How Will Drug Importation Work? The Process for State and Manufacturer Importation Plans

Primarily driven by a vision of cost savings, drug importation has long been the subject of debate in the patient, medical, and payer communities, as well as in legislative bodies. Shellie L. Keast, PharmD, PhD, Cathy Traugott, RPh, JD, both principals at Mercer Government, gave a status update on pathways for pharmaceutical importation and the impact this may have on pharmacists and pharmacy operations.

At the federal level, drug importation from Canada was first permitted with the passage of the Medicare Modernization Act. However, the presenters said no coordinated importation programs materialized, and the federal government did not issue follow-on regulations regarding drug importation. Years later, new efforts were undertaken by several states (Colorado, Florida, Maine, New Hampshire, New Mexico, and Vermont) to move forward with their own programs. These initiatives forcing the FDA to move forward, creating two separate pathways for drug importation. The first pathway is known as the state importation plan (SIP), which allowed states, territories, the District of Columbia, Indian tribes, and pharmacists and wholesale distributors (under certain circumstances) to coordinate drug importation efforts. The second pathway is for manufacturers, using the FDA’s formal regulatory guidance.

The SIP Pathway

Under the SIP pathway, states are given two-year authority (which can be renewed) to oversee its program. This authority extends to which drugs it will import, development of a supply chain, and demonstration of cost savings and safety compliance. The presenters laid out a four-step process:

  1. An FDA-approved manufacturer in Canada produces the medicine.
  2. A Canadian-registered wholesale entity (“foreign seller”) purchases and delivers the drug shipment to a U.S.-registered wholesaler or pharmacy.
  3. The U.S.-registered wholesaler or pharmacy is responsible for testing the product and relabeling it for use in America.
  4. After bringing product into compliance, the U.S. wholesaler then delivers the product to retail, hospital, and mail-order pharmacies.

The FDA does impose some limits on drug importation. Controlled substances, biologics, infused/injected drugs, and those subject to Risk Evaluation Mitigation Strategies are among the categories that cannot be imported. The presenters noted that drugs to be imported from Canada must bear a different national drug code than the U.S. counterpart and must be identified as an imported drug (in addition to bearing information about the importer).

The implications of drug importation may be limited for state Medicaid programs, according to the presenters, principally because the imported drugs must be substantially less costly than the U.S. alternative to make financial sense. The imported drugs may not be rebated, and Medicaid’s rebates on its U.S.-purchased medications are substantial. The presenters doubted that many of the imported medications would cost less than what Medicaid currently pays. Another potential issue is Canada’s participation. Its supply is not unlimited, and the country will no doubt be wary of creating drug shortages for its own population, the presenters cautioned.

The Manufacturer Pathway

In the case of the manufacturer pathway for importation, a U.S. manufacturer can import its own FDA-approved drugs, assuming there is no difference between the foreign and the U.S. versions. Under this pathway, biologics may be imported into the US. There is also a requirement for significant savings from the imported version.

The presenters noted that this process would require the drug maker to file a supplemental new drug application or biologic license application with the FDA. If the imported drug approved by the FDA, they become subject to all Medicaid requirements, including rebates, average manufacturer price calculations, and best price provisions.

The presenters emphasized that the primary reason for drug importation is to reduce drug prices.

“Most current proposals include a potential mark-up of 45% on the ingredient price from Canada,” they said. “This includes 20% for profit, 15% for the cost of repackaging/relabeling, 5% for required testing, and 5% for any additional required management.”

Even with this mark-up, they maintained that savings could be anywhere from 79% to as high as 91% for most branded and generic pharmaceuticals.

Keast SL, Traugott C. Drug Importation—What You Need to Know about State and Manufacturer Importation Plans. Presentation B5. Presented at AMCP 2021; April 12-16, 2021.