|Footnotes for this article are available at the end of this page.
On September 25, 2020, the U.S. Food and Drug Administration issued a final rule entitled, “Importation of Prescription Drugs,” to implement Section 804(b) through (h) of the Federal Food, Drug, and Cosmetic Act (FD&C Act).1 The rule allows FDA-authorized programs to import certain prescription drugs from Canada under specified conditions designed to ensure that the imported drugs pose no additional risk to the public’s health and safety, as well as to provide a “significant reduction” in costs to American consumers.2 The final rule goes into effect on November 30, 2020.3
We will highlight the key points from the Final Rule in this Bulletin:
Key Terms and Participants
Eligible Prescription Drug
A prescription drug that has been approved and has received a Drug Identification Number (DIN) from Health Canada, and 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 U.S.
The following prescription drugs are excluded: controlled substances; biological products; infused drugs; intravenously injected drugs; drugs inhaled during surgery; intrathecally or intraocularly injected drugs; drugs subject to a Risk Evaluation and Mitigation Strategy (REMS) under Section 505-1 of the FD&C Act; and drugs that are not “products” for purposes of the Drug Supply Chain Security Act (blood or blood components intended for transfusion; radioactive drugs and biologics; imaging drugs; medical gases; homeopathic drugs; compounded drugs).
Section 804 Importation Program (SIP)
A time-limited program that has been authorized by FDA for the importation of eligible prescription drugs from Canada.
Section 804 Importation Program Sponsor (SIP Sponsor)
A State or Indian Tribe that initially submits a proposal to FDA describing a program to facilitate the importation of prescription drugs from Canada, and is responsible for oversight of the program. An import program may be co-sponsored by a State, Indian Tribe, pharmacist, or wholesale distributor. After an initial 2-year period, FDA may determine, based on experience under a SIP, that a pharmacist or wholesaler may serve as a SIP sponsor.
A person who owns or operates an establishment that manufactures an eligible prescription drug.
An establishment within Canada that purchases eligible prescription drugs for importation directly from the Manufacturer. The Foreign Seller must have an active license to “wholesale drugs” by Health Canada, be registered with Canadian authorities, and be registered with FDA as a Foreign Seller. The Foreign Seller ships the drugs directly to the Importer in the U.S.
A U.S. State-licensed pharmacist, or a State or FDA-licensed wholesale distributor (license must be issued by a State that is a SIP Sponsor or Co-Sponsor). The Importer buys the eligible drugs directly from the Foreign Seller, and is responsible for: proposing an NDC number for assignment for each eligible drug imported; screening eligible prescription drugs; ensuring eligible drugs are relabeled with the required U.S. labeling (including container and carton labeling, Prescribing Information, and all patient labeling); arranging for an entry to be submitted to U.S. Customs; submitting adverse event, field alert, and other reports; and complying with drug recalls.
The required testing of an eligible prescription drug that is done to establish the approved Canadian drug conforms to the specifications in the NDA or ANDA for the drug’s FDA-approved counterpart. Includes testing for authenticity, degradation, to ensure the drug is in compliance with established specifications and standards, and was manufactured in accordance with the conditions described in the NDA or ANDA.
The Manufacturer or Importer must conduct or arrange for the Statutory Testing to be conducted by a Qualifying Laboratory on a statistically valid sample of the batch or shipment. A Qualifying Laboratory must have ISO 17025 accreditation, a satisfactory FDA inspection history, and must comply with applicable current good manufacturing requirements.
The Manufacturer or Importer must submit to FDA a complete set of laboratory records, a description of the sampling method, the testing protocols used, complete testing data to ensure that the eligible drug meets the specifications in the NDA or ANDA, and any additional information FDA deems necessary. After FDA has reviewed the testing results and determined that they are acceptable, FDA will notify the Importer and then the Importer must relabel the eligible drugs with the required U.S. labeling.
Section 804 Importation Programs
A SIP Sponsor must initially designate only one Manufacturer, one Foreign Seller, and one Importer (a limited supply chain).
A SIP Proposal must include:
- an importation plan
- the name and DIN of each eligible prescription drug the sponsor seeks to import
- the names and addresses of the Foreign Seller and Importer
- a recall, return, and compliance plan; and
- how the sponsor will ensure that the eligible prescription drugs meet the aforementioned Statutory Testing requirements, the supply chain is secure, the labeling requirements of the FD&C Act are met, and the SIP will result in a significant reduction in the cost to the American consumer of the eligible prescription drugs the SIP Sponsor seeks to import.
Based on a review of a submitted SIP Proposal, FDA may authorize a SIP, modify a SIP, or extend the authorization period of a SIP.
However, FDA may decide not to authorize a SIP proposal that meets the requirements in the rule, for a number of reasons, including
- potential safety concerns
- uncertainty that the proposal protects public health
- recommendations by an HHS component that the SIP proposal would not result in significant cost savings
- potential for conflicts of interest; or
- in order to limit the number of authorized SIPS so FDA can carry out its responsibilities under the FD&C Act.
SIPS will be approved initially for two years, but could be reauthorized for additional periods. FDA may suspend or revoke authorization of a SIP.
Labeling of Eligible Prescription Drugs
At the time the 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, except that the labeling must bear conspicuously (among other things): the Importer’s NDC for the drug; the lot number assigned by the Manufacturer; and the statement: “This drug was imported from Canada without the authorization of [name of manufacturer] under the [name of SIP Sponsor] Section 804 Importation Program.”
Supply Chain Security Requirements for Eligible Prescription Drugs
- The Foreign Seller must ensure that a Section 804 Serial Identifier (SSI) (a unique alphanumeric serial number) is affixed to or imprinted on each package and homogenous case intended for sale to the Importer in the U.S.
- The Importer must purchase the drug directly from a Foreign Seller in Canada. The Importer must ensure that a Product Identifier is then affixed or imprinted on each package or homogenous case it receives from the Foreign Seller. The Product Identifier must include an NDC Code, a unique alphanumeric serial number, lot number, and expiration date in both human and machine-readable format.
- Records must be maintained by both the Importer and the Foreign Seller to track shipments and receipts.
- Once FDA has authorized a SIP Proposal, the Importer must submit a Pre-Import Request to FDA at least 30 calendar days before the scheduled date of arrival or entry of for consumption, and FDA must approve the Pre-Import Request.
- Entry of and arrival of a shipment of eligible drugs is limited to the U.S Customs and Border Protection port of entry designated by FDA. Once the shipment arrives or is entered at a port of entry, it may be examined by a government agency.
- Importers must submit NDA and ANDA field alert reports, and reports of all adverse events associated with the use of its imported drug products to both the Manufacturer and FDA.
- SIP Sponsors must effectuate any recalls as determined by FDA or any SIP participant
- SIP Sponsors must submit quarterly reports to FDA containing information and documentation about their importation activities, including data, information, and analysis on the SIP’s cost savings to American consumers for the drugs imported under the SIP.
Consequences for Violations
A drug that is imported or offered for import into the U.S. in violation of this rule is subject to refusal under Section 801 of the FD&C Act.
The importation of a prescription drug in violation of this rule, and the falsification of any record required to be maintained or provided to FDA under this rule, is a prohibited act under the FD&C Act. This could serve as the basis for a Warning or Untitled Letter from FDA, and/or an FDA enforcement action, such as a seizure, injunction, or criminal prosecution.
Both the Final Rule and the guidance document issued at the same time concern drug importation. However, the guidance document does not implement the Final Rule. Instead, the guidance document addresses a totally different statutory scheme/pathway, i.e., FDA-approved drugs that were originally intended to be marketed in a foreign country and are authorized for sale in that foreign country (so-called “multi-market products or MMA products”). The guidance document describes a pathway by which manufacturers of these products can obtain an NDC code in order to import the drugs into the U.S. to be sold at a lower cost in the U.S. market.
Surprisingly, the Final Rule has very few timelines. Several comments to the Proposed Rule suggested that FDA should establish specific timeframes for reviewing and authorizing SIP Proposals, and that SIP proposals should be addressed on a first-come, first-served basis. FDA declined these suggestions in the preamble to the Final Rule, stating that, “Because this program is novel, we do not have sufficient information to estimate a timeframe for the review of a SIP Proposal. Review times may depend on factors such as the quality and complexity of proposals and Agency resource constraints. FDA plans to establish internal processes for its review of SIPs, rather than specifying details, such as the order of its review, in this regulation.”
The Final Rule includes an entire section of detailed supply chain requirements. In addition, when Congress enacted the DSCSA in 2013 (adding Section 582 of the FD&C Act), the DSCSA did not include an exemption for drugs imported under Section 804 of the FD&C Act, so drugs imported under the Final Rule are subject to the DSCSA requirements. However, because FDA recognized that certain DSCSA requirements may be difficult or impossible to apply to drugs imported under a SIP, the Final Rule exempts from the DSCSA certain transactions for drugs imported under the Final Rule. For example, under the Final Rule, an Importer is exempt from the prohibition on receiving a product for which the previous owner did not provide the transaction history, transaction information, and transaction statement under the DSCSA, provided the Importer receives from the Foreign Seller certain transaction-related information that is adequate to ensure that there is no additional risk to supply chain security.
It is unclear to us the number, scale and scope of drugs that will be imported under the Final Rule, and what impact that will have on the sales of FDA-approved products. You will recall, that the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) was signed into law in 2003. Section 1121 of the MMA amended Section 804 of the FD&C Act authorizing the Secretary of Health and Human Services (HHS) to issue regulations permitting the importation of certain prescription drugs from Canada under certain conditions and limitations. For Section 804 to become effective, the Secretary must certify that its implementation will pose no additional risk to the public’s health and safety, and that it will result in a significant reduction in the cost of covered products to the American consumer. No prior HHS Secretary made the certification necessary to implement Section 804 of the FD&C Act.
As part of the Trump Administration’s efforts to lower prescription drug prices, they proposed and finalized this Rule, and as part of the Rule, Secretary Alex Azar made the required certification regarding safety and cost savings. In our view, they made that happen by having FDA craft a rule with an extremely detailed set of requirements to ensure that any imported drugs meet the conditions in an FDA-approved NDA or ANDA (e.g., the Statutory Testing and Supply Chain requirements, and the provisions giving FDA extremely wide discretion, including the authority to not authorize a SIP that meets the requirements of the Rule). As a result, we tend to believe that it will be very difficult and expensive for states to meet all the requirements in the Rule and be able to import significant quantities of prescription drugs from Canada. However, because FDA stated in response to comments in the Final Rule that several potential SIP sponsors believe they can implement a SIP that will achieve a significant reduction in the cost of covered products with no additional risk to public health and safety, perhaps, significant quantities of drugs will be imported under the Rule. Only time will tell the number, scale, and scope of drugs imported under the Rule, and it is important to recognize that if President Trump is not re-elected, the Biden Administration could stay the Rule, reverse Secretary Azar’s certification, or both.
 21 U.S.C. 384(b) through (h).
 85 FR 62094.
 At the same time FDA issued the Final Rule, it also issued a guidance document entitled, “Importation of Certain FDA-Approved Human Prescription Drugs, Including Biological Products, and Combination Products Under Section 801(d)(1)(B) of the FD&C Act.” Both the Final Rule and guidance document are briefly discussed in FDA’s news release (“FDA Takes Actions to Help Lower U.S. Prescription Drug Prices). See further discussion of the guidance document under AGG Observations.