Guide to the Trump Administration's Drug Importation Final Rule and Guidance

On September 24, 2020, the Secretary of Health and Human Services (the HHS Secretary) and the Food and Drug Administration (FDA or Agency) issued a final rule (the Final Rule) implementing a provision of law allowing the commercial importation of certain prescription drugs from Canada through FDA-authorized, time-limited programs sponsored by states or Indian tribes, and, in certain future circumstances, pharmacists and wholesalers.¹ On the same day, FDA released a final guidance for industry (the Final Guidance) detailing procedures for drug manufacturers to import FDA-approved prescription drug, biological, and combination products that were manufactured abroad and authorized and intended for sale in a foreign country (multi-market approved products or MMA Products).² In issuing the Final Rule and Final Guidance, the Department of Health and Human Services and FDA finalized proposals first described in a July 2019 Safe Importation Action Plan, and in a subsequent December 2019 proposed rule and draft guidance. A summary of the earlier proposals is available here.  

Please see below for an overview of the key aspects of the Final Rule and Final Guidance. The Final Rule, which was published in the Federal Register on October 1, 2020, is set to take effect November 30, 2020.

Overview of Section 804 Importation Pathway Final Rule

The Final Rule implements Section 804(b) through (h) of the Federal Food, Drug, and Cosmetic Act (FDCA) to allow importation of eligible prescription drugs shipped from Canada through Section 804 Importation Programs (SIPs). As detailed herein, a SIP would be proposed by a SIP sponsor (SIP Sponsor) responsible for overseeing the SIP, a foreign seller (Foreign Seller) in Canada would purchase the eligible prescription drug from the manufacturer, and the drug would be imported into the US by an importer (Importer) following authenticity and degradation testing and relabeling.

Section 804 becomes effective only if the HHS Secretary certifies to Congress that importation will pose no additional risk to the public's health and safety, and will result in significant reduction in the cost of covered products to the American consumer. The preamble to the Final Rule explains that the HHS Secretary has made this certification to Congress concurrently with the issuance of the rule.

SIP Sponsors: SIP Sponsors are responsible for oversight of the implementation of the SIP.  The Final Rule initially limits SIP Sponsors to state or Indian tribes that regulate wholesale drug distribution and the practice of pharmacy, and allows co-sponsorship by a State, Indian Tribe, pharmacist, or wholesaler. However, the Final Rule leaves open the possibility of a SIP being sponsored by a pharmacist or wholesaler at a later date. The Final Rule provides that after an initial two-year period beginning on the date of first import entry under any authorized SIP, the HHS Secretary may determine, based on experience under the program, that there is sufficient likelihood that a proposal that does not include a state or Indian tribe as the SIP Sponsor could provide the same level of assurance of safety as a proposal that does include such a sponsor, such that FDA may begin receiving, reviewing, and potentially authorizing applications for SIPs without a State or Indian Tribe sponsor. After the HHS Secretary makes such a determination, a pharmacist or wholesaler may propose a SIP that does not include a state or Indian tribe as a sponsor, and FDA may authorize such a SIP if the SIP Sponsor demonstrates that the SIP meets the criteria for authorization with the same level of assurance of safety as a proposal that includes a state or Indian tribe as the SIP Sponsor.

Eligible Prescription Drugs: Importation through a SIP is limited to "eligible prescription drugs." The Final Rule defines the term to mean a drug subject to Section 503(b) of the FDCA that has received a Notice of Compliance and a Drug Identification Number (DIN) from the Health Products and Food Branch of Health Canada (HPFB), and, but for the fact that it deviates from the required US labeling, also meets the conditions in an FDA-approved new drug application (NDA) or abbreviated new drug application (ANDA) for a drug that is currently commercially marketed in the US. FDA explains that "[e]ssentially, eligible prescription drugs, are those that could be sold legally on either the Canadian market or the American market with appropriate labeling."³

The term "eligible prescription drug" excludes certain specified categories of products, including biological products, controlled substances, infused drugs, intravenously injected drugs, drugs inhaled during surgery, intrathecally or intraocularly injected drugs, and drugs subject to a risk evaluation and mitigation strategy (REMS). In the preamble to the Final Rule, FDA addresses several comments it received that the Agency exclude additional categories of drug products from the "eligible prescription drug" definition. Although FDA declined to exclude additional categories at this time, for products not excluded by the Final Rule, FDA intends to determine whether the product can be imported safely in the context of a specific SIP proposal on a product-by-product basis, including, for example, sterile drugs; drugs requiring special storage conditions such as temperature controls; or drugs intended to be used solely with a specific, separately distributed delivery system (such as may be the case for drug constituent parts of cross-labeled combination products).⁴

Foreign Sellers and Importers: The Final Rule requires that the SIP proposal identify the Foreign Seller in Canada that will purchase the eligible prescription drug directly from its manufacturer, and the Importer in the US that will buy the drug directly from the Foreign Seller. The Final Rule initially limits SIP Sponsors to designating only one Foreign Seller and one Importer per proposal, but additional Foreign Sellers and Importers can later be added through a supplement process.

The Final Rule defines a Foreign Seller to mean an establishment within Canada engaged in the distribution of an eligible prescription drug that is imported or offered for importation into the US. A Foreign Seller must be registered with FDA under Section 804 of the FDCA, have an active drug establishment license to wholesale drugs by Health Canada, be registered with the provincial regulatory authorities to distribute HPFB-approved drugs, and must not be licensed by a provincial regulatory authority with an international pharmacy license that allows it to distribute drugs that are approved by countries other than Canada and that are not HPFB-approved for distribution in Canada.

In response to concerns about finding a Foreign Seller to obtain the eligible prescriptions drugs identified in a SIP proposal, FDA revised the Final Rule from what was initially proposed to provide for a phased review of a SIP proposal that does not identify a Foreign Seller in an initial submission but otherwise meets the requirements of the Final Rule. The Final Rule requires that the Foreign Seller be identified within six months of the initial submission of the SIP proposal.

Under the Final Rule, an Importer must be a state-licensed pharmacist, or a state- or FDA-licensed wholesale distributor, who is the US owner of the eligible prescription drug at the time of entry into the US. Further, the Importer's pharmacist license or wholesale distributor license (if issued by a State and not FDA) must be issued by a State that is a SIP Sponsor or SIP co-sponsor. Responsibilities of Importers are described in 21 C.F.R. § 251.12. Notably, those responsibilities include examining the Canadian labeling of a sample of each shipment to verify that the labeling is that of the HPFB-approved drug, and ensuring that the drug is relabeled with the required US labeling as further detailed in the Final Rule.

Importation Process: The process begins with submission of a SIP proposal by a SIP Sponsor. Specific information that must be included in a SIP proposal is detailed in final 21 C.F.R. § 251.3. Significantly, the Final Rule appears to provide FDA discretion not to authorize a SIP request, even where the SIP proposal meets the requirements of the rule.⁵Unless an extension is granted, authorization for a SIP automatically terminates after two years. Once FDA authorizes a SIP, an eligible prescription drug may not be imported or offered for import until the Importer has filed a pre-import request (Pre-Import Request) as further detailed in 21 C.F.R. § 251.5.

The Final Rule sets out a number of steps to be taken to ensure that the supply chain is secure and importation will pose no additional risk to the public's health and safety. One of the requirements is that either the manufacturer or the Importer must conduct testing of the eligible prescription drug for authenticity, degradation, and to ensure that the eligible prescription drug is in compliance with established specifications and standards (referred to as "Statutory Testing"). If the manufacturer does not perform the Statutory Testing, the Importer is required to arrange for Statutory Testing by a qualified laboratory in the US. The Importer must also ensure that the drug complies with all labeling requirements under the FDCA. If Statutory Testing is performed by the Importer, the manufacturer of the eligible prescription drug is required to supply the information the Importer needs to authenticate the drug and to confirm its labeling complies all FDA labeling requirements.

The logistics and timing of the importation entry filing, statutory testing, and relabeling processes are detailed in the Final Rule. In accordance with Section 804(c)(3) of the FDCA, the Final Rule also sets forth post-importation requirements, including pharmacovigilance requirements

Drug Supply Chain Security Act (DSCSA) Considerations: Additionally, the Final Rule subjects both Foreign Sellers and Importers to supply chain security controls. Among other requirements, Foreign Sellers are required to affix a Section 804 serial identifier (SSI) to, or imprint the SSI on, each package and homogenous case of the eligible prescription drug(s). The Final Rule clarified that Importers must facilitate affixation or imprinting of a product identifier on each package or homogenous case for all eligible prescription drugs upon receiving it from the Foreign Seller. This includes a scenario where the Importer intends to dispense product directly to patients, a change made in the Final Rule in response to comments. The Final Rule explained that such requirement is necessary to "facilitate verification activities through the Importer's maintenance of records associating the product identifier at the package level with the SSI that had been placed by the Foreign Seller, thus enhancing supply chain security."⁶

The Final Rule, however, finalized the exemption that Importers that are wholesalers or dispensers are exempt from the DSCSA requirement to not accept ownership of a product unless the previous authorized trading partner provided the transaction history, transaction history, and transaction statement,⁷despite objections from commenters that such exemptions would create a path for counterfeit or unsafe drugs to enter the US supply chain. FDA cited to its explicit authority under the DSCSA to create exemptions through FDA guidance and explained that such exemption was necessary to fully implement the SIP.⁸ Instead, the Importer must confirm if the imported product includes the foreign seller-affixed SSI, the original Canadian labeling, and the Canadian DIN, as provided to the importer by the Foreign Seller.⁹

Labeling: Under the Final Rule, at the time an eligible prescription drug is sold or dispensed, the labeling of the drug must be the same as the FDA-approved labeling under the applicable NDA or ANDA with certain specified exceptions. Those exceptions include that the drug must bear the Importer's national drug code (NDC) number (and no other NDC), the lot number assigned by the manufacturer, and the name and place of business of the Importer. The labeling must also contain the statement ''[This drug was/ These drugs were] imported from Canada without the authorization of [Name of Applicant] under the [Name of SIP Sponsor] Section 804 Importation Program.''

Manufacturers: One area of ambiguity in the Final Rule is with the definition of "manufacturer." The Final Rule sets forth certain disclosure and other requirements that apply to the manufacturer of an eligible prescription drug. For instance, the Final Rule requires that, upon request by the Importer, the manufacturer provide an attestation and information statement that establishes that the drug proposed for import, but for the fact that it bears HPFB-approved labeling, meets the conditions in the FDA-approved NDA or ANDA. Another example is that the manufacturer must, upon the Importer's request, provide certain manufacturing batch records. The manufacturer must also, upon request of the SIP Sponsor or Importer, provide written authorization for the Importer to use the drug's FDA-approved labeling at no cost. If the manufacturer fails to do so, the Final Rule provides that FDA may deem the authorization to have been given.

The Final Rule defines "manufacturer" to mean the NDA or ANDA applicant, or a person who owns or operates an establishment that manufactures an eligible prescription drug. The definition further provides that "manufacturer" also means a holder of a drug master file (DMF) containing information necessary to conduct the Statutory Testing, prepare the manufacturer's attestation and information statement, or otherwise comply with Section 804 of the FDCA or the Final Rule. Because for some drugs (e.g., contract-manufactured drugs), the entity that holds the NDA/ANDA is different from the entity that manufactures the drug and/or the entity that holds the DMF, the definition calls into question how FDA would determine which such entity is considered an eligible prescription drug's manufacturer for purposes of the Final Rule.

FDA's preamble response to a comment proposing that FDA define "manufacturer" to include only NDA/ANDA applicants suggests that the Agency expects the Importer to determine the entity that is the manufacturer of an eligible prescription drug. The Agency in its response states that "[a]n Importer will determine which manufacturer, as defined in the rule, has the information needed, in particular for the Pre-Import Request, and will send a request for information to the appropriate manufacturer, which might not be the applicant."¹⁰ By way of example, the Agency explains that the Importer may send a request for batch and stability testing records to the facility that manufactured the eligible prescription drug and that entity would be required to provide those records if the records are in the facility's possession or control.

Notably, the proposed rule included a provision allowing FDA to transmit information that the manufacturer is required to provide to an Importer if the manufacturer had not transmitted such information to the Importer in a timely fashion and if such information is available to FDA in the NDA or ANDA. In explaining its reasoning for not finalizing that provision, FDA remarks that manufacturers are required to provide the Statutory Testing information themselves, and, if they fail to do so, they will have committed a prohibited act under Section 301(aa) of the FDCA.¹¹ The Agency also points to Section 303(b)(6) of the FDCA providing for a prison term of up to 10 years for manufacturers or Importers that knowingly fail to comply with a requirement of Section 804(e) of the FDCA.¹²

Cost Savings Requirement: As a part of a SIP Sponsor's SIP proposal, the importation plan must "clearly articulate," "in a manner sufficiently detailed to allow for a meaningful evaluation," how the SIP Sponsor will ensure that the SIP will "result in a significant reduction in the cost to the American consumer." FDA clarifies that the information needed to demonstrate this anticipated cost savings will be dependent on the specific proposal. FDA suggests that a SIP Sponsor might demonstrate this expected cost savings by comparing either (1) the anticipated costs or prices to the consumer or (2) the current retail cash price, of each eligible prescription drug that the SIP Sponsor seeks to import.

FDA notes that if the cost savings do not go to the consumer directly (e.g., they accrue to a healthcare provider, payor, or state-run program), the SIP proposal would need to show that the SIP will nonetheless result in a significant reduction in the cost of covered products to the American consumer, presumably through the reduction of cost-sharing expenses. In the context of state-run programs, FDA suggests a sponsor might demonstrate that savings are passed on to consumers in other ways, such as increasing the number of people covered by a state program, or increasing the availability of drugs covered by the program. However, FDA emphasizes that a SIP proposal cannot demonstrate cost savings in connection to a government program if the eligible prescription drugs to be imported do not meet the program's requirements.

CMS Medicaid Drug Rebate Program Guidance: On September 25, 2020, the Centers for Medicare and Medicaid Services (CMS) issued a Medicaid Drug Rebate Program (MDRP) Notice for State Medicaid Programs, which contains guidance regarding eligible prescription drugs.¹³ Based on FDA guidance, because "there will not be approval of an application under Section 505, and [eligible prescription drugs] will not be subject to an NDA or ANDA approval," CMS has concluded that these products do not meet the definition of "covered outpatient drugs" that would subject the products to the MDRP's price reporting and rebating requirements.¹⁴

Overview of Final Guidance MMA Pathway

In contrast to the Final Rule, the Final Guidance details procedures for drug manufacturers themselves to import certain products, referred to as MMA Products, into the US. The Final Guidance describes: (i) recommended labeling changes for MMA Products; (ii) the process and recommendations for submitting a supplement to an approved FDA application for an MMA Product; (iii) the process and recommendations for registering, listing, and obtaining an NDC number for the MMA Product; (iv) recommendations for issuing Dear Healthcare Provider Letters; (v) DSCSA requirements for MMA Products; (vi) recommendations for importing MMA Products; and (vii) other FDA requirements applicable to MMA Products.

A manufacturer (i.e., the NDA or Biologics License Application (BLA) holder) may import an MMA Product if, consistent with Section 801(d)(1)(b) of the FDCA, the product is manufactured outside the US and the manufacturer has authorized the drug, and has caused the drug to be labeled, to be marketed in the US. An MMA Product must also comply with all other applicable requirements of the FDCA and related laws, including not being adulterated or misbranded.

Eligible Products: Under the Final Guidance, a MMA Product is an FDA-approved prescription drug, FDA-licensed biological product, or combination product approved under an NDA or BLA that: (i) was originally manufactured outside of the US and is authorized for marketing by a foreign country's regulatory authority; (ii) is subject to an NDA or BLA supplement as discussed below; (iii) is imported into, and authorized by the manufacturer to be marketed in, the US; (iv) meets quality standards of the approved NDA or BLA; (v) continues to meet quality standards for marketing in the originally-intended foreign market; and (vi) differs only from the FDA-approved or FDA-licensed product with respect to the labeling statement discussed below.

MMA Products do not include biological products that are not licensed under Section 351(a) or 351(k) of the Public Health Service Act, or certain blood and blood component products and allogeneic cellular and tissue-based products. Notably, for cross-labeled combination products that include a separately distributed device constituent part, only the drug or biological constituent part would constitute a MMA Product.

Labeling: MMA Products, like any FDA-approved prescription drug, must bear, and be accompanied by, the FDA-approved labeling (e.g., container label, carton and package labeling, Prescribing Information) in accordance with FDA requirements. However, the Final Guidance recommends that, with the exception of FDA-approved patient labeling, MMA Product labeling include statements and markers to distinguish it from a non-MMA Product. Moreover, FDA recommends that the Prescribing Information, as well as the aforementioned labeling, contain a statement that the MMA Product was imported in accordance with the Final Guidance's procedures.

NDA and BLA Supplements: Manufacturers are required to follow all regulatory and statutory requirements regarding changes to their applications. Notably, FDA recommends that manufacturers seeking to market a MMA Product submit a labeling supplement because the above labeling statements would not be appropriate for submission in an annual report. Section IV of the Final Guidance details information to be submitted in an NDA and BLA supplement and recommends providing supporting information in an attestation. For example, FDA recommends that NDA and BLA supplements include: (i) information to demonstrate that the MMA Product is the FDA-approved/licensed product and is manufactured in accordance with the FDA-approved NDA/BLA except for the labeling differences discussed above; (ii) information establishing that the MMA Product meets all of the specifications in the chemistry, manufacturing, and controls section of the NDA/BLA; and (iii) the potential impact of shipping conditions, including holding and warehousing, necessary to import the MMA Product on the identity, quality, purity, or potency of the MMA Product and supporting data.

FDA also recommends that manufactures issue a Dear Healthcare Provider Letter upon approval of an NDA or BLA supplement for a MMA Product to help healthcare providers distinguish an MMA Product from a counterfeit or unapproved product.

NDC Considerations: Generally, manufacturers should follow the procedures in 21 C.F.R. Part 207 to obtain an NDC for their MMA Product. FDA acknowledges that the manufacturer may change the labeler or product code; however, the Agency recommends obtaining a new labeler code. The Agency further recommends that changes to the NDC should not be limited to the package code. FDA further recommends that MMA Products be listed under the recently implemented "multi-market approved products" marketing category.

DSCSA Considerations: MMA Products are subject to all applicable requirements of the DSCSA. MMA Products should be imported by its manufacturer or an authorized trading partner (as defined under the DSCSA), when facilitated by the manufacturer. The DSCSA also requires manufacturers to affix or imprint product identifiers to the MMA Product (each package and homogenous case of a product), and the Final Guidance recommends that manufacturers affix such product identifier at the same time the FDA-approved label is applied. Manufacturers and trading partners must also exchange product track and trace information for MMA products (e.g., transaction information, transaction history, transaction statement) for each transaction (change of ownership). Trading partners must also continue to have product verification systems in place, including to verify requests from other trading partners regarding whether an MMA product is suspect or illegitimate.

CMS Medicaid Drug Rebate Program Guidance: On September 25, 2020, in addition to the guidance released related to eligible prescription drugs under a SIP, CMS issued MDRP Manufacturer Release No. 114, which contains guidance regarding the drug price reporting implications of MMA Products imported under the Final Guidance.¹⁵ CMS clarified that MMA Products can be considered "covered outpatient drugs," as defined under the Medicaid Statute, because they are FDA-approved or FDA-licensed prescription products. Therefore, in order for Medicaid and Medicare reimbursement to be available for MMA Products, any manufacturer with an active National Drug Rebate Agreement for the MDRP would need to comply with all price reporting requirements of the Medicaid Statute and CMS' regulations.

Regarding the price reporting implications of these drugs, CMS suggests that MMA Products should be treated similarly to authorized generic drugs. In CMS' view, because an "MMA product is a drug that the manufacturer approves, allows, or otherwise permits to be sold under the manufacturer's NDA," the sale of such drugs in the US alongside equivalent non-MMA Products should be considered "akin to that of a brand drug and an authorized generic product."

Recently, in light of legislative revisions to the Medicaid Statute that became effective in October 2019, CMS updated its guidance regarding the calculation of authorized generic drugs. In particular, Manufacturer Release No. 112 directs that, when the same manufacturer (or affiliated companies) sells both the branded and authorized generic version of a drug, Average Manufacturer Price (AMP) should be calculated separately and "one single" Best Price should be reported across the products.¹⁶ In applying this guidance to MMA Products, Manufacturer Release No. 114 notes that "the separate AMP calculation could also apply in the context of the manufacturer's calculation of the AMP for the non-MMA product and the MMA product." For Best Price, CMS reiterates that "the MMA product/non-MMA product scenario should be viewed similarly to that of the brand drug and authorized generic drug scenario" described in Manufacturer Release No. 112. Best Price therefore would "be reflective of the lowest price available to any entity for any such drug sold under a manufacturer's NDA"—thus suggesting that Best Price would be reported as the lowest price actually realized by the manufacturer across either the MMA or non-MMA Product.

In the absence of specific guidance on a particular issue, CMS encourages manufacturers to adopt reasonable assumptions for their calculation approaches. A record of any such reasonable assumptions should be maintained within the manufacturer's files.

© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.