On May 25, 2022, the U.S. Food and Drug Administration (FDA) issued a guidance document intended to help pharmacists and wholesale drug distributors understand and comply with its final rule regarding the import of certain prescription drugs from Canada. The 2020 final rule, titled "Importation of Prescription Drugs," implemented Sections 804(b) through (h) of the Federal Food, Drug, and Cosmetic Act (FD&C Act) with the goal of reducing the cost of covered products to American consumers without compromising public health and safety.

The FDA's final rule follows an acknowledgement of public frustration with the high cost of prescription drugs in the United States. In its notice of proposed rulemaking, the FDA notes that "prohibitive costs" can negatively impact health outcomes, causing reduced medication adherence or delayed treatments for patients. Furthermore, the FDA calls attention to the significant disparity between the prices of prescription drugs in the U.S. and in other developed countries, and the incentive those price differentials create for Americans to seek treatment abroad or purchase drugs from ex-U.S. sources.

According to a 2020 University of Florida study, each year approximately two million Americans purchase prescription drugs outside of the country. The study found that many purchases are made from international internet pharmacies without sufficient regulatory oversight, placing patients at risk of consuming harmful counterfeit drugs, and highlighting the need for a legitimate route of import.

Policymakers at the federal and state levels have long been interested in allowing the regulated importation of drugs from Canada to help defray prescription drug costs for American consumers. Both the Medicine Equity and Drug Safety (MEDS) Act passed in 2000 and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) contemplated development of regulations permitting pharmacists and wholesalers to import certain prescription drugs from Canada, in each case subject to a certification by the Secretary of Health and Human Services (HHS) that implementation would 1) pose no additional risk to the public's health and safety, and 2) result in a significant reduction in the cost of covered products to the American consumer.

No Secretary of HHS has been willing to make such a certification—until now. In issuing its final rule, the FDA contends that section 804 of the FD&C Act can be implemented to meet the certification criteria through time-limited importation programs known as Section 804 Importation Programs (SIPs), which are reviewed and authorized by the FDA and managed by states or certain other non-federal governmental entities and their co-sponsors. The 2022 guidance, provided in Q&A form, clarifies prescription drug import procedures and the role of pharmacies and wholesale drug distributors under these programs.

Importation Guidance

In the guidance, the FDA clarifies the entities eligible to submit importation program proposals and import eligible prescription drugs (including drug-device combination products). SIPs will be managed by States and Indian Tribes (SIP Sponsors), subject to review and authorization by the FDA. SIPs may be co-sponsored by a State, Indian Tribe, pharmacist, or wholesale distributor (SIP Co-Sponsors). In an authorized SIP, the importer of eligible prescription drugs must be either a pharmacist or wholesale distributor (Importer), in each case holding an active license in good standing issued by the FDA or a state that is a SIP Sponsor or Co-Sponsor.

The final rule contains a number of provisions designed to ensure the quality of imported products. Pharmacists and wholesalers are only permitted to import the eligible medications identified by the SIP Sponsor for the SIP and authorized by the FDA. To be eligible for importation under a SIP, a prescription drug must be approved by the Health Canada's Health Products and Food Branch (HPFB), have HPFB-approved labeling when marketed in Canada, and, other than meeting U.S. labeling requirements, otherwise meet the conditions in an FDA new drug application or abbreviated new drug application. According to the FDA, "[e]ssentially, eligible prescription drugs are those that could be sold legally on either the Canadian market or the American market with appropriate labeling."

Certain types of drug products are categorically ineligible for importation under SIPs, including:

• controlled substances;
• drugs subject to a risk evaluation and mitigation strategy (REMS);
• biological products;
• infused drugs; and
• drugs inhaled or injected into veins, eyes, or spinal fluid.

Even if a drug product is eligible for importation, FDA authorization is not guaranteed. A SIP Sponsor must make the case that the product can safely be manufactured, stored, and transported free of contamination and sterility and stability concerns. The manufacturer or Importer must test the products for authenticity, for degradation, and otherwise ensure that the eligible products are in compliance with established specifications and standards. Additionally, product supply chains approved under SIPs must be limited to just three entities: one manufacturer, one Foreign Seller (i.e., an entity licensed to wholesale drugs by Health Canada and registered with FDA as a Foreign Seller), and one Importer. Foreign Sellers are not permitted to have an international pharmacy license authorizing distribution of drugs approved by foreign, non-Canadian regulatory agencies.

A SIP may only be authorized for up to two years from the date of its first imported shipment. The FDA may extend authorization for up to two years at a time. Extensions will likely be provided on a case-by-case basis, subject to FDA consideration of the SIP and associated supply chain.

In addition, the final rule stipulates several post-importation requirements. After import under a SIP, SIP Sponsors are responsible for maintaining and providing the FDA with data and information regarding the SIP's cost savings to American consumers and effectuating any recalls deemed necessary by the FDA or any SIP participant. Importers have ongoing pharmacovigilance obligations and must submit adverse events, field alerts, and other reports to the FDA and the product's manufacturer. In addition, SIP Sponsors and other SIP participants must also agree to audits and facility inspections by the FDA as a condition of participation in a SIP.

Although limited to a subset of drug products sourced from Canada, the FDA's final rule is a significant step towards disrupting a historically insular market for prescription drugs in the United States. The final rule has the potential to impact drug costs for American consumers, create business opportunities for pharmacists and wholesale distributors, and may pave the way for further importation from other countries. However, the move is not without its critics: industry groups have expressed concerns over potential risks to product quality and safety posed by opening the United States' closed system of drug distribution, and other associations appear skeptical about the actual cost savings importation will provide to the average American consumer.

The ultimate impact of the FDA's final rule is yet to be seen. For now, stakeholders should refer to the FDA's guidance for questions and answers on operationalizing SIPs and be on the lookout for further agency insights.

For More Information

For more information, please contact any member of Wilson Sonsini's FDA Regulatory, Healthcare, and Consumer Products practice.