Until September 24, 2020, every head of the Department of Health and Human Services, supported by every head of the U.S. Food and Drug Administration, since 2003 had refused to certify the safety of bulk drug importation from Canada.[1] This was not a partisan issue. Both Republican and Democratic administration public health leaders opposed it.

Many—including HHS Secretary Alex Azar,[2] former FDA Commissioner Scott Gottlieb,[3] and Gottlieb’s four immediate predecessors[4]— explicitly have criticized previous proposals as unsafe, unimplementable, and unlikely to save money.

Yet the Trump Administration implemented importation rules over the objections of informed safety advocates, economists, healthcare professionals, pharmaceutical wholesalers, patient advocates, and anti-counterfeiting experts. That the Canadian federal government and major Canadian wholesalers also objected and were ignored is baffling.

The Partnership for Safe Medicines has worked on drug counterfeiting issues for over 15 years. It is our mission to protect public safety. In keeping with that mission, we continue to educate stakeholders about why drug importation is bad policy for Americans. The following primer outlines why.

1. Bulk importation is not the same as walking into a pharmacy in Toronto and filling a prescription.

We’ve all heard of people going to Canada to get medication. It’s an easy mental jump to imagine that shipping pallets of medication from Canada to the U.S. is the same thing, but it isn’t. For one, bulk importation requires buying from Canadian middlemen, not physical pharmacies on Canadian soil.

The Canadian government is not going to ensure the safety of drugs exported from Canada, and Canadian law does not impose track-and-trace requirements like the U.S. on the sale of bulk quantities of medication across the border. Criminals take advantage of these gaps in regulation to introduce counterfeit and substandard drugs into the U.S.  Because these sorts of crimes do not occur on Canadian soil but the perpetrators reside there, they have been challenging to prosecute.

Keeping these criminals in check with prosecution is important, because for some patients, subtherapeutic and counterfeit medicines can be catastrophic; they do not have a do-over if their treatment doesn’t work.

HIV medicines, for example, appear on prospective drug lists for every state pursuing Canadian drug importation. However, if a Canadian vendor sold substandard medicines to American HIV patients, it would be an unrecoverable disaster.

Subtherapeutic HIV medicine can lead to the HIV virus mutating and becoming immune to that therapy. A patient who developed viral resistance to a subtherapeutic drug would not be able to use medicines in that therapeutic class for the rest of their life, and because treatments for HIV patients are finite, they could eventually be left with no treatment.

We’ve already seen examples of what happens when cancer patients get subtherapeutic or counterfeit cancer medications, and it isn’t good. A fake cancer medication may allow cancer to progress to a point where a curable cancer may become incurable or rob patients of remaining time with their families that can never be recovered.[5]

2. Importing medicine from Canada’s supply chain is not the same as having our medicine made in factories in other countries.

When U.S.-regulated medicine is made overseas, it is brought into the U.S. by manufacturers themselves, who are legally responsible for that medicine being intact.

But Canadian drug importation is not about doing business with Canadian manufacturers. It’s about buying from Canadian wholesalers who have already expressed reluctance to export Canadian drugs to U.S. states. Those Canadian wholesale drug vendors are honest, but shady third-party distributors still have incentives to profit from state importation programs. They will cut corners on the medicine[6] they sell us. Past history has shown[7] they will and their risk of prison time is minimal.[8]

Effective prosecution of Canadian wholesalers who sell U.S. states substandard or counterfeit medicines relies on large budgets for investigations and on Canada’s willingness to extradite bad actors. No state plan to date has allocated money for investigations and enforcement. Shady wholesalers who are effective at dodging regulators will thrive in this environment as they attempt to profit from U.S. state importation programs.

In addition, we cannot rely on Health Canada, the counterpart to the FDA in Canada to ensure the medicines we import are safe. The Canadian government has repeatedly said they do not want the U.S. to export their medicine [9] and that they will not regulate medicines Canadian sellers ship to the U.S.[10]

3. Importation creates a significant interior enforcement issue and an unfunded mandate for law enforcement

Law enforcement experts, leaders and associations, including former FBI Director Louis Freeh, the National Sheriffs’ Association, the Western States Sheriffs’ Association, the International Association of Chiefs of Police and other regional and state law enforcement associations, have repeatedly voiced their concerns that importation will increase the prevalence of counterfeit, substandard and adulterated drugs.[11]

Enforcing against illegal importation is an unfunded mandate that will overwhelm existing law enforcement. Despite a clear threat to public safety, no federal or state drug importation proposal includes increases in resources for law enforcement at the federal, state or local level. Importation transfers the illegal trade risks and costs to state and local law enforcement agencies, requiring them to do additional work without additional funding.

3. Drug importation cannot be integrated into track and trace

Today, every medicine that comes off the factory line for the U.S. gets a unique number that tracks every entity that touches it all the way to the pharmacy. We have this law because scammers repeatedly victimized U.S. patients by selling counterfeits into the supply chain in the early 2000’s.[12]

Systems like this rely on a combination of technology and regulation to be effective. If we start importing medicine in bulk from Canada, we will disrupt both track and trace technology and regulation.

Canada does not have track and trace system technology[13] and the Canadian authorities have not agreed to regulate their vendors for exporting to the U.S. on behalf of American states.

The Trump Administration’s drug importation policy breaks the track and trace system established to keep medicines safe for Americans. By carving out a giant exception for Canadian drug importation, this policy weakens the entire system.

4. Safety-testing imported drugs is prohibitively expensive and not foolproof

The Medicare Modernization Act of 2003 (MMA) requires documentation showing that “each batch of the [imported] prescription drug in a shipment was statistically sampled for authenticity and degradation.”[14] In a recent study, Dr. Kristina Acri, a professor at Colorado College’s Department of Economics & Business, examined testing costs for drugs that could be imported from Canada. Dr. Acri concluded that the cost to meet the MMA’s testing requirements would far exceed any cost benefits from importing foreign medicines.

Dr. Acri also examined the potential costs of treatment failure because of substandard medicine, and the cost of treating an adverse medical event. She determined that “pharmaceutical importation plans are politically attractive, but the numbers demonstrate that they fail to deliver cost savings.”[15]

Even if testing were affordable, “no testing scheme is foolproof.”[16]  The bulk drug importation scheme introduces opportunities for adulteration, and testing of randomly selected batches or shipments cannot ensure that each and every drug that reaches U.S. patients will be safe.

5. State Medicaid programs will lose money on imported drugs

Government insurance programs receive substantial rebates from pharmaceutical companies that lower the overall cost of medicines dispensed to patients. Imported drugs, however, are not eligible for those rebates.[17]

State Medicaid administrators know this, and several have reported that after rebates, Canadian medicines would cost more than medicines from the U.S.’s domestic supply. According to Vermont’s Agency of Human Services, “drug importation from Canada would not provide net savings to the state or individuals because Medicaid’s existing prescription drug rebate program already yields substantial savings.”[18]

Colorado echoed Vermont’s conclusion in its draft application,[19] and in March 2020, MaineCare’s Director of Pharmacy Operations, Jill Kingsbury, stated that drug importation would not save the state’s Medicaid program any money. PSM filed a Freedom of Access Act request to see MaineCare’s analysis, and the highly-redacted spreadsheet showed that 50 of 115 importation prospects they had identified would cost MaineCare almost a million dollars MORE than that Maine pays today for these same medicines.

Similarly, MaineCare’s pricing analysis showed that after rebates, Maine’s Medicaid program would lose hundreds of thousands of dollars importing Canadian versions of gabapentin and bupropion.

6. U.S. generics are often less expensive than Canada’s medicine

States are considering importation before examining savings from the bulk purchase of FDA-regulated U.S. generics.

Colorado’s March 2020 draft application included many medicines that had lower priced U.S. generics available. PSM found that Colorado could save more than $43 million by using available U.S. generics without wasting precious taxpayer funds importing drugs from Canada. You can read our analysis of Colorado’s draft proposal here.[20]

7. Importation programs raise liability concerns for pharmacies

In 2003, the family of a patient who received counterfeit medicine from his local pharmacy filed Fagan v. AmerisourceBergen, suing every corporation in the supply chain that delivered the fake prescription. The pharmacy asked to be removed from the case because they felt they were not responsible for finding counterfeits that others behind them in the supply chain missed. The court disagreed and ordered them to prepare for trial, which would have meant crushing legal costs.[21] The pharmacy settled instead.

States have not addressed liability for counterfeits for pharmacists or any member of the supply chain in their prospective importation programs, and insurance companies have not taken a position about whether they would cover settlement costs. In addition to harming patients, a failure on the part of the state’s program could financially destroy pharmacies.

8. Canada has not agreed to export medicines to U.S. states

Over 25 different Canadian organizations and Canada’s three major wholesalers, AmerisourceBergen,[22] Cardinal Health,[23] and McKesson,[24] opposed the proposed rulemaking for prescription drug importation when the Department of Health and Human Services solicited comments in early 2020.

Most importantly, the Canadian government objected,[25] citing existing shortages[26] and noting that “the Canadian drug market and manufacturing capacity are too small to meet the demands of both Canadian and American consumers for prescription drugs.”

This claim is borne out by academic studies,[27] including a September 2019 paper in which PSM President Dr. Marv Shepherd found that Canada’s prescription drug supply would last less than six months if 20% of U.S. prescriptions were sourced from Canada.[28]

It is difficult to understand how states will import Canadian drugs when Canadians have no interest in exporting them and vendors who participate in state importation programs will have to hide their activities from Canadian regulators.

Conclusion

Supporters of Canadian drug importation have repeatedly admitted that this initiative is mostly about showing how serious they are about reducing the price of medicine. We agree that there is work that needs to be done in this area, but Canadian drug importation simply doesn’t work. Further, implementation will harm American patients.


Footnotes

[1] “Who Opposes Drug Importation?” The Partnership for Safe Medicines, July 2018, https://bit.ly/3lwe7Ma.

[2] Alex Azar, “Remarks on Drug Pricing Blueprint,” U.S. Department of Health and Human Services, May 14, 2018, http://bit.ly/2LhM0Pr.

[3] Scott Gottlieb, “What Trump Should Have Said On Drug Prices,” Forbes, March 4, 2016, https://bit.ly/3eXTwO9.

[4] “Former FDA Commissioners Warn About Drug Importation,” The Partnership for Safe Medicines, March 22, 2017, https://bit.ly/3lvSVpz.

[5] Mary Pat Flaherty and Gilbert M. Gaul, “Lax System Allows Criminals to Invade the Supply Chain,” The Washington Post, October 22, 2003, http://wapo.st/2IPvAAN.

[6] Christopher Weaver, “Former Internet Pharmacist Sentenced in Fake Drug Case,” The Wall Street Journal, January 9, 2013, http://on.wsj.com/2OoeUAc.

[7] “Medical Company Executive Sentenced for Smuggling $18 Million in Misbranded Pharmaceuticals into United States,” U.S. Department of Justice Press Release, U.S. Food and Drug Administration, January 18, 2019, http://bit.ly/3pDCKZL.

[8] Matt Volz, “Canadian Pharmacy to be Fined Millions for Illegal Imports in US,” CBC, April 13, 2018, http://bit.ly/2qUllC8.

[9] Government of Canada Comments on the Proposed Rule “Importation Of Prescription Drugs,” https://bit.ly/2UD6GXy.

[10] Health and Human Services Task Force Report citing Letter from Diane C. Gorman, Assistant Deputy Minister, Health Canada, to Richard H. Carmona, U.S. Surgeon General, June 1, 2004, https://bit.ly/38VEszE.

[11] See their statements on PSM’s Statements Opposing Importation page.

[12] Sick Crime: Counterfeit Drugs in the United States, Hearing Before the Subcommittee on Criminal Justice, Drug Policy, and Human Resources of the Committee on Government Reform, House of Representatives, November 1, 2005, https://bit.ly/2wRaaxs.

[13] Testimony at a public hearing of the Connecticut General Assembly’s Insurance and Real Estate Committee, March 3, 2020, https://bit.ly/33X3Ss2.

[14] Section 804 of the Medicare Modernization Act, http://bit.ly/2GWIGrM.

[15] Dr. Kristina M.L. Acri née Lybecker, “State Pharmaceutical Importation Programmes: an Analysis of the Cost‐Effectiveness,” Journal of Pharmaceutical Health Services Research, March 2020, https://bit.ly/38MPt6x.

[16] Health and Human Services Task Force Report at 30, June 1, 2004, https://bit.ly/38VEszE.

[17] Adam Fein, Tweet reviewing guidance from the Center for Medicaid and CHIP Services, September 25, 2020, https://bit.ly/38DYAWY.

[18] “Wholesale Importation Program for Prescription Drugs Legislative Report,” December 31, 2018, https://bit.ly/3lwD5uT.

[19] “Section 804 Importation Program: Colorado’s Drug Importation Program–Draft Application,” Colorado Department of Healthcare Policy and Financing, March 9, 2020, https://bit.ly/3ppJGtj.

[20] “Analysis of Colorado Draft Importation Plan,” The Partnership for Safe Medicines, https://bit.ly/2REopfT.

[21] Opinion and Order, U.S. District Court of the Eastern District of New York, CV-03-3787 SJF WDW, http://bit.ly/2GMPRT8.

[22] Comment from AmerisourceBergen to the Center for Drug Evaluation and Research, March 6, 2020, https://bit.ly/2JWF9yb.

[23] Comment from Cardinal Health to the Dockets Management Staff of the Food and Drug Administration, March 6, 2020, https://bit.ly/3eVYg79.

[24] Comment from McKesson Corporation to Stephen M. Hahn, Commissioner of Food and Drugs, March 9, 2020, https://bit.ly/3pv5rb0.

[25] Government of Canada Comments on the Proposed Rule “Importation Of Prescription Drugs,” https://bit.ly/2UD6GXy.

[26] “Summary Report,” Drug Shortages Canada, http://bit.ly/2EeXnW3.

[27] Brett J. Skinner, “Potential Impact of U.S. Demand on the Canadian Supply of 46 Prescription Drugs” Canadian Health Policy, September 2019, https://bit.ly/3lqk2SR.

[28] Marv Shepherd, “New Pathways for U.S. Importation Threaten Canadian Prescription Drug Supply,” Canadian Health Policy, September 2019, http://bit.ly/37T3TPa.