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CRS Report for Congress
Received through the CRS Web
Order Code RL32191
Prescription Drug Importation
and Internet Sales:
A Legal Overview
Updated October 4, 2004
Jody Feder
Legislative Attorney
American Law Division
Prescription Drug Importation and Internet Sales:
A Legal Overview
Summary
As prescription drug prices have escalated in recent years, so too has consumer
interest in purchasing less costly medications abroad. Meanwhile, in July, 2003, the
House of Representatives passed H.R. 2427, a bill that would allow wholesalers,
pharmacists, and consumers to import certain prescription drugs from 25 different
countries, including Canada, where drug prices are often lower than in the United
States. Although H.R. 2427 passed the House, the provisions allowing drug
importation faced opposition in the Senate and were not included in the conference
agreement on Medicare prescription drug benefits. Instead, the final Medicare bill,
H.R. 1, modified a provision of existing law that authorizes the Food and Drug
Administration (FDA) to allow the importation of prescription drugs if the Secretary
of Health and Human Services certifies that implementing such a program is safe and
reduces costs, a determination that no Secretary has made in the years since a similar
certification requirement was established in 2000.
Despite the compromise reached in the final Medicare bill, the debate about
drug importation continues. On the one hand, some policymakers remain opposed to
allowing prescription drugs to be imported from foreign countries, arguing that the
FDA cannot guarantee the safety of such drugs. On the other hand, importation
proponents, who claim that importation would result in significantly lower prices for
U.S. consumers, say that safety concerns are overblown and would recede if
additional precautions were implemented.
Just as the FDA has expressed concerns about the safety of imported drugs,
federal regulators have become increasingly worried about the risks posed by some
online pharmacies and Internet drug sales. Indeed, the regulation of prescription drug
importation and the oversight of online pharmacies often overlap because many
consumers use online pharmacies to purchase imported drugs. Regardless of whether
or not drugs purchased online are imported, the FDA is worried about the safety of
such medications because of its concern that a small number of online doctors and
pharmacies are exploiting regulatory gaps to prescribe and dispense illegal, addictive,
or unsafe drugs.
In response to concerns about prescription drug imports and Internet sales,
several congressional lawmakers have introduced the following bills: H.R. 616, H.R.
780, H.R. 847, H.R. 1733, H.R. 2497, H.R. 2652, H.R. 2717, H.R. 2769, H.R. 3710,
H.R. 3870, H.R. 3880, H.R. 4512, H.R. 4612, H.R. 4790, S. 1781, S. 1974, S. 1992,
S. 2137, S. 2307, S. 2328, S. 2464, S. 2487, and S. 2493. Currently, the following
federal and state agencies are involved in regulating aspects of prescription drug
importation and Internet sales: the Food and Drug Administration, the U.S. Customs
and Border Protection (CBP), the Drug Enforcement Agency (DEA), state boards of
pharmacy, and state medical boards. Although this report is intended to focus on
legal aspects of prescription drug importation and Internet sales, both legal and policy
issues are addressed because they are closely linked. For a more complete analysis
of policy issues, see CRS Report RL32511, Importing Prescription Drugs:
Objectives, Options, and Outlook, by Susan Thaul and Donna U. Vogt.
Contents
I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. Prescription Drug Importation: Legal Regulation . . . . . . . . . . . . . . . . . . . . . . . 4
Importation of U.S.-Manufactured Prescription Drugs . . . . . . . . . . . . . . . . . 5
Importation of Foreign Versions of Prescription Drugs . . . . . . . . . . . . . . . . 6
Penalties Under the FFDCA and Other Federal Laws . . . . . . . . . . . . . . . . . . 7
The FDA’s Personal Importation Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
State and Local Importation of Prescription Drugs:
Violation of Federal Law? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Businesses That Facilitate Importation of Prescription Drugs . . . . . . . . . . . 14
Antitrust Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Federal Antitrust Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
State Antitrust Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
International Trade Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
General Agreement on Tariffs and Trade . . . . . . . . . . . . . . . . . . . . . . 24
WTO Agreement on Technical Barriers to Trade . . . . . . . . . . . . . . . . 26
General Agreement on Trade in Services . . . . . . . . . . . . . . . . . . . . . . 29
Patent Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
III. Internet Pharmacies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Federal Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
State Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
IV. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
1 Pub. L. No. 108-173 [hereinafter Medicare Act]. The original certification provision was
contained in the Medicine Equity and Drug Safety (MEDS) Act. Pub. L. No. 106-387. The
new Medicare Act also requires HHS to conduct a study and issue a report on importing
prescription drugs.
Prescription Drug Importation and
Internet Sales: A Legal Overview
This report explores the legal issues raised by prescription drug importation and
Internet sales. Although this report is intended to focus on legal analysis, both legal
and policy issues are addressed because they are closely linked. For a more complete
analysis of policy issues, see CRS Report RL32511, Importing Prescription Drugs:
Objectives, Options, and Outlook, by Susan Thaul and Donna U. Vogt.
I. Introduction
In general, there are two types of prescription drug imports: commercial imports
by wholesalers and pharmacists, and personal imports by consumers. As prescription
drug prices have escalated in recent years, so too has consumer interest in purchasing
less costly medications abroad by means of either commercial or personal imports.
Meanwhile, congressional legislators have been exploring a variety of legislative
solutions to the problems posed by rising drug costs. In July, 2003, the House of
Representatives passed H.R. 2427, a bill that would allow wholesalers, pharmacists,
and consumers to import prescription drugs that are approved by the Food and Drug
Administration (FDA) and that are manufactured in FDA-approved plants. Under the
bill, drugs could be imported from 25 different countries, including Canada, where
drug prices are often lower than in the United States. In addition, the bill would have
instituted anti-counterfeit technologies. Despite opposition from the leadership, H.R.
2427 easily passed the House, but the provisions allowing drug importation faced
opposition in the Senate and were not included in the conference agreement on
Medicare prescription drug benefits. Instead, the final Medicare bill, H.R. 1, modified
a provision of existing law that authorizes the FDA to allow the importation of
prescription drugs if the Secretary of Health and Human Services (HHS) certifies that
implementing such a program is safe and reduces costs, a determination that no
Secretary has made in the years since a similar certification requirement was
established in 2000.1
Despite the fact that the final Medicare bill did not change the law with respect
to the prohibition against importing prescription drugs from Canada and other foreign
countries, the debate about drug importation continues. On the one hand, some
policymakers remain opposed to allowing prescription drugs to be imported from
foreign countries. Worried about the risk to consumers, these critics argue that the
CRS-2
2 The Canadian government has also stated that it cannot guarantee the safety of drugs
exported to the U.S. from Canada. Marc Kaufman, Canadian Drug Position Misinterpreted,
WASH. POST, May 26, 2003, at A11.
3 Marc Kaufman, FDA’s Authority Tested Over Drug Imports, WASH. POST, Nov. 9, 2003,
at A11.
4 Id.
5 For a discussion of the debate about costs, see CRS Report RL32511, Importing
Prescription Drugs: Objectives, Options, and Outlook, by Susan Thaul and Donna U. Vogt.
6 Gardiner Harris, The Nation: Prescriptions Filled; If Americans Want to Pay Less for
Drugs, They Will, N.Y. TIMES, Nov. 16, 2003, § 4, at 4.
7 Congressional Budget Office, Would Prescription Drug Importation Reduce U.S. Drug
Spending?, Economic and Budget Issue Brief, April 29, 2004.
FDA cannot guarantee the safety of such drugs,2 which they contend are more
susceptible to being mishandled, mislabeled, unapproved, or counterfeited than drugs
sold domestically. In addition, drug manufacturers and other opponents argue that
allowing the importation of prescription drugs would stifle investment in the research
and development of new drugs.3 On the other hand, importation proponents, who
claim that importation would result in an increased supply of prescription drugs that
could result in significantly lower prices for U.S. consumers, say that safety concerns
are overblown and would recede if additional precautions were implemented.
Arguing that drug manufacturers are concerned only about their profits, proponents
of importation contend that U.S. consumers should not subsidize the cost of research
and development and that consumers in other countries should share the burden.4
Linked to the issue of prescription drug importation is a debate about drug costs.
While some comparisons of U.S. and Canadian drug prices conclude that U.S. prices
are higher than their Canadian counterparts, other studies do not find such
discrepancies.5 In part, studies may vary depending on which drugs are selected for
comparison and whether or not U.S. generic drugs, which tend to be cheaper than
Canadian brand-name drugs, are considered.
In addition, there is an unresolved debate about whether allowing drug imports
would affect drug prices, with supporters arguing that drug prices would drop due to
competition if imports were allowed and opponents arguing that increased demand
for imported drugs and moves by manufacturers to limit supplies of cheaper drugs
would cause prices to rise both in the U.S. and abroad and would increase the risk of
counterfeit drugs being introduced into the system.6 Indeed, according to a recent
study by the Congressional Budget Office (CBO), “the reduction in drug spending
from importation would be small,” in part because of new costs associated with
ensuring the safety of imported drugs and because of the likelihood that
manufacturers would alter drug formulations or reduce foreign supplies.7
Furthermore, there are questions about how much it would cost to implement a safe
drug importation program. The FDA estimates that such a program would cost at
CRS-3
8 Inside Washington Publishers, $58 Million for Canadian Rx Importation Based on
Outdated Estimate, FDA WEEK, March 19, 2004.
9 Some of these concerns are reflected in a recent report by the Government Accountability
Office (GAO; formerly the General Accounting Office). GAO Report GAO-04-820, Internet
Pharmacies: Some Pose Safety Risks for Consumers.
10 FOOD AND DRUG ADMINISTRATION, Buying Medicines and Medical Products Online,
[http://www.fda.gov/oc/buyonline/default.htm].
11 The sponsors of S. 2328 have also indicated that they intend to add to the bill provisions
that would address the safety of prescription drugs sold by domestic Internet pharmacies.
Press Release, Sen. Olympia Snowe, Snowe Joins AARP in Pressing Members of the Senate
to Take Up Bipartisan, Prescription Drug Importation Legislation (July 14, 2004).
12 Inside Washington Publishers, Frist Scuttles Idea of Vote on Drug Import Bill, Says Too
Little Time, FDA WEEK, Sept. 17, 2004.
13 For other information on prescription drug importation and Internet sales, see CRS Report
RL32511, Importing Prescription Drugs: Objectives, Options, and Outlook, by Susan Thaul
and Donna U. Vogt; CRS Report RL32271, Importation of Prescription Drugs Provisions
(continued...)
least $100 million but that the figure could rise as high as several hundred million
dollars, especially if there is an increase in the volume of imported drugs.8
Just as the FDA has expressed concerns about the safety of imported drugs,
federal regulators have become increasingly worried about the risks posed by some
online pharmacies and prescription drug sales over the Internet.9 Indeed, the
regulation of prescription drug importation and the oversight of online pharmacies
often overlap because many consumers use online pharmacies to purchase imported
drugs. Regardless of whether or not drugs purchased online are imported, the FDA
is worried about the safety and quality of such medications because of its concern
about the lack of adequate physician supervision, the prospects for tampering with
or counterfeiting such drugs, and the possibility that such drugs may be handled,
dispensed, packaged, or shipped incorrectly.10
In response to concerns about prescription drug imports and Internet sales, a
number of congressional legislators have introduced bills that would make changes
to existing law in these areas. In addition to H.R. 2427, multiple other bills –
including H.R. 616, H.R. 780, H.R. 847, H.R. 1733, H.R. 2497, H.R. 2717, H.R.
2769, H.R. 3710, H.R. 4512, H.R. 4790, S. 1781, S. 1974, S. 1992, S. 2137, S. 2307,
S. 2328, S. 2487, and S. 2493 – would amend current importation policy, and at least
nine bills – H.R. 616, H.R. 2652, H.R. 2717, H.R. 3870, H.R. 3880, H.R. 4612, H.R.
4790, S. 2464, and S. 2493 – would make changes to the law governing how drugs
are sold online.11 The Senate, however, does not appear likely to vote on prescription
drug importation legislation in the near future.12 In addition to the above bills, the
House-passed version of the FY2005 appropriations bill that funds the FDA prohibits
the agency from spending any of its appropriation to prevent drug importation,
although the Senate bill contains no such provision.
Current regulation of prescription drug importation and Internet sales consists
of a patchwork of federal and state laws in an array of areas.13 At the federal level,
CRS-4
13 (...continued)
in P.L. 108-173, the Medicare Prescription Drug, Improvement, and Modernization Act of
2003, by Susan Thaul and Donna U. Vogt; CRS Report RL32568, Senate Prescription Drug
Importation Legislation: A Side-by-Side Comparison of Current Law, S. 2307, S. 2328, and
S. 2493, by Susan Thaul and Donna U. Vogt; and GAO Report GAO-01-69, Internet
Pharmacies: Adding Disclosure Requirements Would Aid State and Federal Oversight.
14 21 U.S.C. § 301 et seq.
15 “Reimportation” is a term that is commonly used to describe importation. The term
“importation” is used throughout this report.
16 21 U.S.C. § 353(b).
17 Id. at § 801 et seq. For more information on the Controlled Substances Act, see CRS
Report 97-141A, Drug Smuggling, Drug Dealing and Drug Abuse: Background and
Overview of the Sanctions Under the Federal Controlled Substances Act and Related
Statutes, by Charles Doyle.
18 21 U.S.C. § 301 et seq.
the Food and Drug Administration (FDA) regulates prescription drugs under the
Federal Food, Drug, and Cosmetic Act (FFDCA), which governs, among other
things, the safety and efficacy of prescription medications, including the approval,
manufacturing, and distribution of such drugs.14 It is the FFDCA that prohibits the
importation — sometimes referred to as “reimportation”15 — of certain prescription
drugs by anyone other than the manufacturer and that requires that prescription drugs
may be dispensed only with a valid prescription.16 Meanwhile, U.S. Customs and
Border Protection (CBP) has the initial responsibility for examining imported goods
at the nation’s borders and for detaining any FDA-regulated products that appear to
pose a health risk. In addition, the Drug Enforcement Agency (DEA) administers the
Controlled Substances Act, which is a federal statute that establishes criminal and
civil sanctions for the unlawful possession, manufacturing, or distribution of certain
addictive or dangerous substances, including certain prescription drugs that share
these properties, such as narcotics and opiates.17 At the state level, state boards of
pharmacy regulate pharmacy practice, and state medical boards oversee the practice
of medicine. Thus, some of the laws that govern online pharmacies and doctors vary
from state to state.
II. Prescription Drug Importation: Legal Regulation
At the federal level, the FDA regulates prescription drugs under the Federal
Food, Drug, and Cosmetic Act (FFDCA), which governs, among other things, the
safety and efficacy of prescription medications, including the approval,
manufacturing, and distribution of such drugs.18 Although many states also have their
own laws that regulate drug safety, the FDA maintains primary responsibility for the
premarket approval of prescription drugs, while the DEA and CBP have somewhat
more limited regulatory authority over such drugs.
The FFDCA contains several provisions that apply to prescription drug imports.
First, the statute contains an outright prohibition that forbids anyone other than the
U.S. manufacturer from importing prescription drugs. This prohibition affects only
drugs that originally are made in the U.S. Second, the FFDCA contains a number of
CRS-5
19 Id. at § 381(d)(1). The Secretary, however, is authorized to allow the importation of any
drugs that are required for emergency medical care. Id. at § 381(d)(2).
20 Under the FDA’s personal importation policy, however, the FDA currently does not
enforce this prohibition against individuals who import a limited supply of prescription
drugs for personal use. See infra notes 50-57 and accompanying text.
21 Letter from William K. Hubbard, Associate Commissioner for Policy and Planning, Food
and Drug Administration, to Robert P. Lombardi, Esq., The Kullman Firm 1 (Feb. 12, 2003),
[http://www.fda.gov/ora/import/kullman.pdf] [hereinafter Lombardi Letter].
22 Pub. L. No. 106-387.
23 21 U.S.C. § 384.
other provisions relating to drug approvals and labeling that make it nearly
impossible for prescription drugs made for foreign markets to comply with the
extensive statutory requirements, in part because the FDA considers any drugs not
made on an FDA-inspected production line to be unapproved and therefore illegal.
These provisions generally affect foreign versions of drugs that are approved for
domestic sale.
Importation of both U.S.-manufactured prescription drugs and unapproved
foreign versions of U.S.-approved prescription drugs are discussed in this section, as
are the penalties under the FFDCA, the FDA’s personal importation policy, state
plans to import prescription drugs, and businesses that facilitate the importation of
prescription drugs. In addition, this section contains a discussion of other legal areas
that may affect prescription drug importation, including antitrust law, trade law, and
patent law.
Importation of U.S.-Manufactured Prescription Drugs
Currently, the FFDCA prohibits anyone other than the U.S. manufacturer of a
prescription drug from importing that drug into the United States.19 Thus, it is
technically a violation of the statute for individual consumers or online pharmacies
to import a prescription drug back into the country, even though the drug was, prior
to export, originally manufactured in the U.S. and even if the drug otherwise
complies with the FFDCA.20 Although critics of this law argue that there is no
rational justification for forbidding the importation of a drug that is theoretically
identical to its counterpart sold in the U.S., the FDA contends that the agency can no
longer guarantee the safety of a prescription drug once it has left the country and the
agency’s regulatory control. According to the agency, the FDA “cannot provide
adequate assurance to the American public that the drug products delivered to
consumers in the United States from foreign countries are the same products
approved by the FDA.”21
In response to concerns about the rising costs of prescription drugs, however,
Congress adopted importation amendments to the FFDCA in 2000. Under the
Medicine Equity and Drug Safety (MEDS) Act,22 the FDA was authorized to allow
pharmacists and wholesalers to import prescription drugs from foreign countries if
certain safety precautions were followed.23 The act, however, stipulated that the
importation provision would not become effective until and unless the Secretary of
CRS-6
24 Id. at § 384(l).
25 Medicare Act, supra note 1.
26 Id.
27 Id. This legislation, which is similar to the FDA’s personal importation policy, is
discussed in more detail in a separate section below.
28 Id.
29 Lombardi Letter, supra note 21, at 2.
30 21 U.S.C. § 355.
31 Id. at § 353(b)(2).
32 Id. at § 353(b)(1).
HHS determined that the implementation of the provision would “pose no additional
risk to the public’s health and safety; and [would] result in a significant reduction in
the cost of covered products to the American consumer.”24 Citing safety concerns,
both the current and the former Secretaries declined to implement this provision.
In the recently enacted Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (hereinafter referred to as the Medicare Act),25 Congress
once again revisited the issue of prescription drug importation. Like the MEDS Act
it superseded, the Medicare legislation directs the FDA to allow pharmacists and
wholesalers to import prescription drugs if certain safety precautions are followed.
Unlike the MEDS Act, which covered prescription drugs from a specified group of
foreign countries, the Medicare Act allows imports from Canada only.26 In addition,
the Medicare Act, unlike the MEDS Act, also authorizes the FDA to allow, by
regulatory waiver, individuals to import prescription drugs for personal use under
certain circumstances.27 Despite these new importation provisions, the Medicare Act,
like the MEDS Act, stipulates that the importation provisions will not become
effective until and unless the Secretary certifies that the implementation of the
provision would “pose no additional risk to the public’s health and safety; and
[would] result in a significant reduction in the cost of covered products to the
American consumer.”28As noted above, the Secretary of HHS has thus far declined
to provide such certification. Absent such certification, the ban on the importation
of prescription drugs remains in effect.
Importation of Foreign Versions of Prescription Drugs
Even if the FFDCA did not contain an explicit prohibition against drug
importation, the FDA maintains that consumer imports of prescription drugs from
foreign countries would almost certainly violate other provisions of the act.29 For
example, such drugs are likely to be unapproved,30 mislabeled,31 or improperly
dispensed.32 According to the FDA:
The reason that Canadian or other foreign versions of U.S.-approved drugs are
generally considered unapproved in the U.S. is that FDA approvals are
manufacturer-specific, product-specific, and include many requirements relating
to the product, such as manufacturing location, formulation, source and
CRS-7
33 Lombardi Letter, supra note 21, at 3.
34 21 U.S.C. §§ 331 (a)-(c), 353(b)(2).
35 21 C.F.R. §201.100(c)(2).
36 21 U.S.C. § 353(b)(1).
37 Press Release, Food and Drug Administration, Recent FDA/U.S. Customs Import Blitz
Exams Continue to Reveal Potentially Dangerous Illegally Imported Drug Shipments (Jan.
27, 2004), [http://www.fda.gov/bbs/topics/NEWS/2004/NEW01011.html].
38 Id.
specifications of active ingredients, processing methods, manufacturing controls,
container/closure system, and appearance. . . . Moreover, even if the
manufacturer has FDA approval for a drug, the version produced for foreign
markets usually does not meet all of the requirements of the U.S. approval, and
thus it is considered to be unapproved. Virtually all shipments of prescription
drugs imported from a Canadian pharmacy will run afoul of the Act, although it
is a theoretical possibility that an occasional shipment will not do so. Put
differently, in order to ensure compliance with the Act when they are involved
in shipping prescription drugs to consumers in the U.S., businesses and
individuals must ensure, among other things, that they only sell FDA-approved
drugs that are made outside of the U.S. and that comply with the FDA approval
in all respects.33
In addition to complying with the requirements regarding FDA approvals,
imported drugs must also meet FDA requirements regarding labeling and dispensing.
For example, mislabeling a drug is a violation of the FFDCA, as is the act of
introducing or receiving a mislabeled drug in interstate commerce.34 In order to be
properly labeled, prescription drugs must be labeled in accordance with the FDA’s
extensive labeling requirements.35 Furthermore, the FFDCA requires that prescription
drugs may be dispensed only with a valid prescription.36 Therefore, it is a violation
of the act to import prescription drugs without a legitimate U.S. prescription.
According to the FDA, a recent inspection of prescription drug shipments by
CBP found that 1,728 of 1,982 drug shipments from foreign countries violated the
FFDCA because they contained “unapproved drugs” that could pose clear safety
problems.37 Although the reason for the violation varied depending on the shipment,
the FDA and CBP found shipments of drugs that, among other things, had never been
approved by the FDA, were inadequately labeled (e.g., lacked instructions or were
labeled in a foreign language), had been withdrawn from the U.S. market due to
safety concerns, could cause dangerous interactions, required monitoring by a doctor,
or were controlled substances.38
Penalties Under the FFDCA and Other Federal Laws
If a business or consumer violates the FFDCA by importing unapproved or
misbranded prescription drugs, there are a number of criminal and civil penalties that
may apply. As set forth in the act, penalties, which vary depending on the offense, are
as follows: (1) violations of the act’s general prohibitions are a misdemeanor offense
CRS-8
39 21 U.S.C. § 333(a)(1). In addition, misdemeanor violations of the act are strict liability
offenses. United States v. Dotterweich, 320 U.S. 277, 284 (1943).
40 21 U.S.C. § 333(a)(2).
41 Id. at §§ 333(b)(1), 381(d)(1).
42 18 U.S.C. §§ 3559, 3571.
43 21 U.S.C. § 332.
44 Id. at § 334.
45 Lombardi Letter, supra note 21, at 1.
46 18 U.S.C. §§ 2, 371.
47 21 U.S.C. § 331.
48 See infra notes 174-76 and accompanying text.
punishable by up to a year in prison or a fine of up to $1,000, or both;39 (2) a
violation that occurs after a prior conviction for violating the act or that is committed
with the intent to defraud or mislead is a felony offense punishable by up to three
years of imprisonment or up to a $10,000 fine, or both;40 and (3) if a business or
consumer knowingly violates the importation provision, then the violation is a felony
offense punishable by up to 10 years in prison or up to $250,000 in fines.41 Despite
these designated penalties, individuals and corporations that violate the act may face
monetary fines far greater than those specified in the FFDCA because those sanctions
are superceded by general fines set forth in the Sentencing Reform Act of 1984,
which applies across the board to all federal crimes. That statute raised the limit on
the maximum penalties that apply to federal crimes. As a result, misdemeanor
violations of the FFDCA are punishable by a fine of up to $100,000 for individuals
and up to $200,000 for organizations, and felony violations of the act are punishable
by up to $250,000 for individuals and up to $500,000 for corporations.42 In addition,
federal courts are authorized to issue injunctions in order to enjoin violations of the
act,43 and any drug that is adulterated or misbranded is subject to seizure under the
act.44
It is important to note that “[t]hose who aid and abet a criminal violation of the
act, or conspire to violate the act, can also be found criminally liable.”45 Federal
criminal law generally makes it a separate crime to aid or abet any criminal offense
against the United States or to conspire to commit a criminal offense against the
United States,46 so illegal importers could potentially be charged with these offenses
as well as other general federal crimes, such as mail or wire fraud or making false
statements. In addition, the FFDCA explicitly forbids certain acts, as well as the
causing of such prohibited acts.47 Thus, businesses that facilitate the importation of
unapproved prescription drugs or U.S.-manufactured prescription drugs may be liable
if they are deemed to be “causing” violations of the act. In addition to penalties under
the FFDCA and other federal criminal statutes, individuals or businesses that illegally
import prescription drugs that are also controlled substances may be subject to
penalties under the Controlled Substances Act.48
Despite the range of penalties that FDA has available to punish those who
import prescription drugs in violation of the act, the agency has clarified that its
CRS-9
49 Lombardi Letter, supra note 21, at 4.
50 OFFICE OF REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION, Coverage of
Pe r s o n a l I m p o r t a t i o n s, REGULATORY PROCEDURES MANUAL,
[http://www.fda.gov/ora/compliance_ref/rpm_new2/ch9pers.html]. CBP estimates that
40,000 packages of prescription drugs arrive on a daily basis at New York’s John F.
Kennedy mail center, the nation’s busiest international mail facility. Inside Washington
Publishers, Customs Says 40,000 Drug Parcels Go Through JFK Facility Daily, FDA
WEEK, March 19, 2004.
51 Id. See also, OFFICE OF REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION,
I m p o r t a t i o n o f P r e s c r i p t i o n M e d i c i n e s / D r u g s ,
[http://www.fda.gov/ora/import/traveler_alert.htm]; OFFICE OF REGULATORY AFFAIRS, FOOD
AND DRUG ADMINISTRATION, Information on Importation of Drugs (April 3, 1998),
[http://www.fda.gov/ora/import/pipinfo.htm]. Furthermore, Canadian law prohibits
(continued...)
“highest enforcement priority would not be actions against consumers.”49 Indeed, the
FDA exercises its enforcement discretion leniently in this regard by allowing
consumers to import certain otherwise illegal prescription drugs under certain
circumstances. This enforcement policy, known as the personal importation policy,
is described in detail below.
The FDA’s Personal Importation Policy
Although importing unapproved prescription drugs is a violation of the FFDCA,
it is CBP, not FDA, that has the initial responsibility for examining imported goods
at the nation’s borders. Accordingly, CBP notifies the FDA if it has detected a mail
or baggage shipment of “an FDA-regulated article intended for commercial
distribution, an article that FDA has specifically requested be detained, or an FDA
regulated article that appears to represent a health fraud or an unknown risk to
health.”50 In order to assist agency personnel in determining when to allow or refuse
entry to imported drugs, the FDA developed its personal importation policy.
Under the FDA’s personal importation policy, the FDA exercises its
enforcement discretion to permit consumers to import otherwise illegal prescription
drugs for purposes of personal use. Recognizing that the agency’s limited
enforcement resources are best directed at commercial shipments of imported drugs
rather than personal imports, the FDA may, at its discretion, refrain from taking legal
action against illegally imported drugs under the following circumstances:
a) the intended use is unapproved and for a serious condition for which effective
treatment may not be available domestically either through commercial or
clinical means;
b) there is no known commercialization or promotion to persons residing in the
U.S. by those involved in the distribution of the product at issue;
c) the product is considered not to represent an unreasonable risk; and
d) the individual seeking to import the product affirms in writing that it is for the
patient’s own use (generally not more than three month supply) and provides the
name and address of the doctor licensed in the U.S. responsible for his or her
treatment with the product, or provides evidence that the product is for the
continuation of a treatment begun in a foreign country.51
CRS-10
51 (...continued)
Canadian pharmacists from dispensing drugs unless the patient submits a prescription from
a Canadian doctor. Thus, U.S. consumers generally must secure prescriptions from both U.S.
and Canadian doctors in order to purchase drugs from Canadian pharmacies.
52 OFFICE OF REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION, Coverage of
P e r s o n a l I m p o r t a t i o n s, REGULATORY PROCEDURES MANUAL,
[http://www.fda.gov/ora/compliance_ref/rpm_new2/ch9pers.html].
53 OFFICE OF REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION, Importation of
Prescription Medicines/Drugs, [http://www.fda.gov/ora/import/traveler_alert.htm].
54 OFFICE OF REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION, Information on
Importation of Drugs (April 3, 1998), [http://www.fda.gov/ora/import/pipinfo.htm].
55 Inside Washington Publishers, Canadian Pharmacist to Drug Firms: Support Limited Rx
Imports, FDA WEEK, May 7, 2004.
56 Medicare Act, supra note 1, at § 1121.
57 Id.
Ultimately, the personal importation policy is designed to set forth guidance for
agency personnel regarding the FDA’s enforcement priorities for imported drugs, but
it is not intended to grant a license to consumers to import unapproved prescription
drugs into the United States.52 Indeed, the FDA emphasizes that even if all of the
factors above are met, “the drugs remain illegal and FDA may decide that such drugs
should be refused entry or seized.”53 Furthermore, this policy does not apply to
commercial shipments of unapproved prescription drugs, nor is it intended to permit
the importation of foreign versions of drugs that are already approved in the United
States. Thus, it appears that personal importations of cheaper versions of prescription
drugs that are already available in the U.S. do not conform to the FDA’s personal
importation policy.54 Nevertheless, U.S. consumers continue to import drugs from
abroad, and one Canadian group claims that Canadian pharmacies supply two million
people in the U.S., or roughly one percent of the U.S. market for prescription drugs.55
Meanwhile, in the recent Medicare Prescription Drug, Improvement, and
Modernization Act of 2003, Congress authorized the FDA to allow individuals to
import prescription drugs for personal use under certain circumstances, provided that
the Secretary has certified that importation is safe and cost-effective.56 Specifically,
the act, subject to certification, requires the Secretary of HHS to allow individuals to
import prescription drugs from Canada if the drug:
(A) is imported from a licensed pharmacy for personal use by an individual, not
for resale, in quantities that do not exceed a 90-day supply;
(B) is accompanied by a copy of a valid prescription;
(C) is imported from Canada, from a seller registered with the Secretary;
(D) is a prescription drug approved by the Secretary . . .
(E) is in the form of a final finished dosage that was manufactured in [a registered]
establishment . . .
(F) is imported under such other conditions as the Secretary determines to be necessary
to ensure public safety.57
CRS-11
58 Pam Belluck, Boldly Crossing the Line for Cheaper Drugs, N. Y. TIMES, Dec. 11, 2003,
at A38.
59 Ceci Connolly, Drug Reimportation Plan Saves City $2.5 Million, WASH. POST, July 15,
2004.
60 Marc Kaufman, FDA, States at Odds Over Drugs, WASH. POST, Feb. 22, 2004, at A11.
61 Inside Washington Publishers, Rhode Island is First State to Pass Canadian Drug Import
Law, FDA WEEK, July 9, 2004. The FDA has warned Rhode Island that the legislation may
be preempted by federal law. Letter from William K. Hubbard, Associate Commissioner for
Policy and Planning, Food and Drug Administration, to Governor Donald L. Carcieri (July
1, 2004), [http://www.fda.gov/oc/opacom/hottopics/importdrugs/carcieri.pdf]. For a
discussion of the preemption doctrine, see infra notes 71-72 and accompanying text.
62 For example, California, Illinois, Iowa, Minnesota, New Hampshire, North Dakota, Rhode
Island, Vermont, and Wisconsin are among the states that have considered and/or
(continued...)
Although the new individual importation provisions in the Medicare Act appear
similar to the FDA’s personal importation policy, the legislation differs significantly
because it contains the certification requirement. The current Secretary of HHS,
however, has declined to provide such certification in the past, and it is unclear what
direction the agency will take in the future. Thus, the new individual importation
provisions do not appear to represent a codification of the FDA’s personal
importation policy.
State and Local Importation of Prescription Drugs:
Violation of Federal Law?
Just as individual consumers have sought to buy cheaper prescription drugs from
foreign sources, several state and local governments are currently considering plans
to import or facilitate the importation of prescription drugs in order to save
themselves or their residents money on medicines. For example, multiple states have
been exploring the prospect of drug importation, and several localities, including
Springfield, Massachusetts and Montgomery, Alabama, have already begun to import
drugs.58 Contending that carefully structured state programs will provide a sufficient
degree of safety, states argue that they have a duty to explore innovative methods for
providing more affordable prescription drugs to their residents, even at the risk of
violating federal law.
Each state and local importation plan varies somewhat in the details.
Springfield, for example, has been facilitating the purchase of Canadian drugs as part
of a plan to provide cheaper medications to city employees, and the city estimates
that it has saved it least $2.5 million in the first year of the program.59 Meanwhile,
Minnesota and Wisconsin have established websites that offer information to state
residents regarding Canadian pharmacies that the states have inspected and
determined to be reliable sources for prescription drugs. Neither state, however,
imports drugs directly or allows consumers to order through its website.60 In addition,
Rhode Island legislators recently passed a new law that would allow the state to
license Canadian pharmacies.61 Many other states and localities have considered
and/or implemented importation plans of their own.62
CRS-12
62 (...continued)
implemented importation programs. For current information on state activities with regard
to prescription drug importation, see National Conference of State Legislators, 2004
P r e s c r i p t i o n D r u g L e g i s l a t i o n ( S e p t . 1 4 , 2 0 0 4 ) ,
[http://www.ncsl.org/programs/health/drugdisc04.htm]. According to the National
Conference of State Legislators, at least 60 state bills and resolutions currently address the
issue of prescription drug importation. Id.
63 Inside Washington Publishers, Vermont Wants FDA to Allow Drug Reimportation for
State Employees, FDA WEEK, Dec. 19, 2003. See also, Inside Washington Publishers, Sen.
Dorgan Pushes for Drug Import Pilot Program in North Dakota, FDA WEEK, April 2, 2004;
Letter from Lester M. Crawford, Acting Commissioner of Food and Drugs, Food and Drug
Administration, to Governor Rod R. Blagojevich, State of Illinois (June 3, 2004),
[http://www.fda.gov/oc/opacom/hottopics/importdrugs/GovB63.pdf].
64 Kelly Field, Battle Brewing Between Administration, Local Officials Over Drug
Importation Issue, CQ TODAY, Dec. 19, 2003.
65 Vermont v. Thompson (D. Vt. filed Aug. 19, 2004).
66 Press Release, Food and Drug Administration, Statement on Vermont’s Lawsuit on
Importing Prescription Drugs from Canada (Aug. 20, 2004),
[http://www.fda.gov/bbs/topics/news/2004/NEW01107.html].
67 Indeed, the FDA has issued a series of warning letters to states that have considered or
that have implemented prescription drug importation plans. These letters are posted on the
FDA’s website at [http://www.fda.gov/importeddrugs/].
In addition, several states, including Vermont, have petitioned the FDA in hope
that the agency would, as it has done with regard to personal drug importation,
exercise its enforcement discretion and allow states to establish prescription drug
importation pilot plans.63 The new Medicare bill authorizes the FDA to provide
waivers for individual importation, and some lawmakers are arguing that the
individual importation waiver authority extends to state importation plans because
such plans are intended to provide prescription drugs to individual state residents.
The FDA, however, notes that the waiver provisions in the Medicare bill become
effective only upon certification by the Secretary that drug importation is safe and
reduces costs.64 Nevertheless, Vermont, whose petition for a pilot program was
rejected by the FDA, has recently sued the agency, claiming that the FDA’s failure
to implement regulations that authorize waivers and subsequent denial of Vermont’s
petition violate the Administrative Procedure Act. The Vermont lawsuit also claims
that the importation provisions in the new Medicare legislation constitute an
unconstitutional delegation of legislative authority to the Secretary of HHS.65 The
government has indicated that it intends to fight the lawsuit.66
Despite the efforts of such state and local governments, the FDA continues to
maintain that importing unapproved prescription drugs is unsafe and illegal. Indeed,
FDA representatives have met with and sought to convince state officials to change
their minds about importing drugs in apparent violation of federal law. At the same
time, the agency has notified certain states of its legal position regarding drug
imports.67 For example, according to the FDA’s response to an inquiry from
California officials, “if an entity or person within the State of California (including
any state, county, or city program, any public pension, or any Indian Reservation)
CRS-13
68 Letter from William K. Hubbard, Associate Commissioner for Policy and Planning, Food
and Drug Administration, to Gregory Gonot, Deputy Attorney General, State of California
2 (Aug. 25, 2003), [http://www.fda.gov/opacom/gonot.html] [hereinafter California Letter].
69 Id. at 3.
70 See supra notes 19-38 and accompanying text.
71 California Letter, supra note 68, at 5-7. The preemption doctrine derives from the
Supremacy Clause of the Constitution, which establishes that the laws of the United States
“shall be the supreme law of the land; and the judges in every state shall be bound thereby,
any thing in the Constitution or laws of any State to the contrary notwithstanding.” U.S.
CONST. art. VI, cl. 2. In applying this constitutional mandate, courts have recognized both
express and implied forms of preemption, which are “compelled whether Congress’
command is explicitly stated in the statute’s language, or implicitly contained in its structure
and purpose.” Gade v. National Solid Wastes Management Association, 505 U.S. 88, 97
(1992) (quoting Jones v. Rath Packing Co., 430 U.S. 519, 525 (1977)).
72 Many of these cases, however, deal with prescription drug labeling, not importation, and
state common law claims, not state statutory law. David R. Geiger and Mark D. Rosen,
Rationalizing Product Liability for Prescription Drugs: Implied Preemption, Federal
Common Law, and Other Paths to Uniform Pharmaceutical Safety Standards, 45 DEPAUL
L. REV. 395, 408 (1996). It is also important to note that the FFDCA expressly preempts
state law with regard to over-the-counter drugs and medical devices but not with regard to
prescription drugs. As a result, it is more difficult to predict the outcome of a preemption
challenge to state laws on prescription drugs. A detailed examination of the preemption
issue, however, is beyond the scope of this report.
were to import prescription drugs into the State of California from Canada [or any
other foreign country], it would violate FFDCA in virtually every instance.”68
The FDA provides several legal arguments for reaching its conclusion that state
and local drug importation is a violation of the FFDCA. First, the statute prohibits
anyone other than the manufacturer from importing drugs that were originally
manufactured in the United States. Second, even if an FDA-approved drug is
manufactured outside the U.S., the imported version of the drug will likely violate
statutory requirements regarding drug approvals, labeling, and dispensing.69 These
first two arguments are identical to the arguments that FDA has made when
explaining why the agency views business and consumer imports of prescription
drugs to be statutory violations.70 Therefore, the FDA considers virtually any imports
of prescription drugs, as well as virtually any act that causes such imports, to be
illegal, regardless of whether such imports are conducted by businesses, consumers,
or governmental entities.
In addition, the FDA contends that any effort by states to enact legislation
authorizing prescription drug imports would be preempted by federal law.71 Although
the FDA sets forth several legal arguments for its position, preemption of the act’s
importation provisions does not appear to have been tested in court, and there are
several instances in which other prescription drug provisions in the FFDCA have
been held not to preempt state law.72 Finally, the agency has warned some states that
they could be subject to lawsuits for injuries to consumers who relied on the state’s
endorsement when purchasing prescription drugs from Canada. For example, in a
letter to Minnesota state officials, the FDA warned of “the potential tort liability that
CRS-14
73 Letter from William K. Hubbard, Associate Commissioner for Policy and Planning, Food
and Drug Administration to the Honorable Tim Pawlenty, Governor of Minnesota 3 (Feb.
23, 2004), [http://www.fda.gov/oc/opacom/hottopics/importdrugs/pawlenty022304.html].
In the Minnesota warning letter, the FDA explicitly noted that Minnesota’s own inspection
of some of the recommended Canadian pharmacies had revealed potential safety violations.
Id. at 1-3.
74 Id. One possible explanation for the FDA’s silence with respect to the legality of
Minnesota’s actions could be that it is unclear whether the state is “causing” the prohibited
importation activity in violation of the statute, in part because the state neither imports drugs
from Canada nor allows consumers to order directly through its website. On the other hand,
the Minnesota website does provide order forms, pricing information, and instructions on
how to submit an order to either of two recommended Canadian pharmacies, and such
actions may be enough to establish that Minnesota is facilitating illegal importation. See
[http://www.state.mn.us/cgi-bin/portal/mn/jsp/home.do?agency=Rx] to view Minnesota’s
website.
75 Inside Washington Publishers, FDA Signals Reluctance to Sue Illinois for Importing
Drugs, FDA WEEK, Aug. 20, 2004.
76 Inside Washington Publishers, FDA To Resolve Rx Depot Suit Before Taking on States,
FDA WEEK, Oct. 31, 2003.
a state could be subject to if a citizen purchases an unapproved, illegal drug on your
advice, and suffers an injury as a result.”73
Despite the FDA’s position regarding state and local imports of prescription
drugs, it appears that the agency is currently refraining from taking legal action
against state and local governments that are importing such drugs. Indeed, in its
warning letter to Minnesota, the agency notably refrained from asserting that the
state’s program violated the FFDCA and did not describe any potential enforcement
action that the FDA might take.74 Likewise, the FDA has indicated that it is unlikely
to sue the state of Illinois, which recently announced a plan to import drugs from
certain European countries, despite the agency’s earlier pronouncement that it would
refrain from suing states and localities as long as those entities imported drugs from
Canada and not from other countries.75 In addition, although “FDA and industry
officials say the agency has not ruled out possible future legal action,” “the agency
wants to first win its case against Rx Depot, giving FDA bargaining power for the
more difficult task of taking formal action against states and local governments.”76
In the Rx Depot case, which is discussed in detail in the following section, the FDA
is pursuing legal action against a private company that helps individual consumers
import prescription drugs.
Businesses That Facilitate Importation of Prescription Drugs
As noted above, the FDA is currently refraining from taking legal action against
both states and individual consumers who import prescription drugs in violation of
the FFDCA because the agency has instead chosen to focus its initial enforcement
effort on pursuing businesses that facilitate the importation of such drugs. Unlike
pharmacies, which receive orders from consumers and dispense drugs directly, some
businesses facilitate drug sales without dispensing drugs directly. Rather, these
companies, many of which are online, act as middlemen between consumers, who
CRS-15
77 290 F. Supp. 2d 1238 (D. Okla. 2003) (order granting preliminary injunction).
78 DOJ initiated this lawsuit after Rx Depot failed to respond to the agency’s warning letter
and continued to facilitate the importation of prescription drugs and the importation of
unapproved drugs. See Letter from David J. Horowitz, Esq., Director, Office of Compliance,
Center for Drug Evaluation and Research, Food and Drug Administration, to Harry Lee
Jones, Store Manager, Rx Depot, Inc., (March 21, 2003),
[http://www.fda.gov/foi/warning_letters/g3888d.htm]. FDA has sent similar warning letters
to other businesses that facilitate the importation of prescription drugs. See, e.g., Letter from
David J. Horowitz, Esq., Director, Office of Compliance, Center for Drug Evaluation and
Research, Food and Drug Administration, to G. Anthony Howard, President, CanaRx
Services, Inc., (Sept. 16, 2003), [http://www.fda.gov/cder/warn/2003/RHoward.pdf].
CanaRx is the business that currently assists Springfield, Massachusetts in importing
prescription drugs. Press Release, Food and Drug Administration, CanaRx Illegally
S u p p l y i n g P r e s c r i p t i o n D r u g s ( N o v . 6 , 2 0 0 3 ) ,
[http://www.fda.gov/bbs/topics/NEWS/2003/NEW00973.html].
79 United States v. Rx Depot, 290 F. Supp. 2d 1238 (D. Okla. 2003) (order granting
preliminary injunction). See also, 21 U.S.C. §§ 331(d), 331(t), and 355.
80 RxDepot, 290 F. Supp. 2d at 1241.
81 Inside Washington Publishers, Rx Depot: FDA Alleged Safety Concerns With
Reimportation Are Bogus, FDA WEEK, Nov. 7, 2003.
82 Id..
provide medical and payment information, and foreign (typically Canadian)
pharmacies, which then ship drugs directly to consumers. The FDA is currently
pursuing legal action against one such business. That case is discussed in detail in
this section, while separate but related issues involving online pharmacies are
discussed in a separate section below.
In United States v. Rx Depot,77 the Department of Justice (DOJ), acting on
behalf of the FDA, filed suit against Rx Depot, a storefront operation that helps U.S.
consumers obtain prescription drugs from Canada.78 According to the suit, DOJ
contends that Rx Depot is violating two provisions of the FFDCA, namely the
provision prohibiting importation and the provision prohibiting the introduction into
interstate commerce of any drug that violates the act’s approval requirements.79
Although Rx Depot is not directly importing drugs, the company admits that it is
“engaged in the business of causing the shipment of U.S.-manufactured and
unapproved, foreign-manufactured prescription drugs from Canadian pharmacies to
U.S. citizens.”80
Rx Depot has countered that the FDA is not actually concerned about the safety
of imported drugs because the agency never tested the drugs it bought from Rx Depot
as part of a sting operation against the company.81 Similar complaints have been
voiced by other businesses that facilitate the importation of prescription drugs. Critics
of FDA’s importation stance also argue that it “fails to protect the public health
because it allows individuals to import drugs, while prohibiting ‘commercial’
operations that are in the best position to develop safeguards,”82 and allege that the
CRS-16
83 Inside Washington Publishers, CanaRx Says FDA’s Reimportation Policy Violates Trade
Agreements, FDA WEEK, Nov. 7, 2003.
84 Marc Kaufman, FDA’s Authority Tested Over Drug Imports, WASH. POST, Nov. 9, 2003,
at A11.
85 Rx Depot, 290 F. Supp. 2d 1238.
86 Id. at 1241-42.
87 Id. at 1241-42, 1245.
FDA’s importation policy may violate international trade agreements.83 Ultimately,
critics argue that the FDA’s policy protects the profits of drug manufacturers at the
expense of consumer pocketbooks.84
Despite these arguments, the district court held against Rx Depot during a
preliminary ruling in the case. Concluding that “Rx Depot’s importation of
prescription drugs clearly violates the law,” the district court issued a preliminary
injunction enjoining Rx Depot from facilitating the importation of prescription
drugs.85 While the court’s order is not actually a final order on the merits of the case,
it does indicate that DOJ has a substantial likelihood of prevailing in the lawsuit.
Indeed, the court appeared particularly concerned with the safety of imported drugs:
napproved prescription drugs and drugs imported from foreign countries by
someone other than the U.S.-manufacturer do not have the same assurance of
safety and efficacy as drugs regulated by the Food and Drug Administration. . .
Because the drugs are not subject to FDA oversight and are not continuously
under the custody of a U.S. manufacturer or authorized distributor, their quality
is less predictable than drugs obtained in the United States. For instance, the
drugs may be contaminated, counterfeit, or contain erratic amounts of the active
ingredient or different excipients. Also, the drugs may have been held under
uncertain storage conditions, and therefore be outdated or subpotent.86
With regard to Rx Depot, the court specifically noted that drugs ordered through
the company were often dispensed in quantities greater than prescribed and did not
contain the required package inserts. Although the court acknowledged that the cost
of prescription drugs in the U.S. is high and that there are no known cases of an
individual who has suffered harm from drugs imported through Rx Depot, the court
nevertheless concluded that the FDA has legitimate safety concerns and that
Congress is in the best position to resolve the tension between prescription drug
safety and cost.87
As noted above, the district court’s decision to issue a preliminary injunction
against Rx Depot is not a final decision on the merits of the case. Meanwhile, as the
legal battle continues, many companies like Rx Depot remain in business, and an
increasing number of states and localities have begun to contemplate their own
importation programs. In response, several drug manufacturers have begun limiting
sales of their drugs to Canadian pharmacies in an effort to prevent the drugs from
being resold in the U.S. at cheaper prices. These actions have raised questions about
whether such behavior violates federal antitrust laws, a topic that is discussed in the
following section.
CRS-17
88 This section was written by Janice E. Rubin, Legislative Attorney in the American Law
Division of CRS.
89 Following the example set by GlaxoSmithKline, Pfizer Inc., the world’s biggest drug
manufacturer, recently announced that the company was limiting sales of prescription drugs
to Canadian pharmacies that resold such drugs to U.S. consumers. Ceci Connolly, Pfizer
Cuts Supplies to Canadian Drugstores, WASH. POST, Feb. 19, 2004, at A10.
90 Inside Washington Publishers, Lawmakers Seek DOJ Anti-Trust Probe of Firms Limiting
Sales to Canada, FDA WEEK, Nov. 7, 2003.
91 See, e.g., H.R. 2497; S. 1992; S. 2328.
92 Inside Washington Publishers, Judge Wants More Info Before Deciding Motion to Compel
Against GSK, FDA WEEK, Nov. 21, 2003.
93 For a more detailed discussion of this issue, see CRS Report, Monopoly and
Monopolization — Fundamental But Related Concepts in U.S. Antitrust Law, by Janice E.
Rubin and Congressional Distribution Memorandum, Duty of a Monopolist to Deal, by
(continued...)
Antitrust Laws88
As noted above, several major prescription drug manufacturers have responded
to the rise in the number of businesses and consumers that are importing cheaper
drugs into the U.S. by reducing the supply of such drugs to distributors and
pharmacies in Canada, where most of the imported drugs originate.89 Although some
manufacturers argue that restrictions on sales are designed to prevent drug shortages
in Canada, such moves may instead be intended to limit Canadian distributors and
pharmacies to selling prescription drugs to Canadian consumers only, rather than
selling excess supplies of prescription drugs to U.S. consumers at cheaper prices than
such consumers would pay for similar drugs in the U.S. As a result, several members
of Congress have questioned whether these drug manufacturers are violating federal
antitrust laws,90 and several bills introduced in the 108th Congress would prohibit
such sales tactics.91 In addition, at least one state has launched an investigation into
whether or not the drug manufacturer GlaxoSmithKline (GSK) has violated state
antitrust laws.92 This section discusses the potential federal and state antitrust issues
raised by the decision of certain drug manufacturers to limit the supply of drugs to
Canadian distributors and pharmacies.
Federal Antitrust Law.
Federal antitrust law is concerned with the competitiveness of markets
(competition), and not with the competitors — unless they have suffered an injury
as a result of an actionable wrong under the antitrust laws — or with the achievement
or implementation of specific programs or goals. It is not a given, therefore, that
existing federal antitrust laws could be successfully employed to challenge
pharmaceutical manufacturers whose actions appear to reduce the U.S. supply of
imported prescription drugs or to make it more difficult for Americans to purchase
prescription drugs from other countries such as Canada.
First, neither current antitrust statutes nor doctrine make unlawful the marketoriented
activities of individual entities, unless the entity is a monopolist.93 Section
CRS-18
93 (...continued)
Janice E. Rubin.
94 15 U.S.C. §§ 1-7.
95 See, infra, the section of this report on “State Antitrust Law,” regarding the existence at
the state level of some unilateral restraint of trade provisions.
96 Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 767-68 (1984) (ruling that
a parent corporation was not legally capable of conspiring with its ow

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PURPOSE

To provide guidance for the coverage of personal-use quantities of FDA-regulated imported products in baggage and mail and to gain the greatest degree of public protection with allocated resources.



BACKGROUND

Because the amount of merchandise imported into the United States in personal shipments is normally small, both in size and value, comprehensive coverage of these imports is normally not justified. This guidance clarifies how FDA may best protect consumers with a reasonable expenditure of resources.

There has always been a market in the United States for some foreign made products that are not available domestically. For example, individuals of differing ethnic backgrounds sometimes prefer products from their homeland or products labeled in their native language to products available in the United States. Other individuals seek medical treatments that are not available in this country. Drugs are sometimes mailed to this country in response to a prescription-like order to allow continuation of a therapy initiated abroad. With increasing international travel and world trade, we can anticipate that more people will purchase products abroad that may not be approved, may be health frauds or may be otherwise not legal for sale in the United States.

In addition, FDA must be alert to foreign and domestic businesses that promote or ship unapproved, fraudulent or otherwise illegal medical treatments into the United States or who encourage persons to order these products. Such treatments may be promoted to individuals who believe that treatments available abroad will be effective in the treatment of serious conditions such as AIDS or cancer. Because some countries do not regulate or restrict the exportation of products, people who mail order from these businesses may not be afforded the protection of either foreign or U.S. laws. In view of the potential scale of such operations, FDA has focused its enforcement resources more on products that are shipped commercially, including small shipments solicited by mail-order promotions, and less on those products that are personally carried, shipped by a personal non-commercial representative of a consignee, or shipped from foreign medical facility where a person has undergone treatment.



PERSONAL BAGGAGE

FDA personnel are not to examine personal baggage. This responsibility rests with the U.S. Customs Service. It is expected that a Customs officer will Notify their local FDA district office when he or she has detected a shipment of an FDA-regulated article intended for commercial distribution (see GENERAL GUIDANCE below) an article that FDA has specifically requested be detained, or an FDA regulated article that appears to represent a health fraud or an unknown risk to health.

When items in personal baggage are brought to FDA's attention, the district office should use its discretion, on a case-by-case basis, in accordance with the guidance provided under GENERAL GUIDANCE below, in deciding whether to request a sample, detain the article, or take other appropriate action.



MAIL SHIPMENTS

FDA personnel are responsible for monitoring mail importations. It is expected that a Customs officer from the Customs Mail Division will examine a parcel and will set it aside if it appears to contain a drug, biologic, or device, an article that FDA has specifically requested be held, or an FDA-regulated article that appears to represent a health fraud or unknown risk to health.

FDA should audit those parcels set aside by Customs in accordance with the guidance provided under GENERAL GUIDANCE below, using the following procedures:

Prepare a Collection Report for each parcel sampled. Generally, a physical sample is not required on mail importations because a documentary sample (for example, labeling, labels and inserts) will be sufficient for most regulatory purposes. If a physical sample is needed, collect only the minimum necessary for analysis by the laboratory. The remaining portion should not be removed from the custody of the Customs Mail Division.

Importations detained in accordance with this guidance should be held by Customs until they are either released or refused entry. Attached as guidance are two specimen letters that may be sent with the Notice of Detention and Hearing when a parcel is detained. (See Exhibit 9-3 for use in general mail importations and Exhibit 9-4 for use in unapproved drug or device mail importations).

On occasion, products detained by FDA will be mixed with non-FDA-regulated products. When we refuse admission of the FDA-regulated portion, any request for the release of the non-FDA-regulated portion should be referred to the Customs Mail Division with a Notice of Refusal of Admission covering the detained article. Final disposition of all merchandise, including the destruction of detained merchandise, is the responsibility of Customs.



GENERAL GUIDANCE

The statements in this chapter are intended only to provide operating guidance for FDA personnel and are not intended to create or confer any rights, privileges, or benefits on or for any private person.

FDA personnel may use their discretion to allow entry of shipments of violative FDA regulated products when the quantity and purpose are clearly for personal use, and the product does not present an unreasonable risk to the user. Even though all products that appear to be in violation of statutes administered by FDA are subject to refusal, FDA personnel may use their discretion to examine the background, risk, and purpose of the product before making a final decision. Although FDA may use discretion to allow admission of certain violative items, this should not be interpreted as a license to individuals to bring in such shipments.

Commercial or Promotional Shipments

Commercial and promotional shipments are not subject to this guidance. Whether or not a shipment is commercial or promotional may be determined by a number of factors including, for example, the type of product, accompanying literature, size, value, and/or destination of the shipment. FDA personnel may also consider whether an importation of drugs or medical devices is a commercial shipment by evaluating whether the article appears to have been purchased for personal use or whether the quantity suggests commercial distribution (i.e., the supply exceeds what one person might take in approximately three months). Commercial shipments generally include shipments other than those products that are personally carried, shipped by a personal non-commercial representative of a consignee, or shipped from a foreign medical facility where a person has undergone treatment.



Products Other than Drugs and Devices

Many products other than drugs, biologics, and devices that individuals seek to import in personal quantities do not pose a significant health risk although they appear to be violative and may be the subject of an import alert or automatic detention based on standards violations, filth, and/or labeling problems. When such items are brought to FDA's attention by Customs, it may be appropriate for FDA personnel to use their discretion to "Release with Comment" and advise the importer of the agency's concerns. FDA personnel should be alert to and should detain those products that do pose a significant health risk.



Drugs, Biologics, and Devices

When personal shipments of drugs and devices that appear violative are brought to FDA's attention by Customs, FDA personnel will use their discretion to decide on a case by case basis whether to detain, refuse, or allow entry of the product. Generally, drugs and devices subject to Import Alerts are not amenable to this guidance. Devices to be used by practitioners for treating patients should not be viewed as personal importations subject to this chapter. Drugs subject to Drug Enforcement Agency (DEA) jurisdiction should be returned to Customs for handling.



In deciding whether to exercise discretion to allow personal shipments of drugs or devices, FDA personnel may consider a more permissive policy in the following situations:

1. when the intended use is appropriately identified, such use is not for treatment of a serious condition, and the product is not known to represent a significant health risk; or

2. when a) the intended use is unapproved and for a serious condition for which effective treatment may not be available domestically either through commercial or clinical means; b) there is no known commercialization or promotion to persons residing in the U.S. by those involved in the distribution of the product at issue; c) the product is considered not to represent an unreasonable risk; and d) the individual seeking to import the product affirms in writing that it is for the patient's own use (generally not more than 3 month supply)and provides the name and address of the doctor licensed in the U.S. responsible for his or her treatment with the product, or provides evidence that the product is for the continuation of a treatment begun in a foreign country.



If there are any questions about the application of these factors to any product, the product should be detained and FDA personnel should consult with the appropriate headquarters office.

When a shipment is not refused entry, FDA personnel may consider issuing a "Release with Comment" and, as appropriate, advise the recipient that 1) the drug (or device) that has been obtained for personal use appears to be unapproved in the United States; 2) the drug (or device) should be used under medical supervision; 3) FDA may detain future shipments of this product; and 4) the patient's physician should consider for example, enrolling the patient in an Investigational study or applying for Investigation New Drug (IND), Compassionate IND, or Treatment IND exemption.



IMPORT ALERTS

FDA personnel should recommend to the Division of Import Operations and Policy (HFC-170) the issuance of an import alert if they encounter:

1. personal importation of products that represent either a direct or indirect health risk; or

2. the promotion of unapproved foreign products for mail order shipment; or repeated importation of products that represent fraud*.

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