June 1, 2004

## Vice Admiral Richard H. Carmona, M.D., M.P.H., F.A.C.S. 

Surgeon General

U. S. Department of Health and Human Services

c/o Division of Dockets Management (HFA-305)

Food and Drug Administration

5630 Fishers Lane, Rm. 1061

Rockville, MD 20852

> **RE: Prescription Drug Importation; Docket No., 2004N-0115;**
>
> **(69 FR 12810, March 18, 2004)**

Dear Dr. Carmona:

On behalf of the Healthcare Distribution Management Association (HDMA),
thank you for the opportunity to provide written comments on the issues
related to the importation of prescription drugs. These comments are in
addition to the oral testimonies we presented to the Task Force on April
5^th^ and April 14^th^. HDMA is a national trade association
representing full-service distribution companies responsible for
ensuring that billions of units of medication are safely distributed to
tens of thousands of retail pharmacies, hospitals, nursing homes,
clinics, and other provider sites across the United States.

HDMA recognizes the extreme importance of this study of drug importation
and commends you and the Health and Human Services' (HHS) Task Force on
Drug Importation for the monumental efforts you have undertaken to date.
We hope these comments provide constructive input into your assessment
of this serious public health issue.

**[A. Patient Safety]{.underline}**

As stated in our earlier presentations, when considering the feasibility
of importation, the paramount concern is to ensure patient safety. With
that in mind, HDMA believes there are six key safety areas that any
approach to importation must address:

1.  **Product Authentication**. When our citizens order their
    medications, they must be assured they receive the drugs in the
    exact specifications their physicians require. This sounds simple
    yet products are produced differently for different markets, based
    on differing standards. In addition to legal differences in
    same-brand-name pharmaceuticals, we know that counterfeiting is a
    much more pervasive criminal activity outside the United States so a
    greater level of security is necessary to guard the U.S.
    pharmaceutical supply channel and patients against the effects of
    this insidious practice.

2.  **Product Integrity**. When a patient is in need of a medication,
    there should never be a question about the strength or safety it
    possesses. We cannot allow a system to be developed that does not
    properly address the multitude of factors that cause degradation of
    pharmaceuticals. Climate control, safe handling practices and strict
    adherence to manufacturer specifications are just a few of the
    important ways wholesalers protect the integrity of the U.S. drug
    supply.

3.  **Availability of Supply**. The strong demand for a small supply of
    drugs available for importation may result in inadvertently
    encouraging the production of substandard, or even counterfeit,
    products.

4.  **Recalls**. Under the U.S. domestic drug supply system, there are
    FDA-regulated procedures for determining and carrying out product
    recalls if a safety concern is found after the product has reached
    the market. A recall process would have to be developed for imported
    products.

5.  **Repackaging and Relabeling**. Imported products will likely be
    packaged and labeled according to the requirements of the country of
    origin or intended use. Therefore, products will need to be
    repackaged and relabeled, including translation into English, to
    meet U.S. specifications. This additional step must be conducted in
    such a manner as to assure the product is not damaged or otherwise
    rendered unsuitable for U.S. consumption.

6.  **Bioterrorism**. The potential for use of the drug importation and
    distribution system as a mechanism for causing harm within our
    borders also deserves very careful consideration prior to allowing
    importation.

**[1. PRODUCT Authentication]{.underline}**

It must be assured that any imported drug is the U.S.-formulation of the
product and made in a U.S.-approved manufacturing facility. To avoid any
chance that an imported product is counterfeit, substandard, or
otherwise unsuitable for U.S. patients, it is imperative to determine
these two critical factors.

Product testing has been identified as a means to verify authenticity,
but this method will fall short if tests do not consider both the active
and inactive ingredients, which make up the total formulation of the
drug. To ensure the imported drug is the U.S.-approved formulation made
in a U.S.-approved plant requires either certification from the
manufacturer or analytical testing for all the inactive ingredients.
Ensuring the imported drug was made in a U.S.-approved facility would
require manufacturer certification. Similarly, authentication of the
active ingredient would need to be certified, which would require
comprehensive profiling of the imported product or certification from
the manufacturer.

In addition, since we know that counterfeiting is a random event, total
protection against counterfeit drugs from entering the U.S. market would
require that every lot from every shipment would be tested, not just
random samples. Considering the sophistication of the testing and the
frequency with which it would have to be done, this would be costly; we
estimate as much as \$15,000 per sample. (See Attachment 1)

**[2. Product Integrity]{.underline}**

While the challenge of authenticating imported supply is significant,
assurance of product integrity is perhaps even more complex and
multifaceted.

In the U.S., there are stringent storage and recordkeeping requirements
to assure that adulterated product (that is, product that may have
degraded due to improper handling along the way) does not enter the
marketplace. This includes strict temperature and humidity controls.
These requirements are unique to the U.S. and parity with these types of
requirements may not exist in foreign countries. As a result, there are
no guarantees as to how product coming in from foreign countries has
been stored and handled and no way to guarantee, even through testing,
that such product will continue to meet U.S. and FDA efficacy standards
through its expiration date.

Therefore, if importation were to occur, there must be rigorous
regulatory standards, registration requirements and inspection programs.
These standards should be designed to ensure that all those engaged in
exporting and importing pharmaceuticals, including Internet pharmacies,
can be readily identified, are qualified, and posses the skills,
infrastructure and interest to protect the integrity of the supply chain
commensurate with U.S. standards.

Furthermore, importation should only be done at the wholesale level and
then, through a linear channel, (i.e. product should flow from
manufacturer to exporter to importer to pharmacy to patient) in order to
provide additional security and product integrity controls on imported
medicines. Patients importing pharmaceuticals for their own personal use
do not have the expertise to determine if a drug is counterfeit,
adulterated or misbranded or if the drug was manufactured in an
FDA-approved facility with an FDA-approved formulation. They would also
have no way of knowing the country of production of their drugs when
importing on their own. Moreover, personal importation also raises
questions about self-medication and potential unknown drug interactions
if the patient's health team is not involved or aware that these drugs
are being taken.

**[3. Availability of Supply]{.underline}**

Another issue that must be addressed is product supply and demand. There
will likely not be enough products to meet domestic demand under
importation. For example, U.S. pharmacists fill about 10 times the
number of prescriptions as are filled by their counterparts in Canada.
An environment of strong demand, with low supply from Canada or other
approved exporting countries, would open the door for transshipment of
prescription drugs from other areas of the world and likely attract
diverted, counterfeit, sub-potent and adulterated products.

**[4. RECALLS]{.underline}**

While HDMA believes that the safety issues described above are the most
important to address, HDMA has identified a number of other critical
safety considerations. This includes the safety features incorporated
into U.S. policies and regulations under the current FDA managed system
for "product recalls."

Systems are in place today to facilitate domestic product recalls that
are initiated by the manufacturer and processed by distributors and
pharmacies. When dealing with foreign imports, it will be critical to
ensure that the FDA has the authority and resources to apply the same
level of oversight to international product recalls as they have to
domestic product recalls. Foreign manufacturers should be held to the
same standards for evaluating when a product should be recalled as is
currently done in the U.S. This leads to a number of questions, such as:

-   Who will have responsibility for initiating, regulating and
    monitoring international recalls? The agency equivalent to the FDA
    in the country of production? The foreign manufacturer? The U.S.
    FDA?

-   Will FDA have jurisdiction and oversight over the foreign firm's
    recall plan, to make sure recall information is disseminated to the
    U.S. in a timely manner, is directed to the appropriate audiences,
    and includes an understandable translation?

-   How will post-marketing complaints and adverse event reports be
    gathered and assessed?

-   What will happen if foreign originated product is recalled but its
    domestic counterpart is not (or vice-versa)---will this require
    distributors and pharmacies to maintain separate inventories in
    order to distinguish one from the other? If so, this implies a whole
    new set of procedures and costs that should be factored into your
    study.

## 

## [5. Repackaging and Relabeling]{.underline}

Imported products may have to be repackaged and relabeled to meet FDA
specifications. This in turn means ensuring that the product's label
that may appear in a foreign language is now accurately translated into
English. In the alternative, this means conforming English language
labeling to meet FDA requirements.

Furthermore, the labeling requirements become more problematic when
dealing with product sourced from locations outside Canada. Generally,
products sold in Europe come in blister or unit dose packaging. The
expiration dating for those products is determined by a foreign
jurisdiction based upon packaging components used in that country. This
dating determination may not be in accord with the time parameters set
forth by the FDA in the U.S. Thus, there may be a discrepancy on how
long the product can be used by consumers regardless of how they are
originally labeled. Additionally, the English language labeling
requirements become more difficult to address if product is from sources
where blister or unit dose packaging is predominately used.

The repackaging of blister packages is a more laborious process subject
to more opportunities for error. Moreover, FDA's position on the
repackaging of unit dose product into other unit dose packaging limits
that product's expiration dating to six (6) months dating unless costly
stability studies are conducted to validate that longer expiration
dating is warranted.

All of these steps are critical, and they will result in additional time
in getting drugs to the patient and have costs associated with them that
also need to be factored in.

**[6. Bioterrorism]{.underline}**

The potential for using drug importation as a route for a terrorist
organization to threaten the United States was discussed during the Task
Force's public meetings. It is a significant concern and cannot be
overemphasized. Bioterrorism represents a unique safety concern since it
is not merely a criminal act of greed, as they would be well planned
attacks with the expressed purpose of doing harm.

As FDA Deputy Commissioner Lester Crawford pointed out when asked to
comment on "whether reimportation (from Canada) now raises greater
challenges than it did previously \[to September 11, 2001\]" and "what
is your view\... \[of the\] safety of drugs for the consuming
Americans?"

> The problem would be if it becomes apparent to the rest of the world,
> including the world of terrorists, that we are not interdicting
> shipments of drugs that come from Canada...I think this is a signal to
> a would be terrorist that this might be a way to enter the United
> States...**.** It also would be a signal to\...the transshippers and
> these would be people in various countries that may not have a
> regulatory system or may not have a regulatory system for exported
> drugs...[^1]

Thus, it is certain that opening up our borders to the purchase of
substances that are intended for human consumption means that we are
exposing the U.S. to a unique form of vulnerability.

HDMA is aware that the Task Force has already consulted with various
U.S. governmental agencies and departments that would be involved in a
drug importation program including the U.S. Customs and the Justice
Departments. However, if there is a decision to allow importation, we
urge full partnership with the Department of Homeland Security in
defining the security and regulatory requirements that will accompany
importation.

**[B. Cost Factors]{.underline}**

In addition to the costs associated with the safety concerns we have
addressed above\--product authentication, product integrity, product
availability, recalls, repackaging and relabeling and bioterrorism\--
there are still additional cost elements that must be factored in when
considering the feasibility of a drug re/importation program. The four
factors we address in detail include:

1.  **Liability**. With importation, distributors may experience an
    increased level of liability exposure, because of the increased
    risks and responsibilities involved, and the differences in the way
    the U.S. laws would apply to imported products vs. domestic ones.

2.  **Documentation and Recordkeeping**. Imported products will require
    new and extended documentation and recordkeeping to be able to
    identify the imported products, e.g., to identify recalled products
    and to verify of the products' source.

3.  **Treatment/Allocation/Reimbursement**. Determining which patients
    receive which products i.e., domestic versus imported, raises
    additional questions such as how to ensure that patients receive the
    formulation specified by their physician, determining who will be
    entitled to the "lower cost" product, and how insurance or
    Medicare/Medicaid reimbursement will be handled.

4.  **Customs and other Cost Factors**. HDMA has provided a list of such
    additional factors as customs fees, tariffs, and other associated
    importation expenses that will impact the total costs.

[**1.** **Liability **]{.underline}

Liability issues are likely to become a significant cost factor in
determining whether a drug importation program should be developed. As
with any activity involving the handling and sale of consumer products,
patterns of liability develop over time and through insurance actuarial
analysis and claims experience. The roles and functions of drug
distributors are well established, and so is their product liability
exposure. As drug distributors undertake new roles and functions in
importing or reimporting pharmaceuticals, their liability exposure will
likely increase.

Increased liability exposure is a particular and expensive concern when
an importing distributor is put in a position of new and expanded
responsibilities. This could include, for example, authenticating the
product, ensuring the integrity of the product when it has come from a
source outside the U.S. with no assurances as to whether the product was
appropriately stored and handled, and facing additional risks as a
result of a substantial likelihood of an increasing number of drug
counterfeits getting into the U.S. pharmaceutical distribution channel.
Moreover, the importer could be held liable for product manufacturing or
performance defects, especially if such problems are difficult to
distinguish from those that may occur during handling.

There are other forms of liability that will become more significant
should importation become commonplace. For example, the importer may be
at increased risk if the original product producer does not want an
importer to buy a product at a lower price from a foreign country and
sell it at a higher price in the U.S. and can make a case that their
product patent rights have been violated. An importer may also be at
risk of violating trademark and/or copyrighting laws when the imported
product is repackaged and relabeled, and that risk may be exacerbated
when language translations are involved.

Currently, most domestic distributors are indemnified by the drug
manufacturers they do business with due to the controlled nature of the
U.S. supply system. However, if importation becomes a reality, this
indemnification would likely disappear. Manufacturers understand that
importation, even if it is limited to Canada, will diminish the
oversight and protections that characterize the U.S. prescription drug
supply system. U.S. manufacturers are not likely to indemnify
distributors dealing with products that may or may not have been
manufactured by them.

Based on the above considerations, the distributor may need to factor
higher litigation costs, or higher costs for measures to avoid these
forms of liability (e.g., additional records, legal consultation, etc.)
into their total costs of importation.

## [2. Documentation and Recordkeeping]{.underline}

Once a decision is made to import product from a foreign source, the
importer may be required to obtain documentation from foreign suppliers
all the way back to the manufacturer of the imported goods. The required
information is likely to include the amount of product in each lot
received by the importer, documentation from the foreign exporter that
they received the product from the manufacturer, and other documentation
about the product shipped from the manufacturer to the exporter. It is
uncertain whether these records would be readily available, as other
countries often do not require that such records be kept.

The importer may also be required to confirm that the imported product
has been appropriately stored and handled by foreign suppliers. Because
other countries do not necessarily adhere to the strict storage and
recordkeeping requirements that we have in the U.S., there is no way to
guarantee this. Even if an importer required certification from the
foreign entity, back up and/or documentation to the certification may
not be available if in fact a problem is found long after the product
had been sold in the U.S. As a result, the distributor may be forced to
bear an unreasonable amount of product liability exposure.

Because of the recordkeeping requirements associated with imported
product, it may be necessary to maintain dual inventories. This also
involves a whole new set of administrative and operating procedures and
costs. Identical products with different and/or redundant processes for
ordering, receiving, invoicing, handling returns and recalls, and many
other steps will only serve to put additional pressure on drug
distributors' already slim net profit margins of 0.73 percent.

**[3. Treatment/Allocation/Reimbursement]{.underline}**

Another significant issue that must be addressed will be who receives
the imported products, and how reimbursement will be determined.

Care must be taken that the patient receives the exact formulation
prescribed by the patient's physician, which may involve additional
administrative tracking costs on the part of the importer and the
pharmacy. Also significant will be determining which patients will be
offered the "lower cost" drug, and whether the same lower cost drug will
be available to the same patient if refills are required. Even if the
policy and medical treatment implications of offering different priced
drugs for the same prescriptions and/or patients can be addressed
satisfactorily, there are significant cost implications. The need to
ensure that the same patients are given the same drugs with the same
formulations during the course of their therapy will likely reinforce
the need for dual inventories discussed previously. Importers,
pharmacies, and payers, including Medicare and Medicaid, may also be
expected to keep multiple product payment tracking systems to
accommodate reimbursement requirements.

All of these complex administrative issues are likely to add to the
increased cost of offering imported products to U.S. patients.

## [4. Customs and other Costs]{.underline}

As evidenced at the public meetings, one of the Task Force's greatest
challenges will be to determine the total costs of an importation
program and whether the consumer will actually receive the anticipated
benefits.

From the distribution perspective, for example, distribution costs for
storage space and segregation mechanisms will certainly be significant.
In order to offset the increased inventory costs, the importer could be
forced to increase the selling price for these products. This would be
one more factor that could mitigate the cost differential being sought.

Customs requirements are also a factor, since a product must go through
customs before it can enter the U.S. Related cost items that must be
considered include:

-   Bonds required by customs for the payment of liquidated damages in
    the event of default;

-   Broker fees;

-   Expenses incurred by government officers or company employees
    responsible for the destruction, supervision of relabeling or other
    required action;

-   Customs' storage expenses in connection with the storage, cartage or
    labor for articles refused immediate admission;

-   Attorney's fees if product is detained for any reason.

HDMA has identified further costs that we have not discussed at length,
but we recommend factoring into the Task Force's analysis, including:

-   Import license fees;

-   Tariffs;

-   Costs of expenses of government officers or employees in connection
    with the destruction, supervision of re-labeling or other action
    conducted;

-   Cost of transportation of product;

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-   Inventory costs associated with quarantining product if testing is
    required;

-   Destruction/appropriate handling of adulterated product, and

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-   Potential new state requirements such as a different type of license
    to import, certificates of authenticity, etc.

**[Summary/Conclusion]{.underline}**

In summary, patient safety must be the paramount concern in the
determination of whether or not a drug importation program should be
instituted. Distributors are best positioned to help maintain the
integrity and security of the national drug supply. However, importing
product from foreign sources introduces significant challenges that must
be addressed to ensure the broad safety of imported products while
maintaining the desired cost benefits for consumers. Limiting commercial
re/importation to products in a particular country or select list of
countries does not preclude the likelihood of counterfeit or adulterated
drugs entering the United States and assuring patient safety in any
re/importation scenario is likely to be very costly. Before the green
light is given to importation, the safety, liability logistics and cost
issues we have discussed above should be thoroughly evaluated by this
Task Force.

We extend our appreciation for the opportunity to share our views with
you and the Task Force. If you have any questions, please do not
hesitate to contact us.

Sincerely,

![](media/image2.jpeg){width="1.4472222222222222in"
height="0.39791666666666664in"}

John Gray

President and CEO

**Scope of Product Authentication Testing**

In order to confirm that a drug is the authentic U.S. product, it is
critical to establish three essential conditions.

(1) The drug was made with the U.S. approved active ingredient
    manufactured by the plant and process approved for the U.S. market.

(2) The drug was manufactured with the inactive ingredients in
    proportions and amounts approved for the U.S. formulation.

(3) The drug was manufactured by a plant and process approved for the
    U.S. market.

Testing should be designed to confirm primarily that conditions (1) and
(2) have been met and that the drug is the genuine U.S. approved
product. Proving either condition will require sophisticated testing as
outlined below.

+---------------------------------+------------------------------------+
| [Condition]{.underline}         | [Testing]{.underline}              |
+---------------------------------+------------------------------------+
| \(1\) Confirm that the drug was | -   LCMS to fingerprint the active |
| made with the U.S. approved     |     ingredient in the product and  |
| active ingredient made by the   |     to confirm the impurity        |
| U.S. approved plant and process |     profile matches the active     |
|                                 |     ingredient in the genuine U.S. |
|                                 |     product.                       |
|                                 |                                    |
|                                 | -   Capillary Electrophoresis (CE) |
|                                 |     used in combination with or as |
|                                 |     an alternative to LCMS to      |
|                                 |     fingerprint the active         |
|                                 |     ingredient and to confirm the  |
|                                 |     impurity profile matches the   |
|                                 |     active ingredient in the       |
|                                 |     genuine U.S. product.          |
+---------------------------------+------------------------------------+
| \(2\) Confirm the drug was made | -   HPLC, GC, FTIR, and NMR used   |
| with the U.S. approved          |     in various combinations to     |
| formulation of inactive         |     confirm that the inactive      |
| ingredients and U.S. approved   |     ingredients in the product     |
| process.                        |     match the U.S. approved        |
|                                 |     formulation for the product.   |
|                                 |                                    |
|                                 | -   Dissolution profile to         |
|                                 |     establish that the product     |
|                                 |     behaves similar to the U.S.    |
|                                 |     approved product.              |
|                                 |                                    |
|                                 | -   Microbial quality to confirm   |
|                                 |     liquid products are aseptic.   |
+---------------------------------+------------------------------------+

This type of testing would be both time consuming and expensive,
totaling possibly as much as \$15,000 per sample. The challenge of such
a scheme is that it would have to be applied to each lot of each product
received in every shipment by the importing entity. The introduction of
counterfeit drugs into the pharmaceutical supply chain has been a random
and unpredictable event in the past. The only way the American consumer
could be reasonably protected against a counterfeit drug under these
circumstances is to conduct testing on every shipment as outlined.

[^1]: March 21, 2002 House Appropriations Subcommittee on Agriculture,
    Rural Development, Food and Drug Administration and Related Agencies
    hearing.