finally passed allows pharmacists and wholesalers to reimport FDA-approved prescription drugs
from Australia, New Zealand, Japan, Canada, Israel, South Africa, Switzerland, and the 16 countries of
the European Union. (Though grammatically incorrect because it implies that a product has been
imported into the U.S. once already, reimported is industry jargon for U.S.-made products that are
exported but returned to the U.S. for sale.) Reimporters must provide the FDA with detailed records
that demonstrate where each batch of drugs has been and that each passes tests for authenticity and
safety. Before allowing reimportation to begin, the Department of Health and Human Services must
demonstrate to Congress that it poses no additional risk to public health, and that it will result in
"significant" cost savings for consumers.
To John Rector, NCPA's general counsel, the final product doesn't look at all bad. For instance, he
says, "There was not, in either the House or Senate bill, any provision that prohibited contractual
arrangements that would allow opponents of reimportation to undermine the statute," he adds. "We're
glad the conference committee added something to prevent that kind of conduct."
Independent pharmacies may stand to gain the most from reimportation. "Our people want the
business back in our pharmacies. They don't want people going across the border or to rogue Internet
sites to get prescription drugs," Rector says. He adds that corner drug stores' ability to acquire
medications at lower prices may help them "participate more evenly in the third-party market. You'll
see fewer exclusive networks with chain drug stores — our buying groups will be able to offer better
deals to health plans and employers."
Fear and loathing
As the reimportation debate unfolded in Congress, a donnybrook ensued, with PhRMA leading the
opposition. In an impressive display of star power and sheer political skill, PhRMA secured testimony
from 11 former FDA commissioners who cautioned that reimportation would threaten public safety.
David Kessler, commissioner under Presidents Bush and Clinton, said reimported drugs could be
"subpotent, superpotent, impotent, or toxic." Donald Kennedy, who served under President Carter,
admonished Congress for its timing: "If we lower safety standards when [prescription] use is rising
and more pivotal to heath care, the effects on health and safety could be devastating."
Nikki Mehringer, quality control leader for Eli Lilly and Co., told the House Subcommittee on Oversight
and Investigations on Oct. 3 that the existing pharmaceutical supply chain provides for accountability
at each step. "If the pharmaceutical company no longer controls movement of materials between
countries, there is the risk that the importer will not discern critical differences in products that may
lead to confusion and safety issues."
Safety weighed on the minds of federal officials, too. FDA Commissioner Jane Henney warned the
same committee that a reimportation program "would be totally unworkable without funding." U.S.
Customs Service Commissioner Raymond Kelly added that counterfeit-drug seizures are up sharply,
and that reimportation "has the potential to add to the volume that Customs has to deal with."
To Riddle, the safety argument has a familiar ring. "There was quite a bit of fuss about safety when
generics became widely embraced in managed care plans," he recalls. "I see similarities to this."
Rector finds the pharmaceutical industry's exhortations about safety disingenuous. Rector notes that
under the 1988 Prescription Drug Marketing Act, which gave manufacturers sole right to reimport their
own products, drug companies brought almost $14 billion worth of prescription drug products back
into the U.S. last year — nearly 20 percent of the market (see chart at end of story). "On one hand,
they were trashing imported products, but on the other they're bringing them in ever-increasing
numbers — including an 800-percent increase in imports from 1992 to '99 from Mexico, the country
they disparaged the most."
Expressions of concern about safety are "smoke and mirrors anyway," he adds. "It's all about price."
Jeff Trewhitt, a PhRMA spokesman, says that the elderly and others who championed the issue as a
way to reduce drug costs are missing the point. "Reimportation does not give you what most of these
patients need: comprehensive coverage. Cheaper prices — if in fact they happen, and there's no
guarantee of that — do not give you coverage." Using a hypothetical example of a heart drug that
retails for $100 in the U.S., Trewhitt says that its reimported counterpart, at $60 to $75, would still be
unaffordable for many elderly people. "The best way to resolve that is by expanding coverage under
an improved Medicare program."
Implications for health plans
Some analysts have estimated that reimportation could cause drug prices to drop 30 to 40 percent,
based on price spreads between the U.S. and other countries. Others say that estimate is highly
optimistic, and is contingent on numerous factors.
For starters, it depends on what comes into the country. Because importers could bear the cost of
compliance with the FDA's tracking and testing requirements, they would probably try to focus on
importation of drugs that are easiest to test or that have sales volumes and price differentials large
enough to make it worth the effort. But drug companies are expected to try to minimize the impact of
that during the regulatory process. "In that regard, you might see generics more quickly reimported
than patented property," says McKercher. "Pharmaceutical manufacturers are not going to fall on their
swords for something that didn't already have exclusive market protection."
FDA requirements may be costly enough to make savings negligible. "The worst-case scenario," says
McKercher, is that you create a whole new business of reimportation, the result being not a terrible
amount of savings for consumers or employers." Watch the wholesalers, who could establish
themselves as batch certifiers for prescription drugs, he says. "If you see them hire someone from one
of the major pharmaceutical companies to set up a lab for testing, that would be a clue that
wholesalers see this as a major business opportunity."
Just how any savings from reimportation would benefit health plans and purchasers remains to be
seen, but Riddle says it would be easy to design a benefit around them. "A simple way is to do it the
way we do it with generics. In many plans, you have a separate copayment for generics. To the
degree you can classify drugs as reimported, you can add 'and reimported drugs' to 'generics.'"
You could, Gaffney agrees, but he adds that when doing so, plans should be careful not to open
themselves up to liability should a reimported product prove to be adulterated.
"Will MCOs require members to obtain a reimported product when it's available," he wonders, "or will
they give them incentives to obtain them? The insureds are going to want lower costs. To stay
competitive, MCOs may say, 'We have to look at this, but perhaps the way to do it is to give our
members a choice.' That might be plans' legal way out."
Where there may be real potential for health plans and employers to realize savings is in the area of
mail-service pharmacy, according to Ed Kaplan, vice president of Segal's National Health Care
Practice. "There's been an increased emphasis on mail order and coalition purchasing," he says. "If
these buyers of medications can successfully reimport products, then we may have something."
But with the uncertainty surrounding the nature and length of the regulatory process to come, health
plans aren't yet counting the dough. The Health Insurance Association of America and the Blue Cross
Blue Shield Association told Managed Care that reimportation isn't on their radar screens. "It's so far
away, it's like saying, 'In two years, there's going to be a fire in the building, so everybody line up
single file,'" says Gaffney. "A lot of MCO execs are burdened by what they're doing next quarter, let
alone two years from now."
Riddle offers a different take. He says a lot of plans want reimportation, but may not have much
influence on its effect on their costs. "Plans don't always have full control over their formularies —
they contract with pharmacy benefit managers that get rights over some of those things. Plans can
encourage it, but depending on how far they've delegated the function, the PBMs are in control."
Reimportation appears to be of little interest to a major trade group representing PBMs. "It's hard to
determine whether this will have a direct impact on us, because it's not clear how this is going to
shake out," says Pat Donohoe, vice president for government affairs at the Pharmaceutical Care
Management Association. In fact, PCMA will not seek a seat at FDA's rulemaking table.
No surprise there, says Riddle. "Pharmacy costs are the number one problem for health plans because
these third parties, PBMs, are pretty much contracted on a fee-for-service basis. PBMs don't have the
same incentives plans do to ratchet down costs," he says. And given PBMs' market share, that's not
likely to change. "If you exclude Kaiser Permanente, which manages its own pharmacy benefit, more
than 95 percent of plans use PBMs. If plans got serious about pulling it back in house, you might see
PBMs shake things up."
PBMs might also be concerned about losing any rebates that they now negotiate privately with
manufacturers but don't always share with payers.
Battles to come
PhRMA isn't so confident about reimportation getting off the ground, let alone in short order. "Based
on what the FDA has said, it's going to take two years to develop the regulatory program," says
PhRMA's Trewhitt. "In the third year, there will be a pilot program allowing limited reimportation.
Then, in the fourth year, there would be full-scale reimportation.
"Lawmakers were not quite accurate when they implied to constituents that this was imminent. This is
neither easy nor imminent."
One of the more serious problems the FDA faces, he points out, is funding. The agriculture bill gave
the FDA $23 million in first-year funding, but no more. Internal FDA estimates suggest that it will
require $90 million a year to sustain a complex reimportation program — an expense that Trewhitt
says, "comes at a time when Congress has been slow to provide adequate funding to the FDA."
None of this talk surprises reimportation supporters. "I have no doubt that drug companies are
searching for ways to thwart this," North Dakota's Dorgan said in the well of the Senate in October
when passage was imminent. He pledged to close remaining loopholes that many observers feel could
allow pharmaceutical companies to drain the spirit of the law. One area of contention allows drug
makers to deny importers access to FDA-approved labels required for imports, giving them de facto
veto power over what products come into the U.S.
That's a nonstarter, Trewhitt says. "That's not the way it's normally done anyway. If you look at
repackagers in this country, medications are sold in massive amounts, and then repackagers break
them down into units. When they repackage medications to be sold in retail pharmacies, they don't
get the trademark label," he explains. "They either fire up the photocopier, or they retype the relevant
information on the label. That's all you need."
NCPA's Rector — who, too, will be active in the rulemaking process — expects labeling and other
issues to be resolved fairly. "The law was carefully crafted to prevent the kind of conduct that some
speculate will be the outcome of this," he says. Still, Rector is keeping a wary eye on the
pharmaceutical industry, while his other eye is trained on wholesalers, who also opposed
"Oh, they're two peas in a pod, pharmaceutical companies and wholesalers," he says. "That was
demonstrated during the debate on reimportation — you could see NWDA's [the National Wholesale
Druggists' Association] lips moving but you could hear PhRMA's voice. All of a sudden, wholesalers
discovered safety and repackaging issues."
Smaller wholesalers, Rector says, are eager to begin reimportation. But whether there will be any
product to reimport is another matter, which probably will be addressed during the regulatory process.
"There could be a hesitation for pharmaceutical companies to do business in countries where you only
get 20 cents on the dollar for your product," says McKercher. Recalling his previous life as a policy
analyst for Upjohn, McKercher says he once asked his superiors, "Why do we even mess with Canada?
It's only 7 percent of sales — we could walk away without hurting the bottom line."
Riddle says two issues of direct interest to health plans could surface. One, formulary development,
could come up during the rulemaking process.
"Plans want control when studying the safety and efficacy of drugs," he says. "Any HHS regulation
that pulls formulary control away from health plans is of great interest for two reasons: One, it may
impede plans' ability to work reimported drugs into the mix, and two, it would be precedent-setting. If
the government starts doing that, it could control formularies for domestic products, too."
The other issue, he says, would probably arise apart from the regulatory process: "Pharmaceutical
companies will attack this with a state-by-state strategy. The law talks about what drugs can be
reimported — it addresses the pharmaceutical industry, not health plans. Federal laws defer to states
when regulating health plans. So a state could bar plans from offering a reimported drug. They're not
saying a consumer can't buy it; all they'd be saying is that it can't be covered in a benefit plan."
Whether reimportation looks as if it will fly as its supporters intended, or is effectively stripped of any
bite — or falls somewhere in between — will help to determine if and when health plans warm up to it.
But for now, doubts persist. "The apathy about this legislation on Wall Street and with health plans
tells me there are a lot of hurdles to clear," says McKercher.
Maybe, but smart health plans may be better off competitively just keeping a close eye on
developments, says Gaffney — just in case. "There's no reason you can't start to get ready for this
Volume of reimported drugs to U.S., 1995–99
More than $13 billion in U.S.-made prescription drugs is already reimported for human consumption.
Figures on left side of graph are by customs value, in billions of dollars.
Country (increase, 1998–99)
United Kingdom (36.5%)
* Private importers would not be allowed to bring prescription drugs into the U.S. from these countries
under the reimportation law. Pharmaceutical manufacturers, which have authority to do so under the
Prescription Drug Marketing Act of 1988, could continue.
DATA SOURCES: U.S. DEPARTMENT OF COMMERCE, U.S. TREASURY, U.S. INTERNATIONAL TRADE COMMISSION
May 8th, 2003 Washington Post
Canada to Guarantee Imported Medicine
By Marc Kaufman
Washington Post Staff Writer
Thursday, May 8, 2003; Page A06
The Canadian government has officially said that it will be responsible for the safety
and quality of the large and growing flow of prescription drugs across the border to
American consumers, a clarification long sought by U.S. officials.
In an official document posted late last week, the Canadian health ministry said all
imported drugs must be equally safe and effective whether they are for use by
Canadians or for export.
The statement, made after many discussions with the U.S. Food and Drug Administration, is
an effort to provide better protection to the millions of Americans who now buy their
medications from Canada, where price controls often make drugs considerably cheaper.
The FDA has voiced concern about the safety and quality of some drugs coming over the
border, but said it has limited power to stop Americans from buying them from Canada
through the Internet and at pharmacy storefronts. Although the sales have become a big
business -- and are growing by some estimates at 50 percent a year -- they are generally
illegal under U.S. laws.
"We appreciate that [Canadian officials] are stepping up to this difficult challenge where we
don't have the regulatory authority, and they might," FDA Commissioner Mark McClellan,
who worked with Health Canada officials on the new policy statement, said in an interview.
"The fact that they are explicitly stating that they are trying to assure safety and effectiveness
not only for Canadians, but for the millions of prescriptions sold to Americans through
Canada, is a potentially useful step."
But one opponent of the cross-border drug sales, Larry Kocot of the National Association of
Chain Drug Stores, said the new Canadian position could "lull consumers into thinking that
Canadian drugs are as safe as American ones. We believe they're not." For instance, he said,
Canada accepts the factory inspections of nations including China and India, while the FDA
often sends its own inspectors.
The issue of the safety and quality of drugs imported from Canada into the United
States has become a contentious one, often pitting consumer groups and their political
allies against the U.S. pharmaceutical industry and, to some extent, the FDA.
The Pharmaceutical Research and Manufacturers Association (PhRMA) opposes the practice,
which cuts drugmakers' profits by allowing Americans to buy the cheaper drugs U.S. drug
companies ship to Canada. PhRMA's public argument, however, has primarily been that
re-importing drugs from Canada is inherently unsafe and poses a risk to consumers. Its
officials have testified that Canadian laws allow drugs from third countries to pass
unregulated through Canada, but Daniele Dionne, Health Canada's associate director
general, denied that yesterday.
"As soon as any drug crosses the border into Canada, it has to meet all the regulations
of our laws," Dionne said. She described the new posting as a "clarification" rather than
a new policy.
Congress has twice passed bills that would make it legal to re-import drugs from
Canada, but both times the Department of Health and Human Services concluded that
the safety and quality of the imported drugs could not be ensured and so the bill did not
become law. McClellan said the Canadian statement will help protect consumers, but it does
not solve the agency's basic problem with the cross-border traffic.
"We still can't assure safety and quality because the products go outside of our authority," he
said. "The situation remains 'Buyer beware,' and that's not a good way to assure public
Because the cross-border pharmaceutical sales are often done through online outlets, it has
been very difficult to determine how much business is being done. But McClellan said the
sales already make up 1 percent to 2 percent of all U.S. drug purchases. Kocot estimated the
flow is increasing by 50 percent annually.
The FDA has recently begun to crack down on Web sites that advertise cheap drugs from
Canada, and has posted its own statement for consumers on how to safely use Internet drug
sites. McClellan said the agency's concern has increased as the Web sites have begun to send
U.S. consumers more drugs made in nations other than Canada.
Canadian law does provide a regulatory exemption for drugs manufactured there for
export only, but Dionne said its rules governing manufacturing practices cover these
drugs as well, and they are as safe and effective as any others.