Importing Prescription Drugs — Comparison of the Drug Import Provisions in the Medicare Reform Bills, H.R. 2427, and Current Law

Importing Prescription Drugs — Comparison of the Drug Import Provisions in the Medicare Reform Bills, H.R. 2427, and Current Law

Order Code RL32107
CRS Report for Congress
Received through the CRS Web
Importing Prescription Drugs — Comparison of
the Drug Import Provisions in the Medicare
Reform Bills, H.R. 2427, and Current Law
October 8, 2003
Blanchard Randall IV, Susan Thaul, and Donna U. Vogt
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

Importing Prescription Drugs — Comparison of the
Drug Import Provisions in the Medicare Reform Bills,
H.R. 2427, and Current Law
Summary
For years now, Congress has been concerned about the rising cost of
prescription drugs in the United States. Recent international price comparisons have
confirmed that American consumers, particularly the elderly and uninsured, often pay
much more for pharmaceuticals than do citizens in other countries. As drug prices
continue to rise, more people and some local governments are turning to online
pharmacies or traveling outside the country to purchase less costly prescription drugs.
However, under U.S. law only drug manufacturers can import pharmaceuticals into
the United States. Despite this legal restriction, the Food and Drug Administration
(FDA) has for years allowed patients to bring a 90-day supply of prescription
medications into the country under its so-called “personal use” import policy.
In 2000, Congress passed the Medicine Equity and Drug Safety (MEDS) Act
that would have let pharmacists and drug wholesalers import less costly FDA-
approved prescription drugs from foreign countries. However, the Act included a
controversial provision barring the Secretary of Health and Human Services (HHS)
from implementing the law without first confirming that the drugs imported under
the program would “pose no additional risk to the public’s health and safety; and
result in a significant reduction in the cost of covered products to the American
consumer.” Since then, two Secretaries have declined to implement the law, stating
that these conditions could not be met.
The 108th Congress is focusing now on several new proposals that may make it
easier for consumers to access cheaper prescription drugs. In June 2003, the House
and Senate agreed to amendments on their respective Medicare reform bills (H.R. 1
and S. 1) that would modify the MEDS Act and make it easier for pharmacists and
wholesalers to import less costly prescription drugs from Canada. The bills would
also prescribe conditions under which the Secretary could allow imports of drugs for
personal use. In separate action, the House passed the Pharmaceutical Market Access
Act of 2003 (H.R. 2427), a measure sponsored by Representative Gil Gutknecht that
would permit pharmacists, wholesalers and qualifying individuals to import
prescription drugs from 25 industrialized countries, and require drug companies to
incorporate various tamper-resistant technologies in all prescription drug packaging.
Both Medicare reform bills would require prior HHS certification of safety and cost
savings; however, H.R. 2427 includes no such mandate.
Supporters of drug importation are urging Congress to pass legislation to allow
pharmacists and wholesalers to import prescription drugs commercially, and to allow
consumers to bring cheaper prescription drugs into the country. Opponents insist
these proposals would weaken existing import laws and make it easier for unsafe or
counterfeit drugs to enter the country. Other concerns involve FDA’s ability to
devise and enforce regulations, the added costs, the feasibility of imports as a long-
term solution to high domestic prices, and possible effects on future pharmaceutical
research and development. This report will be updated as events warrant.

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Prescription Drug Marketing Act of 1987 . . . . . . . . . . . . . . . . . . . . . . . 2
The Medicine Equity and Drug Safety (MEDS) Act of 2000 . . . . . . . . . . . . 3
FDA’s Personal-Use Import Enforcement Policy . . . . . . . . . . . . . . . . . . . . . 4
Pending Drug Import Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Issues for Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Would the Cost of Drugs to U.S. Consumers Decrease? . . . . . . . . . . . . . . . 18
Reducing Prescription Drug Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Manufacturer Actions to Limit Supply . . . . . . . . . . . . . . . . . . . . . . . . 19
Would U.S. Consumers Face Unsafe or Ineffective Drugs? . . . . . . . . . . . . 19
Product Integrity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
FDA Personal-Use Import Policy and Enforcement Issues . . . . . . . . . 20
Lack of Physician Involvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Could U.S. Regulatory Agencies Enforce Consumer Protections? . . . . . . . 22
Secretary’s Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Cost of Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Feasibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
What Are Possible Domestic and International Ramifications? . . . . . . . . . 23
Industry Reaction and Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Questions about International Relationships . . . . . . . . . . . . . . . . . . . . 23
Other Federal Agency Involvement . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Congressional Options for Controlling Drug Costs . . . . . . . . . . . . . . . . . . . 24
List of Tables
A Comparison of the Drug Importation Provisions in Current Law,
the House and Senate Medicare Bills, and H.R. 2427 . . . . . . . . . . . . . . . . . . 7

Importing Prescription Drugs — Comparison
of the Drug Import Provisions in the
Medicare Reform Bills, H.R. 2427, and
Current Law
Introduction
For some time now, Congress has been concerned with the high cost of
prescription drugs in the United States. International comparisons of drug prices
have confirmed that American consumers, particularly the elderly and uninsured,
often pay much more for prescription drugs than do citizens in other countries.1
Often, this price disparity stems from the fact that some countries — especially those
with nationalized health care systems — have the leverage to negotiate lower drug
prices due to their market strength as a single large purchaser. Today, the lower
prices in these countries have become an incentive for an increasing number of U.S.
citizens to buy their prescription drugs from Internet or mail-order pharmacies, or
when they travel outside the United States, especially to Canada or Mexico.
According to the Food and Drug Administration (FDA), the volume of foreign drug
imports is increasing rapidly.2
Advocates for legalizing drug imports, including many Members of Congress,
feel that U.S. consumers have shouldered the rising cost of prescription drugs for too
long. This is unfair, they say, particularly for consumers who lack health insurance
and are forced to pay higher retail prices at pharmacies here, while citizens in other
countries, especially those with national health plans, have access to much cheaper
pharmaceutical products, some of which were developed through research supported
by the U.S. government.
Furthermore, if FDA-approved pharmaceuticals are
available from foreign suppliers at prices significantly lower than in this country, they
insist that consumers, pharmacists, and wholesalers must have a safe, viable, and
legal way to import these drugs.
1 David Gross, Prescription Drug Prices in Canada, AARP Public Policy Institute Issue
Brief, Washington, D.C., American Association of Retired Persons, June 2003. (See Figure
3: Summary of Published Estimates of Canada-U.S. Drug Price Differences, 1990 to
Present.)
2
William K. Hubbard, Senior Associate Commissioner for Policy, Planning, and
Legislation, and John M. Taylor, III, Associate Commissioner for Regulatory Affairs, Food
and Drug Administration (FDA).
U.S. Congress, House Committee on Energy and
Commerce, Subcommittee on Oversight and Investigations, hearing on “A System
Overwhelmed: the Avalanche of Imported, Counterfeit, and Unapproved Drugs in the U.S.,”
June 24, 2003.
(Hereafter cited as Hubbard, June 24, 2003.)

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To this end, the House and Senate recently agreed to amendments to their
respective Medicare reform bills (H.R. 1 and S. 1) that would modify current law to
make it easier for pharmacists and drug wholesalers to import less costly prescription
drugs from Canadian suppliers.
In separate action, the House passed the
Pharmaceutical Market Access Act of 2003 (H.R. 2427), a bill offered by
Representative Gil Gutknecht that would let pharmacists, wholesalers, and qualifying
individuals import prescription drugs from 25 industrialized countries. At the same
time, the legislation would require drugmakers to incorporate various counterfeit-
resistant technologies in all their prescription drug packaging. If Congress decides
to legalize the importation of prescription drugs by pharmacists, wholesalers, and
consumers, it would likely have to reconcile the major differences in these three bills.
Background
The Prescription Drug Marketing Act of 1987
In the mid-1980s, concerned that substandard or even counterfeit drugs were
being reimported back into the United States as “American goods returned,” events
that could potentially jeopardize the health of American consumers, Congress passed
the 1987 Prescription Drug Marketing Act (PDMA).3 Since then, the Act has made
it illegal for anyone other than the original manufacturer to import prescription drugs
into the United States. Today, Section 801(d)(1) of the Federal Food, Drug, and
Cosmetic Act (FFDCA)4 states that no “drug ... which is manufactured in a state and
exported may be imported into the United States unless the drug is imported by the
manufacturer of the drug.”
The purpose of the PDMA was to keep subpotent or adulterated drugs from
inadvertently ending up in retail pharmacies in the United States.5 To prevent this
from happening — and enforce the law — the FDA has adopted a host of regulations
in years past that require drug companies to maintain a detailed chain of custody for
every pharmaceutical product brought into this country. Today, these rules not only
impose strict record keeping requirements, they also require manufacturers to ensure
the safety and quality of all drugs that are exported and later reimported back into the
country.
When drugs are imported into the United States — whether they are shipped
commercially, carried by travelers, or arrive by mail — the Bureau of Customs and
Border Protection (BCBP) (formerly the U.S. Customs Service) and the FDA have
broad authority to detain and deny products that “appear” to violate U.S. law or
3 P.L. 100-293.
4 Federal Food, Drug, and Cosmetic Act, 52 Stat. 1040 (1938).
5 U.S. Congress, House Committee on Energy and Commerce, Prescription Drug Marketing
Act of 1987, H.Rept. 100-76, 100th Cong., 1st Sess. Washington, GPO, Apr. 30, 1987, p. 7.

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regulatory standards.6 For regulatory enforcement purposes, FDA distinguishes
between two types of imported drugs: those destined for commercial distribution,
and those destined for personal use, including mail-order drugs and drugs that are
brought into the country by individuals passing through U.S. customs.7
The Medicine Equity and Drug Safety (MEDS) Act of 2000
In an effort to take advantage of the lower prices charged by drug manufacturers
in other countries, in 2000 the 106th Congress passed the Medicine Equity and Drug
Safety (MEDS) Act. Part of the FY2001 agriculture appropriations bill,8 the MEDS
Act amended the FFDCA to establish a 5-year program that would have allowed
pharmacists and drug wholesalers to import less costly prescription drugs from
foreign suppliers.9 Pharmaceuticals imported under the Act could come only from
specific industrial countries, and the agency could suspend importation immediately
if a pattern of counterfeiting emerged.
As an integral part of the program, the Secretary of Health and Human Services
(HHS) was required to publish regulations to ensure the safety and effectiveness of
the imported drugs. Congress further stipulated, however, that before the import
provisions of the MEDS Act could go into effect the Secretary of HHS had to:
... demonstrate[s] to Congress that the implementation of this section 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.
(Section 804(l).)
In late December 2000, then-Secretary Donna Shalala announced that she could not
implement the MEDS Act because it contained several “serious flaws and
loopholes.”10 According to the Secretary, the law allowed drug companies to deny
U.S. importers legal access to the FDA-approved labeling required for reimportation.
Second, the Act did not prohibit drug manufacturers from requiring distributors to
charge higher prices, limit supply, or treat U.S. importers less favorably than foreign
purchasers.
She also wrote that the drug import legislation’s 5-year “sunset”
provision would have a chilling effect upon private-sector investment in the testing
and distribution systems required under the law.
6 FDA, “Information on Importation of Drugs,” prepared by Marvin A. Blumberg, Division
of Import Operations and Policy, Office of Regulatory Affairs, FDA, HFC-170, Apr. 3,
1998, at [http://www.fda.gov/ora/import/pipinfo.htm].
(Hereafter cited as FDA,
“Information on Importation of Drugs.”)
7 The term “reimportation” means that an FDA-approved drug was exported from the United
States by a U.S. manufacturer and then reimported by that manufacturer, or was produced
by a U.S.-licensed drug manufacturer outside of the United States and then imported.
8 P.L. 106-387 added new Section 804 to the FFDCA.
9 The import provision does not cover controlled substances, biologics, infused drugs,
intravenous drugs, and drugs inhaled during surgery.
10 Letter from Donna E. Shalala, Secretary of Health and Human Services (HHS), to
President William J. Clinton, Dec. 26, 2000.

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In July 2001, her successor, Secretary Tommy G. Thompson, declined to
implement the law as well, stating that the safety of prescription drugs could not be
adequately guaranteed if drugs were allowed to be reimported under the MEDS Act.11
Moreover, the Secretary argued that the costs associated with the documenting,
sampling, and testing of imported drugs, as the statute required, would make it very
difficult for consumers to recognize any noticeable price savings.
FDA’s Personal-Use Import Enforcement Policy
As previously noted, only drug manufacturers can legally import prescription
drugs into the United States. Despite this restriction, the FDA has maintained a
“lenient” enforcement policy that lets individuals (patients) bring a small amount
(i.e., a 90-day supply) of non-FDA approved drugs into this country for
compassionate use.12 In addition, individuals are supposed to affirm in writing that
the drug is for their own use, and provide the name and address of their treating
physician.13 For decades, this so-called “personal use” import policy has made it
easier for patients with life-threatening diseases (such as cancer and AIDS) to bring
medicines into the country and be treated by their own doctors.14 Drugs cannot be
imported commercially under the policy.
When FDA’s personal use import policy began, it was not envisioned as a way
for consumers to bring lower-priced prescription drugs into the United States. But,
where the policy once let a limited number of patients import drugs for
compassionate use, today it is being used to import drugs for all kinds of medical
conditions, particularly by consumers seeking cheaper prescription drugs from
foreign countries. Over time, changes in the economy, lenient enforcement, and a
growing use of the Internet have contributed to a dramatic upsurge in the number of
drugs entering the country. Today, the majority of prescription drugs entering the
country are not being brought in by individuals; instead, they come via the mail after
being purchased by consumers from online mail-order pharmacies.15 More recently,
some retail pharmacies, state employee health plan members, and groups of
individual citizens have started importing as well.16 Monitoring this wave of drug
11 Department of Health and Human Services, “Secretary Thompson Determines That Safety
Problems Make Drug Reimportation Unfeasible,” HHS News, press release, July 10, 2001,
at [http://www.hhs.gov/news].
12 FDA, “Information on Importation of Drugs.”
13 FDA, “Coverage of Personal Importations,” Regulatory Procedures Manual, Office of
Regulatory Affairs, FDA, Jan. 11, 2003, at
[http://www.fda.gov/ora/compliance_ref/rpm_new2/ch9pers.html].
14 FDA, “Information on Importation of Drugs.”
15 FDA letters to the Kullman Firm, Feb. 12, 2003; and FDA warning letters to Rx Depot,
Mar. 21, 2003 and to CanadianDiscountDrugs, June 30, 2003, at
[http://www.accessdata.fda.gov/scripts/wlcfm/subject.cfm?FL=I].
16 Letter from William K. Hubbard, Senior Associate Commissioner for Policy, Planning
and Legislation, FDA to Mr. Gregory Gonot, Deputy Attorney General, state of California,
responding to questions on the importation of prescription drugs into the state of California,
(continued...)

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products has become a tremendous enforcement problem for both BCBP and FDA
inspectors.17
In 2001, the BCBP and FDA conducted a 5-week survey in Carson City,
California to get a better idea of the number and types of drug products that were
entering the United States by mail. According to the agencies, many of the drugs
detained during the survey were for treating health conditions that normally require
a doctor’s diagnosis.18 This finding has raised concerns that some patients are buying
prescription drugs without a doctor’s prescription and exposing themselves to serious
health risks. During a June 24, 2003 congressional hearing on FDA’s drug import
policies, William K. Hubbard, Associate Commissioner for Policy and Planning
testified that the agency was very concerned about the safety of imported drug
products, and warned that foreign outlets could be dispensing expired, sub-potent,
contaminated, or even counterfeit medicines.19 He further cautioned that the labeling
of some drugs may not be in English and/or lack adequate directions for use, that the
drugs may not have been packaged and stored under conditions appropriate to
prevent degradation, or been made under current good manufacturing practices.
Moreover, according to the agency, when consumers take imported drugs, they run
the risk of experiencing dangerous drug interactions and/or adverse reactions, some
of which could be life threatening.20 Furthermore, persons who unknowingly take an
ineffective product forgo the opportunity to receive the appropriate treatment.
When accounts of fake Procrit, Lipitor, and Viagra were reported by the media
this spring, the FDA notified pharmacists and issued consumer warnings that the
drugs might be counterfeit.21
In April 2003 the agency commended the
pharmaceutical industry for helping to identify and remove counterfeit drug products
from the market. Some Members of Congress felt that these actions were inadequate
to ensure the safety of prescription drugs, and asked whether the FDA should
consider requiring “counterfeit-proof” packaging for all prescription drugs. In partial
response to their concerns, on July 16, 2003, FDA Commissioner Mark McClellan
unveiled a new “Counterfeit Drug Initiative” aimed to protect U.S. consumers from
16 (...continued)
Aug. 25, 2003.
17 Hubbard, June 24, 2003.
18
William K. Hubbard, Senior Associate Commissioner for Policy, Planning, and
Legislation, FDA. Testimony before the U.S. Congress, House Committee on Energy and
Commerce, Subcommittee on Health, July 25, 2002.
19 Hubbard, June 24, 2003.
20 “FDA Takes Action Against Companies That are Importing Unapproved, Potentially
Unsafe Drugs,” FDA News, Sept. 9, 2003.
21 See: “FDA Statement on Counterfeit Procrit,” FDA News, Mar. 11, 2003; “FDA Alerts
Consumers and Health Professionals to Recall of Counterfeit Lipitor,” FDA Talk Paper,
May 23, 2003; and “FDA Assesses Irregularities Involving the Handling of Certain
Unapproved Imported Viagra Products,” FDA Talk Paper, May 20, 2003.

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counterfeit products.22 In addition, a task force is being appointed to explore the use
of technologies that can better identify, deter, and combat the counterfeiting of
prescription drugs. The task force will also look into whether stronger enforcement
is necessary, how to tighten wholesaler licensing, and how to identify the risks and
threats from counterfeit drugs.23
Pending Drug Import Legislation
On June 27, 2003, the Senate passed the Prescription Drug and Medicare
Improvement Act of 2003 (S. 1), which also included Title VIII: Importation of
Prescription Drugs.
On the same day, the House agreed to the Medicare
Modernization and Prescription Drug Act of 2003 (H.R. 1), which included Title IX:
Importation of Prescription Drugs as an amendment. Both bills would completely
replace existing Section 804 of the FFDCA, and require the Secretary of HHS to
issue regulations allowing pharmacists and drug wholesalers to import prescription
drugs from Canada into the United States.
One month later, on July 24, 2003, the House voted 243 to 186 to adopt the
Pharmaceutical Market Access Act of 2003 (H.R. 2427). The bill, sponsored by
Representative Gil Gutknecht, would amend parts of Section 804 only, and, in so
doing, permit pharmacists, wholesalers, and qualifying individuals (i.e., consumers)
to import prescription drug products from 25 industrialized countries, and not just
Canada. The legislation would also require drug makers to incorporate various
counterfeit-resistant technologies in the packaging and shipping containers of all
prescription drugs. According to media reports, some Members want the conference
to remove language from the Medicare bill that would continue to require HHS to
first certify, as the MEDS Act does, that importation would pose no additional risk
to public health and safety and lower the cost of prescription drugs for U.S.
consumers.24 The language requiring prior HHS certification has been called a
“poison pill” provision by some observers. A letter from 142 Members of Congress
to the Medicare bill conferees urges that they include “market access
provisions...without the ‘certification’ language” in the final legislation.25
The following table provides a comparison of the drug import provisions of the
three bills — S. 1, H.R. 1, and H.R. 2427 — and current law.
22 “FDA Announces Initiative to Heighten Battle Against Counterfeit Drugs,” FDA News,
July 16, 2003, at [http://www.fda.gov/bbs/topics/NEWS/2003/NEW00926.html].
23 FDA, “Anti-counterfeit Drug Initiative,” Federal Register, vol. 63, no. 165, Aug. 26,
2003, p. 51270.
24 Juliet Eilperin, “For House GOP, One Vote Came With Hefty Price,” Washington Post,
July 24, 2003.
25 U.S. Congress, House, “Letter: Emanuel to Medicare Conferees Chairmen urging
inclusion of Prescription Drug Reimportation Legislation,” Rep. Rahm Emanuel press
release, Sept. 18, 2003.

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A Comparison of the Drug Importation Provisions in Current Law, the House and Senate Medicare Bills, and
H.R. 2427
Provisions
Current Law
S. 1
H.R. 1
H.R. 2427
How the
Section 804 of the Federal Food,
The amendment would replace
Same as S. 1.
Amends Section 804 of the Federal
legislation
Drug,
and
Cosmetic
Act
—
existing Section 804 entirely.
Food, Drug, and Cosmetic Act —
would amend
Importation of Covered Products —
Importation of Covered Products;
current law
established under the Medicine
and establishes new Section 505B —
Equity and Drug Safety Act of 2000
Counterfeit-Resistant Technologies.
(P.L. 106-387).
Regulatory
Regulations.
The Secretary of
Regulations. Same as current law,
Regulations. Same as S. 1, except
Regulations. Within 180 days, the
requirements
Health and Human Services (HHS),
however, prescription drugs could
that the U.S. Trade Representative
Secretary
must
publish
rules
after consulting with the U.S. Trade
only be imported from Canada.
and the Commissioner of Customs
permitting
pharmacists,
drug
R e p r e s e n t a t i v e
a n d
t h e
would not be involved in the rule-
wholesalers,
and
q ualifying
Commissioner of Customs, must
making process.
individuals to import prescription
publish
regulations
permitting
drugs from the same counties already
pharmacists and wholesalers to
specified under existing law, i.e.,
import “covered products” (i.e.,
Australia, Canada, Israel, Japan, New
prescription drugs imported from
Zealand, Switzerland, South Africa,
Australia, Canada, Israel, Japan,
the
European
Union,
and
the
New Zealand, Switzerland, South
European Economic Area.
Africa,
the
European
Union
[Austria,
Belgium,
Denmark,
Finland, France, Germany, Greece,
Ireland ,
Italy,
Luxemb urg,
Netherlands,
Portugal,
Spain,
Sweden, and the United Kingdom],
and the European Economic Area
[the European Union plus Iceland,
Liechtenstein, and Norway], as
specified in Section 802 (b)(1)(A)
of the law) into the United States.
Assurances
Limitation.
The regulations must
Limitation. Same as current law.
Limitation. Same as current law
Limitation.
Same as current law;
that imported
ensure that all imported prescription
and S. 1. However, the Secretary
however, the bill eliminates the
drugs will be
drugs meet the same safety and
would have to adopt additional
Secretary’s
authority
to
adopt
safe and
efficacy
standards
as
drugs
rules requiring that all prescription
additional measures as necessary to
effective
approved in the United States and
drugs from Canada be contained
either
protect
public
health
or
that imported products not be
in packaging which the Secretary
facilitate the importation of drug
ad ulterated
or
misbranded .
judges to be reasonably tamper-
products.

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Provisions
Current Law
S. 1
H.R. 1
H.R. 2427
Moreover,
the
Secretary
is
resistant and incapable of being
permitted to adopt such rules as
counterfeited.
Additionally,
necessary to safeguard public health
imported drugs would have to
or as a means to facilitate the
include a statement aimed at end
importation of products.
users noting that the product has
been imported from a foreign
seller other than the manufacturer.
Moreover, only prescription drugs
which have not left the possession
of the first Canadian recipient
after the original manufacturer
would be eligible for import.
Also, if the Secretary so decides,
imported drugs could enter the
United
States
only
through
designated
ports
of
entry.
Clarifies
that
the
Secretary’s
regulations to facilitate imports of
prescription
drugs
could
not
jeopardize the public health.
Information
Records.
Records
regarding
Information and Records. Similar
Information and Records. Similar
Records. Similar to the information
and record
imported prescription drugs must be
to the information and record
to current law and S. 1 in the area
and record keeping requirements in
keeping
provided to the Secretary, and then
keeping requirements under the
o f
r e c o r d
k e e p i n g
a n d
current law, but only pharmacists
requirements
kept for such time as the Secretary
‘Importation’ section in current
documentation.
and
wholesalers
(not
qualifying
for importers
determines to be appropriate.
law.
individuals) would have to keep and
of prescription
provide information about imported
drugs
drugs.
The importer is required to provide
Same as current law.
Same as current law.
Deletes provision requiring public
any other information that the
health information.
Secretary determines is necessary to
ensure the public health.
Drug
importers
must
provide
Same as current law except while
Same as current law.
Same as current law except foreign
information that includes: the name
drug importers would still have to
sellers would not have to document
and amount of the active ingredient
report the prices they pay for
the original source of drug products
of the drug, the dosage form of the
prescription drugs, the price they
nor the amount of each lot they
drug, the date the product is
charge when the drug is sold would
received.
shipped, the quantity shipped, and
not have to be reported.
information about its origin and

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Provisions
Current Law
S. 1
H.R. 1
H.R. 2427
destination. The importer must also
supply the price paid by the
importer and the price the drug was
sold by the importer; the importer’s
name, address, and license number;
original source of the drug and the
amount of each lot received from
that source; and the manufacturer’s
lot or control number.
Also, the
importer or manufacturer must
certify that the drug is FDA-
approved and properly labeled, and
provide
laboratory
records
of
authenticity testing, including data,
and evidence that testing was
conducted in an approved U.S.
laboratory.
For a prescription drug imported
Same as current law.
Same as current law except while
Similar to current law but testing and
directly from the first recipient in
H.R. 1 mandates that the importer
its documentation are needed only if
the foreign country, there must be
or manufacturer certify that the
the imports are not in counterfeit-
documentation indicating that the
imported drug is not adulterated
proof packaging.
drug
came
directly
from
the
or misbranded, documentation of
manufacturer, that the amount being
s a mp ling
and
testing
of
imported is not greater than the
subsequent shipments from the
quantity
that
was
originally
importer or manufacturer would
received, and verification that each
not be required.
batch
of
the
drug
has
been
statistically sampled and tested for
authenticity and degradation prior
to
importation.
Samples
of
subsequent shipments of these drugs
must also be tested for authenticity
and degradation.
For a prescription drug not imported
Same as current law.
Only allows imports from the first
Similar to current law but see above.
directly from the first recipient in
Canadian recipient.
the foreign country, there must be
documentation demonstrating that
each batch of the drug has been
statistically sampled and tested for

CRS-10
Provisions
Current Law
S. 1
H.R. 1
H.R. 2427
authenticity and degradation prior
to importation and the importer or
manufacturer must certify that the
drug is FDA-approved and properly
labeled.
Testing
Testing.
By law, authenticity
Testing.
Similar language to
Testing.
Similar language to
Testing.
Similar to existing law,
requirements
testing can be done by either the
current law.
current law.
however, only drug wholesalers
for imported
importer or the manufacturer.
A
importing prescription drugs would
drugs
manufacturer
must
give
the
have
to
sample
and
test
for
importing pharmacist or wholesaler
authenticity. [If new Section 505B
the
information
needed
to
for counterfeit-resistant technologies
authenticate
the
product
and
becomes law, the authenticity testing
confirm its labeling. Also, testing
requirements would be moot.]
information
must
be
kept
in
confidence, and the Secretary may
adopt rules to protect trade secrets
and
commercial
or
financial
information that is privileged or
confidential.
Requirements
No provision.
No provision.
Limitation. Would require that all
Requirements
for
Counterfeit-
for tamper-
prescription drugs imported from
Resistant Technologies.
Would
resistant or
Canada by domestic pharmacists
amend current law establishing a
counterfeit-
or wholesalers be contained in
new Section 505B — Counterfeit-
resistant
tamper-resistant packaging which
Resistant Technologies. Henceforth,
technologies
cannot be counterfeited.
the packaging of all prescription
drugs (not just those being imported)
would have to incorporate overt
optically
variable
counterfeit-
resistant technology or technologies
that have an equivalent function of
security.
The technologies employed must
provide visible identification of the
product; be similar to those used by
the Bureau of Engraving and Printing
to secure U.S. currency; be made and
distributed in a secure environment;
and
must
integrate
non-visible

CRS-11
Provisions
Current Law
S. 1
H.R. 1
H.R. 2427
security
features
with
forensic
capability.
A l s o ,
m a n u f a c t u r e r s
m u s t
incorporate the technologies into
multiple elements of the packaging
for prescription drugs.
Moreover, shipping containers for
drugs
must
have
labels
that
incorporate technologies that enable
inspectors to verify the authenticity
of the shipment.
Countries
Country Limitation.
Prescription
[Note: Elsewhere, the bill restricts
[Same as S. 1.]
Country
Limitation. Similar to
from which
drugs covered by the law could be
imports of prescription drugs under
current law, but eliminates the
drugs could be
imported
only
from
countries
this section to those from Canada.]
authority of the Secretary to limit the
imported
specified in Section 802(b)(1)(A).
areas for public health reasons.
Registration of
No provision.
Registration of Foreign Sellers.
Registration of Foreign Sellers.
No provision.
foreign sellers
R e q u i r e s
a n y
C a n a d i a n
Same as S. 1, but adds that the
establishment
engaged
in
the
Canadian
establishment
also
distribution of a prescription drug
register the name of its U.S. agent.
imported or offered for importation
into the United States to register its
name and place of business with
the Secretary.
Secretary’s
Suspension of Importations. If the
Suspension of Importations. Same
Suspension of Importations. Same
Suspension of Importations. Similar
authority to
Secretary discovers a pattern of
as current law.
as current law.
to current law, except that after an
suspend a
counterfeit or violative products, the
investigation into the suspension of
specific drug
agency must suspend importation of
an imported drug, the Secretary
and a specific
a specific product or a specific
would not have to make a further
importer
importer. The suspension must stay
finding that the public was being
in effect until the FDA investigates
a d e q u a t e l y
p r o t e c t e d
f r o m
and determines whether the public
counterfeit drug products before the
is being adequately protected from
suspension could be lifted.
counterfeit
and
violative
drug
products under existing regulations.

CRS-12
Provisions
Current Law
S. 1
H.R. 1
H.R. 2427
Labeling
Requires certification from the
Approved Labeling. Directs drug
Approved Labeling. Same as S. 1.
Approved Labeling. Same as current
importer
or
manufacturer
that
manufacturers to allow importers to
law
b y
saying
“meets
all
product is FDA-approved and meets
use, at no cost, the approved
requirements under the Act.”
all labeling requirements.
labeling for prescription drugs.
Prohibition on
Prohibited Agreements. Prohibits
Prohibition
of
Discrimination.
No provision.
Prohibited Agreements.
Same as
discrimination
manufacturers of imported drugs
Makes it unlawful for a drug
current law.
from entering into contracts or
manufacturer
to
discriminate
agreements that include provisions
against a pharmacist or wholesaler
to prevent the sale or distribution of
who
wants
to
purchase
a
imported products.
prescription
drug.
Defines
discrimination as any activity, such
as a sales contract, that limits the
supply of the drug, or any measure
that provides terms or conditions
that
are
less
favorable
to
pharmacists or wholesalers than
those
provided
to
foreign
purchasers, or that restricts their
access to a prescription drug that
the law allows to be imported.
Charitable
C h a r i t a b l e
C o n t r i b u t i o n s ;
Charitable Contributions. Same as
Charitable Contributions. Same
Charitable Contributions; Parenteral
contributions
Parenteral
Drugs.
Section
current law regarding charitable
as S. 1.
Drugs. Same as current law.
801(d)(1) of the Act, which allows
contributions.
No mention of
only the U.S. manufacturer of a
parenteral drugs in this context.
drug to import it into the United
States, will continue to apply to (1)
a
p r o d u c t
d o n a t e d
b y
a
manufacturer
of a
drug to
a
charitable organization or foreign
government; and (2) a parenteral
drug that the Secretary determines
poses a threat to the public health.
Importing
No provision in law, but FDA
Waiver Authority for Importation
Waiver Authority for Importation
Authority
for
Importation
by
prescription
policy allows individuals to bring in
by Individuals.
by Individuals.
Individuals. The bill would require
drugs for
drugs for personal use.
the
Secretary
to
publish
rules
personal use
Declarations — Congress declares
No declarations.
allowing ‘qualifying individuals’ —
that the Secretary should use
along
with
pharmacists
and
discretion
when
enforcing
the
wholesalers — to import prescription

CRS-13
Provisions
Current Law
S. 1
H.R. 1
H.R. 2427
current legal prohibition against
drugs into the United States.
[A
persons importing drugs or devices
waiver of the law, therefore, would
for personal use.
The Secretary
not be necessary.]
should focus on cases where the
importing may pose a significant
threat to public health or an
unreasonable risk to the individual.
Waiver Authority — The Secretary
No provision for a waiver for
may grant waivers, to individuals
individuals
to
import
from
to
bring
in
pharmaceuticals
countries other than Canada.
(apparently from any country),
either through rule-making or on an
individual basis, of the law that
only
allows
manufacturers
to
import
FDA-approved
drugs
[Section 801 (d)(1)]. The Secretary
may also decide the conditions
under which waivers are given on a
regular basis.
Moreover, the Secretary would
No guidance provision. The bill
have
to
publish
a
guidance
does
specify,
however,
that
describing the circumstances when
imported
drugs
may
not
be
the waivers would be granted to
adulterated or misbranded.
individuals consistently.
Drugs Imported From Canada —
Drugs Imported From Canada —
The Secretary shall grant waivers
The Secretary may grant waivers
so persons can import a 90-day
to individuals. Waivers must meet
supply
of
an
FDA-approved
requirements similar to those in S.
prescription drug from a licensed
1. However, under H.R. 1, if the
pharmacy in Canada, so long as the
Secretary grants a waiver, the
drug’s final dosage form was made
imported drug or device must be
in an FDA-registered facility, came
in possession of the individual
from a registered Canadian seller,
when the individual enters the
was
accompanied
by a
valid
United States.
prescription, and was imported
under conditions the Secretary
determines
were
necessary
to
ensure public safety.

CRS-14
Provisions
Current Law
S. 1
H.R. 1
H.R. 2427
Evaluation of
Studies; Reports.
Requires the
Studies; Reports.
Requires the
Studies; Reports. Similar to S. 1
Studies; Reports. Similar to current
the program
Secretary to either conduct or
Secretary to ask the Institute of
except that it does not require that
law in that the Secretary must
contract with an entity to evaluate
Medicine (IOM) of the National
the Institute of Medicine, in its
conduct, or contract with an entity to
drug importers’ compliance with
Academy of Sciences to conduct a
evaluation of the effects on trade
conduct, a study of imported drugs,
the new regulations. In so doing,
study evaluating drug importers’
and patent rights, to consult with
evaluating importers’ compliance
the study must compare the number
comp liance
with
the
new
the U.S. Trade Representative and
with regulations, and the incidence,
of
counterfeit,
misbranded,
or
regulations and to submit the report
the Commissioner of Patents and
if any, of drug shipments found to be
adulterated drugs imported under
to
Congress.
Otherwise
the
Trademarks.
misbranded or adulterated.
More
this law with the number of drugs
sections are identical.
specifically, the study would assess
shipped
domestically
that
are
whether this level of compliance
counterfeit,
misbranded,
or
contrasts with the incidence of
adulterated. After consulting with
shipments
of prescription drugs
the U.S. Trade Representative and
transported within the United States
the Commissioner of Patents and
which have been found to be
Trademarks, the FDA must evaluate
misbranded and adulterated.
the effect that imports have had on
trade and patent rights under federal
Not later than 18-months after the
law. Two years after the effective
date of enactment, the Secretary must
d ate
o f
the
imp lementing
submit
a
report
to
Congress
regulations, the Secretary must
describing the findings of the above
submit
a
report
to
Congress
study.
describing the study’s findings.
Also, 18 months after the import
program goes into effect, GAO
must submit to Congress a report
evaluating the program’s effect on
retail drug prices for consumers.
No limits on
Construction.
Nothing in this
Construction. Same as current law.
Construction. Same as current
Construction. Same as current law.
the Secretary
section shall be construed to limit
law.
the Secretary’s authority relating to
the importation of covered products,
other than with respect to Section
801(d)(1), which allows only the
manufacturer
to
imp o rt
a
prescription drug.

CRS-15
Provisions
Current Law
S. 1
H.R. 1
H.R. 2427
Definitions
Definitions.
Under the Act, the
Definitions. The term prescription
Definitions. Same as in S. 1.
Definitions. Similar to current law
term “covered product” means
drug means any drug other than a
except that it includes the definition
prescription drugs. The definition,
controlled substance, a biologic, an
of a “qualifying individual” to mean
however, does not include drugs
infused
drug,
an
intravenous
an individual who is not a pharmacist
listed in Schedules I, II, and III (i.e.,
injection drug, or a drug inhaled
or wholesaler.
drugs with high abuse potential) of
during surgery. Other definitions
the Controlled Substances Act, nor
are the same as in current law.
biological products regulated under
the Public Health Service Act.
Under
the
Act,
besides
drug
companies
themselves,
only
licensed pharmacists or wholesalers
may import drugs.
All labs that
qualify for testing must be in the
United States, and be approved first
by the Secretary. Also, parenteral
(injectable)
drugs
cannot
be
imported if the Secretary feels they
might pose a threat to public health.
A pharmacist is defined as a person
licensed by a state to practice
pharmacy and dispense and sell
prescription drugs.
A wholesaler
means a person licensed as a
wholesaler
or
distributor
of
prescription drugs in the United
States, but does not include the
manufacturer of the drug being
imported.
A prescription drug
means, as described in Section
503(b) of the Act, a drug intended
for
use
by
man
under
the
supervision of a licensed health
practitioner.
Conditions for
No provision.
Effectiveness of Section. Between
No provision.
No provision.
the Secretary
12 and 18
months after the
to halt the
regulations are implemented, if the
import
Secretary certifies to Congress that,
program
based on substantial evidence, in

CRS-16
Provisions
Current Law
S. 1
H.R. 1
H.R. 2427
the opinion of the Secretary, the
benefits of the implementation of
the
import
program
do
not
outweigh
any
detriment,
drug
imports under the section would
cease 30 days after the certification
is
submitted.
However,
the
certification may not be submitted
unless, after a public hearing, the
Secretary finds it is more likely
than not that implementation will
result in an increased risk to the
public
health;
identifies,
in
qualitative and quantitative terms,
the nature and causes of the
increased risk; considers whether
measures can be taken to avoid,
reduce, or mitigate the increased
risk; describes whether additional
statutory
authority
is
needed;
identifies,
in
qualitative
and
quantitative terms, the benefits that
would result from the program,
including reductions in the cost of
drugs to U.S. consumers, which
would allow them to obtain needed
medications
without
foregoing
other necessities of life; and, in
specific
terms,
compares
the
detriment with those benefits and
determines the benefits do not
outweigh the detriment.

CRS-17
Provisions
Current Law
S. 1
H.R. 1
H.R. 2427
Conditions for
Conditions.
The drug import
Conditions.
The Secretary must
Conditions. Same as current law.
Conditions. The bill would delete
the Secretary
program could begin only if the
certify these conditions rather than
the conditions section from current
to implement
Secretary first demonstrated to
demonstrate them.
law.
the import
Congress that its implementation
program
would pose no additional risk to
public health and safety, and would
result in a significant reduction in
the
cost
of
drugs
for
U.S.
consumers.
Authorizing
No provision.
Authorization of Appropriations.
Authorization of Appropriations.
No provision.
appropriations
The
bill
authorizes
to
be
Same as S. 1.
appropriated such sums as are
necessary to carry out this section.
Conforming
No provision.
C o n f o r m i n g A m e n d m e n t s .
Conforming Amendments. Same
No provision.
amendment to
Replaces references to “covered
as S. 1.
current law
product” in Sections 301(aa) and
303(a)(6) in the Federal Food,
Drug, and Cosmetic Act with
“prescription drug.”
Sunset
Sunset. The import program would
No provision.
No provision.
Sunset.
The bill would delete the
provision
expire 5 years after the Secretary
‘sunset’ provision in current law.
i s s u e d
f i n a l
r e g u l a t i o n s
implementing the law.

CRS-18
Issues for Consideration
Would the Cost of Drugs to U.S. Consumers Decrease?
A recent compilation of U.S. and Canadian drug-price comparisons showed that,
on average, prices charged by manufacturers, wholesalers, and retailers were higher
in the United States, most recently by about 70%.26 Estimates of cross-border
prescription drug sales have increased to as much as $650 million a year.27 The
purpose of the drug import bills is to give U.S. consumers the opportunity to buy
drugs at the lower prices now available in other countries. Would passage of the
legislation actually lower prices for prescription drugs in the months that follow?
Would these prices remain lower a year or two or ten from now? It is unclear at this
point whether these changes in the law would have a long term impact on the cost of
pharmaceuticals to U.S. consumers primarily because the determinants of drug prices
are so diverse, interdependent, and labile.
Under the terms of S. 1 and H.R. 1, imported prescription drugs could only
come from Canada. However, the U.S. and Canadian pharmaceutical markets are
significantly different. For example, approximately 98% of Canadian citizens over
the age of 65 have some form of prescription drug coverage, mainly through their
provincial government health programs.28 This allows the government to negotiate
bulk purchasing contracts for pharmaceutical products. Both public and private
benefit plans actively manage costs using price and cost-effectiveness data;
international price comparisons; reference pricing; substantial generic substitution;
and pharmacy reimbursement policies. By federal law, Canada’s Patented Medicine
Prices Review Board keeps drug costs in check by regulating a drug’s price based on
guidelines involving the cost of alternate drugs, cost of the same drug in other
countries, and changes in the Consumer Price Index.29 Over the years, U.S. policy
makers have chosen not to implement a similar policy (except in specific programs
that deal with government entitlements, such as the Department of Veterans Affairs
and state Medicaid programs).
Reducing Prescription Drug Costs. Supporters of the import provisions
under consideration assert that a drug import program would increase competition
among drug suppliers and lead to lower prescription drug prices for U.S. consumers.
Representative Gutknecht, using Congressional Budget Office projections that
Americans over 65 will spend $1.8 trillion on prescription drugs over the next ten
years, estimates a 10 year saving of $630 billion by importing prescription drugs
from abroad.30 Some critics, however, question whether such a program would in
26 Gross, 2003.
27 Gardiner Harris, “Pfizer Moves to Stem Canadian Drug Imports,” New York Times, Aug.
7, 2003, p. A7.
28 Gross, 2003.
29 Gross, 2003.
30 Representative Gutknecht estimates a savings of 35%, based on CBO-estimates of $1.8
trillion in non-Medicare prescription drug purchases by persons over 65 for the next 10
(continued...)

CRS-19
reality translate into lower prices to consumers for prescription drugs. They point out
that none of the proposals guarantees that pharmacists and wholesalers would pass
on potential savings to consumers, and further note that increased demand and
possible actions by manufacturers to limit supplies could cause pharmaceutical prices
in Canada — for both U.S. and Canadian buyers — to rise.
Manufacturer Actions to Limit Supply. Under the language of H.R. 1 and
S. 1, prescription drugs could only be imported from Canada; however, under H.R.
2427, they could be imported from at least two dozen industrialized countries,
including Canada. One unknown factor is whether drug manufacturing facilities
operating in Canada, even those currently registered with FDA, would be capable of
suppling the variety and quantity of pharmaceutical products that American
consumers would likely demand. Nor would sufficient supplies be assured from
production plants located in the United States. In August 2003, Pfizer joined the
pharmaceutical companies GlaxoSmithKline, AstraZeneca, and Wyeth in curtailing
the supply of pharmaceuticals to Canadian wholesalers and pharmacists. According
to reports, when these companies calculate that the amount of drugs Canadian
wholesalers (and pharmacies) are ordering is above that normally needed to supply
the Canadian market, they cut or withhold from future shipments the percentage they
feel is destined to fill prescriptions from American consumers.31
On a related note, some have suggested that if Congress does pass a drug import
bill, pharmaceutical companies may seek ways around the law, for instance, by
exporting drugs to foreign countries with characteristics (e.g., color, size, shape, or
dosages) different from those intended for retail distribution in the United States.
Because these imported products might appear different than their FDA-approved
counterparts, some fear they could be deemed unapproved, and not qualify for
import. Another concern is that if drugmakers continue to restrict or tighten supplies
of pharmaceuticals to Canadian suppliers, and adjust prices accordingly, a U.S. drug
import program could, inadvertently, cause drug prices to rise in that country.
Would U.S. Consumers Face Unsafe or Ineffective Drugs?
Since 1938, the FFDCA has required that drugs sold to U.S. consumers be safe.
With the 1962 Kefauver-Harris Amendments,32 all drugs had to be proven effective
as well. Today, the FDA uses its many statutory and regulatory tools to monitor
domestic production and distribution of all pharmaceutical products. Generally, the
agency’s inspection, testing, and surveillance efforts are less extensive outside the
United States than within. FDA officials have said they cannot vouch for the safety
and effectiveness of imported drugs that come from unregistered and uninspected
facilities.33 Among their concerns are obvious violations such as counterfeits or
intentionally diluted FDA-approved products; inadvertent changes to product quality
30 (...continued)
years, available at [http://www.gil.house.gov/Issues/PDrugs/pdrugs.htm].
31 Harris, 2003.
32 P.L. 87-781.
33 Hubbard, June 24, 2003.

CRS-20
resulting from inappropriate handling; and misuse by patients fostered by improper
labeling. Another concern is that some imported drugs may not meet the United
States’ stringent requirements for effectiveness testing.
Product Integrity. FDA officials contend that allowing drugs to be imported
by pharmacists, wholesalers, and individual consumers will only make it easier for
adulterated, misbranded, subpotent, or counterfeit products to enter the U.S.
distribution pipeline. They are concerned that these drugs could end up in U.S. retail
pharmacies, despite the increased number of FDA inspectors hired through recent
increases in bioterrorism-protection funding. Also, the increased volume of drug
imports could draw FDA inspectors away from other priorities, such as food safety.34
To address concerns about the safety and effectiveness of the imported products,
the import proposals all include requirements for packaging, inspections, sample
testing, chain-of-custody documentation, and registration of participants. Similar to
current law, S. 1 and H.R. 1 would require that authenticity testing be done by either
the importer or the manufacturer. H.R. 2427 would eliminate the testing mandate so
long as the imported drugs were contained in counterfeit-proof packaging. H.R. 1,
however, would impose additional limitations to ensure the safety of the drug
imports. It would require that imported drugs not have left the possession of the first
Canadian recipient; include a statement verifying that the drug was imported by the
seller; be in reasonably tamper-resistant packaging; and, if the Secretary so decides,
enter the United States only through designated ports of entry.
H.R. 2427, however, goes significantly further to ensure safety: it would require
that the packaging of all prescription drugs — not just those for importation —
“incorporate overt optically variable counterfeit-resistant technologies ....”
Authentication testing by drug wholesalers (defined to include importers) would only
be required if the drugs are not in counterfeit-proof packaging. Nevertheless, FDA’s
Associate Commissioner William Hubbard has testified that the legislation would not
protect against the threat of counterfeit drugs because no random sampling plan can
protect against such criminal conduct.35 According to one report, an FDA official
recently claimed that the bill would cost FDA $500 million over 5 years to
implement, monitor, and test imported products.36 Further, critics predict that the
testing and packaging requirements will be very costly and burdensome for drug
manufacturers, costs that will likely just be passed on to consumers.
FDA Personal-Use Import Policy and Enforcement Issues. According
to FDA’s policy statement on importing drugs for personal use:
34 “Rx Reimportation Could Divert FDA Inspectors From Food Safety-HHS,” The Green
Sheet, Feb. 25, 2002, p. 3.
35 William K. Hubbard, Senior Associate Commissioner, Policy, Planning and Legislation,
FDA, hearings before the Senate Special Committee on Aging, Buyer Beware: Public
Health Concerns of Counterfeit Medicine, July 9, 2002, p. 14.
36 Transcript of telephone conversation with FDA official, FDA Week, Aug. 1, 2003, at
[www.InsideHealthPolicy.com].

CRS-21
... the intent of the personal use importation guidance is to save FDA resources
and to generally permit, through the exercise of enforcement discretion, medical
treatments sought by individuals that are not otherwise available in the United
States (where such treatments are not promoted/commercialized in the United
States). Thus foreign-made chemical versions of drugs available in the United
States are not intended to be covered by the policy.37
Both S. 1 and H.R. 1 would authorize the Secretary, either through rule-making or
on an individual basis, to grant waivers to individuals to import prescription drugs
from Canada. Under the waivers, persons could bring a 90-day supply of prescription
drugs into the United States for personal use so long as they were FDA-approved
drugs, in final dosage form, made in FDA-registered facilities, from registered
Canadian sellers, accompanied by valid prescriptions, and imported under conditions
the Secretary determined were necessary to ensure public health. H.R. 1 also says
that, if the Secretary grants a waiver with conditions, one condition must be that the
imported drug (also includes devices) be in the possession of an individual when that
person enters the United States. S. 1 would let the Secretary grant waivers for
personal use imports from any source, and urges using discretion in enforcing the
personal-use import policy. H.R. 2427 would amend the law to allow, within rules
published by the Secretary, individuals to import drugs for personal use.
FDA continues to believe that the personal importation of drugs is a bad idea.
Two years ago, in a letter to the Chairman of the House Energy and Commerce
Committee, FDA’s William Hubbard warned that, if any of the provisions became
law, the situation would be “buyer beware” for consumers who decided to import
prescription drugs under those circumstances.38 This year, at a hearing before the
same committee, he reiterated that concern, saying that consumers expose themselves
to a number of risks potential risks when they purchase drugs from foreign sources.39
The BCBP is responsible for checking all imported goods coming into this
country. When BCBP officials suspect that an FDA-regulated product is being
illegally imported either by mail or in personal baggage, they often refer the package
to FDA border officials. However, as the volume of imported drugs has grown
exponentially in recent years — to the point where a close examination of each and
every package is not feasible, some commentators have cautioned that it will become
more and more difficult to keep counterfeit pharmaceuticals out of the country,
especially if they look exactly like FDA-approved drugs and appear to comply with
all U.S. regulations.40
Lack of Physician Involvement. The FDA has raised another concern
about the use of imported drugs — the fact that a growing number of patients,
particularly those now using Internet pharmacies, are buying and taking medications
37 FDA, “Information on Importation of Drugs.”
38 Letter from William K. Hubbard, Senior Associate Commissioner, Policy, Planning, and
Legislation, FDA to the Honorables W. J. “Billy” Tauzin, Chairman, and John Dingell,
Ranking Minority Member, House Committee on Energy and Commerce, July 17, 2001.
39 Hubbard, June 24, 2003.
40 Ibid.

CRS-22
without the traditional safeguards of a medical diagnosis and a doctor’s prescription.
Safe and effective drugs can become unsafe and/or ineffective if they are not taken
under the care of a physician. Also, prescription drugs can have serious side effects
that the average layperson is unaware of — an issue that fuels agency doubts about
a move to expand Internet or mail-order availability.
Could
U.S.
Regulatory
Agencies
Enforce
Consumer
Protections?
Secretary’s Certification. Under the drug import provisions of S. 1 and
H.R. 1, the rules governing the import of prescription drugs could be issued only if
the Secretary of HHS first certified that there would be no additional risks and that
the costs of the drugs would be reduced. This so-called “poison pill” or “safety
provision” (depending on your point of view) was not included in H.R. 2427 mainly
because the bill’s supporters realized that not being able to meet these prerequisites
under the MEDS Act is what has kept HHS from implementing the law to begin
with. Recently, the Congressional Budget Office (CBO) declined to estimate the cost
savings to U.S. consumers of the drug import titles in H.R. 1 and S. 1 based on the
assumption that the Secretary would not issue the necessary regulations to implement
the legislation. CBO further noted that, even if the Secretary were to implement the
provisions, there would be no substantial savings to the federal government because
brand-name drug companies would be unlikely to increase the supply of drugs in
Canada enough to permit a significant share of their U.S. market to be imported from
Canada.41
Cost of Protection. In addition to the initial costs of rulemaking, ongoing
FDA and BCBP inspection and enforcement processes to manage the imports would
be costly to the government. The pharmaceutical industry would face the cost of the
development, manufacture, and ongoing maintenance of the packaging technologies
called for to deter tampering and counterfeiting.42 The U.S. consumer will likely end
up bearing a significant portion of all of these costs through taxes and increased
prices.
Feasibility. If Congress were to establish an expanded import mechanism for
prescription drugs, its success, in all likelihood, will depend on the ability of
pharmacists, drug wholesalers, and consumers to access and purchase FDA-approved
drugs without any undue administrative hardships. Some feel that this is unlikely
given that the agency that would administer the import regulations, the FDA, is on
record with concerns over the safety of drugs from foreign sources.43 Under S. 1, the
Secretary could terminate the program by certifying to Congress, with statistical
evidence, that the benefits of the import program did not outweigh its detriments.
41 Congressional Budget Office, Estimates of the Cost of S. 1 and H.R. 1, July 22, 2003, p.
52-53, at [http://www.cbo.gov/showdoc.cfm?index=4438&sequence=0].
42 FDA, Federal Register, Aug. 26, 2003.
43 Hubbard, June 24, 2003.

CRS-23
What
Are
Possible
Domestic
and
International
Ramifications?
A number of commentators have proffered scenarios describing the intermediate
and long-term implications should the drug import legislation pass. Not surprisingly,
these predictions vary considerably among Members of the House and the Senate,
individual pharmaceutical manufacturers, organized trade associations, consumer
advocacy groups, and observers in the U.S. states and Canadian provinces.
Industry Reaction and Actions. Some have raised concerns about how the
pharmaceutical industry may react to changes in market conditions, suggesting that
some larger manufacturers might curtail their investments in research and
development, or move their offices and plants to countries offering more favorable
regulatory and financial climates perhaps. Short of such actions, companies could,
as mentioned before, attempt to manipulate the supply of drugs to circumvent the
purpose of the legislation.44
Questions about International Relationships. Administration officials
have repeatedly said that the FDA will be unable to monitor the life-cycle of
imported drugs — from manufacturing, packaging, and shipping — to ensure that the
drugs are safe and effective. In the case of drugs imported from Canada, might the
two governments consider some form of reciprocity, recognizing the validity of the
other’s system? Canada’s drug regulatory requirements are quite similar to those of
the United States, and Health Canada and the FDA operate with similar procedures
when ensuring the safety and efficacy of pharmaceutical products.45 In addition to
safety, several trade issues have been raised.46 A drug import agreement between the
United States and Canada could, perhaps, present some NAFTA related issues. In
addition, although there were strict requirements in the recent World Trade
Organization agreement on the humanitarian import of generic versions of patented
pharmaceuticals to prevent shipments of these generic drugs from entering developed
countries, some have questioned whether these arrangements are enough to prevent
cross-shipments of these drugs from being imported into the United States.47
44 See John E. Calfee, “The High Price of Cheap Drugs: The House is tempted by a terrible
idea,” The Weekly Standard, July 21, 2003; and “Drug Dealing,” editorial in The
Washington Post, July 24, 2003, p. A20.
45 See “Questions Concerning the U.S. and Canadian Regulatory Systems for Approving and
Distributing Prescription Drugs,” a memorandum by CRS, May 28, 2003 to Rep. Bernard
Sanders, available at [http://bernie.house.gov/documents/CRS-Canadian_Rx_Drugs.pdf],
visited Aug. 25, 2003.
46 Ronald Guse, Registrar, Manitoba Pharmaceutical Association, National Association of
Pharmacy Regulatory Agencies (Canada), noted out at a July 16, 2003 conference at the
Center for Strategic and International Studies that should a wrong or counterfeit imported
drug cause medical treatment failure, the cost of the failure would fall on the health care
system rather than on the trading entity.
47 An Aug. 2003 World Trade Organization (WTO) General Council agreement seeks to
ensure that intellectual property rights do not keep countries that lack the capacity to
produce medicines for themselves from obtaining them from abroad. Under the agreement,
(continued...)

CRS-24
Other Federal Agency Involvement. Expanding drug imports would
probably involve agencies other than the FDA and the BCBP. The U.S. Postal
Service, for instance, is already involved in dealing with mail-order drug purchases.
The Federal Communications Commission has a role in regulating commerce over
the Internet. The Treasury Department oversees tax revenues. The Department of
Veterans Affairs is already involved and benefits from negotiating drug prices with
pharmaceutical companies. How a new drug law might affect them is very unclear
at this point.
Congressional Options for Controlling Drug Costs
Clearly, the high cost of prescription drugs is affecting the purchasing power of
individual consumers and public and private entities. Not only are prices seen as too
high, but the emerging trend today is toward the development of evermore
sophisticated drugs, with complex dosing schedules and intense patient-monitoring
requirements, which cost more to make and to administer medically. Together, these
factors are ratcheting up overall healthcare spending (particularly in the United States
which hasn’t traditionally controlled utilization). These drug import provisions
address the market prices of existing drugs, but the high cost of prescription drugs
presents larger dilemmas for which importing drugs from other countries is but one
possible fix.
If Congress wants to lower the cost of drugs to U.S. consumers, there are other
options beyond maintaining the status quo or facilitating the limited importation of
prescription drugs.48 The options — some more feasible than others — include
instituting price controls or other regulatory measures on prescription drugs in this
country; encouraging more market action (such as with purchasing agreements); and
promoting or providing insurance coverage for pharmaceuticals, among others.
47 (...continued)
countries are expected to limit production of these generic drugs to amounts needed for
public health dangers such as HIV/AIDS, malaria, and tuberculosis, and not use the
opportunity for commercial ventures. WTO News, 2003 Press Release 350, Decision
removes final patent obstacle to cheap drug imports, Aug. 30, 2003, available at
[http://www.wto.org/english/news_e/pres03_e/pr350_e.htm].
48 In its current consideration of a Medicare drug benefit, Congress may avoid a government
role in price controls by including the private sector in benefit administration. See CRS
Report RL31992, Medicare Prescription Drug Provisions as Passed by the Senate, and H.R.
1, as Passed by the House, by Jennifer O’Sullivan.