FAQs on Prescription Drug Importation

The high cost of prescription drugs continues to be a top health care priority for the public. Policymakers from both parties at the federal and state level have been pursuing a range of options to lower drug prices for Americans, one of which would allow for the safe importation of prescription drugs from Canada. This idea is based on data showing that people in the U.S. often pay more for medications than people in other countries.

On January 5, 2024, Florida became the first state to gain authorization from the Food and Drug Administration (FDA) to import certain prescription drugs from Canada. Florida’s plan is based on an approach developed under the Trump Administration and executed under the Biden Administration, following an executive order issued by President Biden in July 2021 directing the FDA to work with states to import prescription drugs from Canada. The idea of importing prescription drugs has bipartisan support among the general public (Figure 1), although there are long-standing concerns with this approach in terms of ensuring drug safety, and the idea is opposed by the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Canadian government.

 

Many studies have shown that people in the United States often pay more for their prescription drugs than in other developed countries, including Canada. One analysis of a broad range of drugs found that Canadian prices are 44% of those in the United States, and according to a KFF analysis, per capita spending on prescribed medicines was 42% higher in the United States than Canada. Canada’s drug prices are generally lower than those in the United States because the Canadian government has various mechanisms to lower the cost of prescription drugs.

The Inflation Reduction Act included many provisions that affected Medicare drug prices and out-of-pocket costs, but did not address drug prices for others, which has contributed to ongoing interest in adopting strategies, such as importation, to lower drug costs for other Americans.

These FAQs address questions related to prescription drug importation, including the current status of importation proposals, details of Florida’s importation program recently authorized by the FDA, and concerns and challenges with this approach.

1. How does the U.S. currently regulate the importation of prescription drugs from other countries?

Currently, the only type of legally imported FDA-approved drugs are those that are: 1) manufactured in foreign FDA-inspected facilities, intended for use by U.S. consumers, and imported into the U.S. by the drug manufacturer, and 2) those that are U.S.-approved and manufactured in the U.S., sent abroad, then imported back into the U.S. under rare circumstances such as for emergency medical purposes or in the case of product recalls.

Drug importation as part of efforts to lower drug prices in the U.S. takes a different form. In 2000, Congress enacted the Medicine Equity and Drug Safety (MEDS) Act, which added Section 804 to the FD&C Act, to allow pharmacists and wholesalers to import prescription drugs directly from certain industrialized countries, including Canada. The MEDS Act allows such importation only if the HHS Secretary certifies that the program: “poses no additional risk to the public’s health and safety,” and “results in a significant reduction in the cost of covered products to the American consumer.” The Medicare Modernization Act of 2003 (MMA) amended Section 804 by specifying that wholesalers and pharmacists can only import prescription drugs from Canada, not other industrialized countries. The MMA also requires the HHS Secretary to issue regulations that would grant waivers to individuals to import drugs for personal use under certain circumstances.

In September 2020, the Trump Administration issued a final rule that created a new pathway, called the Section 804 Importation Program (SIP) pathway, for states and other entities to import drugs from Canada. To comply with the statutory requirements related to health and safety and cost savings, then-HHS Secretary Alex Azar certified that importation of prescription drugs poses no risk to public health and safety and would result in significant cost savings to the American consumers.

2. How did Florida gain approval to import drugs from Canada and what requirements must be met before the plan can be implemented?

In January 2024, the FDA under President Biden granted its approval to Florida’s state plan to import certain prescription drugs from Canada for a period of two years, stating that it met the requirements that importation would provide savings to consumers without sacrificing health and safety. When submitting its SIP application for approval, Florida was required to specify: the drugs it seeks to import; the foreign seller in Canada that would purchase the drug directly from its manufacturer; the importer in the U.S. that would buy the drug directly from the foreign seller in Canada; the re-labeler or re-packager of the drug itself that would ensure the drug meets all labeling requirements in the U.S.; the qualifying lab that would conduct testing of the drug for authenticity and degradation; and steps that would be taken by the SIP to ensure the supply chain is secure.

Even with FDA approval, Florida will need to meet additional requirements before the plan can be implemented. For example, before Florida is permitted to import any drugs from Canada, it will need to submit a pre-import request to the FDA for each drug it seeks to import, and it can only import that drug if the FDA approves that request. The state of Florida will also be required to conduct quality testing of the drugs and ensure that drug labels meet FDA standards.

3. Which drugs can be imported by Florida and other states under the SIP importation pathway?

Under the SIP pathway, only drugs that are currently marketed in the U.S. are eligible for importation. In addition, in order for a drug to eligible, it must also be approved by the Health Canada’s Health Products and Food Branch (HPFB) and have appropriate labeling to be marketed in Canada.

As under current law, certain types of drugs are excluded from the definition of a prescription drug eligible for importation including: controlled substances, biological products (including insulin), infused drugs, intravenously injected drugs, and inhaled drugs during surgery. Furthermore, drugs that are subject to risk evaluation and mitigation strategies (REMS), which are high-risk products with serious safety concerns, such as opioids, are not eligible for importation.

Florida seeks to initially import 14 drugs that treat HIV/AIDS, mental illness, prostate cancer, and urea cycle disorder. In Florida, imported drugs will only be available for people receiving services through certain state agencies and government programs, including people covered under Medicaid, people served through county health departments, and others residing in certain state facilities. The program does not extend to people with other types of insurance, such as employer insurance, or the uninsured.

4. What are the estimated savings associated with Florida’s drug importation plan?

According to Florida’s January 5, 2024 press release, the state’s plan will save the state up to $183 million in the first year of implementation, and based on Florida’s October 20, 2023 estimate of cost savings, these savings will accrue to the state’s Medicaid program. Whether any Floridians will pay lower out-of-pocket costs on imported drugs, or how much they are likely to save, is unclear.

Neither the September 2020 final rule that created the SIP pathway nor the FDA’s full final regulatory impact analysis provided an estimate of the expected savings. The final regulatory analysis noted that responses by other stakeholders, such as Canadian regulatory agencies and drug manufacturers, could impact the potential benefits of this program.

5. What are other states doing to implement drug importation proposals?

Many states are considering legislation that would facilitate drug importation from Canada. Several states, including Colorado, Vermont, Maine, New Mexico, New Hampshire, North Dakota, and Texas have enacted laws to establish importation programs and are actively pursuing the importation of prescription drugs from Canada.

• Colorado: In February 2024, Colorado submitted a revised version of its SIP to the FDA. In its proposal, Colorado notes that it has been having difficulty negotiating with drug manufacturers in Canada to allow exportation of their drugs to the U.S. and has been looking for more guidance from the FDA on how to address this issue. Colorado seeks to import 24 drugs to treat blood clots, cystic fibrosis, respiratory illnesses, cancer, type 2 diabetes, HIV/AIDS, psoriatic and rheumatoid arthritis. Of the drugs Colorado lists in its application, 4 overlap with those that are on Florida’s importation drug list.Colorado estimates the program will save $50.9 million in the first 3 years of implementation if all 24 eligible drugs are imported. Unlike the Florida analysis of savings, Colorado’s analysis assumes cost savings for individuals with commercial insurance, including employer-sponsored and individually purchased insurance. According to Colorado, Medicaid is not a targeted population because it “receives steep rebates for covered drugs, lower than what any importation program could provide,” and therefore, its estimates of savings do not include individuals covered by Medicaid, nor does it include Medicare or the uninsured. Colorado expects the nearly all of the savings (93.5%) will be passed onto consumers in the form of lower premiums though consumers will also see some savings in the form lower out-of-pocket expenses.

• New Mexico: New Mexico submitted its SIP application in December 2020 for FDA approval and is still awaiting a response from the FDA.
• New Hampshire: New Hampshire submitted a SIP proposal in August 2021, which was rejected by the FDA in November 2022 because the state had not identified a Foreign Seller nor provided other requested information. New Hampshire has not yet submitted a revised application.
• Vermont: Vermont submitted a concept paper in November 2019, but it has not submitted a new importation proposal following the SIP pathway being finalized in September 2020.
• Maine: Maine submitted an importation proposal in May 2020 for FDA approval, also prior to the SIP pathway being finalized, and has not submitted a new proposal.
• North Dakota: North Dakota passed a bill in April 2021 that requires a study on the potential impacts of prescription drug importation.
• Texas: In June 2023, Texas enacted legislation to establish an importation program and published a wholesale prescription drug importation report in December 2023 with research and recommendations to support implementation of the program.

6. How does Canada view these importation programs?

When the SIP importation pathway was first proposed, the Government of Canada stated that it would be unable to meet the needs of the U.S. market without impacting access to medications for Canadians. The Canadian government also expressed concern that this policy would create drug shortages in Canada, and issued an order in November 2020 prohibiting the distribution of drugs that could cause or exacerbate a shortage. Therefore, it is possible that the Canadian government may impose barriers for importation to the U.S. Canadian law limits the sale of drugs outside of Canada that could create or worsen supply issues for Canadians. In response to the recent FDA action, Health Canada released a statement saying, “the Government of Canada is taking all necessary action to safeguard the drug supply and ensure Canadians have access to the prescription drugs they need” and added, “bulk importation will not provide an effective solution to the problem of high drug prices in the U.S.”

7. Under what circumstances can individuals legally import drugs from other countries, like Canada?

In most circumstances, it is illegal for individuals to import FDA-approved drugs from other countries for personal use. However, based on changes enacted by the MMA, personal importation of prescription drugs that have not been approved by the FDA for use in the U.S. is permitted on a case-by-case basis. Under this statutory authority, FDA has put out guidance that lays out certain circumstances where importation of non-FDA approved drugs for personal use might be allowed. For example, personal importation is generally allowed if the treatment is for a serious condition, there is no effective treatment available in the U.S., and there is no commercialization of the drug for U.S. residents. Typically, only a three-month supply is allowed, and individuals must confirm in writing that the drug is for personal use and provide information about the physician responsible for their treatment.

There appears to be little enforcement by the FDA of the ban against importing FDA-approved drugs for personal use. Even if the personal importation of a drug is technically illegal, current law directs the FDA to exercise discretion in permitting personal importation of drugs when the product is “clearly for personal use, and does not appear to present an unreasonable risk to the user,” which is reinforced in FDA guidelines.