Health Plans in the Cross Hairs: FDA Gets Tough on Imported Prescription Drugs Plans Could Face Criminal, Civil Liability

In a recently released letter, FDA has staked out a tough new position against importation of prescription drugs purchased in Canada. The agency has let industry know that, at least in FDA's view, health plans that provide coverage for prescription drugs purchased abroad will, in most circumstances, be violating the law and could face civil and criminal enforcement action. Although it's not clear how aggressive FDA enforcement will be, health plans and other businesses that might consider opportunities created by Canadian drug pricing should take the agency's position - and its strong statement - seriously.

Background - FDA Policy on Importation

Generally, the Food, Drug, and Cosmetic Act prohibits importation of foreign-manufactured drugs or reimportation of US-manufactured drugs that have been exported. Over the years, however, FDA has exercised enforcement discretion in this area, at least with regard to individual consumers. The agency has adopted a policy under which, as a practical matter, individuals have been able to bring a three-month supply of drugs into the country for personal use, without FDA or Customs taking exception. There has been less flexibility with regard to commercial undertakings; FDA has taken action against businesses that actively solicit foreign drug purchases from US consumers or otherwise try to exploit (in the agency's view) the personal importation policy.

Because Canadian drugs often are priced at a fraction of what they sell for in the US, the past few years have seen a significant increase in consumer purchases of Canadian drugs, and of organized activities in this area. Internet-based pharmacies that focus on Canadian prescriptions for US consumers and drug-buying bus trips in border states (some led or sponsored by elected officials) are among the better known undertakings. Not surprisingly, prescription drug manufacturers have been calling for stepped-up FDA action. Although the agency has taken pains to emphasize the limited circumstances in which the personal importation policy is intended to apply, not much more has happened. In this context, the strong, direct statement aimed at health plans is all the more ominous.

Health Plan Liability

In FDA's view, although it is theoretically possible for a prescription to be legally filled by a Canadian pharmacy, in practice "[v]irtually all shipments of prescription drugs imported from a Canadian pharmacy will fun afoul of" the Food, Drug, and Cosmetic Act (FDCA). Shipments would violate the FDCA, the agency explains, because the drug would likely be unapproved in the US (approvals are manufacturer- and product-specific), and may well be misbranded (most likely for failure to meet labeling specifications) or adulterated (by not being manufactured in accordance with FDA regulations). Additionally, even if the drug were manufactured in the US (and presumably legal), once exported it can be imported back into the US only by the US manufacturer.

The FDCA prohibits, among other things, interstate shipment of a drug that is unapproved, adulterated or misbranded. The Act also prohibits "the causing" of any such prohibited act, and that could be the basis for health plan liability, FDA states. The liability for such violations can be civil (remedies include injunctive relief) or criminal. Misdemeanor violations are strict liability offenses (felonies require intent to defraud or mislead, or a prior conviction), and it is long established that individuals can face personal liability for corporate acts that violate the FDCA. More generally, entities and individuals may face criminal liability for aiding and abetting criminal violations, or conspiring to violate the FDCA.

Implications for Health Plans

FDA's letter on health plan liability came in response to a hypothetical question posed to the agency, and does not necessarily mean the agency intends to devote significant resources to enforcement in this area. Having made such a strong statement, however, FDA might find it hard to avoid taking action if it became aware of a health plan offering coverage for Canadian prescriptions. And in the current climate, any health plan that would condone or encourage Canadian prescriptions should expect FDA to become aware of those actions. Health plans and others considering business activities related to foreign prescription drugs should act with care.

Click here for a copy of the FDA letter.