Pangaea Express: HHS Outlines Action Plan for Cross-Border Sales

August 1, 2019

“Canada does not support actions that could adversely affect the supply of prescription drugs in Canada and potentially raise costs of prescription drugs for Canadians.” These are the talking points prepared by Canada’s foreign ministry to be used by Canadian officials when speaking with their American counterparts as obtained by Reuters through the freedom of information law.1 However, these talking points may no longer cut it, given the U.S. Department of Health and Human Services (HHS) announcement today proposing an Action Plan at the federal level for the safe importation of certain drugs from foreign markets (a.k.a. Canada).

The HHS, in conjunction with the FDA, have outlined an Action Plan that describes two pathways to provide safe, lower cost drugs to U.S. consumers:

Pathway 1: States, wholesalers or pharmacists could submit plans to HHS for review demonstrating how they propose to import Health Canada-approved drugs in a manner that would ensure compliance to specified conditions regarding drug quality, record keeping, testing and protection against counterfeiting. Applications from States would need to propose an arrangement with a wholesaler or pharmacist that meets the specific conditions. This pathway excludes: controlled substances, biological products, infused or intravenous drugs, drugs inhaled during surgery, and certain parenteral drugs.

Pathway 2: Manufacturers of FDA-approved drug products would be able to import versions of these FDA-approved drugs that they sell in foreign countries into the U.S. The drug would be sold under a different National Drug Code number than the U.S. version, which could allow the manufacturer to introduce the product at a lower price - something they could not do if locked into contracts with other parties in the supply chain.

Alex Azar, the HHS Secretary has completely changed his tune from last year and has now shifted cross-border sales into high gear. “This is the next important step in the Administration’s work to end foreign freeloading and put American patients first.” It wouldn’t be surprising to see Florida as the first State to address all the necessary criteria for HHS approval. The Governor of Florida has already sanctioned cross-border sales and as Florida is often described as a political swing state come election time, Trump may look to ensure Floridians are able to access cheaper drugs from Canada before they cast their vote.

So what happens next for Canadians? The Ministry said officials will be ready to "take action to ensure Canadians have uninterrupted access to the prescription drugs they need." 1 What this will mean was not explained, however it will certainly give rise to an increased level of focus and enforcement within trade and the supply chain as it pertains to the final destination of product, in order to uphold the safety and supply of Pharmaceuticals to Canadians.

If you are interested in learning more about the ways in which U.S. import could play out in Canada, please Ben Parry or Marla Weingarten.