Importation of Prescription Drugs Provisions in P.L. 108-173, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003

CRS Report for Congress
Importation of Prescription Drugs Provisions in
P.L. 108-173, the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003
March 12, 2004
Susan Thaul and Donna U. Vogt
Specialists in Social Legislation
Domestic Social Policy Division


Congressional Research Service ˜ The Library of Congress

Importation of Prescription Drugs Provisions
in P.L. 108-173, the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003
Summary
The new Medicare legislation, the Medicare Prescription Drug, Improvement,
and Modernization Act (P.L. 108-173), addresses the importation of prescription
drugs for all U.S. consumers, not just for Medicare-eligible individuals. These
provisions are rooted in consumer and congressional concern with the high cost of
prescription drugs in the United States. International comparisons of drug prices
have confirmed that American consumers, particularly the elderly and uninsured,
often pay more for prescription drugs than do citizens in other countries. The
importation of lower-priced prescription drugs is one strategy to reduce U.S.
consumer spending.
The new Act, despite being structured as a replacement to the importation
provisions in the Medicine Equity and Drug Safety (MEDS) Act of 2000, does not
effectively change U.S. prescription drug importation policy. The details it adds will
not be implemented unless the Secretary of Health and Human Services (hereafter
referred to as the Secretary) certifies to Congress that such imports do not threaten
the health and safety of the American public and do provide cost savings. That
certification requirement, continued from prior law, has effectively halted
implementation of existing import provisions because no Secretary has been willing
to provide the required certification.
The Act changes the law in four basic ways: it (1) directs the Secretary to allow
imports from Canada only (the MEDS Act had allowed imports from a specific list
of industrialized countries, including Canada); (2) includes a shift in approach to the
importation of prescription drugs by individuals, by codifying the discretion in
enforcement that the Food and Drug Administration (FDA) has exercised to allow
the “personal use” imports of prescription drugs; (3) eliminates the prohibition
against a manufacturer’s entering into agreements to prevent the sale or distribution
of imported products; and (4) includes a mechanism, based on evidence, by which
the Secretary can terminate the import program.
Following enactment of the Medicare bill in December 2003, some Members
of Congress have moved to amend the importation of prescription drugs provisions.
Some states and localities have set up websites to facilitate individuals’ purchase of
prescription drugs from Canadian pharmacies. FDA has responded. In letters to state
officials, FDA has warned that states could face tort liability suits and charges of
assisting in criminal activity if citizens suffer injury from these drugs. FDA, via the
Department of Justice, has gone to the courts to stop the Canadian and U.S.
distributors of drugs imported from Canada.



Contents
In troduction ......................................................1
Drug Import Provisions in Current Law................................2
Provisions ....................................................2
Definitions ...............................................2
Regulations ..............................................3
Limitation ................................................3
Information and Records....................................3
Testing ..................................................3
Registration of Foreign Sellers...............................3
Suspension of Importation...................................4
Approved Labeling........................................4
Charitable Contributions....................................4
Waiver Authority for Importation by Individuals.................4
Construction ..............................................5
Commencement of Program.................................5
Termination of Program.....................................5
Authorization of Appropriations..............................5
Conforming Amendments...................................5
Study and Report on Importation of Drugs......................5
Study and Report on Trade in Pharmaceuticals...................6
Discussion of Enacted Legislation.................................6
Import Provisions..........................................6
Studies and Reports........................................7
Changes in Law...............................................7
House- and Senate-passed Bills in the 108th Congress Leading to the
Medicare Bill Conference Agreement............................14
Post-Passage Activity..............................................14
States and Municipalities.......................................14
Food and Drug Administration..................................15
Congress ....................................................16
List of Tables
Comparison of the Importation of Prescription Drug Provisions in the
New Law and What They Replace.................................8



Importation of Prescription Drugs Provisions
in P.L. 108-173, the Medicare
Prescription Drug, Improvement, and
Modernization Act of 2003
Introduction
The new Medicare legislation, the Medicare Prescription Drug, Improvement,
and Modernization Act (P.L. 108-173), addresses the importation of prescription1
drugs for all U.S. consumers, not just for Medicare-eligible individuals. These
provisions are rooted in consumer and congressional concern with the high cost of
prescription drugs in the United States. International comparisons of drug prices
have confirmed that American consumers, particularly the elderly and uninsured,2
often pay more for prescription drugs than do citizens in other countries. The
importation of lower-priced prescription drugs is one strategy to reduce U.S.
consumer spending.
The new Act, despite being structured as a replacement to the importation
provisions in the Medicine Equity and Drug Safety (MEDS) Act of 2000, does not
effectively change U.S. prescription drug importation policy. The details it adds will
not be implemented unless the Secretary of Health and Human Services (hereafter
referred to as the Secretary) certifies to Congress that such imports would not
threaten the health and safety of the American public and would provide cost savings.
That certification requirement, continued from prior law, has effectively halted
implementation of import provisions because no Secretary has been willing to
provide the required certification, a stance outlined in testimony from the Food and
Drug Administration (FDA).3


1 The debate, resulting in House and Senate amendments to their respective Medicare bills
(H.R. 1 and S. 1) and a separately passed House bill (H.R. 2427), involved varied
approaches toward modifying current law to make it easier for pharmacists, drug
wholesalers, and individuals to import less costly prescription drugs from foreign suppliers.
2 David Gross, Prescription Drug Prices in Canada, AARP Public Policy Institute Issue
Brief, Washington, D.C., American Association of Retired Persons, June 2003. (See Figure
3: Summary of Published Estimates of Canada-U.S. Drug Price Differences, 1990 to
Present.)
3 William K. Hubbard, Senior Associate Commissioner for Policy, Planning, and
Legislation, and John M. Taylor, III, Associate Commissioner for Regulatory Affairs, Food
and Drug Administration (FDA). U.S. Congress, House Committee on Energy and
(continued...)

Although earlier laws restricted the importation of a prescription drug to its
manufacturer, the FDA has maintained a lenient enforcement policy that lets
individuals bring a small amount of non-FDA approved drugs into this country for
their own use.4 Called a “personal-use” or “compassionate-use” policy, this FDA
discretion has made it easier for patients with life-threatening diseases (such as
cancer and AIDS) to bring medicines into the country and be treated by their own
doctors. The policy, as described on the FDA website, does not cover commercial
imports, nor does it cover individual imports of FDA-approved drugs available in the
United States.5
Drug Import Provisions in Current Law
The new Medicare legislation6 entirely replaces the language in Section 804 of
the Federal Food, Drug, and Cosmetic Act (FFDCA) that had been inserted by the
MEDS Act of 2000. The following summarizes the prescription drug import
provisions in the new Act.
Provisions
Definitions. [Section 804(a)] “Importer” is defined to mean a pharmacist or
a wholesaler; “pharmacist” to mean a person licensed by a state to practice pharmacy,
including the dispensing and selling of prescription drugs; and “wholesaler” to mean
a person licensed as a wholesaler or distributor of prescription drugs in the United
States, not including the manufacturer of the drug being imported. A “prescription
drug” is defined as a drug subject to Section 503(b)7 excluding, however, a controlled
substance, a biological product, an infused drug, an intravenously injected drug, a
drug that is inhaled during surgery, or a parenteral drug whose importation the
Secretary determines poses a threat to the public health. “Qualifying laboratory” is
defined as a U.S. laboratory that has been approved by the Secretary for the purposes
of this section.


3 (...continued)
Commerce, Subcommittee on Oversight and Investigations, hearing on “A System
Overwhelmed: the Avalanche of Imported, Counterfeit, and Unapproved Drugs in the U.S.,”
June 24, 2003.
4 FDA, “Information on Importation of Drugs”; and FDA, “Coverage of Personal
Importations,” Regulatory Procedures Manual, Office of Regulatory Affairs, FDA, Jan. 11,

2003, at [http://www.fda.gov/ora/compliance_ref/rpm_new2/ch9pers.html].


5 See also, CRS Report RS 21711, Legal Issues Related to Prescription Drug Sales on the
Internet by Jody Feder. Updated March 5, 2004.
6 Section 1121(a) of P.L. 108-173, Dec. 2003.
7 Section 503(b) of the FFDCA defines which kind of substances the law requires to be
filled for human use by prescription only. This is a drug that because of its “toxicity or
other potentiality for harmful effect, or the method of its use, or the collateral measures
necessary to its use, is not safe for use except under the supervision of a practitioner
licensed by law to administer such drug ... shall be dispensed only upon a written
prescription of a practitioner licensed by law to administer such drug ....”

Regulations. [Section 804(b)] The Secretary, after consultation with the
United States Trade Representative and the Commissioner of Customs, must
promulgate regulations permitting pharmacists and wholesalers to import prescription
drugs from Canada into the United States.
Limitation. [Section 804(c)] The regulations must ensure that all imported
prescription drugs meet the same safety and efficacy standards as drugs approved in
the United States and that the importer comply with all information and reporting
requirements. The Secretary is permitted to adopt such rules as necessary to
safeguard public health or as a means to facilitate the importation of prescription
drugs.
Information and Records. [Section 804(d)] Drug importers must provide
information that includes the name and amount of the active ingredient of the drug,
the dosage form of the drug, the date the drug is shipped, the quantity shipped, and
information about its origin and destination. The importer must also supply the price
paid by the importer; the importer’s name, address, and license number; the original
source of the drug and the amount of each lot received from that source; and the
manufacturer’s lot or control number. Also, the importer or manufacturer must
certify that the drug is FDA-approved, properly labeled, not adulterated, and not
misbranded; and provide laboratory records of authenticity testing, including data,
and evidence that testing was conducted in an approved U.S. laboratory. The
importer is required to provide any other information that the Secretary determines
is necessary to ensure the public health. Records regarding imported prescription
drugs must be provided to the Secretary, and then kept for such time as the Secretary
determines to be appropriate.
For a prescription drug imported directly from the first foreign recipient from
the manufacturer, there must be documentation indicating that the drug came directly
from the manufacturer, that the amount being imported is not greater than the
quantity that was originally received, that the drug was subsequently shipped by that
recipient to the U.S. importer, and verification that each batch of the drug has been
statistically sampled and tested for authenticity and degradation prior to importation.
Samples of subsequent shipments of these drugs must also be tested for authenticity
and degradation. For a prescription drug not imported directly from the first recipient
in the foreign country, there must be documentation demonstrating that each batch
of the drug has been statistically sampled and tested for authenticity and degradation
prior to importation.
Testing. [Section 804(e)] The importer or the manufacturer must conduct the
required authenticity testing at a qualified U.S. laboratory. If the importer conducts
these tests, the manufacturer must give the importing pharmacist or wholesaler the
information needed to authenticate the product and confirm its labeling. Also, testing
information must be kept in confidence and used only for this required import testing
or to otherwise comply with this Act. The Secretary may adopt rules to protect trade
secrets and commercial or financial information that is privileged or confidential.
Registration of Foreign Sellers. [Section 804(f)] Any Canadian
establishment engaged in the distribution of a prescription drug imported or offered
for importation into the United States must register its name and place of business



with the Secretary. The Canadian establishment also must register the name of its
U.S. agent.
Suspension of Importation. [Section 804(g)] If the Secretary discovers a
pattern of counterfeit or violative products, the agency must suspend importation of
that specific prescription drug or that specific importer. The suspension must stay
in effect until the FDA investigates and determines whether the public is being
adequately protected from counterfeit and violative drug products under existing
regulations.
Approved Labeling. [Section 804(h)] A drug manufacturer must give the
importer written authorization to use, at no cost, the approved labeling for the
prescription drug.
Charitable Contributions. [Section 804(i)] Section 801(d)(1) of the
FFDCA, which allows only the U.S. manufacturer of a drug to import it into the
United States, will continue to apply to a product donated by a manufacturer of a8
drug to a charitable organization or foreign government.
Waiver Authority for Importation by Individuals. [Section 804(j)]
Congress declares that the Secretary should use discretion when enforcing the current
legal prohibition against persons importing drugs or devices. The Secretary should
focus enforcement on cases where the importing may pose a significant threat to
public health. When the importation is clearly for personal use and the prescription
drug or device does not appear to present an unreasonable risk to the individual, the
Secretary should exercise discretion to permit the importation by the individual. The
new law specifies two waiver procedures to allow individuals — other than
pharmacists and wholesalers — to bring prescription drugs into the United States for
their personal use.
The first deals with drugs from Canada. The Secretary is required to publish
regulations that grant waivers for an individual to import for personal up to a 90-day
supply of a drug from a licensed Canadian pharmacy. The drug must also be in final
dosage form, be made in an FDA-registered facility, come from a registered
Canadian seller, be accompanied by a valid prescription, and be imported under
conditions the Secretary determines are necessary to ensure public safety.


8 With many drug samples being imported illegally in the early 1980s, Congress decided to
restrict such imports. The 1988 Prescription Drug Marketing Act [P.L. 100-293]
established, among other things, requirements for the distribution of prescription drug
samples. The regulations (21 CFR part 203) addressed the practice of licensed practitioners
to donate unused prescription drug samples to charitable institutions such as free clinics,
nursing homes, and other charitable health care entities for dispensing to patients, or for
further donation to another charity here or overseas for dispensing to its patients. These
requirements also say that a drug sample donated to a charitable institution must be
inspected by a licensed practitioner or registered pharmacist and that drug sample receipt
and distribution records must be kept by the institution for a minimum of three years. These
record keeping requirements were intended to deter illegal reimportation. See FDA website
at [http://www.fda.gov/cder/guidance/4932dft.htm].

The second addresses drug imports from any other country. Here, the law gives
the Secretary the option, rather than a requirement, to issue regulations allowing
imports from countries other than Canada. If the Secretary were to publish such
regulations, the law requires the Secretary to also publish guidance specifying the
conditions under which individuals would be able to import drugs for personal use.
Construction. [Section 804(k)] Nothing in this section shall be construed to
limit the Secretary’s authority relating to the importation of prescription drugs, other
than with respect to Section 801(d)(1), which allows only the manufacturer to import
a prescription drug.
Commencement of Program. [Section 804(l)] The drug import program
described above can begin only if the Secretary first certifies to Congress that its
implementation would pose no additional risk to public health and safety, and would
result in a significant reduction in the cost of covered products (prescription drugs)
to American consumers.
Termination of Program. [Section 804(l)] Once an importation program
is implemented, the Secretary can move to terminate it under specified conditions.
If the Secretary certifies to Congress, between 12 and 18 months after the regulations
are implemented, that, based on substantial evidence, in the opinion of the Secretary,
the benefits of the implementation of the import program do not outweigh any
detriment, drug imports under the section would cease 30 days after the certification9
is submitted. However, the Secretary’s certification may not be submitted unless,
after a public hearing, the Secretary finds it is more likely than not that
implementation will result in an increased risk to the public health; identifies, in
qualitative and quantitative terms, the nature and causes of the increased risk;
considers whether measures can be taken to avoid, reduce, or mitigate the increased
risk and, if those measures would require additional statutory authority, to report to
Congress describing needed legislation; identifies, in qualitative and quantitative
terms, the benefits that would result from the program, including reductions in the
cost of drugs to U.S. consumers, which would allow them to obtain needed
medications without foregoing other necessities of life; and, in specific terms,
compares the detriment with those benefits and determines that the benefits do not
outweigh the detriment.
Authorization of Appropriations. [Section 804(m)] The new law
authorizes to be appropriated such sums as are necessary to carry out this section.
Conforming Amendments. Section 1121(b) of the Medicare Prescription
Drug bill replaces references to “covered product” in Sections 301(aa) and 303(a)(6)
in the Federal Food, Drug, and Cosmetic Act with “prescription drug.”
Study and Report on Importation of Drugs. Section 1122 requires the
Secretary, in consultation with appropriate government agencies, to conduct a study
on the importation of drugs to the United States pursuant to Section 804 of the


9 This certification, required only in the context of the Secretary’s intent to end the program,
differs from the certification the Secretary must make to initiate the program.

Federal Food, Drug, and Cosmetic Act (as added by Section 1121 of the conference
agreement). The Secretary shall submit the report to Congress not later than 12
months after the enactment of this Act.
Study and Report on Trade in Pharmaceuticals. Section 1123 requires
the President’s designees to conduct a study and report on issues related to trade and
pharm aceut i cal s.
Discussion of Enacted Legislation
Import Provisions. It is doubtful whether the Secretary will implement these
import provisions given the Act contains the provision that led both Secretaries
Shalala and Thompson to decline. That provision requires that the Secretary certify
that imported drugs would be safe and at reduced cost before implementing import
regulations. Although significant changes were considered, the new law changes
very few elements of the MEDS Act of 2000. Effectively, until the Secretary makes
a certification regarding safety and cost, the law allows no one (other than the U.S.10
manufacturer of the drug) to legally import a prescription drug. Therefore:
Until an HHS Secretary certifies to Congress that “the implementation of this section
will (A) pose no additional risk to the public’s health and safety; and (B) [will] result
in a significant reduction in the cost of covered products to the American
consumer,11“ drug imports are illegal unless imported by the manufacturer of the
drug. Neither a pharmacist nor a wholesaler may import prescription drugs. The law
does not allow an individual to import a drug for personal use.12
If the HHS Secretary were to certify to Congress the required safety and cost savings
certification, then all the mechanisms of Section 804 would go into effect. In that
case, pursuant to regulations that the Secretary must promulgate:
!By law and according to regulations, a pharmacist or a wholesaler
could import prescription drugs from Canada;
!Personal-use imports by an individual from any other country would
remain illegal unless the Secretary chose to issue regulations
allowing them; and
!The law’s restrictions on personal-use imports would be waived so
an individual could import a 90-day supply of a prescription drug
from Canada.


10 FDA has published descriptions of its personal-use import policy, which is based on the
Secretary’s discretion in how to enforce the regulations; the MEDS Act had no provision
for a personal-use waiver. See FDA, “Information on Importation of Drugs”; and FDA,
“Coverage of Personal Importations,” Regulatory Procedures Manual, Office of Regulatory
Affairs, FDA, Jan. 11, 2003, at [http://www.fda.gov/ora/compliance_ref/rpm_new2/
ch9pers.html].
11 Section 804(l)(2) of the FFDCA.
12 The law does not specifically address a state as an importer. See below for more
information.

Studies and Reports. Unrelated to whether the Secretary certifies safety and
cost savings, the Medicare Act mandates two studies with reports to Congress.
Study and Report on Importation of Drugs. The law directs the HHS
Secretary, within 12 months of enactment, to study and report on “the importation of
prescription drugs into the United States pursuant to Section 804 of the FFDCA (as
added by Section 1121 of this Act).” The conference report provides the detailed
instructions for that study. These include consideration of the pharmaceutical
distribution chain; anti-counterfeiting technologies and their costs; the scope,
volume, and safety of unapproved drugs; participation of foreign health agencies in
ensuring product safety; the impact of importation on the drug prices that consumers
face; the impact on research and development; agency resources; liability protections;
and intellectual property rights.
Study and Report on Trade in Pharmaceuticals. The new law also
directs that “[t]he President’s designees shall conduct a study and report on issues
related to trade and pharmaceuticals.” Here, too, the conference report provides
detail not stated in the bill, including the naming of the Secretary of Commerce, the
International Trade Commission, the HHS Secretary, and the United States Trade
Representative as responsible for the conduct of the study and report. Topics to be
covered include how other countries use price controls and what this costs U.S.
consumers; the impact of price controls and intellectual property laws on price,
innovation, generic competition, and research and development; and whether these
are appropriate topics for trade negotiations with other countries.
Changes in Law
The following table provides a comparison of the drug import provisions of the
recently passed Medicare legislation and the MEDS Act provisions that it replaced.



Comparison of the Importation of Prescription Drug Provisions in the New Law and What They Replace
Old Law (Medicine Equity and Drug Safety Act of 2000,New Law (Medicare Prescription Drug, Improvement, and
Topic P.L. 106-387)Modernization Act of 2003, P.L. 108-173)
Section 804 of the Federal Food, Drug, and Cosmetic ActSection 1121(a). The provision replaces the existing Section 804
Importation of Covered Products was established under the Medicineentirely.
Equity and Drug Safety Act of 2000 (P.L. 106-387).
DefinitionsDefinitions. Under the Act, the termcovered product” meansReplaces the term “covered product” withprescription drug.
prescription drugs. Aprescription drug means, as described inMaintains the definition ofprescription drug as a drug subject to
Section 503(b) of the Act, a drug intended for use by man under theSection 503(b), but expands the list of prescription drugs that would not
supervision of a licensed health practitioner. The definition, however,be eligible for import (other than by each drugs U.S. manufacturer)
does not include drugs listed in Schedules I, II, and III (i.e., drugs withunder this law. In addition to prohibiting the importation of a biological
high abuse potential) of the Controlled Substances Act, nor biologicalproduct, a parenteral drug whose importation the Secretary determines
products regulated under the Public Health Service Act. Also, aposes a threat to the public health, and Schedule I, II, and III controlled
parenteral (injectable) drug cannot be imported, other than by its U.S.substances, the new law prohibits importing of an infused drug, an
manufacturer, if the Secretary feels its importation might pose a threatintravenously injected drug, a drug that is inhaled during surgery, and
to public health.any controlled substance.
iki/CRS-RL32271“Importer is not directly defined, although the law states that besides804(a). Definitions. Explicitly defines “importer to mean a pharmacist
g/wdrug companies themselves, only licensed pharmacists or wholesalersor a wholesaler.
s.ormay import drugs.
leak
Apharmacist” is defined as a person licensed by a state to practiceSame.
://wikipharmacy and dispense and sell prescription drugs. Awholesaler”
httpmeans a person licensed as a wholesaler or distributor of prescriptiondrugs in the United States, but does not include the manufacturer of the
drug being imported.
Qualifying laboratory” is defined as a laboratory in the United StatesSame.
that has been approved by the Secretary for the purposes of this section.
RegulationsRegulations. The Secretary of Health and Human Services (HHS), after804(b). Regulations. Requires the Secretary, after consultation with the
consulting with the U.S. Trade Representative and the Commissioner ofUnited States Trade Representative and the Commissioner of Customs,
Customs, must publish regulations permitting pharmacists andto promulgate regulations permitting pharmacists and wholesalers to
wholesalers to importcovered products (i.e., prescription drugsimport prescription drugs from Canada into the United States.


imported from Australia, Canada, Israel, Japan, New Zealand,
Switzerland, South Africa, the European Union [Austria, Belgium,
Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Luxemburg, Netherlands, Portugal, Spain, Sweden, and the United
Kingdom], and the European Economic Area [the European Union plus
Iceland, Liechtenstein, and Norway], as specified in Section 802
(b)(1)(A) of the law) into the United States.

Old Law (Medicine Equity and Drug Safety Act of 2000,New Law (Medicare Prescription Drug, Improvement, and
Topic P.L. 106-387)Modernization Act of 2003, P.L. 108-173)
LimitationLimitation. The regulations must ensure that all imported prescription804(c). Limitation. Same, although includes requirement that the
drugs meet the same safety and efficacy standards as drugs approved inimporter comply with all testing requirements.
the United States and that imported products not be adulterated or
misbranded. Moreover, the Secretary is permitted to adopt such rules
as necessary to safeguard public health or as a means to facilitate the
importation of products.
Drug importers must provide information that includes: the name and804(d)(1)(A,B,C,D,E,F,G,H,I) and
amount of the active ingredient of the drug, the dosage form of the drug,804(d)(1)(K,L,M). Information and Records. Same, except although
the date the product is shipped, the quantity shipped, and informationthe importer must supply the price the importer paid to acquire the drug,
about its origin and destination. The importer must also supply thethe importer is not required to provide price at which the importer sells
price paid by the importer and the price the drug was sold by thethe drug.
importer; the importers name, address, and license number; original
source of the drug and the amount of each lot received from that source;
and the manufacturer’s lot or control number. Also, the importer or
manufacturer must certify that the drug is FDA-approved and properly
iki/CRS-RL32271labeled, and provide laboratory records of authenticity testing, includingdata, and evidence that testing was conducted in an approved U.S.
g/wlaboratory.
s.or
leakFor a prescription drug imported directly from the first recipient in the804(d)(1)(J)(i). Same, although requires, in addition to documentation
foreign country, there must be documentation indicating that the drugthat the drug came directly from the manufacturer, documentation that
://wikicame directly from the manufacturer; the amount being imported is notgreater than the quantity that was originally received; and verificationthe drug was subsequently shipped by that recipient to the importer, andthat it is not adulterated or misbranded.
httpthat each batch of the drug has been statistically sampled and tested for
authenticity and degradation prior to importation. Samples of
subsequent shipments of these drugs must also be tested for authenticity
and degradation.
For a prescription drug not imported directly from the first recipient in804(d)(1)(J)(ii) and 804(d)(1)(K). Same, except also requires importer
the foreign country, there must be documentation demonstrating thatcertification that the drug is not adulterated or misbranded.
each batch of the drug has been statistically sampled and tested for
authenticity and degradation prior to importation and the importer or
manufacturer must certify that the drug is FDA-approved and properly
lab e led .
The importer is required to provide any other information that the804)d)(1)(N). Same.
Secretary determines is necessary to ensure the public health.
RecordsRecords. Records regarding imported prescription drugs must be804(d)(2). Same.


provided to the Secretary, and then kept for such time as the Secretary
determines to be appropriate.

Old Law (Medicine Equity and Drug Safety Act of 2000,New Law (Medicare Prescription Drug, Improvement, and
Topic P.L. 106-387)Modernization Act of 2003, P.L. 108-173)
TestingTesting. By law, authenticity testing can be done by either the importer804(e). Testing. Same, although states that the required authenticity
or the manufacturer. A manufacturer must give the importingtesting be done at a qualified laboratory (defined earlier as being in the
pharmacist or wholesaler the information needed to authenticate theUnited States and approved by the Secretary).
product and confirm its labeling. Also, testing information must be kept
in confidence, and the Secretary may adopt rules to protect trade secrets
and commercial or financial information that is privileged or
co nfid ential.
Registration ofNo provision.804(f). Registration of Foreign Sellers. Requires any Canadian
foreign sellersestablishment engaged in the distribution of a prescription drug
imported or offered for importation into the United States to register its
name and place of business with the Secretary. Also requires that the
Canadian establishment register the name of its U.S. agent.
Suspension ofSuspension of Importations. If the Secretary discovers a pattern of804(g). Suspension of Importations. Same.
importationscounterfeit or violative products, the agency must suspend importation
of a specific product or a specific importer. The suspension must stay
iki/CRS-RL32271in effect until the FDA investigates and determines whether the public
g/wis being adequately protected from counterfeit and violative drug
s.orproducts under existing regulations.
leakApproved labelingRequires certification from the importer or manufacturer that product804(h). Approved Labeling. Requires a drug manufacturer to give the
is FDA-approved and meets all labeling requirements.importer written authorization to use, at no cost, the approved labeling
://wikifor the prescription drug.
httpCharitableCharitable Contributions; Parenteral Drugs. Despite the import804(i). Charitable Contributions. Same.
contributionsprovisions in Section 804, only the U.S. manufacturer of a drug may
import into the United States (1) a product donated by a manufacturer
of a drug to a charitable organization or foreign government; or (2) a
parenteral drug whose importation the Secretary determines poses a
threat to the public health.
Waiver authority forNo provision in law, but FDA policy allows individuals to bring in804(j). Waiver Authority for Importation by Individuals. Congress
importation bydrugs for personal use.declares that the Secretary should use discretion when enforcing the
individualscurrent legal prohibition against persons importing drugs or devices.
The Secretary should focus enforcement on cases where the importing
may pose a significant threat to public health. When the importation is
clearly for personal use and the prescription drug or device does not
appear to present an unreasonable risk to the individual, the Secretary
should exercise discretion to permit the importation by the individual.
The Secretary is authorized to grant waivers, either through rule-making
or on an individual basis, of the law that only allows manufacturers to



Old Law (Medicine Equity and Drug Safety Act of 2000,New Law (Medicare Prescription Drug, Improvement, and
Topic P.L. 106-387)Modernization Act of 2003, P.L. 108-173)
import FDA-approved drugs [Section 801 (d)(1)] to allow individuals
to bring in pharmaceuticals from any country. The Secretary may also
decide the conditions under which waivers are given on a regular basis.
The Secretary must publish guidance describing the consistent
circumstances in which waivers would be granted to individuals.
The Secretary is required to grant waivers, by regulation, so persons can
import for personal use up to a 90-day supply of an FDA-approved
prescription drug from a licensed pharmacy in Canada, so long as the
drugs final dosage form was made in an FDA-registered facility, came
from a registered Canadian seller, was accompanied by a valid
prescription, and was imported under conditions the Secretary
determines were necessary to ensure public safety.
ConstructionConstruction. Nothing in this section shall be construed to limit the804(k). Construction. Same.
Secretarys authority relating to the importation of covered products,
other than with respect to Section 801(d)(1), which allows only the
iki/CRS-RL32271manufacturer to import a prescription drug.
g/wCommencement ofConditions. The drug import program could begin only if the Secretary804(l)(2). Commencement of Program. Same, although uses the term
s.orprogramfirst demonstrated to Congress that its implementation would pose nocertify rather thandemonstrate.”


leakadditional risk to public health and safety, and would result in a
significant reduction in the cost of drugs for U.S. consumers.
://wiki
http

Old Law (Medicine Equity and Drug Safety Act of 2000,New Law (Medicare Prescription Drug, Improvement, and
Topic P.L. 106-387)Modernization Act of 2003, P.L. 108-173)
Termination ofNo provision.804(l)(2). Termination of Program. The authority of the Secretary to
programterminate the program is restricted to the procedure in this section.
Between 12 and 18 months after the regulations are implemented, if the
Secretary certifies to Congress that, based on substantial evidence, in
the opinion of the Secretary, the benefits of the implementation of the
import program do not outweigh any detriment, drug imports under the
section would cease 30 days after the certification is submitted.
However, the certification may not be submitted unless, after a public
hearing, the Secretary finds it is more likely than not that
implementation will result in an increased risk to the public health;
identifies, in qualitative and quantitative terms, the nature and causes of
the increased risk; considers whether measures can be taken to avoid,
reduce, or mitigate the increased risk and, if those measures would
require additional statutory authority, to report to Congress describing
needed legislation; identifies, in qualitative and quantitative terms, the
benefits that would result from the program, including reductions in the
iki/CRS-RL32271cost of drugs to U.S. consumers, which would allow them to obtain
g/wneeded medications without foregoing other necessities of life; and, inspecific terms, compares the detriment with those benefits and
s.ordetermines the benefits do not outweigh the detriment.
leak
Authorization ofNo provision.804(m). Authorization of Appropriations. Authorizes to be
://wikiappropriationsappropriated such sums as are necessary to carry out this section.
httpConformingNo provision.1121(b). Conforming Amendments. Replaces references to covered
amendmentsproduct” in Sections 301(aa) and 303(a)(6) in the Federal Food, Drug,
and Cosmetic Act withprescription drug.



Old Law (Medicine Equity and Drug Safety Act of 2000,New Law (Medicare Prescription Drug, Improvement, and
Topic P.L. 106-387)Modernization Act of 2003, P.L. 108-173)
Studies; reportsStudies; reports. Two reports are required.Also requires two reports, but changes content and timetable required.
Requires the Secretary to either conduct or contract with an entity toNo provision.
evaluate drug importers compliance with the new regulations. In so
doing, the study must compare the number of counterfeit, misbranded,
or adulterated drugs imported under this law with the number of drugs
shipped domestically that are counterfeit, misbranded, or adulterated.
After consulting with the U.S. Trade Representative and the
Commissioner of Patents and Trademarks, the FDA must evaluate the
effect that imports have had on trade and patent rights under federal
law. Two years after the effective date of the implementing regulations,
the Secretary must submit a report to Congress describing the studys
fi nd i ngs.
No provision.Study and Report on Importation of Drugs. Section 1122 requires the
Secretary, in consultation with appropriate government agencies, to
conduct a study on the importation of drugs in the United States
iki/CRS-RL32271pursuant to Section 804 of the FFDCA (as added by Section 1121 of the
g/wconference agreement). The Secretary shall submit the report to
s.orCongress not later than 12 months after the enactment of this Act.
leakAlso, 18 months after the import program goes into effect, the GeneralNo provision.
Accounting Office must submit to Congress a report evaluating the
://wikiprograms effect on retail drug prices for consumers.
httpNo provision.Study and Report on Trade in Pharmaceuticals. Section 1123 requires
the President’s designees to conduct a study and report on issues related
to trade and pharmaceuticals.
Country limitationCountry Limitation. Prescription drugs covered by the law could beNo provision; however, elsewhere, the conference agreement restricts
imported only from countries specified in Section 802(b)(1)(A).imports of prescription drugs under this section to those from Canada.
ProhibitedProhibited Agreements. Prohibits manufacturers of imported drugsNo provision.
agreementsfrom entering into contracts or agreements that include provisions to
prevent the sale or distribution of imported products.
SunsetSunset. The import program would expire five years after the SecretaryNo provision.


issued final regulations implementing the law.

House- and Senate-passed Bills in the
108th Congress Leading to the
Medicare Bill Conference Agreement
In June 2003, the Senate and the House each passed drug importation provisions
as part of their Medicare bills. Both the Senate-passed Prescription Drug and
Medicare Improvement Act of 2003 (S. 1) and the House-passed Medicare
Modernization and Prescription Drug Act of 2003 (H.R. 1) would have required the
Secretary of HHS to issue regulations allowing pharmacists and drug wholesalers to
import prescription drugs from Canada into the United States. These two bills were
sent to conference.
One month later, the House voted 243 to 186 to adopt the Pharmaceutical
Market Access Act of 2003 (H.R. 2427), which contained broader provisions, such
as permitting qualifying individuals (i.e., consumers) as well as pharmacists and
wholesalers to import prescription drug products from 25 industrialized countries,
including Canada. This bill, introduced by Representative Gutknecht, differed
strikingly from the then-current law and the subsequently enacted Medicare
legislation in that it would have eliminated the provision that requires the Secretary
to first certify that importation would pose no additional risk to public health and
safety and would lower the cost of prescription drugs for U.S. consumers.
H.R. 2427 would also have required drug makers to incorporate various
counterfeit-resistant technologies in the packaging and shipping containers of all
prescription drugs. The bill would have created a new section in the law called
Counterfeit-Resistant Technologies. It would have required that all prescription
drugs (not just those being imported) be packaged to incorporate overt optically
variable counterfeit-resistant technology or technologies that have an equivalent
function of security; provide, with those technologies, visible identification of the
product; be similar to those used by the Bureau of Engraving and Printing to secure
U.S. currency; be made and distributed in a secure environment; and integrate
non-visible security features with forensic capability.13
Post-Passage Activity
Drug importation is attracting attention in the legislative, executive, and judicial
branches of government.
States and Municipalities
Because expenditures for pharmaceuticals continue to increase and are taking
a larger portion than previously of public funds used for health care, some states are


13 By requiring manufacturers to incorporate the technologies into multiple elements of the
packaging for prescription drugs, the shipping containers for drugs would have had to
incorporate technologies into labels so inspectors could verify the authenticity of the
shipment.

trying various ways to legally import lower cost prescription drugs from Canada in
order to control the rate of growth of this portion of the state budget. Government
officials from several states have petitioned HHS Secretary Tommy Thompson to
grant waivers from the current law prohibiting imports; allow pilot projects; or
promulgate regulations, as would be allowed under the new Section 804 of the
FFDCA, if the Secretary issued the required certification, to authorize programs for
the safe importation of prescription drugs from Canada. They cite potential savings,
in one case, of over $90 million a year.14
Coinciding with the National Governors Association meeting in Washington,
D.C., a bipartisan group of Governors, accompanied by a bipartisan group of
Members of Congress, held a February 24, 2004 hearing preceded by a press
conference in which they spoke of collective action to take advantage of lower priced
pharmaceuticals from Canada.15
Food and Drug Administration
The FDA, which is charged with ensuring the safety and effectiveness of
prescription drugs sold in the United States, has responded swiftly. Rather than
single out individuals for punishment for breaking the law, the agency has sent
warning letters and has sought to close down the websites and facilities that are
illegally supplying prescription drugs.16 In January 2004, FDA reported on its second
“blitz examination” of import courier hubs. It found that 87% of the almost 2,000
examined parcels containing prescription drugs, mostly from Canada, contained
unapproved drugs. Because, by law, any prescription drug imported by anyone other


14 Ram Kamath and Scott McKibbin, Office of Special Advocate for Prescription Drugs,
Illinois Department of Central Management Services, Report on Feasibility of Employees
and Retirees Safely and Effectively Purchasing Prescription Drugs From Canadian
Pharmacies, Oct. 27, 2003, at [http://www.affordabledrugs.il.gov/pdf/
SpecialAdvocateCanadian10-27-03Final.pdf]. News Release by Olympia Snowe, U.S. Sen.
for Maine, “Snowe Requests Meeting for Two Main Seniors Groups, Penobscot Nation with
HHS Secretary Tommy Thompson,” Dec. 11, 2003. Thomas F. Reilly, Attorney General
of the State of Massachusetts, letter to Tommy G. Thompson and Mark B. McClellan, Oct.

13, 2003.


15 “Dorgan May Delay McClellan Nomination Over Drug Imports,” Congress Daily, Feb.
25, 2004; and Robert Pear, “Senators Threaten to Delay Action on Medicare Nominee,” The
New York Times, Feb. 25, 2004. Collective action was also the topic of a Dec. 2003 meeting
of representatives of nine state governments with five Canadian drug suppliers (“States Call
for Prescription Drug Reimportation Pilot Programs,” Inside Health Policy, Jan. 12, 2004).
Two cities — Springfield, Massachusetts and Montgomery, Alabama — have set up
programs to facilitate the purchase by employees and retirees of drugs from Canada.
Springfield estimated that it could save between $4 to $9 million annually. Montgomery,
which for the last year has allowed its 4,100 city employees and retirees to buy drugs from
Canada, reported saving up to $500,000 so far. Also, Minnesota and Wisconsin unveiled,
in Feb. 2004, websites to guide citizens to Canadian pharmacy sites.
16 See also, CRS Report RS21711, Legal Issues Related to Prescription Drug Sales on the
Internet, by Jody Feder..

than the drug’s manufacturer is illegal, the FDA considers it unapproved.17 FDA
continues to object to these websites and states in a letter to Governor Pawlenty of
Minnesota that the states could face tort liability suits and charges of assisting in
criminal activity if citizens suffer injury from these drugs.18
Congress
Following passage of the Medicare bill, some Members have introduced bills
that seek to allow the importation of prescription drugs. S. 1974, introduced by
Senator Daschle on November 25, 2003, includes the importation and anti-
counterfeiting provisions that the House had passed in the Gutknecht bill, as does S.
2137, introduced by Senator Dorgan on February 26, 2004. Senator Kennedy
introduced S. 1992 on December 9, 2003, one section of which would amend the new
law’s importation provisions to include registration, inspection, and reporting
requirements for Canadian wholesalers and pharmacists who export prescription
drugs to the United States; restore the prohibition of manufacturer discrimination
against importers provisions from the MEDS Act; replace the report requirements
now assigned to the Secretaries of HHS and Commerce with reports involving the
Institute of Medicine and the General Accounting Office; and remove the
requirement that the Secretary certify safety and reduced cost to U.S. consumers
before implementing the importation provisions.
It remains unclear whether Congress will act in the second session of the 108th
Congress to ease the restrictions on prescription drug imports. It confronts a
dilemma in that several Governors, local officials, and the AARP support the
importation of drugs from Canada and possibly other countries and other
stakeholders, including the FDA, the pharmaceutical manufacturers, and pharmacists
are opposed to such importation.


17 FDA considers as unapproved any drug that is a foreign version of, mislabeled, or
inappropriately handled FDA-approved drug; counterfeit version of an FDA-approved drug;
and a drug that FDA has not tested for safety and effectiveness. “Recent FDA/U.S. Customs
Import Blitz Exams Continue to Reveal Potentially Dangerous Illegally Imported Drug
Shipments,” FDA News, Jan. 27, 2004, pp. 4-7, at [http://www.fda.gov/bbs/topics/
NEWS/2004/NEW01011.html]. Joining FDA in expressing opposition to state prescription
drug import programs are the National Association of Boards of Pharmacy, the American
Pharmacists Association, and the National Association of Chain Drug Stores.
18 Letter from William K. Hubbard, FDA Associate Commissioner for Policy and Planning,
to Hon. Tim Pawlenty, Governor of Minnesota, Feb. 23, 2004, at [http://www.fda.gov/oc/
opacom/ hottopics/importdrugs /pawlenty022304.html ].