Fourth Circuit Affirms Injunction Against Drug Importation Scheme, Raising Compliance Stakes for Employer Plans Using Alternative Funding Programs

By: HUB’s EB Compliance Team

Though not a traditional benefits law case, a recent decision in Gilead Sciences, Inc. v. Meritain Health, Inc. has potential implications for employer plan sponsors of health plans. This case is among the first appellate rulings to address the legality of "alternative funding programs" ("AFPs"). AFPs are third-party vendors that self-funded employer health plans can use to source specialty medications from outside the U.S. at a lower cost than domestic pricing.

Case Background

The dispute originated with a single patient in a self-funded employer sponsored health plan. The patient's employer had separately contracted with an AFP to source certain medications internationally rather than through the plan's domestic pharmacy network. One such medication was Gilead's HIV drug Biktarvy. When the patient attempted to fill his Biktarvy prescription, the plan’s pharmacy benefit manager (“PBM”) rejected the claim and redirected him to the AFP, which routed the prescription through an affiliated pharmacy, and then to a prescription referral service, and then to a Turkish pharmacy. The patient received Biktarvy labeled entirely in Turkish, lacking Food and Drug Administration (“FDA”)-required warnings and other safety information found on the U.S. version of the drug.

In 2024, Gilead filed suit alleging that the AFP-affiliated vendors directly infringed its trademarks under the Lanham Act by distributing foreign-market medications that materially differed from the domestic product. The lawsuit also alleged that the plan’s Third Party Administrator (“TPA”) and PBM were contributorily liable for continuing to supply data, claims-processing, and system-routing services despite knowing or having reason to know of the infringing conduct. The district court granted Gilead's motion for a preliminary injunction, and the Fourth Circuit recently affirmed.

The Court's Reasoning

The Fourth Circuit's decision rested on two trademark-related concepts that often apply to "gray-market" goods, namely the notions of material differences and quality control. Although the foreign-sourced Biktarvy was chemically identical to the U.S. version, the court found it was not "genuine" under the Lanham Act because it lacked the labeling, safety warnings, and patient information required domestically, and because it bypassed Gilead's quality-control, chain-of-custody, and recall systems. Since the imported product was not genuine, its distribution was likely to confuse consumers and therefore likely infringed Gilead's trademarks.

Implications for Employer-Sponsored Plans

The Fourth Circuit's ruling affirms a preliminary injunction and is not a final judgment. The underlying case remains pending in the District of Maryland, where Gilead's claims will proceed.

While the injunction is against the AFP vendors and their TPA/PBM partners rather than against any plan sponsors directly, the ruling raises several compliance considerations for employer plan sponsors that use, or are considering using, AFP arrangements:

Liability can reach beyond the AFP vendor itself. The court found the plan’s TPA and PBM liable simply because they knew, or should have known, that they were supporting an illegal importation scheme. Employers using an AFP should understand that their other vendors, including TPAs and PBMs, could face similar exposure just for knowingly facilitating the arrangement. That risk may affect how willing those vendors are to keep supporting an AFP relationship, which may also create overall complications in handling the benefit for the plan sponsor themselves.

This ruling doesn't change the underlying legal risk of AFPs. Federal law already restricts importing drugs that aren't FDA-approved for U.S. sale. This decision simply confirms that drug manufacturers can also sue over these arrangements using trademark law, giving them another legal tool beyond waiting on FDA enforcement.

Choosing an AFP is a fiduciary decision. Under ERISA, plan sponsors must document a careful, reasoned process when selecting benefit vendors. Given the mounting legal challenges and safety concerns tied to AFPs, plan sponsors should be able to show that they weighed those risks against the cost savings before adopting an AFP or continuing to use one.

Patient safety is a real concern, separate from the lawsuit. The court's findings point to practical gaps in AFP-sourced medications — no temperature-controlled shipping, no way to trace the drug back if something goes wrong, and no way to notify patients of a recall. These are risks to plan participants regardless of how the litigation ends.

Vendor relationships may get harder. TPAs and PBMs now have their own reason to worry about liability. Expect them to add new contract requirements, ask for more documentation, or simply refuse to support AFP-related claims and data-sharing going forward.

Conclusion

The ultimate outcome of this case may influence how other pharmaceutical manufacturers pursue similar claims against AFP vendors and their TPA/PBM partners. Although the ruling does not resolve the underlying case or directly bind plan sponsors, it substantially increases the legal and reputational risk associated with AFP arrangements. Plan sponsors currently using or evaluating these programs should revisit that decision with input from legal counsel, particularly given the unsettled and evolving nature of this litigation.

If you have any questions, please contact your HUB advisor. View more compliance articles in our Compliance Directory.

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Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only and is not intended to constitute legal or tax advice as to an organization's or individual's specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and Hub International does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization's specific situation in light of your or your organization's particular needs.