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Rx Reimportation: A Legislative History

November 1, 2002
By Demetrios L. Kouzoukas

In the absence of any Congressional action on a Medicare prescription drug benefit, some states have focused instead on immediate, incremental measures such as drug discount cards and drug reimportation.

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In the absence of any Congressional action on a Medicare prescription drug benefit, some states have focused instead on immediate, incremental measures such as drug discount cards and drug reimportation. The history of drug reimportation should be interest to its current advocates and critics alike.


Importing Our Exports

Drug reimportation refers to allowing prescription drugs produced for use in another country to be imported into the U.S. for sale here instead. Because these drugs were often originally manufactured in the U.S., and then exported abroad, their return to the U.S. has been termed “reimportation.”

Under current law, only pharmaceutical manufacturers themselves are allowed to reimport prescription drugs, and even then only under the Prescription Drug Marketing Act of 1988. They do—to the tune of $13 billion per year.

However, an amendment to the FY 2001 agricultural appropriations bill passed in October 2000, called the Medicine Equity and Drug Safety Act, opened up the possibility of drug reimportation by private importers.

That language required manufacturers or importers to certify to the Food and Drug Administration (FDA) that they tested reimported drugs for authenticity and degradation and to confidentially submit the test results to the FDA. The law also directed the FDA and General Accounting Office to conduct studies addressing compliance with testing requirements, effect on trade and patent rights, and effect on retail prices.

Finally, the law limited the potential source of reimported drugs—mainly the EU countries, Australia, Canada, Israel, Japan, New Zealand, Switzerland, and South Africa. It also provided $23 million in funding for FDA oversight of reimportation, such as the required batch testing to ensure authenticity and purity—a level of funding that was supposed to get the FDA started on a reimportation oversight program, and supposed to become available “only upon submission of an official budget request and justification of such amount by the president to the Congress.”

The legislation was largely pushed through by the efforts of Senators Byron Dorgan (D-North Dakota) and James Jeffords (I-Vermont, then Republican), who cited the support of former FDA Commissioner David Kessler and Secretary of the Department of Health and Human Services (HHS) Donna Shalala.


Clinton: “Empty Promise”

FDA officials and the drug industry contemporaneously expressed strong concerns that reimportation could facilitate entry of impure, counterfeit, or less efficacious drugs into the United States. Critics of drug reimportation also argued implementation of the law would cause manufacturers and wholesalers to curtail supplies in some markets and redirect them to others offering better margins.

One example is the recent redirection by wholesalers of supplies of Bayer's anti-anginal drug Adalat (nifedipine) intended for use in Spain and France to the United Kingdom, where the price is higher.

Although President Bill Clinton signed the Medicine Equity and Drug Safety Act into law on October 28, 2000 as part of an omnibus appropriations bill, he attached it as an “empty promise” and criticized the law because, he said, it contained “several loopholes that effectively render [it] meaningless.”

Specifically, Clinton cited the five-year sunset provision as discouraging investment and the ability of drug manufacturers to deny drug reimporters access to required FDA-approved labeling.

Then, Shalala repeated Clinton’s criticism when, on December 26, 2000, she refused to make the required determination that the law 1) posed no additional risk to public health and safety and 2) significantly lowered the cost of prescription drugs. Under its own terms, the drug reimportation provision could not go into effect without that determination. The Washington Post, New York Times, and Los Angeles Times praised Shalala’s decision.

The issue was revived, however, when Jeffords, a central proponent of drug reimportation and then Chairman of the Senate Health, Education, Labor and Pensions Committee, released a Congressional Research Service legal analysis that found Shalala’s decision “does not preclude” future HHS secretaries from making the prerequisite determination.


Bush: “Looking Doubtful”

Incoming HHS Secretary Tommy Thompson, in his confirmation hearing before Jeffords’ committee, promised he would “revisit Shalala’s determination.” During the campaign, President George W. Bush had said the reimportation plan “makes sense” as a way to provide “an immediate helping hand” to the elderly.

Accordingly, Jeffords and a bipartisan group of 15 other Senators and members of the House of Representatives repeatedly wrote Bush to ask Thompson to reverse Shalala’s decision. Nonetheless, the Bush administration remained non-committal in early 2001. When asked about drug reimportation, Press Secretary Ari Fleischer simply said, “Let me take that question and get back,” and “I don’t have anything for you on that.” Thompson was similarly cagey in his confirmation hearing and appearances in budget hearings.

Just in case, however, Representative Peter Deutsch (D-Florida) reintroduced in the 107th Congress a drug reimportation bill, H.R. 58, addressing the issues identified by Shalala. Another reimportation bill, H.R.698, is sponsored by Rep. Bernie Sanders (I-Vermont) and the Congressional Progressive Caucus.

When Bush’s new budget blueprint came out, it included an omen for the drug reimportation program—a $20 million cut from the $23 million set aside to implement it. The 90 percent budget cut, along with Thompson’s statement that such reinstatement is “looking doubtful,” signaled he would eventually follow Shalala’s lead in refusing to implement the program.

Thompson later did just that, explaining that the required certification “is a pretty difficult test. I can understand why [former Secretary] Shalala said it is difficult.” Thompson went on to say that “at first cut,” it is “impossible” to do such a certification and that “we would have to increase the number of inspectors by quite a large degree in order for us to certify that they’re the same drugs and that they’re going to be safe for the consuming public in America.”

In response, reimportation supporters, somewhat emboldened by the turnover in control of the Senate, from Republican to Democrat, resulting from Jeffords’ switch in party affiliation, succeeded in passing reimportation legislation in this Congress.

Reimportation efforts continue at the state level as well. Eastern Maine Healthcare, a five-hospital network in Maine, says it will operate an international mail-order pharmacy in Canada. The pharmacy will sell 90-day supplies of drugs to U.S. citizens through the mail, but at Canadian prices—so long as customers’ doctors have special “border licenses” to prescribe drugs in New Brunswick.

Reimportation attempts to borrow the benefits of price controls and other pharmaceutical industry regulations in other countries without bearing the concomitant economic costs in terms of potential loss of quality, consumer safety, and unintended changes in pharmaceutical companies’ sales and marketing practices. It seems certain such efforts will continue.

The main question surrounding reimportation will continue to be what extent reimportation also brings in these other costs along with lower prices.


Demetrios L. Kouzoukas is a lawyer at Gardner, Carton & Douglas who specializes in health law. He is a frequent contributor to Health Care News. The views expressed and implied herein are solely those of the author, and they are not to be attributed to Gardner, Carton & Douglas, nor copied or distributed without this disclaimer.

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