The Food and Drug Administration (FDA) has issued a final rule to allow for the importation of certain prescription drugs from Canada. In conjunction with the final rule, the FDA also released guidance for manufacturers that lays out a pathway for manufacturers to import their own drugs. The rule has not yet been published in the Federal Register but will become effective 60 days after it is published.

This final rule and guidance come after the release of an Executive Order (EO) in late July 2020 that directed the FDA to finish rulemaking for drug importation; the proposed rule and draft guidance were initially released in December 2019. The final rule and guidance do not address personal importation of drugs, which was included in the EO.

Shortly after release of the final rule and guidance, the Centers for Medicare and Medicaid Services (CMS) released guidance for both states and drug manufacturers on how importation will impact the Medicaid Drug Rebate Program (MDRP).

States to Be Allowed to Import Certain Prescription Drugs

Under statute, the importation of prescription drugs from Canada is allowed under certain conditions if certified by the Secretary of the Department of Health and Human Services (HHS). The Secretary must certify that importation will “pose no additional risk to the public’s health and safety” and “result in significant reduction in the cost of covered products to the American consumer.” With this final rule, the administration is creating a framework to allow time-limited Section 804 Importation Programs (SIPs), which would be authorized by the FDA.

States (including the District of Columbia and territories) and Indian Tribes may sponsor SIPs; pharmacists and wholesalers can act as co-sponsors. A SIP must specify which drugs are included and sponsors will be required to explain how they will ensure that the importation program will result in a significant reduction in cost to the American consumer of the included products. A SIP can be extended by the FDA before the end of its authorization period and the FDA can also terminate a SIP for specified reasons, including not meeting relevant safety criteria.

SIP Proposals must identify a Foreign Seller in Canada that is licensed to wholesale drugs by Health Canada and registers with the FDA. The Foreign Seller will purchase the eligible drug directly from the manufacturer and then the Importer in the U.S. will buy the drug directly from the Foreign Seller. An Importer is a pharmacist or wholesaler that is state-licensed for a pharmacist and state- or FDA-licensed for a wholesaler. The importer’s license must be issued by a state that is a SIP Sponsor.

The initial SIP Proposal will include just one Foreign Seller and one Importer. A supplemental proposal to add additional sellers and importers can be submitted if the SIP can demonstrate it has consistently imported drugs in accordance with the relevant statute and regulations. However, each supply chain under a SIP can only be three entities- one manufacturer, one Foreign Seller, and one Importer.

The final rule also includes legal language indicating that the entire regulation will not be effective if any provision of it is struck down in court.

Biologics, Controlled Substances, Infused and Injected Drugs Not Eligible for Importation

Eligible drugs are those that could be sold legally in either the Canadian or American market with appropriate labeling. Several categories of drugs are excluded from importation:

• Biologics;
• Controlled substances;
• Drugs inhaled during surgery
• Drugs subject to Risk Evaluation and Mitigation Strategies (REMS)
• Infused Drugs;
• Intravenously injected drugs; and
• Intrathecally or intraocularly injected drugs

The eligibility of other drugs, including sterile drugs, drugs requiring special storage conditions, and drugs intended to be used solely with a specific, separately distributed delivery system, will be determined on a case-by-case basis. SIP proposals must address any concerns on manufacturing, storing, and transporting included drugs.

FDA Establishes Pre-Import, Testing, Labeling, and Post-Import Requirements

Following FDA approval of a SIP, the Importer will have to submit a Pre-Import request to the FDA at least 30 calendar days before the scheduled date of arrival or entry of the drug shipment, whichever date is earlier. The Importer will be required to file formal entries with the relevant data interchange systems authorized by U.S. Customs and Border Protection (CBP). To differentiate between imported and non-imported product, an imported drug sharing the same proprietary name as an FDA-approved drug will have a different National Drug Code (NDC) from its counterpart.

Each package or case of an eligible prescription drug will require certain labelling. This includes a section 804 serial identifier (SSI), which is an alphanumeric serial number unique to each package or case. The NDC, lot number, and expiration date will also need to be labeled on each package or case. Otherwise, imported drugs will generally have the same labeling as their non-imported counterpart.

The manufacturer or Importer will be required to conduct testing on the drugs to ensure compliance with existing specifications and standards. Testing can be done in a qualifying laboratory in the U.S. Manufacturers will have to provide the Importer with protocols to support required testing and the information need to authenticate the drug; this information must be provided within 30 calendar days of a request.

The rule also finalizes various post-importation requirements. Importers will have to submit adverse event and other reports to both the FDA and the drug manufacturer. Each SIP will require a written recall plan and if necessary, a SIP Sponsor is responsible for effectuating a recall.

FDA Maintains Flexibility to Expand Importation Plan Sponsors in the Future

The FDA has left open the possibility of a pharmacist or a wholesaler becoming a SIP Sponsor (instead of just a co-sponsor) after actively participating in a SIP and demonstrating that their proposal (which does not include a State or Indian Tribe) can provide the same assurance of safety. After two years of importation under any authorized SIP, the HHS Secretary can make the determination that there is sufficient likelihood of safety based on experience under the importation program and pharmacists or wholesalers will be able to submit a SIP proposal.

FDA Does Not Offer Estimate of Cost Savings, Financial Impact of Importation

Similar to the proposed rule, the FDA states that they are unable to estimate the cost savings that could result from this final rule since the size, scope, included drugs, and number of SIPs is unknown.

FDA Releases Guidance Outlining Pathway for Manufacturers to Import Prescription Drugs

The final guidance for prescription drug manufacturers lays out a pathway by which manufacturers could import their own products. The guidance establishes recommended procedures to obtain a NDC for certain FDA-approved drugs or biologics originally intended for a foreign market that would be imported into the U.S. FDA-approved drugs that are also authorized for sale in a foreign country in which the drugs were originally intended to be marketed are referred to as “multi-market approved products” or MMA products.

Manufacturers Would Submit Supplemental NDA Prior to Importation

Manufacturers will be required to file a supplement to the drug’s New Drug Application (NDA) or Biologics License Application (BLA) before the product would be eligible for importation. Because there is nothing in the law that compels a manufacturer to do this, a drug product would not be eligible for importation without the manufacturer’s explicit consent. Combination products are also eligible.

The guidance states that the NDA supplement should include the following:

• Information to demonstrate that a product originally intended for sale in another country is the FDA-approved product and is manufactured in accordance with the FDA-approved NDA or BLA, except for limited labeling differences;
• Establish that the composition of the drug product as well as the entirety of the manufacturing process meets all of the specifications in the chemistry, manufacturing, and controls section in the approved NDA or BLA.

The supplemental application will also have to attest that the MMA product is the FDA-licensed product, is manufactured in accordance with the approved NDA or BLA, will continue to meet quality standards of the originally intended market. Further, the supplement will need to demonstrate that the lots of the MMA product for importation are manufactured, packaged, labeled, and tested in approved facilities. Batch records must also be included.

Manufacturers will also need to inform the FDA of any shipment of a purported MMA product by submitting a report via the Electronic Submissions Gateway (ESG) within 10 business days in advance of the first import entry so that the agency can confirm that it has been authorized for marketing in the United States by the manufacturer. The report may include multiple shipments of an MMA product for a specified period of time.

Drugs Imported Under Supplemental NDA or BLA to Have Different NDC

After approval of a supplemental NDA, FDA guidance states that a manufacturer should propose a new National Drug Code (NDC) number for the FDA-approved imported prescription drug and ensure that the product label for the MMA products only bear its assigned NCD to avoid confusion. Manufacturers will also have to ensure that imported drug labels reflect the U.S. marketed name and safety information, if there are any differences.

Manufacturers calculate and report average sales price (ASP) and average manufacturer price (AMP) using NDC numbers so having a different NDC may help alleviate pricing concerns, allowing the use of differential pricing between imported and non-imported drugs. The FDA hopes different NDC numbers will also support pharmacovigilance, accurate billing and reimbursement, and facilitate clearance of the imported drugs through customs.

CMS Releases Guidance on How Importation Impacts the Medicaid Drug Rebate Program

Following release of the final importation rule and guidance, CMS released two guidances on how importation impacts the drug rebates owed under the Medicaid Drug Rebate Program (MDRP); one guidance is directed at states while the other is for manufacturers.

Guidance to States Says SIP Drugs do not Meet Definition of Covered Outpatient Drug

In the guidance for state Medicaid programs, CMS concludes that drugs imported under SIPs would not meet the definition of a covered outpatient drug. CMS elaborates, saying that the statute governing the Medicaid drug rebates describes a covered outpatient drug as a drug approved under Section 505 of the Federal Food Drug and Cosmetic Act (FFDCA) but drugs imported under the final rule are defined to “meet the conditions” of an FDA-approved NDA or ANDA. CMS further says that the FDA indicates that under these importation programs, there will not be approval of an application under Section 505, and the drugs are not subject to an NDA or ANDA approval.

CMS’ conclusion that these imported drugs (referred to as SIP drugs) do not fall under the definition of covered outpatient drugs means that SIP drugs are not eligible for federal rebates under the MDRP and that manufacturers will not report the drugs purchased under these programs for Average Manufacturer Price (AMP) or best price purposes.

CMS does say that the drugs may be eligible for Medicaid federal financial participation (FFP) as prescribed drugs. FFP is the federal government’s share of state expenditures under Medicaid. To receive this, states will be required to assure that their state plan permits coverage of prescribed drugs that are not covered outpatient drugs and to specify a reimbursement methodology for impacted drugs. This reimbursement methodology can be an existing approved ingredient cost and professional dispensing fee for covered outpatient drugs if it includes language for a prescribed drug. A State Plan Amendment (SPA) can be submitted for a methodology to reimburse for ingredient cost and dispensing fee payment for these prescribed drugs if it is not already included in the state’s approved program.

Separate AMP to be Reported for MMA Product but Best Price to be the Same for Non-Imported and Imported Product

The guidance to manufacturers focuses on the importation pathway outlined in the FDA guidance that allows manufacturers to import their own drugs.

CMS states that MMA products can meet the definition of a covered outpatient drug. Accordingly, MMA products are approved under section 505 of the FFDCA (which includes NDAs and ANDAs) or they are biologics licensed under section 351 of the Public Health Service (PHS) Act, which are included in the statutory definition of covered outpatient drugs. To ensure payment under Medicaid for MMA products, manufacturers would have to have a Medicaid drug rebate agreement in effect, which is a statutory requirement for a covered outpatient drug to be paid by Medicaid.

The guidance also addresses calculation of Average Manufacturer Price (AMP). Manufacturers will report a separate AMP for the MMA product based on the sales of only the MMA product. This means that the imported and non-imported product will have separate AMPs. However, manufacturers will have to account for sales of the MMA product in determining best price.

CMS compares the reporting situation of both AMP and best price for MMA product and non-MMA product to that of a brand drug and authorized drug.