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The safety of the supply chain for pharmaceuticals in the United States must be built with solid links. That hasn’t always been the case, which is why the Drug Quality and Security Act (DQSA) was signed into law in 2013. Part of that law (Title II) mandates the development of a national “track-and-trace” electronic system that documents a drug’s distribution path from the manufacturing plant to the pharmacy counter. It facilitates detection and removal of potentially dangerous drugs from the drug supply chain. This system, which will be fully implemented in the next few years, will extend to drugs manufactured outside in the U.S. in FDA-registered facilities.

Florida recently joined Colorado, Maine, and Vermont as states that have passed laws to create state-administered programs for wholesale prescription drug importation; other states are considering the same thing. Because FDA law requires that any importation program must be approved by the secretary of Health and Human Services, the Trump administration has directed HHS to work with Florida to create a program that HHS can approve.

These state-administered programs are not, and cannot be, importation by many commercial entities or individual “open-border importation.” The FDA cannot assure consumer safety in systems like that, and it will never be sufficiently funded to oversee such systems. The state systems will have to be closed systems where the state oversees the safety of the imports and controls the profits of the distribution systems so consumers see the savings (consumer savings is a requirement of federal FDA law).


Some commentators have warned that these state drug importation programs conflict with the federal track-and-trace law. They don’t. In fact, the intent of these state laws and future programs is to build on the safety requirements of the federal supply chain. I developed the wholesale importation model law for the National Academy for State Health Policy that states are using. That model law lays out the processes that will be needed to comply with federal law and to create a safe, cost-saving, closed, system of importation through state administration of the program.

Almost half of the drugs Americans consume now come from overseas FDA-registered manufacturing plants, so it is fair to say that the supply chain of U.S. prescription drugs is entirely global — and compliant with U.S. laws, including track and trace. Given this environment, any state that establishes a state-administered wholesale drug import program will leverage those existing and compliant international supply chains.


Drugs for the Canadian market are manufactured in the same plants in Europe, Japan, or elsewhere that supply U.S. drugs. Those facilities must be track-and-trace compliant because they are part of the U.S. supply chain, even though they are not physically in the U.S. Without putting too fine a point on it, it is hard to conceive that the HHS secretary would ever approve a state-administered wholesale drug importation program without such compliance with federal law.

A state, or its licensed, contracted importer or wholesaler, will likely have to get its own distinct “labeler code,” which is the first five digits of the National Drug Code. The code is the U.S. system of unique identifiers for every drug, an essential component of the track-and-trace system. Once the HHS secretary approves a state program and the imports are re-labeled to be FDA compliant, the drugs are then FDA approved.

Of course, the pharmaceutical industry is utterly threatened by the prospect that prices in the U.S. will have to be competitive with global pricing. The industry’s anxiety about creating a process to assure that drugs are affordable in the U.S. should not be equated with threats to life and safety. In fact, just the opposite is true. As I wrote in a recent white paper, creating a market for pharmaceuticals with competitive prices that actually makes drugs affordable for patients and consumers at the pharmacy counter protects life and safety. The threat to health and safety is when people cannot afford the medications they need, as we see so clearly with news about deaths from the high cost of insulin. The threat does not come from closed systems of importation for expensive brand drugs from countries that have the same manufacturing standards we have.

To create an optimal wholesale import program, Congress should amend existing law to allow states to import biologics, which is important since insulin will be classified as a biologic next year. Current law also prohibits the importation of narcotics.

States need to be able to import directly from Europe and Japan, not just from Canada. The current FDA law allows imports only from Canada for entities that are not manufacturers and their designees. But there are important exceptions to this policy. The FDA already imports pharmaceuticals from around the globe when drug shortages occur in the U.S. The FDA also allows clinical trial sponsors working on behalf of manufacturers to import biologics so developing biosimilars can be developed more affordably. (I find it fascinating that drug companies find U.S.-licensed biologics too expensive for the clinical trials needed to develop biosimilars and so the FDA had needed to allow imports to facilitate biosimilar market development.) If importing drugs and biologics is safe for these various purposes, closed systems of state-administered drug importation programs should have as much latitude as federal programs.

The issues that kept wholesale drug importation from occurring might have been relevant two decades ago, but raising those issues today, in the context of closed, state-administered importation programs is nothing more than scare tactics. The global pharmaceutical supply chain of today can be safely used to relieve the sometimes crushing financial burden of drug treatments — at least until we have an effective national approach to drug affordability.

Jane Horvath is a consultant for states and state organizations on health care financing and drug cost containment and a part-time research faculty member at Georgetown University’s McCourt School of Public Policy. She has support from Arnold Ventures and The Commonwealth Fund for developing drug cost containment policy.

  • I appreciate the comments of Mr. Fein and Mr. Rodgers and the ability to have this discussion. I do think safe and compliant importation is quite possible.

    I think that under any HHS-approved wholesale importation program, drugs will have to be relabeled to be NDC compliant — so the state’s import supply is readily identifiable and in accord with US laws. (This relabeling will be needed for reimbursement as well.) As long as there is a verifiable paper trail of transactions and handling back to the manufacturing plant, serialization could occur at the time the product is relabeled for sale in the US. That trail back through supply chain to the manufacturing plant could be paper or electronic. It will be a condition of the contract between a state and its suppliers.

    Repacking and relabeling are known processes.

    The supply chain requirements anticipate that entities other than original manufacturer and first-purchase wholesaler will be involved in the distribution and track and trace. There are requirements on the entire supply chain. The fact that a state and its (licensed, compliant) wholesaler are part of that supply chain doesn’t seem like a huge stretch. States have the option of even licensing ex-US suppliers under their own laws and those suppliers will have to be registered with the FDA and compliant with supply chain safety.

    Manufacturer obstruction is of course, another matter. There are interesting state laws and even some interesting laws in Canada that might be brought to bear. I don’t think anyone anticipates that a state will be purchasing from the distributor that bought the product at the manufacturing plant because the manufacturer will undoubtedly place restrictions on resale.

    As Mr. Fein and Mr. Rodgers point out, there is the issue of the cost of setting up a wholesale importation system. But I believe states are quite capable of doing the math to import only those products that produce savings for the consumer, at the point of service. Consumer savings is a requirement of federal law for any approved importation. There is no need to fret about costs. If it is too costly, it won’t happen. I do believe there are products that can provide consumer savings.

    We already import the majority of drugs consumed by US residents according to a recent report by pharmacy checker so I appreciate the discussion about what we can do to safely leverage that system to the benefit of patients.

    There are a million ways to say “no”. That’s easy. Getting to “yes” is harder and requires some out-of-the-box thinking. The time spent thinking it through will be worthwhile to all the patients for whom drug affordability is issue #1.

  • We authored the op-ed referenced above:

    Ms. Horvath misstates the requirements of the Drug Supply Chain Security Act (DSCSA). Her conclusions about the feasibility of state importation programs are therefore incorrect.

    The DSCSA’s requirements do not depend on the country where a product is manufactured. The fact that a drug is made in an overseas plant is also irrelevant.

    As we explain in our article, there is no legal or operational way of transforming a drug packaged for a foreign market into a drug that meets the U.S. requirements of the DSCSA’s track-and-trace system. Any drug manufactured to be sold in another country will lack a DSCSA-compliant standardized numerical identifier. This would irreparably break the necessary DSCSA tracking history, making the products permanently unsellable in the U.S. under the track-and-trace law.

    Ms. Horvath touts the opportunity for wholesalers to get a labeler code and then repackage drugs for the U.S market. But as we note in our original article:
    “Each package’s unique standardized numerical identifier must be applied by the original manufacturer. An importer that bought drugs in Canada and repackaged them for distribution in the U.S. would have no way of generating or applying a manufacturer-applied standardized numerical identifier. It also means that a wholesaler can’t purchase drugs in Canada and repackage them for sale in the U.S.”

    States can’t wish away the requirements of the complex federal law that’s behind our nation’s in-progress national track-and-trace system. There is simply no way to alter the DSCSA to enable importation without undermining the law’s purpose and value. Either we have a secure drug supply chain or we don’t.

    Adam and Dirk

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