By: HUB’s EB Compliance Team

As has been widely reported, the Food and Drug Administration (“FDA”) started the new year off by approving the state of Florida’s application to bulk purchase drugs from Canada, subject to several conditions. Although this is a significant development, it is based on a pre-existing FDA authority that specifically allows states to import drugs from Canada. By contrast, the FDA has not approved any corresponding rule that would enable plans or individuals to do so. This means that prescription drug importation by group health plans and individuals is still generally considered illegal, except in very limited circumstances.

Import Duties

Currently, under Section 804 of the Food, Drug, and Cosmetic Act (the “Act”), states and tribal governments, but no one else, can apply to the FDA to bulk import drugs from Canada if they can show that it will significantly reduce costs without sacrificing safety. The application process is extensive. (Approval took Florida three years.) 

Further, as a condition of approval, in addition to other requirements:

  • any importer of drugs must submit a pre-import request to the FDA,
  • the drugs must be examined by a government agency,
  • the manufacturer or the importer must test the drugs for authenticity, degradations, and to ensure they meet certain FDA-required standards; and
  • the drugs must be relabeled in accordance with FDA requirements.

In addition, the FDA specifically excluded certain drug categories from Florida’s approval. For example, biologics and infuse medications were singled out for omission. Therefore, it is not as simple as ordering the drugs online and having them shipped to Florida. Before the drugs can be used, they must go through this extensive process.

Lack of Export Supplies?

Of course, this assumes that there are sufficient drugs available in Canada for importation. The Canadian government has an interest in making sure its drug supply is available for Canadians. Health Canada has issued a statement saying they will restrict external sales of Canadian drugs if it would cause a shortage in Canada. As a result, Florida may be approved to import, but Canada may be unwilling to export.

Import(ant) Considerations for Plans and Individuals

Although, as noted above, prescription drug importation by plans and individuals remains technically illegal, there is an extremely-limited FDA non-enforcement policy. Under the policy, even though importing drugs from outside the U.S. technically does not comply with federal law, the FDA will not penalize individuals in two situations:

  1. An individual suffers from a serious condition where there is no FDA-approved treatment. As a result, they obtain treatment from overseas and bring it into the U.S.; or
  2. An individual began treatment overseas (such as becoming ill during a vacation) and needs to bring the remainder of their medication back with them into the U.S.

Even then, the FDA FAQs on this policy make clear that the FDA may nevertheless choose to refuse entry to the drugs. They say, in part, that this non-enforcement policy “is not, however, a license for individuals to import unapproved (and therefore illegal) drugs for personal use into the U.S.”

The penalty for an initial violation is up to one year in prison, a fine of up to $1,000 or both. For additional violations, the penalty per-violation increases to up to three years in prison, up to a $10,000 fine, or both. HUB has a more extensive piece detailing these restrictions as well as other risks associated with drug importation that is available on request.

Conclusion

While the FDA approval of Florida’s plan is noteworthy, as noted above, it is not without several hoops the Sunshine State must jump through. Most importantly, the FDA’s approval does not change the analysis for plans or individuals for whom drug importation is still illegal. While this Florida approval may be the first step in potential future importation approvals, it is only that: a first step. Plan sponsors will need to continue to source drugs domestically until further notice.

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

NOTICE OF DISCLAIMER

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 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 organization’s particular needs.