Drug Importation

Throwing some cold water on the feasibility of US drug importation

HDA Research Foundation highlights constraints and additional costs of reimportation


For years now, various Congressional bills have proposed allowing drugs to be imported into the US from abroad, outside the control of drug manufacturers themselves. Now an analysis by the research arm of the Healthcare Distribution Alliance (which is certainly not an idle bystander to the question, given that its wholesaler/distributor members would be directly or indirectly impacted) shows that the volume of drugs that could be imported “responsibly” (more about that later) is only about $40 billion, and that it would add costs of an estimated $1.9-2.9 billion (not factoring in the assumed lower cost of imported drugs) to stakeholders in pharma distribution.

Right off the bat, the report, “The Risks and Realities of Commercial Drug Importation,” performs a useful function: defining reimportation. Commercial Drug Importation is an activity in which an organization “brings drugs to the US that (1) were produced outside the U.S. (2) lack Food and Drug Administration (FDA) approval, and (3) lack oversight of elements contributing to product safety and quality (i.e. ingredients, labeling, manufacturing/production, and/or handling methods) in accordance with and pursuant to a FDA approval.” Drug Reimportation is “a subset of approved product importation: a case where drugs manufactured and approved in the US, but intended for sale outside the US, are redirected or reimported into the US commercial supply chain.” The distinction is important because many drugs are already produced outside the US and brought in, but under FDA regulatory oversight.

Based on analysis (by Accenture) of what commercial drugs could be imported without violating existing US patents, or that have been excluded by proposed legislation (such as biologics), the report finds that only 14-18% of the existing US market (about $108 billion) is accessible to importation , and that only about $40 billion of ex-US drug sales are available to be exported to the US. That $40-billion figure is based on the potential from Canada and the EU5 countries only—these are the ones with regulatory frameworks comparable to the US’, and thus a “responsible” source.

Little-recognized fact: Many generic products, which constitute around 90% of the US market by volume, are cheaper in the US than overseas; these would not be attractive candidates for commercial importation.

Apart from the presumed cost savings of the drugs themselves, there are added costs to regulators and distributors in moving these products into US distribution: stepped up inspection by FDA; the combination of higher logistics costs and less revenue for wholesalers; the presumed inability to return products for credit; and (somewhat controversially) added litigation by manufacturers attempting to enforce existing market exclusivity. Another cost—certainly worth factoring in—is increased adverse events for patients as the complexity of different product labels and other changes are worked through.
“While the overall goal of achieving affordability is commendable, it is clear that the risks and costs of prescription drug importation may outweigh any perceived benefits,” said Perry Fri, EVP and COO of the HDA Research Foundation.

Significantly, the HDA Research Foundation report does not make a flat-out assertion that commercial drug importation is infeasible. And the fact that only a partial segment of the overall drug market would be affected is, counterintuitively, a potential advantage to the practice. Overall, the report brings some needed reality to the policy change contemplated by Congress people and other who assume that the practice would be a one-for-one substitution of US-priced products for non-US-priced ones, with no added burden.

The report is available at no cost from the HDA website.