Prescription Drug Importation: How S. 1232 (S. 525/H.R. 1298) Would Change Current Law
Released: 2009-06-16T00:00:00

Context

As public concern over rising spending on prescription drugs continues, Members of Congress have introduced legislation to amend the Federal Food, Drug, and Cosmetic Act (FFDCA) and permit the importation of FDA-approved drugs from lower-priced foreign sources. Lawmakers have also sought to use the appropriations process to counter administrative blocks to drug importation.

Following discussions during Senate consideration of the Family Smoking Prevention and Tobacco Control, which has subsequently been sent to the President for signing, the Senate leadership agreed to bring up the drug importation provisions that Senator Dorgan has championed in the last few congressional sessions. On June 10, 2009, the Senator introduced S. 1232 , the Pharmaceutical Market Access and Drug Safety Act of 2009. The bill contains the same text as S. 525 and H.R. 1298 , which had been introduced earlier in this Congress.

This report provides a brief look at the issues addressed in S. 1232 and compares its provisions to current law. The report concludes by listing other CRS reports on drug importation.

Background

Current law and the bills introduced over the past several years all seek to balance the availability of imported prescription drugs with the assurance that these imports would be safe and effective. Sponsors of drug importation legislation want to reduce or restrain the financial burden prescription drugs place on U.S. consumers—Senator Dorgan's website description of his legislative proposal uses the title "Reducing the Cost of Prescription Drugs."

Under current law, it is illegal for anyone to import a prescription drug other than its manufacturer. The law includes provisions for pharmacists and wholesalers to import, but provides that they not become effective until the Secretary of Health and Human Services (HHS) certifies that the importation program would be safe and offer cost savings to U.S. consumers. Secretaries in both the Clinton and Bush Administrations have declined to provide that certification, referring to safety and cost concerns. The requirement was first established by the Medicine Equity and Drug Safety (MEDS) Act of 2000, which added FFDCA Section 804, Importation of Prescription Drugs. Despite much debate to change that approach, Congress included importation provisions in the Medicare Prescription Drug, Improvement, and Modernization Act (MMA, P.L. 108-173 ) that retained the certification requirement. The Obama Administration, however, has indicated an openness to drug importation activities. The President's budget request for FY2010 contains "a proposal to allow Americans to buy safe and effective drugs from other countries," and includes money for FDA to "begin working with the various stakeholders to develop policy options related to drug importation."

Current law does not permit individuals to import prescription drugs for their own use. It directs the Secretary to exercise discretion to permit importation by an individual for personal use, if such use does not appear to present an unreasonable risk to the individual. If a Secretary were to certify and allow the importation program, Section 804 still would not directly allow individual importation. It would authorize the Secretary to waive, under specific conditions, the provisions that prohibit importation by individuals. FDA has chosen to leniently enforce the current prohibition, and has allowed individuals to bring into the United States a small amount (i.e., a 90-day supply) of non-FDA-approved drugs for personal use. This FDA enforcement policy requires that those individuals affirm in writing that the drugs are for their own use, and provide the name and address of their treating physician. When FDA's personal use import policy began, it was not envisioned as a way for consumers to bring lower-priced prescription drugs into the United States. According to its policy statement on importing drugs for personal use, FDA intended this "enforcement discretion" to allow individuals to get treatments not otherwise available in the United States.

S. 1232 , the Pharmaceutical Market Access and Drug Safety Act of 2009, would rewrite Section 804. It would eliminate the Secretary's certification requirement and allow pharmacists, wholesalers, and individuals to import prescription drugs under a program that would also include potential safeguards regarding drug safety and effectiveness. S. 1232 is similar to legislation introduced in the 109 th and 110 th Congresses.

As discussed below, S. 1232 differs from current law in its approach to ensuring that imported drugs are safe and effective. The bill also includes provisions to influence industry behavior so that drugs available for import by U.S. consumers would result in cost savings relative to current domestic prices. Finally, it includes administrative arrangements, including financing.

Safe and Effective Drugs

Relationship to FDA Approval

Current law explicitly requires that an imported drug be approved for U.S. sale by the FDA. S. 1232 would require that a manufacturer notify the HHS Secretary when a drug that could be imported differs from the version FDA has approved for sale in the United States (the "U.S. label drug"). The bill would require extensive information about whether the difference, if it were to be made to a U.S. label drug, would require a supplemental application to FDA, and whether FDA would require that the application be processed before the drug could be marketed.

Permitted Countries

Current law would allow the importation of prescription drugs from Canada, if the HHS Secretary were to certify that the program of importation would be safe and cost-effective to U.S. consumers. S. 1232 would permit prescription drug importation from Australia, Canada, Japan, New Zealand, Switzerland, and members of the European Union, except for the 10 countries admitted to membership in May 2004. The legislation includes criteria by which the Secretary could add other countries to this list.

Ensuring Drug Identity

To address the possibility that adulterated or counterfeit drugs could enter the U.S. market, S. 1232 calls for a variety of procedures regarding registration; monitoring, inspecting, and testing; packaging and labeling; and Internet pharmacies.

Registration

Current law requires that a Canadian establishment involved in the distribution of a prescription drug that is imported or offered for importation into the United States register with the Secretary its name and place of business and the name of its U.S. agent. S. 1232 would require all exporters from permitted countries and all commercial importers to register.

Monitoring, Inspecting, and Testing

While current law relies on laboratory testing of samples of every shipment of imported drugs to verify their content, potency, and labeling, S. 1232 would instead require documentation of a monitored, uninterrupted chain of custody from manufacturing facility to importer. The requirements related to registration would involve ongoing and onsite physical monitoring of the facilities of a drug's manufacturer, exporter, and importer. If the Secretary determined it were necessary, these would include the inspection of any facility (and its records) that handles the product along the chain of custody.

Packaging and Labeling

To ensure that a drug dispensed to individual consumers is the same product that was tested, monitored, or inspected at a specific manufacturing, shipping, or storage facility, S. 1232 would require that the packaging of all prescription drugs (not just those being imported) incorporate overt, optically variable, counterfeit-resistant technologies that provide visible identification of the product, and be similar to those used to secure U.S. currency. In addition, manufacturers must incorporate the technologies into elements of the packaging (including blister packs, shrink wrap, package labels, package seals, bottles, and boxes). The bill would require that the exporter and importer agree to mark each shipping container to identify its compliance with all registration conditions. The markings would have to include anti-counterfeiting or track-and-trace technology, taking into account their economic and technical feasibility, and would have to be designed to prevent unauthorized affixation.

Internet Pharmacies

S. 1232 would require that detailed information be accessible on an Internet pharmacy's website, covering pharmacist credentials, address and telephone contacts, and the name and professional licensure information of the person, if any, who provides for medical consultations through the site for purposes of providing prescriptions. The bill includes many restrictions, such as: no one could dispense or sell a drug if the purchaser or patient who communicated through the Internet did not have a valid U.S. prescription; and the dispenser of the prescription drug would be required to have a "qualifying medical relationship with the patient." The text of these Internet pharmacy provisions was written before the October 2008 passage of the Ryan Haight Online Pharmacy Consumer Protection Act of 2008 ( P.L. 110-425 ). Until that time, federal law did not address use of the Internet to sell or purchase imported prescription drugs. Because current law does now address issues such as valid prescriptions, Internet pharmacy site disclosure information, and physician-patient contact requirements, some of the provisions in S. 1232 may need technical revisions.

Cost Savings to U.S. Consumers

Anticipating manufacturers' resistance to practices that might limit the industry's revenue, S. 1232 contains specific provisions designed to influence industry behavior.

Discrimination and Unfair Acts

S. 1232 would make it "unlawful for a manufacturer, directly or indirectly (including being a party to a licensing or other agreement)," to discriminate or act unfairly against an exporter, importer, or person who distributes, sells, or uses an imported prescription drug by charging a higher price; denying, restricting, or delaying supplies; or refusing to do business.

Drug Differences

S. 1232 would make it unlawful for a manufacturer to make a drug for distribution in a permitted country so that it differs from the drug made for U.S. distribution "for the purpose of restricting importation of the drug.... " Enforcement would include the involvement of the Federal Trade Commission and the state attorneys general.

Patent Law

A recent federal court case has raised the prospect that a drug manufacturer could, under certain circumstances, sue a drug importer for patent infringement and block U.S. imports of drugs the company sells abroad. The court ruled that a U.S. patent is not exhausted by foreign sales, and, thus, a drug manufacturer could exercise its patent rights and block imports of its patented drug products into the United States. S. 1232 would insert a new subsection in the Patent and Trademark Act to reverse this judicial precedent. Under the provision, goods that were the subject of authorized foreign sales by a U.S. patent holder may be imported into the United States without regard to the U.S. patent.

Administration of Importation Provisions

S. 1232 would set up a fee mechanism to fund the administrative and regulatory tasks of the importation program. It also would set specific implementation dates.

Funding

Current law includes no explicit funding mechanism other than authorizing appropriations of such sums as necessary to implement the prescription drug importation provisions. S. 1232 provides for both exporter and commercial importer fees designed to cover all costs of the program. It links the aggregate total of all fees to the estimated costs of the importation program, setting a limit of 2.5% of the total price of drugs imported. The Secretary would collect from each exporter and importer both a flat registration fee and a proportional registration fee. Each individual importer or exporter would pay the latter fee. The amount of the fee would be based on the extent of the importer or exporter's own activity and calculated to estimate its proportion of the aggregate amount. S. 1232 would require that these fees be used only for the administration of the importation provisions that the bill would add.

Effective Dates

Current law does not specify when importation could begin, other than by linking it to required safety and cost certification by the Secretary. It directs the Secretary to exercise discretion to permit importation by an individual for personal use, if such use does not appear to present an unreasonable risk to the individual.

S. 1232 would require that the Secretary promulgate a final rule for implementing the importation provisions not later than one year after promulgating an interim rule. It also states that the importation provisions shall "permit the importation of qualifying drugs ... without regard to the status of the issuance of implementing regulations" from registered exporters (to individuals in the United States) 90 days after enactment, and from permitted countries by registered importers (commercial) one year after enactment.

Severability

S. 1232 states that if any provision of the Pharmaceutical Market Access and Drug Safety Act of 2009 were to be held unconstitutional, the remainder of the act would not be affected.

CRS Reports On Prescription Drug Importation

Two CRS reports cover in greater depth the current legal issues surrounding the importation of prescription drugs: CRS Report RS21711, Legal Issues Related to Prescription Drug Sales on the Internet , and CRS Report RL32191, Prescription Drug Importation: A Legal Overview , both by [author name scrubbed].

Several archived CRS products—such as CRS Report RL32511, Importing Prescription Drugs: Objectives, Options, and Outlook , by [author name scrubbed]—provide additional policy analysis and historical detail.