Pangaea Express: Presidential Order and US Drug Importation

A US Presidential Order was issued April 15 to lower drug costs. One section of the Executive Order is to help US States import drugs from “other jurisdictions”. Though Canada was not named specifically here, this section is regarding Section 804 Importation Program allowing the importation of certain prescription drugs from Canada:

“Sec. 10. Increasing Prescription Drug Importation to Lower Prices. Within 90 days of the date of this order, the Secretary, through the Commissioner of Food and Drugs, shall take steps to streamline and improve the Importation Program under section 804 of the Federal Food, Drug, and Cosmetic Act to make it easier for States to obtain approval without sacrificing safety or quality.”

It is not spelled out in this presidential Order how Section 804 will be changed to “improve” the importation of drugs. However, there are various manners in which the final rule could be altered, including (but not limited to):

• Expanding the definition of foreign seller to include distributors and pharmacies
  • In Section 804’s current form, a Foreign Seller must have an active Drug Establishment License to wholesale drugs by Health Canada and be registered with provincial regulatory authorities to distribute HPFB-approved drugs
• Allowing foreign sellers to sell non-Health Canada approved products to the U.S.
  • This could entail products coming from other countries
• Removing labeling and testing requirements for Health Canada products
  • The need to relabel and test all drugs coming from Canada is onerous and costly for the importer and limits the SIP requirement for “significant reduction in the cost” of covered products to the American consumer

While many states have passed importation legislation, only Florida’s SIP plan has been approved by the FDA allowing this state to import drugs from Canada. However, it has been almost a year and half since this approval and though Florida has identified Methapharm as the Foreign Seller, the state has yet to find Canadian distributors to sell to them.

Following Florida’s approval, Health Canada issued a Bulletin to remind stakeholders “the Food and Drug Regulations (Regulations) prohibit drug establishment licence (DEL) holders from distributing Canadian drugs for use outside Canada if this could cause or worsen a drug shortage”. Colorado has even written in its application, “The state has attempted negotiations with drug manufacturers in Canada; while we have faced resistance from those with whom we have conducted outreach, we are hopeful that a program approval will open up negotiations with these companies”.

It will be important for Health Canada to revisit this importation issue in light of the new Presidential Order and any existing gaps there may be in the current Regulations.

How exactly will tariffs, if/when, applied to pharmaceuticals affect the price of drugs potentially coming from Canada remains to be seen. On the one hand, tariffs may minimize the price differential and limit States’ desire for imported drugs. On the other hand, if the parameters of the SIP change (e.g., reduced labeling or testing requirements that have a cost to the importer), importation of drugs from Canada, even with a tariff, may look attractive.

For more information, please contact Kristen Knott at kknott@pangaea-consultants.com or Marla Weingarten at mweingarten@pangaea-consultants.com