Order Code RL32191
Prescription Drug Importation
and Internet Sales:
A Legal Overview
Updated November 6, 2007
Vanessa K. Burrows
Legislative Attorney
American Law Division

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Prescription Drug Importation and Internet Sales:
A Legal Overview
Summary
High prescription drug prices have increased consumer interest in purchasing
less costly medications abroad. Policymakers opposed to allowing prescription drugs
to be imported from foreign countries argue that the Food and Drug Administration
(FDA) cannot guarantee the safety or effectiveness of such drugs. Importation
proponents, who claim that importation would result in significantly lower prices for
U.S. consumers, say that safety concerns are overblown and would recede if
additional precautions were implemented. The importation debate continues.

Just as the FDA has expressed concerns about the safety of imported drugs,
federal regulators have become increasingly worried about the risks posed by some
online pharmacies and Internet drug sales. The regulation of prescription drug
importation and the oversight of online pharmacies often overlap because many
consumers use online pharmacies to purchase imported drugs. Regardless of whether
or not drugs purchased online are imported, the FDA is worried about the safety of
such medications because of its concern that a small number of online doctors and
pharmacies are exploiting regulatory gaps to prescribe and dispense illegal, addictive,
or unsafe drugs.
In response to concerns about prescription drug imports and Internet sales,
lawmakers have introduced multiple bills in this and previous Congresses. Bills
introduced in the 110th Congress include H.R. 194, H.R. 380, H.R. 1218, H.R. 2638,
H.R. 2900, H.R. 3161, S. 242, S. 251, S. 554, S. 596, S. 980, S. 1082, and S. 1859.
In May, the Senate passed S. 242 as an amendment to S. 1082, but only after
Members voted for a second-degree amendment that effectively nullified the first,
which would have allowed importation, because it would require the Secretary of
Health and Human Services to certify to Congress that imported prescription drugs
do not pose additional risks to the public health and result in a significant cost
reduction for the American consumer. The overall provision was dropped from H.R.
3580 (P.L. 110-85), the FDA Amendments Act of 2007. In August, the House
approved the agriculture appropriations bill, H.R. 3161, which contains a prescription
drug importation provision that would prevent the FDA from using appropriated
funds to prevent wholesalers and pharmacists from importing prescription drugs that
comply with certain provisions of the Federal Food, Drug, and Cosmetic Act, but
would not legalize importation by such persons. The Homeland Security
Appropriations bill, H.R. 2638, contains a similar restriction on the use of funds by
Customs and Border Protection (CBP) to prevent certain individuals from importing
Canadian prescription drugs; however, both provisions appear to have limited effect.
The following federal and state agencies are involved in regulating aspects of
prescription drug importation and Internet sales: FDA, CBP, the Drug Enforcement
Agency (DEA), state boards of pharmacy, and state medical boards. This report
focuses on legal aspects of prescription drug importation and Internet sales, including
antitrust law, international trade law, and patent law issues. However, policy issues
are also addressed because they are closely linked. For a more complete analysis of
policy issues, see CRS Report RL32511, by Susan Thaul.

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Contents
I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. Prescription Drug Importation: Legal Regulation . . . . . . . . . . . . . . . . . . . . . . 6
Importation of U.S.-Manufactured Prescription Drugs . . . . . . . . . . . . . . . . . 6
Importation of Foreign Versions of Prescription Drugs . . . . . . . . . . . . . . . . 9
Canadian Prescription Drug Importation After the FY2007
Homeland Security Appropriations Bill . . . . . . . . . . . . . . . . . . . . . . . 11
The FY2008 Homeland Security Appropriations Bill . . . . . . . . . . . . . . . . . 13
The House FY2008 Agriculture Appropriations Bill . . . . . . . . . . . . . . . . . 14
Penalties Under the FDCA and Other Federal Laws . . . . . . . . . . . . . . . . . . 16
The FDA’s Personal Importation Procedures . . . . . . . . . . . . . . . . . . . . . . . 17
State and Local Importation of Prescription Drugs:
Violation of Federal Law? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Businesses That Facilitate Importation of Prescription Drugs . . . . . . . . . . . 25
Antitrust Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Federal Antitrust Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
State Antitrust Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
International Trade Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
General Agreement on Tariffs and Trade . . . . . . . . . . . . . . . . . . . . . . 36
WTO Agreement on Technical Barriers to Trade . . . . . . . . . . . . . . . . 38
General Agreement on Trade in Services . . . . . . . . . . . . . . . . . . . . . . 41
Patent Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
III. Internet Pharmacies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Federal Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
State Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
IV. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

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Prescription Drug Importation
and Internet Sales: A Legal Overview1
This report explores the legal issues raised by prescription drug importation and
Internet sales. Although this report is intended to focus on legal analysis, policy
issues are also addressed because they are closely linked. For a more complete
analysis of policy issues, see CRS Report RL32511, Importing Prescription Drugs:
Objectives, Options, and Outlook, by Susan Thaul.
I. Introduction
High prescription drug prices have increased consumer interest in purchasing
less costly medications abroad by means of either commercial or personal (consumer)
imports.2 Meanwhile, congressional legislators have been exploring a variety of
legislative solutions to the problems posed by rising drug costs. In the 110th
Congress, the Senate Subcommittee on Interstate Commerce, Trade, and Tourism
held a March 2007 hearing on policy issues associated with pharmaceutical
importation. The Food and Drug Administration (FDA) Revitalization Act, S. 1082,
as passed by the Senate in May 2007, included provisions regarding importation of
prescription drugs, counterfeit-resistant technologies, and licensing of domestic and
foreign online pharmacies. However, such provisions could only become effective
if the Secretary of Health and Human Services (HHS) certified to Congress that
imported prescription drugs and related conditions in the bill’s section on importation
will “(1) pose no additional risk to the public’s health and safety; and (2) result in a
significant reduction in the cost of covered products to the American consumer.”3
The provision was dropped from H.R. 3580 (P.L. 110-85), the FDA Amendments
Act of 2007. During the 108th Congress, the Medicare prescription drug benefits
bill, H.R. 1, modified a provision of existing law that authorizes the FDA to allow
1 This report was originally written by Jody Feder, Legislative Attorney, CRS.
2 A study by the AARP noted that prices rose 6.2 percent in 2006 for 193 brand-name
prescription drugs commonly prescribed for older individuals. AARP Public Policy
Institute, Trends in Manufacturer Prices of Brand-Name Prescription Drugs Used by Older
Americans — 2006 Year-End Update, [http://assets.aarp.org/rgcenter/health/dd154_
drugprices.pdf]. Prices of 75 commonly prescribed generic drugs decreased 2 percent in
2006. AARP Public Policy Institute, Trends in Manufacturer List Prices of Generic
Prescription Drugs Used by Older Americans — 2006 Year-End Update, [http://assets.aarp.
org/rgcenter/health/dd153_drugprices.pdf]. However, others note that particular drugs may
not necessarily cost more than before, as clinicians may have substituted more expensive
drugs, though these drugs are not necessarily more effective. Spending on prescription
drugs may have increased because clinicians are writing more prescriptions as well.
3 S. 1082, § 811, 110th Cong. (2007).

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the importation of prescription drugs if the Secretary of HHS certifies that
implementing such a program is safe and reduces costs, a determination that no
Secretary has made in the years since a similar certification requirement was
established in 2000.4
Congress has also used the appropriations process to insert provisions
prohibiting the use of funds to restrict prescription drug importation. Most recently,
on August 2, 2007, the House approved a prescription drug importation provision in
the FY2008 agriculture appropriations bill, H.R. 3161, that would prevent the FDA
from using funds to prevent wholesalers and pharmacists from importing prescription
drugs that comply with certain provisions of the Federal Food, Drug, and Cosmetic
Act (FDCA), but would not legalize importation by such persons. The FY2008
Homeland Security appropriations bill, H.R. 2638, which is currently in conference
between the House and the Senate, contains an amendment that would prevent U.S.
Customs and Border Protection (CBP) from using appropriated funds to prevent
certain individuals from importing — by mail, Internet, or physical transportation
across the border — an unlimited supply of Canadian prescription drugs that comply
with parts of the FDCA.5 The 109th Congress had approved a more restrictive
provision in the FY2007 appropriations bill for the Department of Homeland
Security. That provision prohibited the CBP from using funds to prevent individuals
from transporting on their person a 90-day supply of Canadian prescription drugs that
comply with the FDCA.6 However, few, if any, prescription drugs from Canada will
comply with the requirements of the FDCA because such drugs are likely to be
unapproved, mislabeled, or improperly dispensed. As a result, the provisions in these
appropriations bills and the final Medicare bill appear to have limited effect and
ultimately did not change the law with respect to the prohibition against importing
prescription drugs from Canada and other foreign countries.
The debate about drug importation continues. On the one hand, some
policymakers remain opposed to allowing prescription drugs to be imported from
foreign countries. Worried about the risk to consumers, these critics argue that, with
its current resources and authority, the FDA cannot guarantee the safety or
effectiveness of such drugs,7 which they contend are more susceptible to being
4 Medicare Modernization Act (MMA), P.L. 108-173 [hereinafter Medicare Act]. The
original certification provision was contained in the Medicine Equity and Drug Safety
(MEDS) Act. P.L. 106-387. The new Medicare Act also required HHS to conduct a study
and issue a report on importing prescription drugs, which is available at
[http://www.hhs.gov/importtaskforce/Report1220.pdf].
5 H.R. 2638, § 542, 110th Cong. (2007). The provision excludes narcotics and biologics.
6 P.L. 109-295, § 535. The provision excludes narcotics, biologics, internet sales, and
importations of Canadian prescription drugs by mail order. Inside Washington Publishers,
Conferees Strike Deal to Allow Personal Rx Importation, FDA WEEK, September 29, 2006.
7 The Canadian government has also stated that it cannot guarantee the safety of drugs
exported to the U.S. from Canada. Marc Kaufman, Canadian Drug Position Misinterpreted,
WASH. POST, May 26, 2003, at A11.

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mishandled, mislabeled, unapproved, or counterfeited than drugs sold domestically.8
Over the past year, legislators and others have also expressed concerns about the
safety of imports in general and the ability of the FDA to inspect increasing amounts
of imported products entering the United States.9 In addition, drug manufacturers
and other opponents argue that allowing the importation of prescription drugs would
stifle investment in the research and development of new drugs.10 On the other hand,
importation proponents, who claim that importation would result in an increased
supply of prescription drugs that could result in significantly lower prices for U.S.
consumers, say that safety concerns are overblown and would recede if additional
precautions were implemented. Arguing that drug manufacturers are concerned only
about their profits, proponents of importation contend that U.S. consumers should not
subsidize the cost of research and development and that consumers in other countries
should share the burden.11
Linked to the issue of prescription drug importation is a debate about drug
costs.12 While some comparisons of U.S. and Canadian drug prices conclude that
U.S. prices are higher than their Canadian counterparts, other studies do not find such
discrepancies. In part, studies may vary depending on which drugs are selected for
comparison and whether or not U.S. generic drugs, which tend to be cheaper than
Canadian brand-name and generic drugs, are considered.13
In addition, there is an unresolved debate about whether allowing drug imports
would affect drug prices. Supporters argue that drug prices would drop due to
competition if imports were allowed, while opponents argue that increased demand
for imported drugs and moves by manufacturers to limit supplies of cheaper drugs
would cause prices to rise both in the U.S. and abroad and would increase the risk of
8 See Donald G. McNeil, Jr., In the World of Life-Saving Drugs, a Growing Epidemic of
Deadly Fakes, N.Y. TIMES, February 20, 2007.
9 See David Hess, Rising Tide of Legitimate Drug Imports Threatens FDA’s Ability to
Ensure Safety, Congress Daily AM, June 5, 2007 (noting that while “the number of drug
inspectors has risen by 10 percent, the volume of imports has more than tripled”).
10 Marc Kaufman, FDA’s Authority Tested Over Drug Imports, WASH. POST, November 9,
2003, at A11.
11 Id.
12 For a discussion of the debate about drug costs and prices, see CRS Report RL32511,
Importing Prescription Drugs: Objectives, Options, and Outlook, by Susan Thaul; CRS
Report RL33782, Federal Drug Price Negotiation: Implications for Medicare Part D, by
Jim Hahn; CRS Report RL33781, Pharmaceutical Costs: An International Comparison of
Government Policies, by Gretchen A. Jacobson; CRS Report RL33802, Pharmaceutical
Costs: A Comparison of Department of Veterans Affairs (VA), Medicaid, and Medicare
Policies, by Gretchen A. Jacobson, Sidath Viranga Panangala, and Jean Hearne. See also
Congressional Budget Office, Prescription Drug Pricing in the Private Sector, January 2007,
[http://www.cbo.gov/ftpdocs/77xx/doc7715/01-03-PrescriptionDrug.pdf].
13 HHS Task Force on Drug Importation, Health and Human Services, Report on
Prescription Drug Importation, December 2004, at 65 [http://www.hhs.gov/importtaskforce/
Report1220.pdf].

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counterfeit drugs being introduced into the system.14 According to a study by the
Congressional Budget Office (CBO), “the reduction in drug spending from
importation would be small,” in part because of new costs associated with ensuring
the safety of imported drugs and because of the likelihood that manufacturers would
alter drug formulations or reduce foreign supplies.15 Furthermore, there are questions
about how much it would cost to implement a safe drug importation program. The
FDA estimates that such a program would cost at least $100 million but that the
figure could rise as high as several hundred million dollars, especially if there is an
increase in the volume of imported drugs.16
Just as the FDA has expressed concerns about the safety and effectiveness of
imported drugs, federal regulators have become increasingly worried about the risks
posed by some online pharmacies and prescription drug sales over the Internet.17
Indeed, the regulation of prescription drug importation and the oversight of online
pharmacies often overlap because many consumers use online pharmacies to
purchase imported drugs. Regardless of whether or not drugs purchased online are
imported, the FDA is worried about the safety and quality of such medications
because of its concern about the lack of adequate physician supervision, the prospects
for tampering with or counterfeiting such drugs, and the possibility that such drugs
may be handled, dispensed, packaged, or shipped incorrectly.18 For example, in
February 2007, the FDA alerted consumers that Americans who had ordered the
prescription drugs Ambien, Xanax, Lexapro, and Ativan online instead received a
product with haloperidol, the active ingredient in an anti-psychotic drug used to treat
schizophrenia.19
14 Gardiner Harris, The Nation: Prescriptions Filled; If Americans Want to Pay Less for
Drugs, They Will, N.Y. TIMES, November 16, 2003, § 4, at 4.
15 Congressional Budget Office, Would Prescription Drug Importation Reduce U.S. Drug
Spending?, Economic and Budget Issue Brief, April 29, 2004. The HHS Task Force on
Drug Importation found that “total savings to consumers from legalized importation under
a commercial system would be a small percentage relative to total drug spending the U.S.
(about one to two percent.” HHS Task Force on Drug Importation, supra note 13, at 65.
16 Inside Washington Publishers, $58 Million for Canadian Rx Importation Based on
Outdated Estimate, FDA WEEK, March 19, 2004.
17 Some of these concerns are reflected in a report by the Government Accountability Office
(GAO; formerly the General Accounting Office). GAO Report GAO-04-820, Internet
Pharmacies: Some Pose Safety Risks for Consumers.
18 FOOD AND DRUG ADMINISTRATION, Buying Medicines and Medical Products Online,
[http://www.fda.gov/oc/buyonline/default.htm]; Gilbert M. Gaul and Mary Pat Flaherty,
U.S. Prescription Drug System Under Attack, WASH. POST, October 19, 2003.
19 Press Release, Food and Drug Administration, FDA Alerts Consumers to Unsafe,
Misrepresented Drugs Purchased Over the Internet (February 16, 2007),
[http://www.fda.gov/bbs/topics/NEWS/2007/NEW01564.html]; see also Press Release,
Food and Drug Administration, FDA Warns Consumers About Counterfeit Drugs from
Multiple Internet Sellers (May 1, 2007), [http://www.fda.gov/bbs/topics/NEWS/2007/
NEW01623.html] (cautioning consumers about websites distributing counterfeit drugs,
including counterfeit Xenical, a drug “used to help obese individuals who meet certain
weight and height requirements lose weight and maintain weight loss”).

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In response to concerns about prescription drug imports and Internet sales, a
number of congressional legislators have introduced bills that would make changes
to existing law in these areas. Bills introduced in the 110th Congress include
H.R. 194, H.R. 380, H.R. 1218, H.R. 2638, H.R. 2900, H.R. 3161, S. 242, S. 251, S.
554, S. 596, S. 980, S. 1082, and S. 1859.
Current regulation of prescription drug importation and Internet sales consists
of a patchwork of federal and state laws in an array of areas.20 At the federal level,
the FDA regulates prescription drugs under the FDCA, which governs, among other
things, the safety and efficacy of prescription medications, including the approval,
manufacturing, and distribution of such drugs.21 It is the FDCA that prohibits the
importation — sometimes referred to as “reimportation” — of certain prescription
drugs by anyone other than the manufacturer and that requires that prescription drugs
may be dispensed only with a valid prescription.22 After a recent change in
enforcement policy by CBP, the FDA assumed the primary responsibility for
determining whether foreign drug imports may legally enter the country.23 In
addition, the Drug Enforcement Agency (DEA) administers the Controlled
Substances Act, which is a federal statute that establishes criminal and civil sanctions
for the unlawful possession, manufacturing, or distribution of certain addictive or
dangerous substances, including certain prescription drugs that share these properties,
such as narcotics and opiates.24 At the state level, state boards of pharmacy regulate
pharmacy practice, and state medical boards oversee the practice of medicine. Thus,
some of the laws that govern online pharmacies and doctors vary from state to state.
Finally, although foreign laws are beyond the scope of this report, it is important
to note that such laws may also affect the importation of drugs from those countries.
20 For other information on prescription drug importation and Internet sales, see CRS Report
RL32511, Importing Prescription Drugs: Objectives, Options, and Outlook, by Susan
Thaul; CRS Report RL32271, Importation of Prescription Drugs Provisions in P.L. 108-
173, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, by
Susan Thaul; and GAO Report GAO-01-69, Internet Pharmacies: Adding Disclosure
Requirements Would Aid State and Federal Oversight.
21 21 U.S.C. § 301 et seq.
22 21 U.S.C. § 353(b).
23 See section entitled “Canadian Prescription Drug Importation After the FY2007 Homeland
Security Appropriations Bill,” infra at p. 10.
24 Id. at § 801 et seq. For more information on the Controlled Substances Act, see CRS
Report 97-141A, Drug Smuggling, Drug Dealing and Drug Abuse: Background and
Overview of the Sanctions Under the Federal Controlled Substances Act and Related
Statutes, by Charles Doyle.

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II. Prescription Drug Importation: Legal Regulation
At the federal level, the FDA regulates prescription drugs under the Federal
Food, Drug, and Cosmetic Act (FDCA), which governs, among other things, the
safety and efficacy of prescription medications, including the approval,
manufacturing, and distribution of such drugs.25 Although many states also have
their own laws that regulate drug safety, the FDA maintains primary responsibility
for the premarket approval of prescription drugs, while the DEA and CBP have
somewhat more limited regulatory authority over such drugs.
The FDCA contains several provisions that apply to prescription drug imports.
First, the statute contains an outright prohibition that forbids anyone other than the
manufacturer from importing prescription drugs. This prohibition affects drugs
originally made in the United States. Second, the FDCA contains a number of other
provisions relating to drug approvals and labeling that make it nearly impossible for
prescription drugs made for foreign markets to comply with the extensive statutory
requirements, in part because the FDA considers any drugs not made on an FDA-
inspected production line to be unapproved and therefore illegal. These provisions
generally affect foreign versions of drugs that are approved for domestic sale.
Importation of both U.S.-manufactured prescription drugs and unapproved
foreign versions of U.S.-approved prescription drugs are discussed in this next
section, as are the recent change in CBP policy with regard to the seizure of mail
order prescription drugs, the penalties under the FDCA, the FDA’s personal
importation procedures, state plans to import prescription drugs, and businesses that
facilitate the importation of prescription drugs. In addition, this section contains a
discussion of other legal areas that may affect prescription drug importation,
including antitrust law, trade law, and patent law.
Importation of U.S.-Manufactured Prescription Drugs
Currently, the FDCA prohibits anyone other than the manufacturer26 of a
prescription drug from importing that drug into the United States.27 Thus, it is
25 21 U.S.C. § 301 et seq.
26 Id. at § 381(d)(1). The Secretary, however, is authorized to allow the importation of any
drugs that are required for emergency medical care. Id. at § 381(d)(2).
27 The FDCA does not define “United States,” except for in one section, which may present
unique issues for U.S. territorial possessions. However, the FDCA defines “state” and
“territory.” 21 U.S.C. § 321(a). The FDCA defines “state” as any U.S. state or territory, the
District of Columbia, and Puerto Rico. 21 U.S.C. § 321(a)(1). The FDCA defines
“territory” as any territory or possession of the United States, including D.C. and excluding
Puerto Rico and the Canal Zone. 21 U.S.C. § 321(a)(2). The principal insular possessions
are: U.S. Virgin Islands, Guam, American Samoa, Wake Island, Midway Islands, and
Johnston Atoll. The Northern Mariana Islands are also “generally covered by the [FDCA].”
DEPARTMENT OF THE INTERIOR, OFFICE OF THE SOLICITOR, THE APPLICATION OF FEDERAL
LAWS IN AMERICAN SAMOA, GUAM, THE NORTHERN MARIANA ISLANDS, THE U.S. VIRGIN
ISLANDS, VOL. 2 — U.S. CODE TITLES 17-39, p. 624, 626 (1993). These insular possessions
(continued...)

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technically a violation of the statute for individual consumers or online pharmacies
to import a prescription drug back into the country, even though the drug was, prior
to export, originally manufactured in any U.S. state or territory, the District of
27 (...continued)
are outside U.S. customs territory. 19 C.F.R. § 7.2.
As mentioned above, with limited exception, anyone other than the manufacturer is
prohibited from importing into the United States prescription drugs that are manufactured
in a state and exported. 21 U.S.C. § 381(d)(1). If the definition of “United States” in 21
U.S.C. § 381(d)(1) includes insular possessions, then it appears that pharmacies in these
insular possessions are also prohibited from importing U.S.-made prescription drugs.
Section 381(d)(1) might be paraphrased as follows:
... no drug subject to section 503(b) [essentially a prescription drug] ... which is
manufactured in a State [including insular possessions] and exported [to an
insular possession, due to its status as outside the customs territory of the U.S.,
or a foreign country] may be imported into the United States [including insular
possessions] unless the drug is imported by the manufacturer of the drug.
For example, under this interpretation, a drug made in Iowa and exported to the U.S. Virgin
Islands could only be imported into American Samoa or any state by the drug’s
manufacturer. It appears that whether pharmacies in insular possessions are prohibited from
importing prescription drugs depends on whether the definition of “United States” in 21
U.S.C. § 381(d)(1) includes insular possessions. The Department of Health and Human
Services has argued that “United States” includes territories. DEPARTMENT OF THE
INTERIOR, OFFICE OF THE SOLICITOR, THE APPLICATION OF FEDERAL LAWS IN AMERICAN
SAMOA, GUAM, THE NORTHERN MARIANA ISLANDS, THE U.S. VIRGIN ISLANDS, VOL. 2 —
U.S. CODE TITLES 17-39, p. 628 (1993).
However, if the definition of “United States” in 21 U.S.C. § 381(d)(1) did not include
insular possessions, then it appears that insular possessions may not be prohibited from
importing U.S.-made prescription drugs. The statute could potentially be read as follows:
<... no drug subject to section 503(b) ... which is manufactured in a State [which
includes the insular possessions] and exported [to an insular possession, due to
its status as outside U.S. customs territory, or a foreign country] may be imported
into the United States [excluding insular possessions] unless the drug is imported
by the manufacturer of the drug. 21 U.S.C. § 381(d)(1).’
Under this interpretation, for example, a drug made in Illinois and exported to South Africa
or Guam could be imported into the U.S. Virgin Islands by an individual other than a
manufacturer. However, the FDCA contains other provisions relating to drug approvals and
labeling. According to William K. Hubbard, then the FDA’s Associate Commissioner for
Policy and Planning, a version of an FDA-approved drug that is produced for a foreign
market “usually does not meet all of the requirements of U.S. approval, and thus it is
considered to be unapproved.” Letter from William K. Hubbard, Associate Commissioner
for Policy and Planning, Food and Drug Administration, to Robert P. Lombardi, Esq., The
Kullman Firm 1 (February 12, 2003), [http://www.fda.gov/ora/import/kullman.pdf]
[hereinafter Lombardi Letter]. In order to be properly labeled, a prescription drug must be
labeled in accordance with the FDA’s extensive statutory requirements. See infra the
section entitled “Importation of Foreign Versions of Prescription Drugs.”

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Columbia, or Puerto Rico and even if the drug otherwise complies with the FDCA.28
Although critics of this law argue that there is no rational justification for forbidding
the importation of a drug that is theoretically identical to its counterpart sold in the
United States, the FDA contends that the agency can no longer guarantee the safety
of a prescription drug once it has left the country and the agency’s regulatory control.
According to the agency, the FDA “cannot provide adequate assurance to the
American public that the drug products delivered to consumers in the United States
from foreign countries are the same products approved by the FDA.”29
In response to concerns about the rising costs of prescription drugs, however,
Congress adopted importation amendments to the FDCA in 2000. Under the
Medicine Equity and Drug Safety (MEDS) Act,30 the FDA was authorized to allow
pharmacists and wholesalers to import prescription drugs from Canada if certain
safety precautions were followed.31 The act, however, stipulated that the importation
provision would not become effective until and unless the Secretary of HHS
determined that the implementation of the provision would “pose no additional risk
to the public’s health and safety; and [would] result in a significant reduction in the
cost of covered products to the American consumer.”32 Citing safety concerns, both
the current and former Secretaries declined to implement this provision.
In the Medicare Prescription Drug, Improvement, and Modernization Act of
2003 (Medicare Act),33 Congress revisited the issue of prescription drug importation.
Like the MEDS Act it superseded, the Medicare legislation directs the FDA to allow
pharmacists and wholesalers to import prescription drugs if certain safety precautions
are followed.34 Unlike the MEDS Act, which covered prescription drugs from a
specified group of foreign countries, the Medicare Act allows imports from Canada
28 Under the FDA’s personal importation procedures, however, the FDA currently allows
border staff to exercise discretion in implementing the prohibition against individuals who
import a limited supply of prescription drugs for personal use. See infra notes 87-97 and
accompanying text. The CBP previously enforced importation laws in the same general
manner as the FDA’s personal importation procedures, then increased enforcement for an
almost eleven-month period. See infra notes 51-68 and accompanying text. However, due
to a recent change in enforcement policy after the passage of a provision in the FY2007
Department of Homeland Security appropriations act, the CBP will now “focus on
intercepting only counterfeit medicines, narcotics, and illegal drugs.” Christopher Lee, U.S.
to Stop Seizing Prescription Drugs Imported for Personal Use, WASH. POST, October 5,
2006, A16.
29 Lombardi Letter, supra note 27, at 1.
30 P.L. 106-387.
31 21 U.S.C. § 384.
32 Id. at § 384(l).
33 Medicare Act, supra note 4.
34 The Medicare Act also required the Secretary to conduct a study on the importation of
drugs. This study, which was released in December 2004, concluded that legalizing drug
importation would be likely to result in increased risk to consumers and would not
significantly reduce retail drug prices. HHS Task Force on Drug Importation, supra note
13.

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CRS-9
only.35 In addition, the Medicare Act, unlike the MEDS Act, also authorizes the FDA
to allow, by regulatory waiver, individuals to import prescription drugs for personal
use under certain circumstances.36 Despite these new importation provisions, the
Medicare Act, like the MEDS Act, stipulates that the importation provisions will not
become effective until and unless the Secretary certifies that the implementation of
the provision would “pose no additional risk to the public’s health and safety; and
[would] result in a significant reduction in the cost of covered products to the
American consumer.”37 As noted above, the Secretary of HHS has thus far declined
to provide such certification. Absent such certification, the ban on the importation
of prescription drugs remains in effect.
Importation of Foreign Versions of Prescription Drugs
Even if the FDCA did not contain an explicit prohibition against drug
importation, the FDA maintains that consumer imports of prescription drugs from
foreign countries would almost certainly violate other provisions of the act.38 For
example, such drugs are likely to be unapproved,39 mislabeled,40 or improperly
dispensed.41 According to the FDA:
The reason that Canadian or other foreign versions of U.S.-approved drugs are
generally considered unapproved in the U.S. is that FDA approvals are
manufacturer-specific, product-specific, and include many requirements relating
to the product, such as manufacturing location, formulation, source and
specifications of active ingredients, processing methods, manufacturing controls,
container/closure system, and appearance... . Moreover, even if the manufacturer
has FDA approval for a drug, the version produced for foreign markets usually
does not meet all of the requirements of the U.S. approval, and thus it is
considered to be unapproved. Virtually all shipments of prescription drugs
imported from a Canadian pharmacy will run afoul of the Act, although it is a
theoretical possibility that an occasional shipment will not do so. Put differently,
in order to ensure compliance with the Act when they are involved in shipping
prescription drugs to consumers in the U.S., businesses and individuals must
ensure, among other things, that they only sell FDA-approved drugs that are
made outside of the U.S. and that comply with the FDA approval in all respects.42
The difficulty in determining whether a drug is FDA-approved is demonstrated by
the agency’s response to a letter from Representative Edward Markey. On October
11, 2006, he asked the agency how a consumer would know if a product is FDA-
35 Medicare Act, supra note 4.
36 Id. This legislation, which is similar to the FDA’s personal importation procedures, is
discussed in more detail in a separate section below.
37 Id.
38 Lombardi Letter, supra note 27, at 2.
39 21 U.S.C. § 355.
40 Id. at §§ 352, 353(b)(2).
41 Id. at § 353(b)(1).
42 Lombardi Letter, supra note 27, at 3.

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CRS-10
approved or unapproved.43 The agency responded with a recommendation that
consumers
access the FDA site to search for the active ingredient or name of drug. The
names of approved companies for a drug will be listed... . If the manufacturer of
a consumer drug is not listed, the drug may be unapproved or there may be data
errors. The drug may also be an approved drug, but distributed under the name
of another company. Consumers are also advised to check with the drug
manufacturer.44
In addition to complying with the requirements regarding FDA approvals,
imported drugs must also meet FDA requirements regarding labeling and dispensing.
For example, mislabeling a drug is a violation of the FDCA, as is the act of
introducing or receiving a mislabeled drug in interstate commerce.45 In order to be
properly labeled, prescription drugs must be labeled in accordance with the FDA’s
extensive labeling requirements.46 Furthermore, the FDCA requires that prescription
drugs may be dispensed only with a valid prescription.47 Therefore, it is a violation
of the act to import prescription drugs without a legitimate U.S. prescription.
According to the FDA, an inspection of prescription drug shipments by CBP
found that 1,728 of 1,982 drug shipments from foreign countries violated the FDCA
because they contained “unapproved drugs” that could pose safety problems.48
Although the reason for the violation varied depending on the shipment, the FDA and
CBP found shipments of drugs that, among other things, had never been approved
by the FDA, were inadequately labeled (e.g., lacked instructions or were labeled in
a foreign language), had been withdrawn from the U.S. market due to safety
concerns, could cause dangerous interactions, required monitoring by a doctor, or
were controlled substances.49 An FDA investigation found that approximately 43
percent of the imported drugs that the agency intercepted from four countries —
India, Israel, Costa Rica, and Vanuatu — were shipped to fill orders that consumers
believed they were placing with Canadian pharmacies. Of the products believed to
be Canadian, FDA reported that only 15 percent actually originated in Canada, while
the remaining 85 percent were manufactured in 27 different countries.50
43 Inside Washington Publishers, Markey Eyes Bill on Stronger Unapproved Drugs
Enforcement, FDA WEEK, January 5, 2007.
44 Id.
45 21 U.S.C. §§ 331 (a)-(c), 353(b)(2).
46 See e.g., 21 C.F.R. §201.100(c)(2).
47 21 U.S.C. § 353(b)(1).
48 Press Release, Food and Drug Administration, Recent FDA/U.S. Customs Import Blitz
Exams Continue to Reveal Potentially Dangerous Illegally Imported Drug Shipments
(January 27, 2004), [http://www.fda.gov/bbs/topics/NEWS/2004/NEW01011.html].
49 Id.
50 Press Release, Food and Drug Administration, FDA Operation Reveals Many Drugs
Promoted as “Canadian” Products Really Originate From Other Countries (December 16,
(continued...)

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CRS-11
Canadian Prescription Drug Importation After
the FY2007 Homeland Security Appropriations Bill
Until recently, the Department of Homeland Security, via the U.S. Customs and
Border Protection agency (CBP), was responsible for examining imported
prescription drugs at the nation’s international mail centers and borders and for
detaining and destroying any FDA-regulated prescription drugs that did not meet
statutory or regulatory requirements.51 Prior to November 17, 2005, CBP officials
tolerated prescription drug mail orders from Canada of up to 90 days worth of
medication, “generally interpreting U.S. laws against the importation of drugs as
applying to wholesalers and distributors.”52 However, the CBP began strictly
enforcing importation laws on November 17, 2005, two days after the beginning of
open enrollment for the Medicare prescription drug program. This policy change
lead consumer groups and Canadian pharmacies to complain that CBP’s policy was
intended to encourage seniors to enroll in the Medicare plan and decrease
competition for often costly prescription drugs. CBP officials denied this charge,
noting that the new enforcement policy was designed “to protect consumers from
potentially dangerous drugs manufactured abroad.”53 For the next eleven months,
CBP agents confiscated mail packages with foreign prescription drugs and often
destroyed the drugs, then mailed letters about the violation to consumers attempting
to import the drugs.54 An estimated 37,000 to 40,000 packages were detained by CBP
during this period.55
In past years, the House Committee on Appropriations had added provisions to
appropriations bills that would have prohibited the FDA from using monies to
prevent drug importation from foreign countries. Such provisions were always
removed during conferences between the House and the Senate. Last year,
Representative Emerson added a similar provision to the FY2007 Homeland Security
appropriations bill prohibiting CBP from using funds to prevent importation of
“FDA-approved” drugs.56 Opponents labeled the provision “an inappropriate way
to address the issue of drug affordability” and expressed concerns that the United
States would be more exposed to harmful counterfeit drugs or that terrorists would
50 (...continued)
2005), [http://www.fda.gov/bbs/topics/NEWS/2005/NEW01277.html].
51 Lee, supra note 28.
52 Id.; Lisa Girion, U.S. to Allow Canadian Drug Imports, L.A. TIMES, October 4, 2006.
53 Lisa Girion, Seized Drugs Being Released, L.A. TIMES, March 1, 2006, at C1; Susan
Heavey, FDA Role Restored Over Mail-Order Drug Imports, WASH. POST, October 4, 2006;
Girion, supra note 52.
54 Heavey, supra note 53.
55 Inside Washington Publishers, Senators’ Effort to Force Reimportation Floor Debate
Blocked, FDA WEEK, August 4, 2006; Lee, supra note 28.
56 Inside Washington Publishers, Homeland Security Approps Bill Allows Drug
Reimportation, FDA WEEK, June 2, 2006.

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CRS-12
take advantage of the provision.57 Additionally, some Canadian pharmacist
associations and other importation opponents worried that their country would
encounter shortages as a result of the provision.58 Supporters noted that the provision
was “aimed at forcing FDA to assess prescriptions from foreign countries for safety
instead of simply blocking all reimported drugs.”59
The Senate Committee on Appropriations subsequently stripped the Homeland
Security appropriations bill of the importation provision, but Senators Vitter and
Nelson introduced the CBP funding prohibition for certain seizures of Canadian drug
imports in an amendment that passed 68-32.60 As passed on September 25, 2006,
Section 535 reads as follows:
None of the funds made available in this Act for United States Customs and
Border Protection may be used to prevent an individual not in the business of
importing a prescription drug (within the meaning of section 801(g) of the
Federal Food, Drug, and Cosmetic Act) from importing a prescription drug from
Canada that complies with the Federal Food, Drug, and Cosmetic Act: Provided,
That this section shall apply only to individuals transporting on their person a
personal-use quantity of the prescription drug, not to exceed a 90-day supply:
Provided further, That the prescription drug may not be — (1) a controlled
substance, as defined in section 102 of the Controlled Substances Act (21 U.S.C.
802); or (2) a biological product, as defined in section 351 of the Public Health
Service Act (42 U.S.C. 262).61
The provision excludes narcotics, biologics, Internet sales, and importations of
Canadian prescription drugs by mail order.62 Most importantly, the bill appears to
allow individuals to transport a 90-day supply of prescription drugs from Canada
across the border by foot or vehicle. However, the provision ultimately appears to
have limited effect because it states that individuals may personally import Canadian
prescription drugs that comply with the FDCA. By definition, most prescription
drugs from Canada do not comply with the FDCA. As the previous section
explained, drugs that comply with the FDCA must be approved by the FDA, be
dispensed with a valid prescription by a U.S. doctor, and meet, among other possible
requirements, mandates that are manufacturer and product specific, manufacturing
controls and processing methods, extensive labeling requirements, and source and
57 Executive Office of the President, OMB, Statement of Administration Policy: H.R. 5441
— Department of Homeland Security Appropriations Bill, FY 2007, May 25, 2006, at 3;
Inside Washington Publishers, FDA to Resume Rx Drug Import Oversight as Customs Backs
Off, FDA WEEK, October 6, 2006; Inside Washington Publishers, Reimportation Debate
Rages on with Little Movement in Congress, FDA WEEK, July 28 2006.
58 Inside Washington Publishers, Lawmakers’ Solution to High-Cost Drugs Makes Waves
in Canada, FDA WEEK, October 27, 2006.
59 Inside Washington Publishers, Following House Lead, Senate Votes to Allow Drug
Reimportation, FDA WEEK, July 14, 2006.
60 Id.
61 P.L. 109-295.
62 Inside Washington Publishers, Conferees Strike Deal to Allow Personal Rx Importation,
FDA WEEK, September 29, 2006.

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CRS-13
active ingredient specifications.63 While it is possible that a prescription drug could
meet FDA requirements and therefore obtain FDA approval, in almost all cases,
imported prescription drugs will not comply with the FDCA. Thus, the provision
does not change the current illegal status of most drugs imported from Canada, and
it appears that CBP may still legally use funds to detain Canadian drug imports that
do not comply with the FDCA.

Despite the limited effect of the importation provision, CBP announced a
change in its enforcement policy, effective October 9, 2006. CBP agents now “focus
on intercepting only counterfeit medicines, narcotics, and illegal drugs.”64 As a
result, the FDA assumed the primary responsibility for determining whether
Canadian and other international drug imports may legally enter the United States.
In most cases, prescription drugs are illegal to import into the United States.65 The
FDA has the authority to seize “[a]ny article of food, drug, or cosmetic that is
adulterated or misbranded when introduced into or while in interstate
commerce . . . .”66 However, the FDA’s ability to “thoroughly inspect and handle
confiscated imports” is questioned by some, given the agency’s shortage of resources
and staff.67
In December 2006, Senators Grassley and Baucus attempted to alter the
Homeland Security importation provision. Their modification would have only
allowed importation from Canada of prescription drugs “with at least two generic
competitors” and would have excluded certain drugs and biologics from the those
that the Homeland Security appropriations bill intended to allow individuals to
personally carry across the Canadian border in a 90-day supply.68
The FY2008 Homeland Security Appropriations Bill
Senators Vitter and Stabenow cosponsored an amendment to the FY2008
Homeland Security Appropriations bill that would appear to expand upon the
prescription drug importation amendment passed the previous fiscal year:
None of the funds made available in this Act for U.S. Customs and Border
Protection or any agency or office within the Department of Homeland Security
may be used to prevent an individual from importing a prescription drug from
63 Lombardi letter, supra note 27. See 21 C.F.R. § 314.50; notes 35-39, 42-44 and
accompanying text.
64 Lee, supra note 28.
65 Id.; U.S. Steps Back on Drug Confiscations, N.Y. TIMES, October 4, 2006.
66 21 U.S.C. § 334(a)(1).
67 Heavey, supra note 53; Lee, supra note 28.
68 Inside Washington Publishers, Grassley, Baucus Tried Banning Drug Imports When
Generics Available, FDA WEEK, December 8, 2006. The provision would have excluded
“therapeutic DNA plasmid products, therapeutic synthetic peptide products, monoclonal
antibody products used in vivo, therapeutic recombinant DNA-derived products, infused
drugs, injected drugs, drugs inhaled during surgery, drugs with at least two generic
competitors, and sterile ophthalmic drugs intended for use on the skin or in the eye.” Id.

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CRS-14
Canada if — (1) such individual is not in the business of importing a prescription
drug (within the meaning of section 801(g) of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 381(g))); and (2) such drug — (A) complies with
sections 501, 502, and 505 of the Federal Food, Drug, and Cosmetic Act (21
U.S.C. 351, 352, and 355); and (B) is not — (i) a controlled substance, as defined
in section 102 of the Controlled Substances Act (21 U.S.C. 802); or (ii) a
biological product, as defined in section 351 of the Public Health Service Act (42
U.S.C. 262).69
The provision would exclude narcotics and biologics. By preventing CBP from using
funds to prevent certain individuals from importing Canadian prescription drugs, the
amendment would appear to allow an unlimited supply of importations — by mail
order, Internet sales, or physical transportation across the border — of Canadian
prescription drugs that comply with parts of the FDCA. However, like the provision
in the previous fiscal year’s bill, the amendment, if enacted, would ultimately appear
to have limited effect because it states that the imported Canadian prescription drugs
must comply with three sections of the FDCA that address adulteration, misbranding,
and new drug applications. These three FDA provisions require, among other things,
that drugs obtain FDA approval; comply with good manufacturing practices; meet
strength, quality, and purity requirements; do not contain other mixtures or
substitutions of other substances; are labeled in accordance with FDCA requirements;
and were manufactured in establishments registered with the Secretary of HHS. It
appears unlikely that prescription drugs manufactured for the Canadian market would
meet these and other requirements of FDCA §§ 501, 502, and 505.70 While it is
possible that a prescription drug could meet FDA requirements and therefore obtain
FDA approval, in almost all cases, imported prescription drugs will not comply with
the FDCA. Thus, the provision would not change the current illegal status of most
drugs imported from Canada, and it appears that CBP would still be able to use
appropriated funds to detain Canadian drug imports that do not comply with the
selected sections of the FDCA mentioned in the amendment. The bill is currently in
conference.
The House FY2008 Agriculture Appropriations Bill
Members of Congress have also attempted to use the agriculture appropriations
bill to attach language to FDA funding that would allow prescription drug
importation in various forms.71 The House FY2008 agriculture appropriations bill,
69 H.R. 2638, § 542, 110th Cong. (2007). The Vitter amendment was opposed by the
committee, and Senators Cochran and Byrd cosponsored a second degree amendment that
would have placed the same provision from the FY2007 Homeland Security Appropriations
bill into the FY2008 bill. After a period of debate, a deal was apparently struck; the second
degree amendment was withdrawn, and Senator Vitter, by unanimous consent, modified the
text of his amendment, which passed. See 153 Cong. Rec. S 10,067, 10,070-72, S 10,076-
77 (daily ed. 2007).
70 See supra section entitled “Importation of Foreign Versions of Prescription Drugs.”
71 Although the FDA was transferred from the USDA in 1940, FDA appropriations remain
part of the agriculture appropriations bills. Richard M. Cooper, Introduction to Food and
Drug Law and Regulation in 1 FUNDAMENTALS OF LAW AND REGULATION 5 (Robert P.
(continued...)

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CRS-15
H.R. 3161, includes a provision that purports to expand the types of persons who may
import prescription drugs. An amendment to strike the provision failed by a vote of
146-283. The Senate bill, S. 1859, does not contain a similar provision. As passed
by the House on August 2, 2007, § 726 of H.R. 3161 reads as follows:
None of the funds appropriated or otherwise made available by this Act for the
Food and Drug Administration may be used under section 801 of the Federal
Food, Drug, and Cosmetic Act to prevent an individual not in the business of
importing a prescription drug within the meaning of section 801(g) of such Act,
wholesalers, or pharmacists from importing a prescription drug which complies
with sections 501, 502, and 505.
The provision would not allow the FDA to use appropriated funds to prevent
wholesalers, individuals not in the business of importing prescription drugs, and
pharmacists from importing prescription drugs that — among other FDCA conditions
— obtain FDA approval; comply with good manufacturing practices; meet strength,
quality, and purity requirements; do not contain other mixtures or substitutions for
other substances; are labeled in accordance with FDCA requirements; and were
manufactured in establishments registered with the Secretary of HHS. It appears
unlikely that any prescription drug manufactured for a foreign market would meet
these and other requirements of FDCA §§ 501, 502, and 505.72 In a statement of
administration policy, the White House remarked: “While the provision theoretically
limits importation to only FDA-approved prescription drugs, it would be impossible
for FDA to verify at the border that they are not counterfeit.”73
The provision would not “legalize” importation for wholesalers, pharmacists,
or other individuals not in the business of importing prescription drugs. Under
FDCA § 801(d)(1), only manufacturers are allowed to import prescription drugs into
the United States.74 Thus, while H.R. 3161 would not provide funding to the FDA
to prevent those such as wholesalers or pharmacists from importing prescription
drugs that comply with parts of the FDCA, the bill’s provision would not legalize
importation by those persons. Failure to comply with the FDCA may expose such
individuals to criminal and civil liability.75 Additionally, drug manufacturers may not
71 (...continued)
Brady et al. ed. 1997).
72 See supra section entitled “Importation of Foreign Versions of Prescription Drugs.”
73 Executive Office of the President, Office of Management and Budget, Statement of
Administration Policy: H.R. 3161 — Agriculture, Rural Development, Food and Drug
Administration, and Related Agencies Appropriations Act, 2008 (July 31, 2007),
[http://www.whitehouse.gov/omb/legislative/sap/110-1/hr3161sap-h.pdf].
74 As stated previously, the Secretary of HHS may authorize a drug’s importation for
emergency medical care. 21 U.S.C. § 381(d)(2).
75 “Enforcement of the FDCA is not limited to FDA. Seizure, injunction, and misdemeanor
or felony proceedings may be instituted by the United States Attorney in the district in
which the case is brought. In addition, the DHHS Inspector General has been given the
responsibility for investigating felony violations of the FDCA, except for matters ‘that
should remain a function of the Food and Drug Administration.’ “ I. Scott Bass,
(continued...)

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CRS-16
allow individuals not in the business of importing prescription drugs, wholesalers,
or pharmacists to import such drugs into the United States. As a result, it appears
that the provision would have limited effect.
Penalties Under the FDCA and Other Federal Laws
If a business or consumer violates the FDCA by importing unapproved or
misbranded prescription drugs, there are a number of criminal and civil penalties that
may apply. As set forth in the act, penalties vary depending on the offense.
Violations of the act’s general prohibitions are a misdemeanor offense punishable by
up to a year in prison or a fine of up to $1,000, or both.76 A violation of a general
FDCA prohibition that occurs after a prior conviction for violating the act or that is
committed with the intent to defraud or mislead is a felony offense punishable by up
to three years of imprisonment or up to a $10,000 fine, or both.77 Penalties for
violations of the FDCA’s importation provisions are stricter. If a business or
consumer knowingly imports a drug in violation of these provisions, then the
violation is a felony offense punishable by up to 10 years in prison or up to $250,000
in fines, or both.78
Despite these designated penalties, individuals and corporations that violate the
act may face monetary fines far greater than those specified in the FDCA because
those sanctions are superceded by general fines set forth in the Sentencing Reform
Act of 1984, which applies across the board to all federal crimes. That statute raised
the limit on the maximum penalties that apply to federal crimes. As a result,
misdemeanor violations of the FDCA are actually punishable by a fine of up to
$100,000 for individuals and up to $200,000 for organizations, and felony violations
of the act are punishable by up to $250,000 for individuals and up to $500,000 for
corporations.79 In addition, federal courts are authorized to issue injunctions in order
to enjoin violations of the act,80 and any drug that is adulterated or misbranded is
subject to seizure under the act.81
It is important to note that “[t]hose who aid and abet a criminal violation of the
act, or conspire to violate the act, can also be found criminally liable.”82 Federal
75 (...continued)
Enforcement Powers of the Food and Drug Administration in 1 FUNDAMENTALS OF LAW
AND REGULATION 57 (Robert P. Brady et al. ed. 1997).
76 21 U.S.C. § 333(a)(1). In addition, misdemeanor violations of the act are strict liability
offenses. United States v. Dotterweich, 320 U.S. 277, 284 (1943).
77 21 U.S.C. § 333(a)(2).
78 Id. at §§ 333(b)(1), 381(d)(1). The act provides exceptions to the penalties in certain
cases of good faith. Id. at § 333(c).
79 18 U.S.C. §§ 3559, 3571.
80 21 U.S.C. § 332.
81 Id. at § 334.
82 Lombardi Letter, supra note 27, at 1.

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CRS-17
criminal law generally makes it a separate crime to aid or abet any criminal offense
against the United States or to conspire to commit a criminal offense against the
United States,83 so illegal importers could potentially be charged with these offenses
as well as other general federal crimes, such as mail or wire fraud or making false
statements. In addition, the FDCA explicitly forbids certain acts, as well as the
causing of such prohibited acts.84 Thus, businesses that facilitate the importation of
unapproved prescription drugs or U.S.-manufactured prescription drugs may be liable
if they are deemed to be “causing” violations of the act. In addition to penalties
under the FDCA and other federal criminal statutes, individuals or businesses that
illegally import prescription drugs that are also controlled substances may be subject
to penalties under the Controlled Substances Act.85
Despite the range of penalties that FDA has available to punish those who
import prescription drugs in violation of the act, the agency has clarified that its
“highest enforcement priority would not be actions against consumers.”86 Indeed, the
FDA exercises its enforcement discretion leniently in this regard by allowing
consumers to import certain otherwise illegal prescription drugs under certain
circumstances. These enforcement procedures, known as the FDA’s personal
importation procedures, are described in detail below.
The FDA’s Personal Importation Procedures
Because importing unapproved prescription drugs is a violation of the FDCA,
the FDA is responsible for determining whether pharmaceuticals should be admitted
into the United States.87 To determine whether to allow or refuse entry to imported
drugs, the FDA developed its personal importation procedures. Under the
procedures, the FDA exercises its enforcement discretion to permit consumers to
import otherwise illegal prescription drugs for purposes of personal use.
Recognizing that the agency’s limited enforcement resources are best directed at
commercial shipments of imported drugs rather than personal imports, the FDA may,
at its discretion, refrain from taking legal action against illegally imported drugs
under the following circumstances:
83 18 U.S.C. §§ 2, 371.
84 21 U.S.C. § 331.
85 See infra notes 244-48 and accompanying text.
86 Lombardi Letter, supra note 27, at 4.
87 CBP, Medication/Drugs, [http://www.cbp.gov/xp/cgov/travel/clearing_goods/restricted/
medication_drugs.xml]. According to the FDA, CBP has the initial responsibility for
examining imported goods at the nation’s borders. Accordingly, CBP is supposed to notify
the FDA if it has detected a mail or baggage shipment of “an FDA-regulated article intended
for commercial distribution, an article that FDA has specifically requested be detained, or
an FDA-regulated article that appears to represent a health fraud or an unknown risk to
health.” OFFICE OF REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION, Coverage
of Personal Importations, REGULATORY PROCEDURES MANUAL, [http://www.fda.gov/ora/
compliance_ref/rpm_new2/ch9pers.html]. In light of the CBP’s policy change in October
2006, it is unclear whether the CBP is continuing to alert the FDA if it detects shipments of
the above-mentioned items.

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CRS-18
a) the intended use is unapproved and for a serious condition for which effective
treatment may not be available domestically either through commercial or
clinical means;
b) there is no known commercialization or promotion to persons residing in the
U.S. by those involved in the distribution of the product at issue;
c) the product is considered not to represent an unreasonable risk; and
d) the individual seeking to import the product affirms in writing that it is for the
patient’s own use (generally not more than three month supply) and provides the
name and address of the doctor licensed in the U.S. responsible for his or her
treatment with the product, or provides evidence that the product is for the
continuation of a treatment begun in a foreign country.88
Ultimately, the personal importation procedures detail the FDA’s enforcement
priorities for imported drugs, but are not intended to grant a license to consumers to
import unapproved prescription drugs into the United States.89 Indeed, the FDA
emphasizes that even if all of the factors above are met, “the drugs remain illegal and
FDA may decide that such drugs should be refused entry or seized.”90 Furthermore,
these procedures do not apply to commercial shipments of unapproved prescription
drugs, nor are they intended to permit the importation of foreign versions of drugs
that are already approved in the United States. Thus, it appears that personal
importations of cheaper versions of prescription drugs that are already available in
the U.S. do not conform to the FDA’s personal importation procedures.91
Nevertheless, U.S. consumers continue to import drugs from abroad, and one
Canadian group claims that Canadian pharmacies supply two million people in the
U.S., or roughly one percent of the U.S. market for prescription drugs.92
Meanwhile, in the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003, Congress authorized the FDA to allow individuals to
import prescription drugs for personal use under certain circumstances, provided that
the Secretary has certified that importation is safe and cost-effective.93 Specifically,
the act, subject to certification, requires the Secretary of HHS to allow individuals to
import prescription drugs from Canada if the drug:
88 Id.; see also OFFICE OF REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION,
Importation of Prescription Medicines/Drugs, [http://www.fda.gov/ora/import/traveler_
alert.htm]; OFFICE OF REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION,
Information on Importation of Drugs (April 3, 1998), [http://www.fda.gov/ora/import/
pipinfo.htm].
89 OFFICE OF REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION, Coverage of
Personal Importations, REGULATORY PROCEDURES MANUAL, [http://www.fda.gov/ora/
compliance_ref/rpm_new2/ch9pers.html].
90 OFFICE OF REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION, Importation of
Prescription Medicines/Drugs, [http://www.fda.gov/ora/import/traveler_alert.htm].
91 OFFICE OF REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION, Information on
Importation of Drugs (April 3, 1998), [http://www.fda.gov/ora/import/pipinfo.htm].
92 Inside Washington Publishers, Canadian Pharmacist to Drug Firms: Support Limited Rx
Imports, FDA WEEK, May 7, 2004.
93 Medicare Act, supra note 4, at § 1121.

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CRS-19
(A) is imported from a licensed pharmacy for personal use by an individual, not
for resale, in quantities that do not exceed a 90-day supply;
(B) is accompanied by a copy of a valid prescription;
(C) is imported from Canada, from a seller registered with the Secretary;
(D) is a prescription drug approved by the Secretary ...
(E) is in the form of a final finished dosage that was manufactured in [a
registered] establishment ...
(F) is imported under such other conditions as the Secretary determines to be
necessary to ensure public safety.94
Although the new individual importation provisions in the Medicare Act appear
similar to the FDA’s personal importation procedures, the legislation differs
significantly because it contains the certification requirement. The current Secretary
of HHS, however, has declined to provide such certification in the past, and it is
unclear what direction the agency will take in the future. Thus, the new individual
importation provisions do not appear to represent a codification of the FDA’s
personal importation procedures.
Although the FDA exercises its enforcement discretion to permit personal
importation, such importation remains illegal. However, an elderly couple from
Chicago challenged the FDCA’s prohibition on personal importation. In Andrews v.
United States Department of Health and Human Services,95 the court rejected the
plaintiffs’ claim that the statutory prohibition on personal drug importation violated
their substantive due process rights under the Fifth Amendment of the Constitution.
The standard of review that courts use when reviewing substantive due process
claims depends on whether or not the statute in question affects a fundamental right.
If a statute affects a fundamental right, then strict judicial scrutiny is required; if the
statute does not affect a fundamental right, then a court applies rational basis review.
In the Andrews case, the court determined that there is no fundamental right “to
purchase drugs from a preferred source at a preferred price.”96 As a result, the court,
applying the rational basis test, upheld the ban on personal importation because it is
rationally related to a legitimate governmental interest in ensuring the safety of
prescription medications.97
State and Local Importation of Prescription Drugs:
Violation of Federal Law?
Just as individual consumers have sought to buy cheaper prescription drugs from
foreign sources, several state and local governments have in place or have considered
plans to import or facilitate the importation of prescription drugs in order to save
themselves or their residents money on medicines. Contending that carefully
structured state programs will provide a sufficient degree of safety, states and cities
continue to argue that they have a duty to explore innovative methods for providing
94 Id.
95 2005 U.S. Dist. LEXIS 5710 (D.D.C. 2005).
96 Id. at *7.
97 Id. at *8-9.

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CRS-20
more affordable prescription drugs to their residents, even at the risk of violating
federal law. Currently, several states and the District of Columbia have online
prescription drug importation programs, and several localities, including Boston,
Massachusetts, are importing prescription drugs from Canada.98 Interest in importing
Canadian prescription drugs may be beginning to wane due to factors including the
Medicare Part D prescription drug program, a temporary increase in seizures by the
CBP, declining currency-exchange rates, and a greater use of generic drugs.99 For
example, the first city to import Canadian prescription drugs, Springfield,
Massachusetts, reported no problems with its Canadian prescription drug importation
program; however, it later switched to a state health benefits program that does not
import Canadian prescription drugs.100
Each state and local importation plan varies somewhat in the details. Illinois,
for example, has implemented a drug importation program known as I-SaveRx.
Under the program, the state has established website that offers information
regarding pharmacies in Canada, Ireland, and Great Britain that the state has
inspected and determined to be reliable sources for prescription drugs. The state,
however, does not import drugs directly, but rather provides users with information
on available drugs, prices, and order forms. Currently, Kansas, Missouri, Vermont,
and Wisconsin also participate in I-SaveRx.101 In addition, Rhode Island legislators
passed a law that allows the state to license Canadian pharmacies.102 Many other
states and localities have considered and/or implemented importation plans of their
own.103
98 City of Boston, Affordable Prescription Drugs, [http://www.cityofboston.gov/
publichealth/prescription.asp]. The states are: Illinois, Kansas, Minnesota, Missouri,
Vermont, Washington, and Wisconsin. New Hampshire previously advertised such a
program; however, after a different governor was elected in 2005, the program was no
longer advertised on the state’s main website. Associated Press, Future Unclear for State’s
Canadian Web Links, January 2, 2005.
99 Id.; Kelley M. Butler, Local Rx Import Programs Find Fewer Takers, Employee Benefit
News, January 1, 2007. In the fall of 2006, several retail pharmacies said they would sell
certain prescription drugs for as low as $4. Id.
100 Christopher Rowland, Mass. City Ends Drug Plan that Defied U.S., Boston Globe,
August 26, 2006.
101 See [http://www.i-saverx.net/] for more information on drug importation programs for
Illinois, Wisconsin, Kansas, Vermont, and Missouri.
102 R.I. Gen. Laws § 5-19.1-11. Inside Washington Publishers, Rhode Island is First State
to Pass Canadian Drug Import Law, FDA WEEK, July 9, 2004. The FDA has warned Rhode
Island that the legislation may be preempted by federal law. Letter from William K.
Hubbard, Associate Commissioner for Policy and Planning, Food and Drug Administration,
to Governor Donald L. Carcieri (July 1, 2004), [http://www.fda.gov/oc/opacom/hottopics/
importdrugs/carcieri.pdf]. For a discussion of the preemption doctrine, see infra notes 122-
23 and accompanying text.
103 For example, California, Kansas, Illinois, Iowa, Minnesota, Missouri, New Hampshire,
North Dakota, Rhode Island, Vermont, and Wisconsin are among the states that have
considered and/or implemented importation programs. For current information on state
activities with regard to prescription drug importation, see National Conference of State
(continued...)

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CRS-21
In addition, several states, including Vermont, have petitioned the FDA in hope
that the agency would, as it has done with regard to personal drug importation,
exercise its enforcement discretion and allow states to establish prescription drug
importation pilot plans.104 The Medicare Act authorized the FDA to provide waivers
for individual importation, and some lawmakers have argued that the individual
importation waiver authority extends to state importation plans because such plans
are intended to provide prescription drugs to individual state residents. The FDA,
however, responded that the waiver provisions in the Medicare Act become effective
only upon certification by the Secretary that drug importation is safe and reduces
costs.105 If the Secretary would grant a waiver or if federal law would otherwise allow
such a program, Maine would provide access to foreign prescription drugs.106
Ultimately, Vermont, whose petition for a pilot program was rejected by the
FDA, sued the agency, claiming that the FDA’s failure to implement regulations that
authorize waivers and subsequent denial of Vermont’s petition violated the
Administrative Procedure Act (APA). The Vermont lawsuit also claimed that the
importation provisions in the Medicare Act constitute an unconstitutional delegation
of legislative authority to the Secretary of HHS.107 Vermont’s claims, however, were
rejected by a federal district court. In the case, Vermont v. Leavitt,108 the court held
that the FDA did not act arbitrarily and capriciously in violation of the APA because
Vermont’s petition asked the agency to approve a program that was illegal. The
court based its ruling, in part, on its determination that, as the FDA had argued, the
FDCA provision authorizing waivers for personal importation becomes effective only
103 (...continued)
Legislators, 2007 Prescription Drug State Legislation (August 1, 2007),
[http://www.ncsl.org/programs/health/drugbill07.htm]. According to the National
Conference of State Legislators, 13 states considered the issue of prescription drug
importation during 2006, while only 7 states considered the issue during the first seven
months of 2007. Id.; National Conference of State Legislators, 2006 Prescription Drug
State Legislation (March 26, 2007), [http://www.ncsl.org/programs/health/drugbill06.htm]
104 Inside Washington Publishers, Vermont Wants FDA to Allow Drug Reimportation for
State Employees, FDA WEEK, December 19, 2003; see also Inside Washington Publishers,
Sen. Dorgan Pushes for Drug Import Pilot Program in North Dakota, FDA WEEK, April 2,
2004; Letter from Lester M. Crawford, Acting Commissioner of Food and Drugs, Food and
Drug Administration, to Governor Rod R. Blagojevich, State of Illinois (June 3, 2004),
[http://www.fda.gov/oc/opacom/hottopics/importdrugs/GovB63.pdf].
105 Kelly Field, Battle Brewing Between Administration, Local Officials Over Drug
Importation Issue, CQ TODAY, December 19, 2003.
106 22 Me. Rev. Stat. § 254-C. Similarly, the Washington legislature incorporated into its
state laws the ability to ask for waivers from the FDA that would allow them to license
Canadian, United Kingdom, Irish, and other nondomestic prescription drug wholesalers.
Wash. Rev. Code § 18.64.490.
107 Vermont v. Thompson (D. Vt. filed August 19, 2004). In January 2005, Mike Leavitt
succeeded Tommy Thompson as Secretary of the Department of Health and Human
Services, resulting in a different case name.
108 405 F. Supp. 2d 466 (D. Vt. 2005).

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CRS-22
upon certification by the Secretary that drug importation is safe and reduces costs.109
Likewise, the court rejected Vermont’s claim that the certification provision
constitutes an unconstitutional delegation of legislative authority, holding that the
provision “provides clear guidance to the Secretary of HHS by directing the Secretary
to consider safety and cost-effectiveness.”110 Vermont did not appeal the decision.111
Montgomery County in Maryland petitioned the FDA for a waiver to allow its
residents and employees to import prescription drugs from Canada. The FDA
rejected the petition, citing the Leavitt case.112 In response, Montgomery County
filed a lawsuit alleging that the FDA’s denial of its petition was arbitrary and
capricious and violated the APA.113 Specifically, the County argued that the FDA’s
action was arbitrary because the agency has tacitly allowed numerous other states and
localities to import prescription drugs in violation of the FDCA but nonetheless
refuses to assist jurisdictions that attempt to import drugs legally under a waiver
program. Furthermore, the County contended that the FDA’s failure to act with
respect to illegal importation programs indicates that the agency does not believe that
importation poses a safety risk, despite the agency’s statements to the contrary.114
The federal district court granted the FDA’s motion to dismiss the case. The court
held that the FDA complied with the FDCA and the Medicare Act when it denied the
County’s waiver request and found the FDA’s denial did not violate the APA because
it was not arbitrary or capricious.115 In response to the County’s argument that the
FDA failed to act with respect to importation programs, the court held that “the
FDA’s failure to enforce the FDCA in some situations does not constitute de facto
certification by the Secretary” of HHS, because the statute gives the Secretary
discretion to issue such certification that Canadian prescription drug importation
programs are safe and cost-effective.116 The court could not review the Secretary’s
failure to certify importation programs, nor could the court grant the County any
relief, because certification is discretionary.117
109 Id. at 473-75.
110 Id. at 476.
111 Tim Craig, Duncan Sues FDA Over Canadian Drugs, WASH. POST, February 23, 2006,
at B05.
112 Letter from Randall W. Lutter, Ph.D., Acting Associate Commissioner for Policy and
Planning, Food and Drug Administration, to Douglas M. Duncan, County Executive, Office
of the County Executive (November 8, 2005), [http://www.fda.gov/oc/opacom/hottopics/
importdrugs/duncan110805.html].
113 Montgomery County v. Leavitt, 445 F. Supp. 2d 505 (D. Md. 2006).
114 Press Release, Montgomery County, Maryland, Duncan Sues Bush Administration Over
Canadian Drug Import (February 23, 2006), [http://www.montgomerycountymd.gov/apps/
News/press/DisplayInfo.cfm?ItemID=1755].
115 Montgomery County, 445 F. Supp. 2d at 508-10.
116 Id. at 512.
117 Id. at 513-14.

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CRS-23
Despite the efforts of such state and local governments, the FDA continues to
maintain that importing unapproved prescription drugs is unsafe and illegal. Indeed,
FDA representatives have met with and sought to convince state officials to change
their minds about importing drugs in apparent violation of federal law. At the same
time, the agency has notified certain states of its legal position regarding drug
imports.118 For example, according to the FDA’s response to an inquiry from
California officials, “if an entity or person within the State of California (including
any state, county, or city program, any public pension, or any Indian Reservation)
were to import prescription drugs into the State of California from Canada [or any
other foreign country], it would violate FDCA in virtually every instance.”119
The FDA provides several legal arguments for reaching its conclusion that state
and local drug importation is a violation of the FDCA. First, the statute prohibits
anyone other than the manufacturer from importing drugs that were originally
manufactured in the United States. Second, even if an FDA-approved drug is
manufactured outside the U.S., the imported version of the drug will likely violate
statutory requirements regarding drug approvals, labeling, and dispensing.120 These
first two arguments are identical to the arguments that FDA has made when
explaining why the agency views business and consumer imports of prescription
drugs to be statutory violations.121 Therefore, the FDA considers virtually any
imports of prescription drugs, as well as virtually any act that causes such imports,
to be illegal, regardless of whether such imports are conducted by businesses,
consumers, or governmental entities.
In addition, the FDA contends that any effort by states to enact legislation
authorizing prescription drug imports would be preempted by federal law.122
118 Indeed, the FDA has issued a series of warning letters to states that have considered or
that have implemented prescription drug importation plans. These letters are posted on the
FDA’s website at [http://www.fda.gov/importeddrugs/].
119 Letter from William K. Hubbard, Associate Commissioner for Policy and Planning, Food
and Drug Administration, to Gregory Gonot, Deputy Attorney General, State of California
2 (August 25, 2003), [http://www.fda.gov/opacom/gonot.html] [hereinafter California
Letter].
120 Id. at 3.
121 See supra notes 25-50 and accompanying text.
122 California Letter, supra note 118, at 5-7. In a warning letter to Rhode Island, the FDA
elaborated on its preemption argument in greater detail. Letter from William K. Hubbard,
Associate Commissioner for Policy and Planning, Food and Drug Administration, to Patrick
C. Lynch, Attorney General of Rhode Island (January 28, 2005), [http://www.fda.gov/oc/
opacom/hottopics/importdrugs/lynch012805.html]. The preemption doctrine derives from
the Supremacy Clause of the Constitution, which establishes that the laws of the United
States “shall be the supreme law of the land; and the judges in every state shall be bound
thereby, any thing in the Constitution or laws of any State to the contrary notwithstanding.”
U.S. CONST. art. VI, cl. 2. In applying this constitutional mandate, courts have recognized
both express and implied forms of preemption, which are “compelled whether Congress’
command is explicitly stated in the statute’s language, or implicitly contained in its structure
and purpose.” Gade v. National Solid Wastes Management Association, 505 U.S. 88, 97
(continued...)

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Although the FDA sets forth several legal arguments for its position, preemption of
a state act’s importation provisions does not appear to have been tested in court, and
there are several instances in which other prescription drug provisions in the FDCA
have been held not to preempt state law.123 Finally, the agency has warned some
states that they could be subject to lawsuits for injuries to consumers who relied on
the state’s endorsement when purchasing prescription drugs from Canada. For
example, in a letter to Minnesota state officials, the FDA warned of “the potential tort
liability that a state could be subject to if a citizen purchases an unapproved, illegal
drug on your advice, and suffers an injury as a result.”124
Despite the FDA’s position regarding state and local imports of prescription
drugs, it appears that the agency is currently refraining from taking legal action
against state and local governments that have established drug importation programs.
Indeed, in a warning letter to Minnesota, which established a website that provides
information about accessing less costly prescription drugs from Canada, the agency
notably refrained from asserting that the state’s program violated the FDCA and did
not describe any potential enforcement action that the FDA might take.125 Likewise,
the FDA has indicated that it is unlikely to sue the state of Illinois, which has
implemented a plan to import drugs from Canada and certain European countries,
despite the agency’s earlier pronouncement that it would refrain from suing states and
localities as long as those entities imported drugs from Canada and not from other
122 (...continued)
(1992) (quoting Jones v. Rath Packing Co., 430 U.S. 519, 525 (1977)).
123 Many of these cases, however, deal with prescription drug labeling, not importation, and
state common law claims, not state statutory law. David R. Geiger and Mark D. Rosen,
Rationalizing Product Liability for Prescription Drugs: Implied Preemption, Federal
Common Law, and Other Paths to Uniform Pharmaceutical Safety Standards, 45 DEPAUL
L. REV. 395, 408 (1996). It is also important to note that the FDCA expressly preempts state
law with regard to over-the-counter drugs and medical devices but not with regard to
prescription drugs. As a result, it is more difficult to predict the outcome of a preemption
challenge to state laws on prescription drugs. A detailed examination of the preemption
issue, however, is beyond the scope of this report.
124 Letter from William K. Hubbard, Associate Commissioner for Policy and Planning, Food
and Drug Administration to the Honorable Tim Pawlenty, Governor of Minnesota 3
(February 23, 2004), [http://www.fda.gov/oc/opacom/hottopics/importdrugs/
pawlenty022304.html]. In the Minnesota warning letter, the FDA explicitly noted that
Minnesota’s own inspection of some of the recommended Canadian pharmacies had
revealed potential safety violations. Id. at 1-3.
125 Id. One possible explanation for the FDA’s silence with respect to the legality of
Minnesota’s actions could be that it is unclear whether the state is “causing” the prohibited
importation activity in violation of the statute, in part because the state neither imports drugs
from Canada nor allows consumers to order directly through its website. On the other hand,
the Minnesota website does provide order forms, pricing information, and instructions on
how to submit an order to the recommended pharmacies, and such actions may be enough
to establish that Minnesota is facilitating illegal importation. See [http://www.state.mn.us/
portal/mn/jsp/home.do?agency=Rx] to view Minnesota’s website.

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CRS-25
countries.126 One possibility is that the agency is “simply waiting for a state to
actually buy foreign drugs for their residents, which would constitute direct
commercial importation, before taking legal action.”127 Although several localities
are importing drugs directly, “the FDA has not gone after these cities because they
are too small.”128 Previously, the FDA had indicated that it had not yet sued states
or localities because “the agency wants to first win its case against Rx Depot, giving
FDA bargaining power for the more difficult task of taking formal action against
states and local governments.”129 However, in the Rx Depot case, which involved
a private company that helped individual consumers import prescription drugs, the
FDA successfully concluded its lawsuit when Rx Depot agreed to enter into a consent
decree that permanently enjoins the company from the importation of unapproved
prescription drugs.130 The Rx Depot case is discussed in detail in the following
section.
Businesses That Facilitate Importation of Prescription Drugs
Although the FDA has refrained thus far from taking legal action against both
states and individual consumers who import prescription drugs in violation of the
FDCA, the agency has pursued legal action against businesses that facilitate the
importation of such drugs. Unlike pharmacies, which receive orders from consumers
and dispense drugs directly, some businesses facilitate drug sales without dispensing
drugs directly. Rather, these companies, many of which are online, act as middlemen
between consumers, who provide medical and payment information, and foreign
(typically Canadian) pharmacies, which then ship drugs directly to consumers. The
FDA has pursued legal action against at least one such business. That case is
discussed in detail in this section, while separate but related issues involving online
pharmacies are discussed in a different section below.
In United States v. Rx Depot,131 the Department of Justice (DOJ), acting on
behalf of the FDA, filed suit against Rx Depot, a storefront operation that helped U.S.
126 Inside Washington Publishers, FDA Signals Reluctance to Sue Illinois for Importing
Drugs, FDA WEEK, August 20, 2004.
127 Inside Washington Publishers, CMS Could Refuse Medicaid Approvals for Rx-Importing
States, FDA WEEK, December 10, 2005. Even if a state were to import drugs directly,
however, the Centers for Medicare and Medicaid Services (CMS) may be better positioned
to halt such state activities than the FDA would be, since the FDA would have to engage in
potentially lengthy litigation over the issue, while CMS could deny approval for any state
Medicaid plan that contained a drug importation program, thereby eliminating what would
otherwise be a significant source of state funding for importation activities.
128 Id.
129 Inside Washington Publishers, FDA To Resolve Rx Depot Suit Before Taking on States,
FDA WEEK, October 31, 2003.
130 Press Release, Food and Drug Administration, Rx Depot Agrees in Consent Decree to
Cease Importing Unapproved Drugs from Canada (August 20, 2004), [http://www.fda.gov/
bbs/topics/news/2004/NEW01105.html].
131 290 F. Supp. 2d 1238 (D. Okla. 2003) (order granting preliminary injunction).

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CRS-26
consumers obtain prescription drugs from Canada.132 In the suit, DOJ contended that
Rx Depot was violating two provisions of the FDCA, namely the provision
prohibiting importation and the provision prohibiting the introduction into interstate
commerce of any drug that violates the act’s approval requirements.133 Although Rx
Depot was not directly importing drugs, the company admitted that it was “engaged
in the business of causing the shipment of U.S.-manufactured and unapproved,
foreign-manufactured prescription drugs from Canadian pharmacies to U.S.
citizens.”134
Rx Depot countered that the FDA was not actually concerned about the safety
of imported drugs because the agency had never tested the drugs it bought from Rx
Depot as part of a sting operation against the company.135 Similar complaints have
been voiced by other businesses that facilitate the importation of prescription drugs.
Critics of FDA’s importation stance also argue that it “fails to protect the public
health because it allows individuals to import drugs, while prohibiting ‘commercial’
operations that are in the best position to develop safeguards,”136 and allege that the
FDA’s importation procedures may violate international trade agreements.137
Ultimately, critics argue that the FDA’s procedures protect the profits of drug
manufacturers at the expense of consumer pocketbooks.138
Despite these arguments, the district court held against Rx Depot during a
preliminary ruling in the case. Concluding that “Rx Depot’s importation of
prescription drugs clearly violates the law,” the district court issued a preliminary
injunction enjoining Rx Depot from facilitating the importation of prescription
drugs.139 While the court’s order was not actually a final order on the merits of the
132 DOJ initiated this lawsuit after Rx Depot failed to respond to the agency’s warning letter
and continued to facilitate the importation of prescription drugs and the importation of
unapproved drugs. See Letter from David J. Horowitz, Esq., Director, Office of Compliance,
Center for Drug Evaluation and Research, Food and Drug Administration, to Harry Lee
Jones, Store Manager, Rx Depot, Inc., (March 21, 2003), [http://www.fda.gov/
foi/warning_letters/archive/g3888d.pdf]. The FDA has sent similar warning letters to other
businesses that facilitate the importation of prescription drugs. See, e.g., Letter from David
J. Horowitz, Esq., Director, Office of Compliance, Center for Drug Evaluation and
Research, Food and Drug Administration, to G. Anthony Howard, President, CanaRx
Services, Inc., (September 16, 2003), [http://www.fda.gov/cder/warn/2003/RHoward.pdf].
133 United States v. Rx Depot, 290 F. Supp. 2d 1238 (D. Okla. 2003) (order granting
preliminary injunction); see also 21 U.S.C. §§ 331(d), 331(t), and 355.
134 Rx Depot, 290 F. Supp. 2d at 1241.
135 Inside Washington Publishers, Rx Depot: FDA Alleged Safety Concerns With
Reimportation Are Bogus, FDA WEEK, November 7, 2003.
136 Id..
137 Inside Washington Publishers, CanaRx Says FDA’s Reimportation Policy Violates Trade
Agreements, FDA WEEK, November 7, 2003.
138 Marc Kaufman, FDA’s Authority Tested Over Drug Imports, WASH. POST, November 9,
2003, at A11.
139 Rx Depot, 290 F. Supp. 2d at 1247.

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CRS-27
case, it did indicate that DOJ had a substantial likelihood of prevailing in the lawsuit.
Indeed, the court appeared particularly concerned with the safety of imported drugs:
[U]napproved prescription drugs and drugs imported from foreign countries by
someone other than the U.S.-manufacturer do not have the same assurance of
safety and efficacy as drugs regulated by the Food and Drug Administration. ...
Because the drugs are not subject to FDA oversight and are not continuously
under the custody of a U.S. manufacturer or authorized distributor, their quality
is less predictable than drugs obtained in the United States. For instance, the
drugs may be contaminated, counterfeit, or contain erratic amounts of the active
ingredient or different excipients. Also, the drugs may have been held under
uncertain storage conditions, and therefore be outdated or subpotent.140
With regard to Rx Depot, the court specifically noted that drugs ordered through
the company were often dispensed in quantities greater than prescribed and did not
contain the required package inserts. Although the court acknowledged that the cost
of prescription drugs in the U.S. is high and that there are no known cases of an
individual who has suffered harm from drugs imported through Rx Depot, the court
nevertheless concluded that the FDA has legitimate safety concerns and that
Congress is in the best position to resolve the tension between prescription drug
safety and cost.141
Shortly after the court issued the preliminary injunction, Rx Depot agreed to
enter into a consent decree with the FDA. Under the terms of the consent decree, Rx
Depot “admitted liability for causing the importation of unapproved new drugs and
U.S.-manufactured drugs in violation of the act and agreed to permanently cease such
activities.”142 In the wake of the consent decree, the legal battle continued, as the
U.S. requested disgorgement of Rx Depot’s profits.143 The federal court of appeals
found that disgorgement was an appropriate remedy under the FDCA because
disgorgement “furthers the purposes of the FDCA by deterring future violations of
the Act which may put the public health and safety at risk.”144 Many companies like
Rx Depot remain in business,145 and a number of states and localities have
contemplated or implemented their own importation programs. In response, several
drug manufacturers have begun limiting sales of their drugs to Canadian pharmacies
in an effort to prevent the drugs from being resold in the U.S. at cheaper prices.
140 Id. at 1241-42.
141 Id. at 1241-42, 1245.
142 Press Release, Food and Drug Administration, Rx Depot Agrees in Consent Decree to
Cease Importing Unapproved Drugs from Canada (August 20, 2004), [http://www.fda.gov/
bbs/topics/news/2004/NEW01105.html].
143 United States v. Rx Depot, 438 F.3d 1052, 1053 (2006), cert. denied 127 S. Ct. 80
(2006).
144 Id. at 1058, 1061.
145 For example, in a case against a business similar to Rx Depot, the FDA won a permanent
injunction that enjoins a company known as Canada Care from importing unapproved
prescription drugs. Press Release, Food and Drug Administration, Court Halts Illegal
Importation of Prescription Drugs (December 27, 2004), [http://www.fda.gov/bbs/topics/
ANSWERS/2004/ANS01337.html].

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These actions have raised questions about whether such behavior violates federal
antitrust laws, a topic that is discussed in the following section.
Antitrust Laws146
As noted above, several major prescription drug manufacturers have responded
to the rise in the number of businesses and consumers that are importing cheaper
drugs into the U.S. by reducing the supply of such drugs to distributors and
pharmacies in Canada, where most of the imported drugs originate.147 Although
some manufacturers argue that restrictions on sales are designed to prevent drug
shortages in Canada, such moves may instead be intended to limit Canadian
distributors and pharmacies to selling prescription drugs to Canadian consumers only,
rather than selling excess supplies of prescription drugs to U.S. consumers at cheaper
prices than such consumers would pay for similar drugs in the United States. As a
result, several members of Congress have questioned whether these drug
manufacturers are violating federal antitrust laws.148 Several bills introduced in the
109th Congress would have prohibited such sales tactics,149 and similar legislation
has been introduced in the 110th Congress.150 Furthermore, a federal district court
issued what appears to be the first ruling regarding antitrust allegations against
several drug manufacturers and the decision was affirmed on appeal.151 In addition,
at least one state has launched an investigation into whether the drug manufacturer
GlaxoSmithKline (GSK) has violated state antitrust laws.152 This section discusses
the potential federal and state antitrust issues raised by the decision of certain drug
manufacturers to limit the supply of drugs to Canadian distributors and pharmacies.
Federal Antitrust Law. Federal antitrust law is concerned with the
competitiveness of markets (competition), and not with the competitors — unless
they have suffered an injury as a result of an actionable wrong under the antitrust
laws. Similarly, the achievement or implementation of specific programs or goals
is not a concern of the federal antitrust laws. It is not a given, therefore, that existing
federal antitrust laws could be successfully employed to challenge pharmaceutical
manufacturers whose actions appear either to reduce the U.S. supply of imported
146 This section was written by Janice E. Rubin, Legislative Attorney in the American Law
Division of CRS.
147 Following the example set by GlaxoSmithKline, Pfizer Inc., the world’s biggest drug
manufacturer, also announced that the company was limiting sales of prescription drugs to
Canadian pharmacies that resold such drugs to U.S. consumers. Ceci Connolly, Pfizer Cuts
Supplies to Canadian Drugstores, WASH. POST, February 19, 2004, at A10.
148 Inside Washington Publishers, Lawmakers Seek DOJ Anti-Trust Probe of Firms Limiting
Sales to Canada, FDA WEEK, November 7, 2003.
149 See, e.g., H.R. 328; S. 334.
150 See, e.g., H.R. 380; S. 242.
151 In Re: Canadian Import Antitrust Litig., 385 F. Supp. 2d 930 (D. Minn. 2005), aff’d, 470
F.3d 785 (8th Cir. 2006).
152 Inside Washington Publishers, Judge Wants More Info Before Deciding Motion to
Compel Against GSK, FDA WEEK, November 21, 2003.

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CRS-29
prescription drugs or to make it more difficult for Americans to purchase prescription
drugs from other countries, including Canada.
First, neither current antitrust statutes nor doctrine make unlawful the market-
oriented activities of individual entities, unless, under certain circumstances, the
entity is a monopolist.153 Section 1 of the Sherman Act154 makes illegal “[e]very
contract, combination ... or conspiracy, in restraint of trade or commerce ... .” That
provision, by its terms, may only be violated by multiple parties engaged in
concerted, or joint action. Thus, it would not currently be applicable to, for example,
a drug manufacturer who, on his own, and not in agreement with another drug
manufacturer or other person, refuses to supply, or reduces supplies to, a Canadian
or other non-U.S. pharmacy.155
The Sherman Act [15 U.S.C. §§ 1-7] contains a ‘basic distinction between
concerted and independent action.’ The conduct of a single firm is governed by
§ 2 [of the Sherman Act, 15 U.S.C. § 2] alone and is unlawful only when it
threatens actual monopolization. It is not enough that a single firm appears to
‘restrain trade’ unreasonably, for even a vigorous competitor may leave that
impression . . . . Section 1 of the Sherman Act [15 U.S.C. § 1], in contrast,
reaches unreasonable restraints of trade effected by a ‘contract, combination . . .
or conspiracy’ between separate entities. It does not reach conduct that is
‘wholly unilateral.’”156
Moreover, the Court long ago noted in United States v. Colgate that
the [Sherman] act does not restrict the long recognized right of [a] trader or
manufacturer engaged in an entirely private business, freely to exercise his own
independent discretion as to parties with whom he will deal; and, of course, he
may announce in advance the circumstances under which he will refuse to sell.157
The U.S. Court of Appeals for the Federal Circuit added that the fundamental
Colgate precept of seller choice set out above is not altered by the applicability of
153 For a more detailed discussion of this issue, see CRS Report RL33708, The Distinction
Between Monopoly and Monopolization in Antitrust Law, and CRS Report RS20241,
Monopoly and Monopolization — Fundamental But Related Concepts in U.S. Antitrust Law,
by Janice E. Rubin, and Congressional Distribution Memorandum, Duty of a Monopolist to
Deal, by Janice E. Rubin.
154 15 U.S.C. §§ 1-7.
155 See infra the section of this report on “State Antitrust Law” regarding the existence at
the state level of some unilateral restraint of trade provisions.
156 Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 767-68 (1984) (ruling that
a parent corporation was not legally capable of conspiring with its own wholly owned
subsidiary, and so could not be guilty of conspiracy) (citations and footnote omitted)
(emphasis added).
157 United States v. Colgate & Co., 250 U.S. 300, 307 (1919).

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either the patent or copyright law to the item(s) in question, unless it is judicially
determined that the patent or copyright in question was fraudulently procured.158
Second, whether certain joint activity is unlawful and therefore violates the
antitrust statutes is not always susceptible of proof. Although the Supreme Court has
indicated several times that a formal contract may not be necessary to establish the
collective action required by section 1, an antitrust violation may be found if the
unlawful agreement159 can be inferred from the totality of surrounding
circumstances.160
In 1984, in Monsanto Co. v. Spray-Rite Service Corp., the Court said:
The correct standard is that there must be evidence that tends to exclude the
possibility of independent action by the [parties]. That is, there must be direct
or circumstantial evidence that reasonably tends to prove that the [parties] had
a conscious commitment to a common scheme designed to achieve an unlawful
objective.161
“Conscious parallelism” is the term often given to uniform or synchronous
business behavior, which, while prima face evidence of concerted behavior, is not
proof of unlawful agreement.162 In an early case, for example, the Court held that the
158 In re Independent Service Organizations Antitrust Litigation, 203 F.3d 1322, 1326 (Fed.
Cir. 2000).
159 There are a small number of actions (e.g., price fixing, market allocation, boycotts or
concerted refusals to deal) that the courts have designated as per se violations of section 1;
other actions are analyzed pursuant to the Rule of Reason (anticompetitive consequences
weighed against any procompetitive result), and only those found to unreasonably restrain
trade are considered unlawful violations of section 1.
160 “No formal agreement is necessary to constitute an unlawful conspiracy. . . . The
essential combination or conspiracy in violation of the Sherman Act may be found in a
course of dealings or other circumstances as well as in any exchange of words. [A
conspiracy, or unlawful agreement may be found where] the conspirators had a unity of
purpose or a common design and understanding, or a meeting of minds in an unlawful
arrangement . . . .” American Tobacco Co. v. United States, 328 U.S. 781, 809-10 (1946)
(citation omitted).
161 465 U.S. 752, 768 (1984) (refusing to find that concerted action may be inferred from the
fact that a seller terminated a dealer after the seller had received complaints from a
competing dealer about the terminated dealer’s pricing policies).
162 “Tacit collusion, sometimes called oligopolistic price coordination or conscious
parallelism, describes the process, not in itself unlawful, by which firms in a concentrated
market might in effect share monopoly power, setting their prices at a profit-maximizing,
supracompetitive level by recognizing their shared economic interests and their
interdependence with respect to price and output decisions. ... Firms that seek to recoup
predatory losses through the conscious parallelism of oligopoly must rely on uncertain and
ambiguous signals to achieve concerted action. The signals are subject to misinterpretation
and are a blunt and imprecise means of ensuring smooth cooperation, especially in the
context of changing or unprecedented market circumstances. This anticompetitive minuet
is most difficult to compose and to perform ... .” Brooke Group, Ltd. v. Brown &
(continued...)

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circumstances surrounding imposition by eight motions picture distributors of nearly
identical restraints concerning the licensing of first-run “feature” films were
sufficient to create a valid inference that the distributors had acted in concert, in
violation of section 1 of the Sherman Act.
It is elementary that an unlawful conspiracy may be and often is formed without
simultaneous action or agreement on the part of the conspirators. Acceptance by
competitors, without previous agreement, of an invitation to participate in a plan,
the necessary consequence of which, if carried out, is restraint of interstate
commerce, is sufficient to establish an unlawful conspiracy under the Sherman
Act.163
In Theatre Enterprises v. Paramount Film Distributing Corp., the Court
continued to state that parallel behavior by itself is not necessarily proof of a
conspiracy:
The crucial question is whether respondents’ conduct toward petitioner stemmed
from independent decision or from an agreement, tacit or express. To be sure,
business behavior is admissible circumstantial evidence from which the fact
finder may find agreement. But this Court has never held that proof of parallel
business behavior conclusively establishes agreement or, phrased differently, that
such behavior itself constitutes a Sherman Act offense. Circumstantial evidence
of consciously parallel behavior may have made heavy inroads into the
traditional judicial attitude toward conspiracy; but “conscious parallelism” has
not yet read conspiracy out of the Sherman Act entirely.164
Although the Supreme Court has stated, and lower court decisions have
continued to illustrate, that an unlawful agreement or conspiracy in restraint of trade
may be proved by consciously parallel behavior that is accompanied by any of several
“plus” factors — “the additional facts or factors required to be proved as a
prerequisite to finding that parallel action amounts to a conspiracy”165 — there has
not been much agreement or standardization concerning exactly which “plus” factors
are to be given what, if any, evidentiary weight.166 The “plus” factors courts have
162 (...continued)
Williamson Tobacco Corp., 509 U.S. 209, 227, 228 (1993) (citations omitted).
163 Interstate Circuit, Inc. v. United States, 306 U.S. 208, 227 (1939) (citations omitted).
164 346 U.S. 537, 540-44 (1954) (citations omitted).
165 See, e.g., In re Baby Food Antitrust Litigation, 166 F.3d 112, 122 (3d Cir. 1999) (citing
Areeda, ANTITRUST LAW § 1433(e)).
166 For example, the Baby Food court, id. at 122, quoted Balaklaw v. Lovell, 822 F. Supp.
892, 903 (N.D.N.Y. 1993) and cited Todorov v. DCH Healthcare Authority, 921 F.2d 1438,
1456 note 30 (11th Cir.1991): “[T]he mere presence of one or more of these ‘plus factors’
does not necessarily mandate the conclusion that there was an illegal conspiracy between
the parties, for the court may still conclude, based upon the evidence before it, that the
defendants acted independently of one another, and not in violation of antitrust laws”; “If
an inference of ... an agreement may be drawn from highly ambiguous evidence, there is a
considerable danger that the doctrines enunciated in [Continental T.V., Inc. v. GTE]
Sylvania [, Inc., 433 U.S. 36 (1977), non-price restraints evaluated under the antitrust rule
(continued...)

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considered favorably include artificial standardization of products167 and raising
prices in time of surplus.168 Less persuasive is evidence that indicates merely that the
parties had an opportunity to collude.169 That the parties communicated with one
another is, at best, ambiguous evidence of conspiracy.170 The bottom line appears to
be whether the parties acted in their own self-interest: where there is no direct
evidence of a conspiracy, behavior as consistent with a desire to maintain
profitability or to remain in business at all as with any participation in injurious or
unlawful conduct does not constitute sufficient indirect evidence of an alleged
conspiracy;171 similarly, where a defendant would have little or no motive to enter a
conspiracy, his actions will be considered unilateral and independent.172
Based upon these cases and assuming that there is no evidence that the drug
manufacturers in question conspired or colluded when reducing drug supplies to
Canadian distributors and pharmacies, it would appear difficult to sustain a charge
that the drug companies that limit sales to Canada have violated the Sherman Act.
Indeed, there may be lawful reasons for their actions. For example, the manufacturers
may be capable of supplying only the United States market and to a lesser extent
166 (...continued)
of reason] and Colgate [supra note 157, freedom of seller to deal with whom he wishes] will
be seriously eroded.” Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 763 (1984).
167 C-O-Two Fire Equip. Co. v. United States, 197 F.2d 489 (9th Cir. 1952), cert. denied,
344 U.S. 892 (1952).
168 American Tobacco Co. v. United States, 328 U.S. 781 (1946).
169 See, e.g., Greater Rockford Energy & Tech. Corp. v. Shell Oil Co., 998 F.2d 391 (7th Cir.
1993); Carpet Group International v. Oriental Rug Importers Ass’n, 256 F. Supp. 2d 249
(D.N.J. 2003). Both cases stand for the proposition that mere membership in a trade
association, even with the knowledge that the association is engaging in unlawful activity,
is insufficient to prove that a party participated in such activity.
170 See, e.g., Monsanto, supra note 166, at 764: “Permitting an agreement to be inferred
merely from the existence of complaints . . . could deter or penalize perfectly legitimate
conduct.” See also In re Baby Food Antitrust Litigation, supra note 165; Intervest, Inc. v.
Bloomberg, L.P., 340 F.3d 144 (3d Cir. 2003). But see e.g. Toys “R” Us v. Federal Trade
Commission, 221 F.3d 928, 934-35 (7th Cir. 2000): “When circumstantial evidence is used,
there must be some evidence that ‘tends to exclude the possibility’ that the alleged
conspirators acted independently. . . . The test states only that there must be some evidence
which, if believed, would support a finding of concerted behavior. In the context of an
appeal from the Commission, the question is whether substantial evidence supports its
conclusion that it is more likely than not that the manufacturers acted collusively.” (citations
omitted).
171 Intervest, supra note 170; Twombly v. Bell Atlantic Corp., 313 F. Supp. 2d 174
(S.D.N.Y. 2003).
172 Matsushita Electric Industries Co. v. Zenith Radio Corp., 475 U.S. 574 (1986); Todorov,
supra note 166; Hall v. United Air Lines, 296 F. Supp. 2d 652, 600 (E.D.N.C. 2003)
(quoting Matsushita, 475 U.S. at 588: “[C]onduct as consistent with permissible competition
as with illegal conspiracy does not, standing alone, support an inference of antitrust
conspiracy. ... a plaintiff seeking damages for a violation of § 1 [of the Sherman Act] must
present evidence ‘that tends to exclude the possibility’ that the alleged conspirators acted
independently.”)

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foreign markets because of limited production capacity. They may also need to
recoup research and development costs by obtaining a profit margin through sales
primarily in the United States. However, if one were able to show that the drug
companies did in fact conspire or collude or that they engaged in parallel behavior
accompanied by other factors, a case might be made for a Sherman Act violation.
In the first federal court case on the question, In Re: Canadian Import Antitrust
Litigation, a group of consumers and organizations from Minnesota who purchased
prescription drugs in the U.S. from American drug companies challenged the
defendant drug companies.173 The plaintiffs claimed that the defendants violated
federal antitrust laws “by engaging in a course of conduct designed to suppress the
importation of prescription drugs purchased from Canadian pharmacies for personal
use in the United States.”174 The district court held that prescription drugs imported
from Canada are misbranded and that “the transport of drugs for personal use into the
United States constitutes an ‘introduction into interstate commerce.’ “175 The
introduction of misbranded drugs into interstate commerce violates the FDCA.176
Noting that the plaintiffs lacked standing “to challenge Defendants’ allegedly anti-
competitive behavior because the importation of these drugs is unlawful and,
therefore, not the type of activity which federal antitrust laws were designed to
protect,” the district court dismissed the case.177 The district court also dismissed the
state and common law claims, which were ancillary to the federal antitrust claim,
after deciding not to exercise supplemental jurisdiction over them.178
On appeal, the United States Court of Appeals for the Eighth Circuit affirmed
the district court judgment, finding that the importation of prescription drugs from
Canada is illegal and that the plaintiffs did not have standing under antitrust laws to
maintain the suit. Even if importation were legal, according to the court, the antitrust
injury that the plaintiffs encountered — “an absence of competition from Canadian
sources in the domestic prescription drug market” — was not a result of the
defendants’ behavior and was not an injury that the antitrust laws were designed to
prevent. Rather, the injury to the plaintiffs was “caused by the federal statutory and
regulatory scheme adopted by the United States government.”179 Although this
decision is not binding on courts in other jurisdictions, it provides an initial glimpse
of how the antitrust issue may play out in the courts.
Despite the apparent lack of violation of federal antitrust law, drug
manufacturers that limit sales of prescription drugs to Canadian distributors and
pharmacies may still violate state antitrust laws. Because antitrust laws vary from
173 In Re: Canadian Import Antitrust Litig., 385 F. Supp. 2d 930 (D. Minn. 2005) aff’d, 470
F.3d 785 (8th Cir. 2006).
174 Id. at 932.
175 Id. at 934.
176 21 U.S.C. §331(a).
177 385 F. Supp. 2d at 932.
178 Id. at 934.
179 In Re: Canadian Import Antitrust Litig., 470 F.3d 785, 791 (8th Cir. 2006).

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state to state, this section does not provide an exhaustive analysis of state antitrust
laws, but rather describes the legal dispute between GlaxoSmithKline (GSK) and the
state of Minnesota as an example of potential liability under state antitrust statutes.
State Antitrust Law. Even if drug manufacturers that limit sales of
prescription drugs to certain Canadian distributors and pharmacies are found not to
have violated federal antitrust laws, they may still be in violation of state antitrust
law. Antitrust laws exist in all fifty states and the District of Columbia, but their
scope and enforcement differ from state to state.180 Most state antitrust laws mirror
the federal statutes or are interpreted to reflect case law interpreting these federal
statutes,181 although there are a small number of states in which a restraint of trade
violation includes a unilateral act.182 This section describes the recent legal dispute
between the state of Minnesota and GlaxoSmithKline (GSK) over state antitrust law
and its effect on prescription drug importation.
In 2003, the Minnesota Attorney General (AG), who is investigating whether
GSK violated Minnesota antitrust laws,183 filed a court motion seeking to compel
GSK to release information located in Canada and the United Kingdom about the
company’s decision to stop selling drugs to Canadian pharmacies that then sell the
drugs to U.S. consumers. According to the AG, GSK conspired to limit drug sales
to Canada, and “GSK’s refusal to supply prescription drugs to Canadian pharmacies
that sell drugs to Minnesota buyers violates state laws.”184 In reply, GSK argued that
“importing drugs from Canada is illegal and a drug company can take steps to stop
illegal sales of its products;”185 and also that federal law preempts Minnesota’s
antitrust laws. Ultimately, the district court of Hennepin County, Minnesota, ordered
GSK to produce the records and information sought by the AG.186 The court ruled
that even if GSK’s position that “the importation of non-approved drugs from Canada
is illegal under the FDCA, and there cannot be a conspiracy in violation of the
180 See generally Section of Antitrust Law, American Bar Association, STATE ANTITRUST
ENFORCEMENT HANDBOOK, 2003.
181 Id.; see, e.g., Minnesota Twins Partnership v. State ex rel. Hatch, 592 N.W.2d 847, 851
(Minn. Ct. App. 1999), cert. den. Hatch v. Minnesota Twins Partnership, 528 U.S. 1013
(1999): “Minnesota’s antitrust laws are generally interpreted consistently with federal
courts’ construction of federal antitrust laws” (citing State by Humphrey v. Alpine Air
Products, Inc., 490 N.W.2d 888, 894 (Minn. Ct. App.1992), aff’d, 500 N.W.2d 788 (Minn.
S.Ct. 1993)).
182 E.g., § 203(A) of the Oklahoma Antitrust Reform Act (OKLA. STAT. tit. 79, §§ 201 et seq.)
makes illegal and “against public policy” not only agreements, contracts, or combinations
in restraint of trade, but also “acts” in restraint of trade.
183 Minn. Stat. §§ 325D.49 et seq.
184 Inside Washington Publishers, Judge Wants More Info Before Deciding Motion to
Compel Against GSK, FDA WEEK, November 21, 2003.
185 Id.
186 In the Matter of GlaxoSmithKline plc, No. MC 03-15992, slip op. (D. Minn., May 7,
2004).

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antitrust laws to restrain trade in illegal goods”187 were correct, which the court
questioned, “[e]nforcement of federal law is the responsibility of the FDA, not of
GSK,” especially since “the FDA has never even reviewed GSK’s boycott,” much
less specifically approved it.188 The district court judge obliquely addressed the
preemption argument, finding sufficient authority for the Minnesota AG’s
investigation and the document request in pursuit of that investigation under the
Minnesota statute that mandates that the Attorney General “investigate violations of
the business and trade laws of this state . . . .”189
Based on information revealed in the GSK documents that were turned over, the
Minnesota AG filed a lawsuit against GSK in 2004, alleging that the company had
violated state antitrust laws.190 GSK and the Minnesota AG are mired in fighting
over the public release of over 40 documents turned over by GSK. The Minnesota
Supreme Court recently remanded the case regarding public disclosure of the
documents to the district court with a framework to apply to determine whether to
issue a protective order for each document in order to protect a person’s association
rights or to publicly disclose the document’s information.191 Minnesota’s case
against GSK may have been harmed by a federal court decision in In re: Canadian
Import Antitrust Litigation, which determined that drug manufacturers had not
violated federal antitrust law by attempting to halt the importation of prescription
drugs.192
International Trade Law193
As with antitrust law, international trade obligations may also impact the
feasibility of prescription drug importation. On the one hand, permitting some
importation of prescription drugs may be seen as removing an existing barrier to
187 Id. at 11.
188 Id.
189 Id. at 6 (citing Minn. Stat. § 8.31(2002)).
190 Inside Washington Publishers, Minnesota Tries to Publicize GSK Documents to Bolster
Antitrust Suit, FDA WEEK, December 17, 2004.
191 In the Matter of GlaxoSmithKline plc, 732 N.W. 2d 257, 262, 269, 273 (2007). The court
stated the framework as follows:
First, the court should determine whether a party asserting the need for a
protective order has sufficiently established a potential chilling effect on its
association right. Second, if the party meets this burden, the court should
balance the party’s association right against the state’s interest in releasing the
information to the public. The state must demonstrate a compelling
governmental interest in order to release documents protected by the First
Amendment right to association.
Id. at 269-70.
192 See supra notes 173-79 and accompanying text.
193 This section was written by Todd B. Tatelman, Legislative Attorney in the American Law
Division of CRS.

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trade or trade liberalizing; on the other hand, the United States’ international trade
obligations may present obstacles to prescription drug importation. Furthermore,
legislative and/or regulatory proposals regarding importation may be inconsistent
with provisions of various international trade agreements including, but not limited
to, the General Agreement on Tariffs and Trade 1994 (GATT 1994), the Agreement
on Technical Barriers to Trade (TBT) and the General Agreement on Trade in
Services (GATS), all of which are a part of the World Trade Organization (WTO)
Agreement to which the United States is a signatory member.194 At the same time,
however, these agreements contain exceptions that may be used to justify some of the
potential inconsistencies that may arise.
General Agreement on Tariffs and Trade. Under the GATT 1994,
Articles III:4, I:1 and XI:1 contain provisions that may affect prescription drug
imports. Generally, Article III governs the application of domestic regulatory
measures requiring that “laws, regulations and requirements affecting the internal
sale, offering for sale, purchase, transportation, distribution or use of products ...
should not be applied to domestic products so as to afford protection to domestic
production.” Article III:4 specifically obligates Member countries, with respect to
all such domestic measures, to provide national treatment to imported products from
other WTO Member countries. Simply put, national treatment requires that Member
countries not discriminate against imported goods relative to like domestic products.
In addition to the national treatment obligation, internal regulatory measures are also
required to comply with Article I:1, the most-favored-nation (MFN) clause. MFN
requires that “any advantage, favor, privilege or immunity granted by any contracting
party to any product originating in or destined for any other country shall be accorded
immediately and unconditionally to the like product originating in or destined for the
territories of all other contracting parties.” The inclusion of Article III measures
within the Article I:1 MFN obligation was intended to extend the obligation to them
“regardless of whether national treatment is provided with respect to these
matters.”195
To the extent that any legislative or regulatory proposal contains requirements
affecting the internal sale, offering for sale, purchase, transportation, distribution, or
use of prescription drugs in the United States, it could be viewed as falling within the
purview of Article III. The provisions of Article III have been interpreted broadly,
with the use of the word “affecting” having been interpreted as implying that the
drafters of the Article intended it to apply to “not only the laws and regulations which
194 It should be noted that many of the same issues raised in the WTO context may also arise
with respect to the North American Free Trade Agreement (NAFTA), to which the United
States, Canada, and Mexico are signatories. While it appears that under NAFTA similar
defenses are potentially available, the rationales and analysis may be quite different.
Furthermore, issues have been raised with respect to other Free Trade Agreements (FTA)
to which the United States is a party; however, since each agreement contains different
provisions, they should be analyzed independently and are beyond the scope of this report.
195 World Trade Organization, Analytical Index: Guide to GATT Law and Practice 30 (6th
ed. 1995) (quoting the proposal offered by the United States during the Second Session of
the Preparatory Committee of the United Nations Conference on Trade in Employment,
Geneva, April-October 1947).

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directly govern[] the conditions of sale or purchase, but also in any law or regulations
which might adversely modify the conditions of competition between the domestic
and imported products in the international market.”196 Given this broad
interpretation, it appears that any proposals containing provisions affecting the
labeling of imported drugs,197 or requiring that prescription drugs produced in foreign
countries for importation be destined only for the United States may be interpreted
by the WTO as inconsistent with our national treatment and MFN obligations.
In addition to potential conflicts with Articles III:4 and I:1, GATT Article XI:1
prohibits a Member country from instituting or maintaining quantitative prohibitions
or restrictions “on the importation of any product of the territory of any other
contracting party.”198 The language of Article XI has been interpreted to be
comprehensive, applying to “all measures instituted or maintained by a contracting
party prohibiting or restricting the importation, exportation ... of the products other
than measures that take the form of taxes duties and charges.”199 Measures may fall
within the scope of Article XI:1 if they “prevent the importation of goods as such,”200
or “affect the right of importation as such.”201 Furthermore, Article XI:1 requires that
any quantitative restrictions that are imposed be instituted on a non-discriminatory
basis, in other words, that all exports of like products to and imports of like products
of, third countries be similarly restricted or prohibited. Therefore, to the extent that
any legislative or regulatory proposal appears to prohibit, or authorize prohibitions,
on the importation of prescription drugs under specific circumstances, there is a
possibility that the proposals may constitute or result in a measure affecting
importation “as such,” and thus, may be challenged under Article XI:1.
Article XX contains the general exceptions to the GATT. These general
exceptions permit Members to impose otherwise GATT-inconsistent measures to
fulfill certain enumerated public policy objectives, provided that the measures are not
“applied in a manner which would constitute a means of arbitrary or unjustifiable
196 Panel Report on Italian Discrimination Against Imported Agricultural Machinery,
GATT, Basic Instruments and Selected Documents (BISD), 7th Supp. 60, 64 ¶ 12 (1959).
197 It should be noted that not all labeling provisions would be inconsistent with GATT
obligations. Article IX of the GATT 1994 permits contracting parties to require marks of
origin, and the WTO Agreement on Rules of Origin contains additional obligations. Only
to the extent that a labeling requirement goes beyond what is permitted in either of these
provisions could it be considered inconsistent with Article III:4.
198 Article XI:1 states that “no prohibitions or restrictions other than duties, taxes or other
charges, whether made effective through quotas, import or export licenses or other
measures, shall be instituted or maintained by any contracting party on the importation of
any product of the territory of any other contracting party or on the exportation or sale for
export of any product destined for the territory of any other contracting party.”
199 Panel Report Japan — Trade in Semi-Conductors, GATT, BISD, 35th Supp. 116, 153,
¶ 104 (1988).
200 Panel Report on Canada — Administration of Foreign Investment Review Act, GATT,
BISD, 30th Supp. 140, 162-63, ¶ 5.14 (1985).
201 Panel Report on Untied States — Measures Affecting Alcoholic and Malt Beverages,
GATT, BISD, 39th Supp. 206, 292, ¶ 5.63 (1993).

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discrimination between countries where the same conditions prevail or a disguised
restriction on international trade.”202 Specifically relevant to legislation involving
prescription drugs is Article XX(b), which exempts measures “necessary to protect
human, animal or plant life and health.”203
To determine whether a measure is eligible for the Article XX(b) exception a
three-part test, as established by the WTO Appellate Body (AB) must be applied.
First, the policy must fall within the range of policies designed to protect life or
health. Second, the country invoking the exception must show that any GATT/WTO
inconsistent measures are “necessary” to fulfill the policy objective. Third, the
measures must be applied in conformity with the introductory clause, or “chapeau,”
of Article XX.204 Finally, should the United States invoke Article XX(b) in defense
of the import restrictions, the United States would bear the burden of demonstrating
that the measures satisfy all three parts of the test.205
In addition to Article XX(b), another possibly relevant GATT exception is
Article XX(d), which may be invoked where an allegedly GATT-inconsistent
measure can be shown to be “necessary to secure compliance with laws or
regulations that are not inconsistent with the provisions of the Agreement, including
those related to customs enforcement, ... the protection of patents, trade marks and
copyrights, and the prevention of deceptive practices.”
WTO Agreement on Technical Barriers to Trade. According to its
preamble, the WTO Agreement on Technical Barriers to Trade (TBT Agreement)
expands upon the GATT Article III obligations with respect to internal regulations
and is intended to promote the general aims of the GATT.206 The TBT Agreement
applies to all products, including industrial and agricultural products, but does not
apply to measures covered by the WTO Agreement on Sanitary and Phytosanitary
Measures, nor to government purchasing specifications for production or
consumption of governmental bodies.207
The three categories of measures covered by the TBT Agreement are: (1)
technical regulations; (2) standards; and (3) conformity assessment procedures. Of
202 GATT Art. XX, chapeau.
203 Id. at Art. XX(b).
204 See Appellate Report on United States — Standards for Reformulated and Conventional
Gasoline, WT/DS2/AB/R (April 29, 1996), p. 25 [hereinafter cited as U.S. - Gasoline (AB
Report)]. The chapeau states that measures are not prohibited so long as they are not
“applied in a manner which would constitute a means of arbitrary or unjustifiable
discrimination between countries where the same conditions prevail or a disguised
restriction on international trade.” GATT 1994, Art. XX.
205 See generally World Trade Organization, WTO Analytical Index; Guide to WTO Law and
Practice 341-42 (1st ed. 2003)[hereinafter cited as WTO Analytical Index].
206 TBT Agreement, Preamble.
207 See Appellate Body Report on European Communities — Measures Affecting Asbestos
and Asbestos Containing Products, WT/DS135/AB/R (March 12, 2001) ¶ 80 [hereinafter
EC — Asbestos (AB Report)].

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particular relevance to prescription drug importation are technical regulations and
conformity assessment procedures.
A “technical regulation” is defined as a “[d]ocument which lays down product
characteristics or their related processing and production methods, including their
administrative provisions, with which compliance is mandatory.”208 A technical
regulation may also include or deal exclusively with terminology, symbols,
packaging, marking or labeling requirements as they apply to a product, process or
production method.”209 To qualify as a “technical regulation,” a measure must fulfill
three criteria, derived from the above-cited definition:
First, the document must apply to an identifiable product or group of products.
The identifiable product or group of products need not, however, be expressly
identified in the document. Second, the document must lay down one or more
characteristics of the product. These product characteristics may be intrinsic, or
they may be related to the product. They may be prescribed or imposed in either
a positive or negative form. Third, compliance with the product characteristic
must be mandatory.210
The TBT Agreement’s primary obligations require that the central governments
of WTO Members provide national treatment with respect to technical regulations.211
In addition, WTO Members must also “ensure that technical regulations are not
prepared, adopted or applied with a view to or with the effect of creating unnecessary
obstacles to international trade.”212 This means that “technical regulations shall be
no more trade-restrictive than necessary to fulfil a legitimate objective, taking
account of the risks non-fulfillment would create. Such legitimate objectives
[include] ... the prevention of deceptive practices; [and] protection of human health
or safety ... .” Moreover, Members are obligated not to maintain technical
regulations “if the circumstances or objectives giving rise to their adoption no longer
exist or if the changed circumstances or objectives can be addressed in a less trade-
restrictive manner.”213
A conformity assessment procedure is “[a]ny procedure used, directly or
indirectly, to determine that relevant requirements in technical regulations or
standards are fulfilled.”214 Such procedures may include, among other things,
“procedures for sampling, testing and inspection; evaluation, verification and
208 TBT Agreement, Annex 1, ¶ 1.
209 Id. at Annex I, ¶ 3.
210 Appellate Body Report on European Communities — Trade Description of Sardines,
WT/DS231/AB/R (September 26, 2002), ¶ 176.
211 See TBT Agreement, Art. 2.1 (requiring Member countries to “ensure that . . . products
imported from the territory of any Member shall be accorded treatment no less favourable
than that accorded to like products of national origin and to like products originating in any
other country.”).
212 Id. at Art. 2.2.
213 Id. at Art. 2.3.
214 Id. at Annex 1, ¶ 3.

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assurance of conformity; registration, accreditation and approval as well as their
combinations.”
Obligations concerning conformity assessment procedures are primarily
contained in Article 5 of the TBT Agreement, which requires WTO Members to
ensure that a number of specific requirements are met “where a positive assurance
of conformity with technical regulations is required.”215 These include a requirement
that the procedures be prepared, adopted and applied in accordance with the
principles of national treatment.216 The TBT Agreement further provides that “access
entails suppliers’ right to an assessment of conformity under the rules of the
procedure.”217 In addition, conformity assessment procedures may not be “prepared,
adopted or applied with a view to or with the effect of creating unnecessary obstacles
to international trade,”218 meaning, among other things, that “conformity assessment
procedures shall not be more strict or be applied more strictly than is necessary to
give the importing Member adequate confidence that products conform with the
applicable technical regulations ... , taking account of the risks non-conformity would
create.”219
Application of the TBT Agreement will depend on the details of any
prescription drug importation program that might be enacted. The AB has speculated
that a measure consisting “only of a prohibition on ... [a product] ... might not
constitute a ‘technical regulation,’” thereby placing it outside the scope of the TBT
Agreement.220 On the other hand, a measure that has both “prohibitive and
permissive elements” may potentially be covered by the Agreement.221 If a
legislative or regulatory proposal were to be considered solely in light of provisions
that would allow importation of drugs from a limited set of approved countries, the
proposal could potentially be viewed as constituting solely a prohibition (albeit
implied) on importing prescription drugs from countries other than those named or
designated as such. One might thus be able to argue, based on the above-quoted AB
statement, that there are no issues under the TBT Agreement. On the other hand,
were any such proposal to be viewed more broadly — that is, as having both
prohibitive and permissive elements — TBT obligations may come into play.
While the TBT Agreement does not contain a separate Article with general
exceptions, there is language within the Agreement that appears to provide for
something similar to an Article XX(b) exception. Specifically, the Preamble to the
215 Id. at Art. 5.1.
216 Id. at Art. 5.1.1 (stating that suppliers are to be granted access to “like products
originating in the territories of other Members under conditions no less favourable than
those accorded to suppliers of like products of national origin or originating in any other
country, in a comparable situation”).
217 Id.
218 Id. at Art. 5.1.2.
219 Id.
220 EC — Asbestos (AB Report), supra note 207, at ¶ 71.
221 Id. at ¶ 64.

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TBT Agreement states that “no country should be prevented from taking measures
necessary ... for the protection of human, animal or plant life or health ... .”222 Given
that there has been no WTO panel or AB ruling to date with respect to this language,
it remains unclear as to what, if any, weight or interpretation this language would be
given, especially considering it appears only in the Preamble and is not within the
body of the agreement.
General Agreement on Trade in Services. The General Agreement on
Trade in Services (GATS)223 applies to “measures by Members affecting trade in
services.”224 The Agreement defines trade in services as the supply of a service
through four modes, two of which would appear to be most relevant to the issue of
prescription drug importation: cross-border supply, or supply “from the territory of
one Member into the territory of any other Member” (Mode 1) and consumption
abroad, or supply “in the territory of one Member to the service consumer of any
other Member” (Mode 2).225
For purposes of the GATS, the phrase “measures by Members affecting trade
in services” has been interpreted broadly, encompassing “any measure of a Member
to the extent it affects the supply of a service regardless of whether such measure
directly governs the supply of a service or whether it regulates other matters but
nevertheless affects trade in services.”226
A basic obligation of the GATS is the unconditional most-favored-nation
(MFN) obligation set forth at Article II:1. The obligation applies to “any” GATS-
covered measure, though Members are allowed to exempt specific national measures
pursuant to Article II:1 and the Annex on Article II Exemptions and may accord
preferential treatment to countries that are members of regional trade agreements (see
GATS, Arts. V and V bis). The other fundamental GATS obligations are the market
access and national treatment obligations made with respect to a Member’s specific
scheduled sectoral commitments.227 These are set forth, with any limitations, in the
Member’s Schedule of Specific Commitments by mode of service supply. As with
222 TBT Agreement, Preamble.
223 General Agreement on Trade in Services (GATS), entered into force January 1, 1995,
H.Doc.103-316, v.1, at 1586-1653, and v. 2, at 3748 [http://www.wto.org/English/docs_e/
legal_e/26-gats.pdf].
224 GATS, Art. I:1.
225 GATS, Art. I:2. The other two modes of service supply — commercial presence of one
Member in the territory of any other Member, and presence of natural persons, or supply
“by a service supplier of one Member, through presence of natural persons of a Member, in
the territory of any other Member — would not seem to be directly at issue here.
226 Panel Report on EC — Regime for the Importation, Sale and Distribution of Bananas,
WT/DS27/R/USA (May 22, 1997) ¶ 7.285. See generally WTO Analytical Index, supra note
205, at 1089-91.
227 GATS, Arts. XVI, XVII. Article XXI of the GATS allows a WTO Member to modify or
withdraw any of its scheduled commitments, once three years have elapsed from the date
the commitment entered into force, subject to certain conditions, including possible
compensation to Members affected by the change.

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the TBT Agreement, application of the GATS will depend on the details of any
specific prescription drug importation that might be enacted. For example, in the
event that a legislative or regulatory proposal affects the wholesale distribution of
prescription drugs, the measure may be subject to a WTO challenge as inconsistent
with our specific GATS commitments.
GATS obligations are also subject to various general exceptions at Article XIV,
including one for measures “necessary to protect human, animal, or plant life or
health.” General exceptions are subject to a requirement that such measures “are not
applied in a manner which would constitute a means of arbitrary or unjustifiable
discrimination between countries where like conditions prevail, or a disguised
restriction on trade in services.” While there does not appear to be any WTO
jurisprudence on this exception to date, it would seem that the same or similar test
as the GATT Article XX(b) exception would also be applicable with respect to the
GATS Article XIV. It should be noted, however, that the GATS contains the phrase
“like conditions” as opposed to the phrase “same conditions” found in the GATT.
In the absence of any WTO jurisprudence, it remains unclear whether this change in
language would have any effect on the application of the exception.228
Patent Law
In addition to raising questions about antitrust law and trade law, the issue of
prescription drug imports has also prompted inquiries regarding whether or not a
drug importation program would violate patent rights. In particular, a federal court
case, Jazz Photo Corp. v. ITC,229 has raised the prospect that a drug manufacturer
could, under certain circumstances, sue a drug importer for patent infringement and
block U.S. imports of drugs the company sells abroad. Under patent law, the first
sale of a patented product in a given market extinguishes, or “exhausts,” the patent
holder’s rights in the product. Prior to the Jazz Photo decision, some legal
commentators believed that this exhaustion doctrine extended internationally,
meaning that the sale of a patented product abroad would exhaust the patent rights
in the U.S. and elsewhere, thereby allowing the purchaser of the product to use, sell,
or otherwise do as he pleases with the product without regard to the patent holder,
unless the purchaser is contractually restricted from importing into the U.S.
In Jazz Photo, however, the court, which addressed the exhaustion doctrine
question only briefly, stated: “United States patent rights are not exhausted by
products of foreign provenance. To invoke the protection of the first sale doctrine,
228 Should the United States take any legislative or regulatory action with respect to the
importation of prescription drugs, any challenges that are brought on international trade
grounds will be required to be adjudicated under the procedures set forth in the specific
agreement. For example, if a challenge is brought pursuant to a WTO Agreement, that
challenge will be required to be heard according to the procedures contained in the WTO
Dispute Settlement Understanding. See CRS Report RS20088, Dispute Settlement in the
World Trade Organization: An Overview, by Jeanne J. Grimmett; see also WTO website
[http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm].
229 264 F.3d 1094 (Fed. Cir. 2001).

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the authorized first sale must have occurred under the United States patent.”230 Under
this ruling, because the U.S. patent is not exhausted by the foreign sale, the patent
holder retains its patent rights. Thus, a drug manufacturer could exercise these rights
to block imports of its patented drug products into the U.S. It is important to note,
however, that some legal commentators have questioned the validity of the ruling in
the Jazz Photo case, and bills proposed in the 109th and 110th Congresses would
have overturned the ruling with respect to patent exhaustion for pharmaceutical
imports.231 For further information on the subject, see CRS Report RL32400, Patents
and Drug Importation, by John R. Thomas.
III. Internet Pharmacies
Just as the FDA has expressed concerns about the safety of imported drugs,
federal regulators have become increasingly worried about the safety of online
pharmacies and prescription drug sales over the Internet.232 Indeed, the regulation of
prescription drug importation and the regulation of online pharmacies often overlap
because many consumers use online pharmacies to purchase imported drugs.
Regardless of whether or not drugs purchased online are imported, the FDA is
worried about the safety, quality, and effectiveness of such medications because of
concerns about the lack of adequate physician supervision for consumers who
purchase prescription drugs online, the prospects for tampering with or counterfeiting
such drugs, and the possibility that such drugs may be handled, dispensed, packaged,
or shipped incorrectly.233 This section discusses current laws and regulations that
govern online pharmacies and physicians who prescribe medications over the
Internet. Specifically, this section provides an overview of the various federal and
state laws that regulate this field, including laws covering prescription drugs,
controlled substances, pharmacies, and the practice of medicine.
With the advent of the Internet, many individuals have turned from traditional
neighborhood pharmacies and large chains with a neighborhood presence to online
pharmacies to purchase prescription drugs, and an increasing number of physicians
have incorporated the Internet and email into their medical practice. Use of this
230 Id. at 1105
231 See S. 334, 109th Cong. (2005); S. 1082, 110th Cong. (2007). The Federal Circuit has
subsequently upheld its Jazz Photo ruling in Fuji Photo Film Co. v. Jazz Photo Corp., 394
F.3d 1368 (Fed. Cir. 2005).
232 Some of these concerns are reflected in a report by the Government Accountability Office
(GAO; formerly the General Accounting Office). GAO Report GAO-04-820, Internet
Pharmacies: Some Pose Safety Risks for Consumers.
233 See supra note 18-19 and accompanying text; Press Release, FDA Finds Consumers
Continue to Buy Potentially Risky Drugs Over the Internet: Practice Puts Consumers at Risk
and May be More Expensive than Domestic Purchasing, July 2, 2007, [http://www.fda.gov/
bbs/topics/NEWS/2007/NEW01663.html] (noting that some anticoagulants or blood
thinners require close supervision by a physician or health care professional “to prevent
stroke or death” and that some imported drugs may contain sub-optimal doses or “may not
have been manufactured under proper conditions to ensure sterility, leaving patients
susceptible to contamination that may result in serious infections”).

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technology has many advantages for both the doctor and the patient, including cost
savings, convenience, accessibility, and improved privacy and communication.234
Although many online pharmacies are legitimate businesses that offer safe and
convenient services similar to those provided by traditional neighborhood
pharmacies, other online pharmacies — often referred to as “rogue sites” — engage
in practices that are illegal, such as selling unapproved or counterfeit drugs or
dispensing drugs without a prescription.235 Some rogue sites operate in a legal gray
area in which the online pharmacy, as mandated by federal law, requires a
prescription before dispensing prescription drugs, but allows patients to secure a
prescription by completing an online questionnaire that is reviewed by a doctor who
never examines or speaks to the patient. This practice, though potentially unsafe for
patients who may be diagnosed incorrectly, is not necessarily illegal.
Current regulation of online pharmacies and doctors consists of a patchwork of
federal and state laws in an array of areas. At the federal level, the FDA regulates
prescription drugs under the FDCA, which governs, among other things, the safety
and efficacy of prescription medications, including the approval, manufacturing, and
distribution of such drugs.236 It is the FDCA that requires that prescription drugs may
be dispensed only with a valid prescription.237 The DEA enforces the Controlled
Substances Act (CSA), which is a federal statute that establishes criminal and civil
sanctions for the unlawful possession, manufacturing, distribution, or importation of
controlled substances.238 At the state level, state boards of pharmacy regulate
pharmacy practice, and state medical boards oversee the practice of medicine.239
Thus, some of the laws that govern online pharmacies and doctors vary from state to
state. The laws that govern each of these areas are described separately below.
Federal Oversight
As noted above, the CSA is a federal statute that establishes criminal and civil
sanctions for the unlawful possession, manufacturing, distribution, or importation of
controlled substances.240 The primary purpose of the CSA is to facilitate the legal
distribution of controlled substances for legitimate medical purposes while
234 Food and Drug Administration, Buying Drugs Online: It’s Convenient and Private, But
Beware of ‘Rogue Sites’ (2001), [http://www.fda.gov/fdac/features/2000/100_online.html].
235 Id. According to Scott M. Burns of the White House Office of National Drug Control
Policy, some Internet pharmacies may steal an individual’s credit card information without
filling the order. Carla K. Johnson, Gore Arrest Highlights Rx Drug Abuse, Associated
Press, July 6, 2007.
236 21 U.S.C. § 301 et seq.
237 Id. at § 353(b).
238 Id. at § 801 et seq. For more information on the Controlled Substances Act, see CRS
Report 97-141A, Drug Smuggling, Drug Dealing and Drug Abuse: Background and
Overview of the Sanctions Under the Federal Controlled Substances Act and Related
Statutes, by Charles Doyle.
239 The FDCA excludes the practice of medicine from its jurisdiction. 21 U.S.C. § 396.
240 Id. at § 801 et seq.

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preventing their diversion for illegal uses. Although the CSA is generally known for
prohibiting illegal drugs that have a high potential for abuse and no accepted medical
use, such as heroin or cocaine, the statute also covers a range of other drugs that have
a lesser potential for abuse and an accepted medical use, including certain
prescription drugs. Although most prescription drugs are not controlled substances
and therefore are not regulated under the CSA, some prescription drugs, such as
narcotics and opiates that are often used in the treatment of pain, are regulated under
the CSA because they have a greater potential for abuse than other prescription drugs
and may lead to physical dependence. The “FDA assess a drug product’s potential
for abuse and misuse” when determining whether to approve a new drug and also
works with the DEA “when there is a nexus between sales of non-controlled and
controlled substances over the Internet.”241
It is the latter category of prescription painkillers that appear to be among the
drugs most heavily dispensed by certain Internet pharmacies in accordance with
prescriptions that are issued based on online questionnaires.242 This practice has
sometimes been abused by rogue sites that dispense large quantities of addictive
substances to customers apparently seeking access to prescription painkillers, and it
has lead to instances of addiction, overdose, and death. In response to cases in which
online doctors have written thousands of prescriptions for controlled substances
without examining their patients, the federal government has begun prosecuting
certain doctors under the CSA by charging them with the illegal distribution of
controlled substances.243 Penalties under the CSA vary depending on the amount and
type of substance involved but generally include monetary fines, forfeiture, and
imprisonment.244 As to the question of whether it is legal for doctors to prescribe
substances, via an Internet pharmacy, based on an online questionnaire, the DEA has
stated in a guidance document:
Completing a questionnaire that is then reviewed by a doctor hired by the
Internet pharmacy could not be considered the basis for a doctor/patient
relationship. A consumer can more easily provide false information in a
questionnaire than in a face-to-face meeting with a doctor. It is illegal to receive
a prescription for a controlled substance without the establishment of a legitimate
241 Oxycontin and Beyond: Examining the Role of FDA and DEA in Regulating Prescription
Painkillers Before the H. Comm. on Gov’t Reform, 109th Cong. (September 13, 2005)
(statement of Robert J. Meyer, Director, Office of Drug Evaluation II, Food and Drug
Administration).
242 See, e.g., Gilbert M. Gaul and Mary Pat Flaherty, Doctors Medicate Strangers on Web,
WASH. POST, October 21, 2003, at A1. However, Internet websites also promote diabetes
“cures” or treatments, which led the FDA and the Federal Trade Commission to send
warning letters to approximately 180 websites and marketing firms. Inside Washington
Publishers, U.S., Mexico, Canada Target Fraudulent Diabetes Treatments Online, FDA
WEEK, October 27, 2006.
243 Id.
244 21 U.S.C. § 841 et seq.

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doctor/patient relationship, and it is unlikely for such a relationship to be formed
through Internet correspondence alone.245
In addition, the CSA regulates imports and exports of controlled substances.
Under the statute, it is unlawful to import a controlled substance into the country
unless the importer is registered with the DEA and has obtained DEA approval to
engage in such importation. Illegal importation of controlled substances is a felony
that may result in imprisonment or fines.246 Because the DEA considers anyone who
causes controlled substances to be brought into the country to be an importer of
controlled substances, an individual or pharmacy who causes controlled substances
to be mailed or shipped into the U.S. may violate the law and be subject to criminal
penalties.247 Specifically, the DEA notes:
It is illegal for a United States consumer or business to have controlled
substances shipped to the United States from a foreign country unless the person
receiving the controlled substances is registered with DEA as an importer or
researcher and is in compliance with [controlled substances laws and
regulations]. ... The acquisition of a controlled substance from a foreign country
by any person other than a DEA-registered importer or researcher is a violation
of the Controlled Substances Act. Therefore, United States pharmacies which
fill prescriptions for controlled substances by obtaining those controlled
substances from Canada, or any other foreign country, are in violation of the
Controlled Substances Act, regardless of whether the consumer possesses a
legitimate prescription issued by a United States practitioner in the usual course
of their professional practice. Likewise, consumers are also in violation of the
Controlled Substances Act if they have prescriptions for controlled substances
filled in foreign countries and shipped to the United States.248
As noted above, prescription drugs are also regulated by the FDA under the
FDCA.249 Although state law also governs the prescribing of drugs, the FDCA
covers certain aspects of the prescribing process, including the requirement that
prescription drugs may not be dispensed without a valid prescription.250
Although federal law requires that prescription drugs be dispensed in
accordance with a prescription, the FDCA does not define the meaning of
“prescription.” Rather, each state defines what constitutes a valid prescription under
245 Dispensing and Purchasing Controlled Substances over the Internet, 66 FR 21181 (April
27, 2001).
246 Id. at §§ 957, 960.
247 See, e.g., Importing Controlled Substances From Canada and Other Foreign Countries,
69 FR 38920 (June 29, 2004).
248 Id. at 38921-22. The CSA contains a limited exception for personal medical use, which
allows U.S. residents who travel to foreign countries and non-U.S. residents who travel to
the United States to carry controlled substances for their legitimate personal medical use,
but this exception does not permit the shipment of controlled substances into the country for
purposes of an individual’s personal medical use. 21 U.S.C. § 956.
249 Id at § 301 et seq.
250 Id. at § 353(b).

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its pharmacy laws. Because such definitions differ from state to state, there is no
uniform, national definition of the term “prescription.”251 Thus, certain activities,
such as prescribing drugs without performing an in-person examination, may be
explicitly illegal in one state but of ambiguous legal status in another.
Concerned about reports of rogue online pharmacies, Congress has considered
legislation to establish a federal definition of what constitutes a valid prescription.252
For example, such legislation has included proposals to establish a single federal
standard for prescriptions or to require online pharmacies to disclose information
about themselves and about the doctors approving prescriptions on their sites.253
Congress has also explored the possibility of limiting the means by which allegedly
rogue sites do business, namely by restricting their ability to advertise on search
engines, make credit card sales, and ship prescription drugs,254 or by requiring credit
card companies to scrutinize sales of drugs on the Internet.255 Some companies have
responded with their own proposals. For example, Google, an Internet search engine,
no longer accepts advertising from unlicensed pharmacies and prohibits the use of
certain controlled substances as keywords for search purposes.256 UPS monitors
online pharmacies that use the shipping company’s name on their site and, since
2001, “has sent cease and desist letters to those operating improperly.”257 Credit card
companies such as Visa USA have outside monitoring programs that “look[] for
websites that display the Visa logo, that sell Schedule II controlled substances or
other prescription drugs that the FDA or DEA have indicated are especially
dangerous, and that do not require a prescription or an exam.”258 Because federal and
state regulators face many legal barriers when attempting to exercise jurisdiction over
251 Inside Washington Publishers, FDA May Back Changing Law to Define Internet
‘Prescription’, FDA WEEK, March 28, 2003.
252 Id.
253 See, e.g., Point, Click, Self-Medicate: A Review of Consumer Safeguards on Internet
Pharmacy Sites: Hearing Before the House Comm. On Government Reform, 108th Cong.
(2003). In the 109th Congress, the following bills addressed this issue: H.R. 840, H.R.
1808, H.R. 4769, S. 399, and S. 3834. See also H.R. 616, H.R. 2652, H.R. 2717, H.R. 3870,
H.R. 3880, H.R. 4612, H.R. 4790, S. 2464, and S. 2493 in the 108th Congress.
254 Gilbert M. Gaul and Mary Pat Flaherty, Google to Limit Some Drug Ads, WASH. POST,
December 1, 2003, at A1. The Bush Administration has also expressed interest in pursuing
such a strategy. Press Release, Office of National Drug Control Policy, U.S. Drug
Prevention, Treatment, Enforcement Agencies Take on “Doctor Shoppers,” “Pill Mills”
(March 1, 2004), [http://www.whitehousedrugpolicy.gov/news/press04/030104.html].
255 Seth Stern, Online Drug War Caught in a Tangled Web, CQ Weekly - In Focus, June 4,
2007, p. 1666.
256 Gaul and Flaherty, supra note 254.
257 Stern, supra note 255.
258 Safety of Imported Pharmaceuticals: Strengthening Efforts to Combat the Sales of
Controlled Substances Over the Internet, H. Comm. on Energy and Commerce, Subcomm.
on Oversight and Investigations, 109th Cong. (December 13, 2005) (statement of Mark
MacCarthy, Senior Vice President for Public Policy, Visa USA, Inc.).

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rogue pharmacies based in foreign countries,259 placing limits on the degree to which
search engines, credit card companies, and shipping entities enable rogue sites to sell
prescription drug may be one of the only ways to control illicit sales by foreign online
pharmacies.
State Oversight
As noted above, state boards of pharmacy are primarily responsible for
regulating pharmacy practice,260 although the FDCA does provide some federal
oversight of pharmacies. Because virtually all states require a pharmacy that sells
drugs in the state to be licensed with the state, a state board of pharmacy traditionally
may exercise regulatory authority over pharmacies and pharmacists located within
the state, as well as those that dispense medication across state lines to citizens within
the state.261
Because each state board of pharmacy sets its own policies with regard to both
online and traditional pharmacies, state pharmacy laws regarding Internet pharmacies
and doctors differ from state to state. While some state laws specify whether or not
prescriptions based on online questionnaires are valid, other state laws fail to address
the issue, thus rendering it difficult for some states to prosecute doctors who
prescribe drugs without performing an in-person evaluation. For this reason, some
critics of the current system have proposed establishing a federal definition of what
constitutes a valid prescription.262
In addition, some organizations have begun to promote uniform national
standards for the industry. For example, the National Association of Boards of
Pharmacy (NABP) is an organization that helps state boards of pharmacy by
developing uniform standards on pharmacy practice. In response to the proliferation
of online pharmacies, NABP established the Verified Internet Pharmacy Practice
259 “The enforcement of a state action or the initiation of a mutual action by a foreign
licensing body is virtually unheard of, making it difficult, if not impossible, for state actions
to have any effect on foreign pharmacies.” National Association of Boards of Pharmacy,
Position Paper on the Importation of Foreign Prescription Drugs 6 (March 2003), at
[http://www.nabp.net/ftpfiles/NABP01/foreigndrug.pdf].
260 National Association of Boards of Pharmacy, Verified Internet Pharmacy Practice Sites
(VIPPS): Most Frequently Asked Questions (2001), at [http://www.nabp.net].
261 Id. “These requirements allow state boards of pharmacy to order non-resident pharmacies
to stop shipping product into the state. Within the US, such orders can be enforced by the
board of pharmacy where the violation took place, or by mutual action by the board of
pharmacy in the state where the pharmacy is located.” National Association of Boards of
Pharmacy, Position Paper on the Importation of Foreign Prescription Drugs 6 (March
2003), at [http://www.nabp.net/ftpfiles/NABP01/foreigndrug.pdf]. Foreign shipments of
prescription drugs may also violate state laws if the foreign pharmacy is not licensed in the
state, although states often face legal barriers when attempting to exercise jurisdiction over
foreign pharmacies.
262 Inside Washington Publishers, FDA May Back Changing Law to Define Internet
‘Prescription’, FDA WEEK, March 28, 2003; see also supra notes 252-53 and accompanying
text.

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Sites (VIPPS) program, a certification program that “identifies to the public those
online pharmacy practice sites that are appropriately licensed, are legitimately
operating via the Internet, and that have successfully completed a rigorous criteria
review and inspection.”263 According to NABP, the VIPPS program was developed
in order to improve the safety of online pharmacy practices and to “provide a means
for the public to distinguish between legitimate and illegitimate online pharmacy
practice sites.”264 Although NABP notes that legitimate online pharmacies outnumber
rogue sites and acknowledges that there are many advantages to ordering drugs
online, the Association specifically warns consumers against buying prescription
drugs online without obtaining an in-person examination and valid prescription from
a doctor. Like U.S. pharmacies, Canadian pharmacies may also be certified under
the VIPPS program, but only if they do not export drugs to the U.S.265 However,
NABP has indicated that it may extend its VIPPS certification program to Canadian
pharmacies that sell to U.S. consumers if Congress approves drug importation or “if
HHS does not stop the state and local governments that already are reimporting
drugs.”266
Like pharmacy practice, the practice of medicine has historically been regulated
at the state level by state medical boards. According to the Federation of State
Medical Boards (FSMB), which coordinates policy among all state medical boards,
“[t]he primary responsibility and obligation of a state medical board is to protect
consumers of health care through proper licensing and regulation of physicians.”267
Traditionally, states enact laws that regulate the practice of medicine, and state
medical boards implement and oversee state policies.268 If a doctor violates a state
law or regulation, state medical boards generally have the authority to discipline the
doctor through modification, suspension, or revocation of the doctor’s license to
practice medicine in that state. In reality, however, laws regarding medical practice
vary widely in strength and effectiveness from state to state. While some states have
strong laws that explicitly prohibit activities such as prescribing drugs without
conducting an in-person examination, other states have weak laws, lax enforcement,
or both.
Like NABP, FSMB has developed a specific policy with regard to online
pharmacies and doctors that prescribe drugs over the Internet. According to FSMB’s
model guidelines on the subject, electronic technology “should supplement and
263 National Association of Boards of Pharmacy, Verified Internet Pharmacy Practice Sites
(VIPPS): Most Frequently Asked Questions (2001), at [http://www.nabp.net].
264 Id.
265 Inside Washington Publishers, FDA Rebuffs Invitations to Inspect Canadian Pharmacies,
FDA WEEK, May 7, 2004. However, the Canadian International Pharmacy Association
(CIPA), which maintains a certification program similar to VIPPS, allows CIPA-certified
members to export drugs to the U.S. [http://www.ciparx.ca].
266 Inside Washington Publishers, Canadian Internet Pharmacies Ask NABP to Certify Their
Operations, FDA WEEK, September 17, 2004.
267 Federation of State Medical Boards, What is a State Medical Board?, [http://www.fsmb.
org/pdf/PUB_WhatIs_StateMedicalBoard_Brochure.pdf].
268 Id.

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enhance, but not replace, crucial interpersonal interactions that create the very basis
of the physician-patient relationship.”269 To that end, FSMB guidelines declare that
doctors who use the Internet as part of their medical practice should conduct a
physical evaluation of the patient before providing treatment. Although FSMB
recognizes the benefits of online pharmacies, the organization emphasizes that
“[t]reatment, including issuing a prescription, based solely on an online questionnaire
or consultation does not constitute an acceptable standard of care.”270 FSMB further
urges that doctors who prescribe drugs on the Internet should be licensed in all states
in which their patients reside,271 a practice that would subject doctors to the oversight
of the medical boards in each state in which their patients lived.272 These
professional standards, however, are not legally enforceable in the absence of state
laws establishing such requirements.
In addition to establishing policies regarding what constitutes a valid
prescription, some states have explored other methods to deter the diversion and
abuse of controlled substances. For example, 28 states have established prescription
drug monitoring programs that track data regarding the prescribing and use of
controlled substances.273 Although such programs enable doctors and pharmacies to
check whether patients have been seeking controlled substances from other doctors
and pharmacies, such programs may be circumvented if patients seek controlled
substances from illegal Internet pharmacies.
269 Federation of State Medical Boards, Model Guidelines for the Appropriate Use of the
Internet in Medical Practice (2002), at 5 [http://www.fsmb.org/pdf/2002_grpol_Use_of_
Internet.pdf].
270 Id. at 8.
271 Id. at 9.
272 FSMB is not the only medical organization to promulgate standards of professional
conduct regarding the prescribing of drugs over the Internet. Several other professional
associations, such as the American Medical Association (AMA), have also established
policies regarding the safe practice of online medicine. For example, the AMA guidelines,
like the FSMB guidelines, state that doctors should perform a physical evaluation of patients
before prescribing medication and should be licensed in every state in which their patients
reside. The AMA guidelines further advise against prescribing drugs to patients solely on
the basis of online communications such as questionnaires. American Medical Association,
Guidance for Physicians on Internet Prescribing (H-120.949) (2003), [http://www.ama-
assn.org/apps/pf_new/pf_online?f_n=browse&doc=policyfiles/HnE/H-120.949.HTM].
273 Inside Washington Publishers, FDA Touts Efforts Against Illegal Diversion of Controlled
Substances, FDA WEEK, March 5, 2004; Inside Washington Publishers, Bush Bid to Stem
Drug Abuse Relies on State Drug Monitoring Efforts, FDA WEEK, June 9, 2006.

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CRS-51
IV. Conclusion
The current legal framework for regulating online pharmacies and doctors is a
patchwork of federal and state laws regarding controlled substances, prescription
drugs, pharmacies, and the practice of medicine. Although many doctors and
pharmacies who use the Internet prescribe and dispense drugs in a responsible, safe,
and legal fashion, others have exploited gaps in the current system to prescribe and
dispense potentially dangerous quantities of highly addictive prescription drugs. To
combat such abuses, legislators and interest groups have proposed an array of
solutions, including establishing a federal definition of what constitutes a valid
prescription, requiring doctors to conduct in-person examinations, mandating that
online pharmacies disclose identifying information about themselves and the doctors
who work for them, establishing state prescription drug monitoring programs to track
data regarding the prescription and use of controlled substances, giving state
prosecutors the authority to seek nationwide injunctions against rogue sites,
educating consumers about the potential dangers of buying drugs online, establishing
certification programs to identify legitimate online pharmacies, and founding an
independent monitoring group within the Department of Justice that would scan the
Internet looking for suspicious drug sites that sell controlled substances without a
prescription and then notify credit card companies and financial institutions, who
could then deny their services.274
Meanwhile, the debate about importing prescription drugs continues. Although
the FDA maintains that it cannot guarantee the safety or effectiveness of imported
drugs, many U.S. consumers, in search of affordable prices, continue to purchase and
import such drugs. As a result, legislators and interest groups have suggested a
variety of changes to current law, including encouraging the development of more
generic drugs; negotiating lower drug prices through bulk purchase programs;
increasing prescription drug insurance coverage; lowering co-pays; allowing drug
imports but restricting ports of entry; establishing state pilot programs; allowing only
certain drugs to be imported; educating consumers about the dangers of imported
drugs; allowing drug imports from approved Canadian pharmacies only; regulating
credit card companies, search engines, and shipping companies that enable rogue
sites to do business; increasing the number of inspections of foreign drug
manufacturers; and utilizing anti-counterfeiting technologies, such as radio frequency
identification technology (RFID),275 for shipments of prescription drugs.
crsphpgw
274 Rogue Online Pharmacies: The Growing Problem of Internet Drug Trafficking Before
S. Comm. on the Judiciary, 110th Cong. (May 16, 2007) (statement of Philip Heymann,
Professor of Law, Harvard Law School), [http://judiciary.senate.gov/testimony.cfm?id=
2755&wit_id=6468]. A similarly described voluntary initiative to combat child pornography
has been said to reduce the availability of credit cards as a method of payment, however,
sellers have “shift[ed] to alternative forms of payment, such as gift cards purchased on an
intermediate Web site.” Stern, supra note 255.
275 Inside Washington Publishers, Senate Bill Requires Drug Tracking Systems that
Discourage RFID, FDA WEEK, May 25, 2007.

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