Status of Plans to Import Prescription Drugs Purchased at Canadian Prices

In the 2003 Medicare drug coverage law, Congress authorized the importation of prescription medications sold originally in Canada—but only if the Food and Drug Administration (FDA) certified that the practice would not create undue health risks for US patients and would reduce their costs. That proved to be a substantial hurdle. However, after a push in the final days of the Trump administration, it now appears possible (pending the outcome of multiple lawsuits) that one or more state-administered test runs will take place relatively soon. The success or failure of these initiatives could have broader political implications.

There has been long-standing interest in the US with taking advantage of the generally lower prices paid by Canadians for their prescription medications (the Canadian government requires all patented products to comply with a price review process). Individual American consumers have been traveling north to cut their drug bills for many years, although it has been mostly illegal (though generally lightly enforced) to transport their purchases back across the border.

The provision in the 2003 law authorizing importation (which had champions from both parties, including Senator John McCain) was an attempt to direct the persistent US demand for drugs priced under Canadian rules through a legal channel.

The policy took a decisive turn in the final days of the 2020 presidential campaign, as President Trump sought to fulfill some of the pledges he had made while running in 2016. After numerous stops and starts over the preceding years, then-Secretary of Health and Human Services Alex Azar sent a letter to Congress in September 2020 certifying that importation of drugs from Canada could be implemented safety. The FDA then immediately issued a final regulation detailing the requirements that states and other entities would need to follow if they wished to take advantage of the importation opportunity.

The FDA rule includes the following parameters:

• Institutional (not Personal) Importation. The 2003 law anticipated the possibility of importation pathways for both institutions and individual consumers. However, the FDA program authorized in 2020 is directed only toward the institutional option (the secretary of HHS can approve hardship requests for individuals seeking to purchase drugs through Canada but only if the product cannot be obtained in the US).
• State or Tribe-Sponsored Section 804 Importation Plans (SIPs). The FDA regulation places the burden for designing and running the importation policy on state governments and Native American tribes (in the future, it is possible that pharmacists and wholesalers will be allowed to sponsor programs too). States or tribes wishing to sponsor a program must submit a SIP to the FDA for approval. The rule limits the duration of the program to two years, but FDA is permitted to grant extensions.
• Covered Drugs. It is up to the SIP sponsors to specify which products will be imported under the program.
• Custody of the Products. For each drug specified in a SIP, there is to be one manufacturer, one Canadian-based purchaser and exporter (known as the “foreign seller”), and one US-based importer. SIPs cannot be approved without specifying each of the relevant entities.

Colorado, Florida, New Hampshire, and New Mexico have submitted applications to the FDA for approval, and Colorado and Florida have also each initiated lawsuits claiming the Biden administration is slow-walking their requests. (Separately, the drug industry’s lawsuit to halt the implementation of the FDA’s importation program was dealt a setback earlier this year in a US district court).

The Colorado plan is notable for its details. Its submitted application cites 112 drugs targeted for inclusion in the program. The state also has lined up a Canadian seller and a US-based importer of the products. An FDA decision on its plan could be issued this summer.

While these states have made progress in assembling credible plans, their programs are dependent on the cooperation of two parties with diverging interests: the Canadian government, and the manufacturers selling products into the Canadian market.

Canadian authorities already have stated that they will not allow the US policy to affect the drug supply market for their patients. If redirecting some of the supply to the US were to create drug shortages, the government would step in and prevent the export of products needed for domestic consumption.

Further, drug manufacturers are mostly hostile to the importation concept. They could impair its effectiveness by closely monitoring their sales into Canada to prevent opportunities for redirecting some of the supply to the US market.

Still, it may be possible for some products to reach the US despite obstruction from the manufacturers. If that is the case, and the pricing is attractive, pressure will build to find ways to expand the program.