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December 23, 2019

Questions & Answers Guide to FDA’s Prescription Drug Importation Proposals

On December 23, 2019, the Food and Drug Administration (FDA) issued a proposed rule and draft guidance to implement and facilitate two pathways for the legal importation of certain drugs, which the FDA and the Department of Health and Human Services (HHS) first described in a July 31, 2019 Safe Importation Action Plan.  A summary of the Safe Importation Action Plan can be found in Arnold & Porter’s August 2, 2019 advisory.  The proposed rule, entitled “Importation of Prescription Drugs” (Pathway 1 Proposed Rule), implements “Pathway 1” of the action plan by proposing to authorize states, tribal or territorial governmental entities, wholesalers, or pharmacists to submit proposals outlining plans to import certain types of prescription drugs from Canada via time-limited Section 804 Importation Programs (SIPs).

The draft guidance, entitled ‘‘Importation of Certain FDA-Approved Human Prescription Drugs, Including Biological Products, under Section 801(d)(1)(B) of the Federal Food, Drug, and Cosmetic Act’’ (Pathway 2 Draft Guidance), addresses “Pathway 2” of the Safe Importation Action Plan.  The Pathway 2 Draft Guidance describes procedures that drug manufacturers can follow to facilitate importation of their prescription drugs, including biological products, that are FDA-approved, manufactured abroad, authorized for sale in a foreign country, and originally intended for sale in that foreign country.

Please see below for a Questions & Answers overview of the key aspects of the Pathway 1 Proposed Rule and Pathway 2 Draft Guidance.  Comments on the Pathway 1 Proposed Rule are due by March 9, 2020, and comments on the Pathway 2 Draft Guidance are due by February 21, 2020.


Section 804 Importation Program Basics 

1. What is a Section 804 Importation Program?

As proposed, a Section 804 Importation Program or SIP would be a time-limited program authorized by FDA to facilitate the importation of certain eligible prescription drugs from Canada under section 804 of the Federal Food, Drug, and Cosmetic Act (FDCA).  SIPs would be proposed and managed by SIP sponsors (see Question 2), and the SIP supply chain would include various other entities including a manufacturer, a foreign seller, an importer, a qualifying laboratory, and a repackager/relabeler (if applicable) (see Question 4).

2. Who would be permitted to sponsor a SIP?  

FDA is proposing two SIP sponsorship models.  Under “Option 1”, which appears to be the agency’s preferred approach, FDA proposes that every SIP be sponsored by a State, tribal, or territorial governmental entity that regulates wholesale drug distribution and/or the practice of pharmacy.  An Option 1 SIP could be co-sponsored by a pharmacist, wholesaler, or another State, tribal, or territorial governmental entity.  FDA believes that co-sponsorship could introduce valuable flexibility (for example, multiple States could co-sponsor a plan with a large wholesaler) and allow SIPs to benefit from the experiences of pharmacists and wholesalers, while preserving the advantages that accrue from sponsorship by at least one State or governmental entity.1

FDA is requesting comments on various aspects of the Option 1 SIP sponsorship model, including, specifically, on what the division of responsibility between co-sponsors should be, whether there are certain arrangements that should not be permitted (e.g. should a pharmacist/wholesaler be permitted to be both a co-sponsor and an importer within the same SIP), and whether non-governmental entities other than pharmacists and wholesalers (e.g., group purchasing organizations, pharmacy benefit managers, or union health and welfare benefit plans) should be permitted to co-sponsor SIPs.

FDA is also proposing an alternative sponsorship model (Option 2) under which pharmacists and wholesalers would be permitted to sponsor a SIP without a governmental entity co-sponsor.  In the preamble to the proposed rule, FDA expresses concern with allowing pharmacists or wholesalers to be SIP sponsors without a State, tribal, or territorial governmental entity as a co-sponsor, because the agency believes that only such a governmental entity would be in a position to demonstrate that it licenses or regulates pharmacists, wholesalers, and others in the prescription drug supply chain.2  FDA is seeking comments on whether it could be possible for a pharmacist or wholesaler to be a SIP sponsor without a State, tribal, or territorial government co-sponsor while posing no additional risk to the public’s health and safety.  If FDA does not receive comments containing adequate information to justify such an allowance, the agency intends to omit the Option 2 provision when it issues the final rule.3 If FDA does end up finalizing the Option 2 proposal, the agency leaves open the possibility of including additional safeguards in the final rule that would be applicable to proposals without a governmental entity co-sponsor.4

Under either scenario, to request authorization to import a SIP sponsor would submit a SIP proposal containing the information specified in proposed 21 C.F.R. § 251.3 (see response to Question 10).

3. For how long would a SIP authorization be valid?

SIPs would initially be authorized for a 2-year period (although FDA could specify a shorter period in the authorization), with the possibility of extensions for additional 2-year periods.  Each 2-year period would begin when the importer files an electronic import entry for consumption for its first shipment of drugs (see Question 14).  If the importer does not file for an import entry within 1 year of the date that the SIP was authorized, the SIP’s authorization would terminate. 

A SIP sponsor may seek extension of a SIP for additional 2-year periods following procedures set forth in the proposed rule.  A SIP may be suspended or terminated by FDA at any time at FDA’s discretion.  

4. What entities other than a sponsor and co-sponsors (if any) would be involved in the SIP supply chain?

Other entities involved in a SIP supply chain include a manufacturer, a foreign seller (located in Canada) and  an importer (located in the US).  In addition, SIP importers may engage a qualifying laboratory (located in the US) to conduct required statutory testing (see Question 11) and with repackagers/relabelers to relabel SIP drugs on its behalf.

Of note, as proposed, SIP sponsors and other SIP participants must agree to submit to audits of their books and records and inspections of their facilities as a condition of participation in a SIP.  If a SIP sponsor, manufacturer, foreign seller, importer, qualifying laboratory, or other participant in the supply chain delays, denies, or limits an inspection, any drug that has been held by such entity will be deemed to be adulterated and the SIP may be suspended immediately.

Please see below questions for additional information of the roles of the different entities in the SIP supply chain.

5. Could a SIP Proposal include multiple foreign sellers and importers?

As currently proposed by FDA, a SIP sponsor must only designate one foreign seller and one importer per initial proposal.  However, a SIP sponsor could propose to add additional foreign sellers or additional importers to an authorized SIP once it has consistently imported eligible prescription drugs in accordance with section 804 and the proposed rule. 

6. What is the statutory basis for FDA’s SIP proposed rule?

In issuing the proposed rule, FDA is primarily relying on section 804 of the FDCA.  Section 804, as amended by section 1121 the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), authorizes the Secretary of HHS, after consultation with the US Trade Representative and the Commissioner of Customs, to issue regulations permitting pharmacists and wholesalers to import certain prescription drugs from Canada under certain conditions and limitations.  For section 804 of the FDCA to become effective, the Secretary of HHS must certify that its implementation will  “pose no additional risk to the public’s health and safety” and that it will “result in a significant reduction in the cost of covered products to the American consumer."5   As explained in the preamble to the proposed rule, the Secretary of HHS intends to make this certification to Congress upon issuance of the final rule. 

Noting that no prior HHS Secretary has made the certification required under section 804, FDA states that past efforts have been unsuccessful in part because of concerns that: (1) FDA could not ensure the safety and effectiveness of drugs imported via such a program, (2) an importation program that opened the “closed” US drug distribution system for prescription drugs could increase the opportunity for counterfeit and other substandard drugs to enter the supply chain, and (3) an importation program would not result in a significant reduction in costs to American consumers.6   FDA has revisited the question of whether section 804 could be implemented so that the Secretary could make the required certification under section 804(l)(1), and asserts that while the concerns about public health and safety and the ability to achieve cost savings remain valid, section 804 of the FDCA can be implemented in a manner consistent with the certification criteria through programs overseen by States or certain other non-federal governmental entities and their co-sponsors (if any) that require authorization by and reporting to FDA.7   FDA points to various aspects of the proposed rule that it views as supporting the agency making the required § 804(l)(1) certification, including that (i) SIPs would be required to demonstrate to FDA that they could import drugs from Canada at no additional risk to the public’s health and safety, (ii) requirements relating to the types of drugs eligible for importation, the distribution channels and methods used for product traceability, and the testing of eligible prescription drugs for authenticity and degradation, and (iii) the requirement that drugs imported under section 804 meet the specifications of an FDA-approved NDA or ANDA.8   

The Secretary’s certification will be conditioned on each authorized SIP meeting the relevant requirements of section 804 of the FDCA and the proposed rule.  Significantly, FDA takes the position that if one or more of the provisions in the proposed rule becomes invalid, in addition to the entire rule becoming invalid, the certification would become null and void because the certification is based on a finding that implementation of section 804 will pose no additional risk to the public’s health and safety, and that finding would no longer be accurate because it would have been based on a final rule that contains all the requirements that were included when published.9 

7. What are the proposed criteria for a drug to qualify for importation from Canada under a SIP?  

To be eligible for importation pursuant to a SIP, a drug must be considered an “eligible prescription drug”.  Proposed 21 C.F.R. § 25.2 defines an “eligible prescription drug” to mean a drug subject to section 503(b) of the FDCA that has been approved and has received a Notice of Compliance and a Drug Identification Number (DIN) from the Health Products and Food Branch of Health Canada (HPFB) and, but for the fact that it deviates from the required US labeling, also meets the conditions in an FDA-approved new drug application (NDA) or abbreviated new drug application (ANDA) for a drug that is currently marketed in the US, including those relating to the drug substance, drug product, production process, quality controls, equipment, and facilities.  As explained by FDA, “[e]ssentially, eligible prescription drugs are those that could be sold legally on either the Canadian market or the American market with appropriate labeling.”10 

Of note, to be eligible for importation under section 804, the proposed rule would require that a prescription drug be marketed in the US currently.  FDA believes it will be better able to determine if there is a safety issue with an imported HPFB-approved drug if the FDA-approved drug is currently marketed, because that will make it more likely that there will be current adverse event reports, medication error reports, and product qualify complaints about the FDA-approved drug.11   In addition, FDA states, a comparison between the cost of the HPFB-approved drug sold in Canada and the cost of the FDA-approved drug sold in the US may be necessary to establish that importation has resulted in significant reduction in the cost of the covered products to the American consumer.12  
8. What categories of drugs are proposed to be excluded from importation under a SIP?

FDA is proposing to exclude from the definition of “eligible prescription drug” the following categories of products: (1) controlled substances; (2) biological products; (3) infused drugs (including a peritoneal dialysis solution); (4) intravenously injected drugs; (5) drugs that are inhaled during surgery; (6) intrathecally or intraocularly injected drugs; (7) drug that are subject to a risk evaluation and mitigation strategy (REMS); and (8) a drug that is not a ‘‘product’’ for purposes of section 582 of the FDCA.  In addition, there are certain other categories of products (e.g., drug-device combinations, sterile drugs, ophthalmic drugs, narrow therapeutic index drugs, drugs with boxed warnings) for which FDA in the preamble explains that it proposes determine whether a product that falls into one of those categories can be imported safely in the context of a specific SIP Proposal on a product-by-product basis.13 

9. What requirements would apply to SIP sponsors?

If the rule is finalized as proposed, SIP sponsors seeking to facilitate the importation of eligible drugs from Canada would be responsible for completing and submitting a SIP proposal to FDA for review and authorization.  If FDA approves a SIP proposal, the SIP sponsor would be responsible for managing and overseeing the SIP as further detailed in the proposed rule.  Among other things, a SIP sponsor must ensure that the SIP, each entity participating in the SIP, each eligible drug, and any other element of the SIP comply with the FDCA, FDA regulations, and with the authorized SIP for the length of the SIP’s approval period.  SIP sponsors would also be required to comply with various post-importation requirements as described in the proposed rule.

10. What information would a SIP sponsor be required to include in a SIP proposal?

Specific information that must be contained in a SIP proposal is detailed in proposed § 251.3, and includes, but is not limited to, information about the following: (i) the SIP Importation Plan, (ii) SIP sponsors and co-sponsors,(iii) the foreign manufacturer, (iv) the foreign seller, (v) the importer, (vi) the eligible prescription drug(s) to be included in the SIP, (vii) the repackager/relabeler that will relabel the drugs (if different from the importer), (viii) the qualifying laboratory that will conduct the statutory resting, (ix) the foreign seller’s enforcement and inspection history, and (x) the steps the SIP sponsor would need to take to ensure the supply chain is secure.  The proposal should also address how the SIP sponsor will ensure compliance with various legal and regulatory requirements (e.g., compliance with statutory testing requirements, supply chain security, addressing concerns arising from the manufacture, storage, and transport), and that the SIP proposal would pose no additional risk to the public’s health and safety and would result in a significant reduction in the cost to the American consumer of the prescription drugs to be imported

11. What testing requirements would apply to SIP drugs?

In accordance with section 804(e)(1) of the FDCA, the proposed rule would require the manufacturer or the importer to arrange for eligible prescription drugs to be tested by a qualifying laboratory for authenticity, degradation, and to ensure that the prescription drug is in compliance with established specifications and standards (Statutory Testing).  If the testing is to be performed or arranged by the importer, the manufacturer would be required to provide the importer with all information needed to authenticate the drug being tested.  The proposed rule would require that the Statutory Testing be done at a qualifying laboratory.  The results of the Statutory Testing would need to be reviewed and found acceptable by FDA, and the drug would have to bear the required US labeling, before the drug is sold in the US.

To be considered a qualifying laboratory for purposes of section 804, FDA proposes that a laboratory (i) have ISO 17025 accreditation, (ii) comply with applicable elements of FDA’s drug current good manufacturing practice (CGMP) requirements set forth in 21 C.F.R. Parts 210 and 211, and (iii) have an FDA inspection history and satisfactorily addressed any objectionable conditions or practices identified during its most recent inspection (if applicable). 

12. What are the proposed eligibility criteria for a SIP proposal?

The SIP proposal would need to meet the submission requirements set forth in proposed 21 C.F.R. § 251.3, certain key elements of which are summarized above, as well as demonstrate that the proposed importation: (i) will pose no additional risk to the public’s health or safety; and (ii) would result in significant cost reductions to the American consumer.  Even if a SIP proposal meets these criteria, FDA may decide to not authorize the SIP proposal in its discretion.  For example, FDA may decline to authorize a SIP proposal due to potential safety concerns, the relatively likelihood the program would not result in significant cost savings, or the need to limit the number of authorized programs to effectively and efficiently monitor the program or in light of other resource demands.

13. What is the proposed process for importation of a drug after FDA authorizes a SIP proposal?

After FDA authorizes a SIP Proposal, the SIP’s foreign seller can purchase prescription drugs with the intent to sell them to the SIP’s importer for importation under section 804.  The importer can then request that the manufacturer agree to conduct the required Statutory Testing.  If the manufacturer declines to do so, the manufacturer must provide the information needed to conduct the testing.  The importer can then seek FDA’s permission to start importation of the drugs by submitting a section 804 Pre-Import Request.  The importer would need to submit the Pre-Import Request at least thirty (30) days prior to the scheduled date of arrival or entry for consumption, whichever is earlier, of a shipment containing an eligible prescription drug.  The information to be included in a Pre-Import Request is detailed in proposed § 251.5.  Once FDA grants the section 804 Pre-Import Request, the importer may start the process for the importation of an eligible prescription drug identified in the Pre-Import Request.

14. What are the two proposed types of entry submission options for a SIP drug?

The importer can choose to admit the drugs specified in the Pre-import Request to an authorized Foreign Trade Zone and then conduct the required Statutory Testing and relabeling before filing an entry for consumption.  Alternatively, the importer can make an entry for consumption and request to recondition the products, which would entail the required testing and relabeling. As proposed, the results of the testing would first be reviewed and accepted by FDA and then the drug would be relabeled with labeling that complies with the FDCA before the drug can be distributed in the US.

Entry and arrival of a shipment containing an eligible prescription drug would be limited under the proposed rule to the US Customs and Border Protection (CBP) port of entry authorized by FDA.  The importer, or authorized customs broker, would be required to electronically file an entry for consumption in the Automated Commercial Environment (ACE) or other electronic data interchange system authorized by CBP.

15. How does the proposed rule define a manufacturer?  What would be the role of the manufacturer in the SIP process?  What requirements would apply to manufacturers?

Under the proposed rule, “Manufacturer” means an applicant, as defined in 21 C.F.R. § 314.3, or a person who owns or operates an establishment that manufactures an eligible prescription drug.  Manufacturer also means a holder of a drug master file containing information necessary to authenticate an eligible prescription drug (§ 251.2).
Under the proposed rule, the manufacturer of a prescription drug, upon the request of a SIP sponsor or importer, must provide an importer written authorization for the importer to use, at no cost, the FDA-approved labeling for the prescription drug.  If the manufacturer fails to do so within a timely fashion, FDA may deem this authorization to have been given (§ 251.13).  As it relates to laboratory testing requirements, the manufacturer must arrange for eligible prescription drugs to be tested by a qualifying laboratory (§ 251.16) (or provide the “importer” with information necessary to conduct the testing).  Manufacturers are also subject to various drug supply chain security obligations.  For example, the manufacturer must provide to the importer a copy of any transaction documents that were provided from the manufacturer to the foreign seller (§ 251.14).  See the drug supply chain Q&As for additional information.

16. How does the proposed rule define a foreign seller?  What would be the role of the foreign seller in the SIP process? What requirements would apply to foreign sellers?  

Under the proposed rule, “foreign seller” means an establishment within Canada engaged in the distribution of an eligible prescription drug that is imported or offered for importation into the United States (§ 251.2).  Under the proposed rule, the foreign seller would buy eligible prescription drugs directly from the manufacturer and then sell them directly to the importer.  If a foreign seller also intends to sell product for use in Canada, FDA proposes that the foreign seller would need to separate the portion of product it intends to sell to the importer in the United States under section 804, and maintain that portion in a separate area in its facility from the portion intended for the Canadian market.   

The foreign seller would also be responsible for relabeling the drug product solely to affix or imprint the Section 804 Serial Identifier (SSI) on each package and homogenous case of the eligible prescription drug(s).  Additionally, some of the requirements applicable to a foreign seller under the proposed rule include requirements to: (1) have an active drug establishment license as a drug wholesaler by Health Canada; (2) be registered with provincial pharmacy regulatory authorities to distribute HPFB-approved drugs; (3) not be licensed by a provincial pharmacy regulatory authority with an international pharmacy license that allows it to distribute drugs that are approved by countries other than Canada and that are not HPFB-approved for distribution in Canada; and (4) be registered with FDA under section 804 of the FDCA  (§ 251.2).  

Foreign sellers are also subject to various drug supply chain security obligations.  See the drug supply chain Q&As for additional information.

17. How does the proposed rule define an importer?  What would be the role of the importer in the SIP process? What requirements would apply to importers?

Under the proposed rule, “importer” means a pharmacist or wholesaler.  An importer must be a State-licensed pharmacist, or a State or FDA-licensed wholesaler, who is the US owner of an eligible prescription drug at the time of entry into the United States.  An importer’s pharmacist or wholesaler license must be in effect (i.e., not expired) and the importer must be in good standing with the licensor (§ 251.2). 

Under the proposed rule, the “importer” (located in the US) would purchase eligible drugs directly from the foreign seller (located in Canada).  The importer’s proposed responsibilities include, but are not limited to: (1) proposing a national drug code (NDC) for assignment for each eligible prescription drug imported; (2) examining the Canadian labeling of a sample of each shipment of eligible prescription drugs to verify that the labeling is consistent with that of an HPFB-approved drug, and attesting that such examination has been conducted through reports to FDA required under this part; (3) screening eligible prescription drugs for evidence that they are adulterated, counterfeit, damaged, tampered with, or expired; (4) ensuring the eligible prescription drug is relabeled with the required US labeling; (5) arranging for an entry to be submitted in accordance with proposed § 251.17; (6) collecting and submitting the information and documentation to FDA about the imported drug(s) pursuant to section 804(d) of the FDCA, in addition to information about the foreign seller, as set forth in proposed § 251.19; and (7) submitting the adverse event, medication error, field alert, and other reports, and complying with drug recalls, in accordance with proposed § 251.18 (§ 251.12).  

Importers are also subject to various drug supply chain security obligations.  See the drug supply chain Q&As for additional information.

18. What labeling requirements would apply to drugs imported under the SIP program?

Section 804(d)(1)(K)(ii) of the FDCA requires that a drug covered by section 804 meets all labeling requirements of the FDCA.  Under the proposed rule, as required by section 804(e)(2)(A)(ii), the manufacturer would need to supply the importer, in a timely fashion, with information needed to confirm that the labeling of the prescription drug complies with the labeling requirements of the FDCA. In addition, before a SIP drug can be introduced into interstate commerce, it would be required to be relabeled so that it bears certain information specified in the proposed rule including: (i) the importer’s NDC for the eligible prescription drug, and such NDC must replace any other NDC otherwise appearing on the label of the FDA-approved drug; and (ii) the name and place of business of the manufacturer and the importer; and (iii) the statement: ‘‘This drug was imported from Canada under the [Name of State or Other Governmental Entity and of Its Co-Sponsors, If Any] Section 804 Importation Program to reduce its cost to the American consumer.’’  

19. How would FDA’s National Drug Code (NDC) requirements apply to SIP drugs?

As proposed, before an eligible prescription drug can be released into interstate commerce, it will need a new NDC and will need to be listed.  The SIP drug would need to have a different NDC than its FDA-approved counterpart -- an NDC that uses the importer’s labeler code.  If the SIP importer is also the repackager/relabeler of the imported drug, then the importer will be responsible for registering with FDA as a repackager/relabeler, proposing an NDC for the drug, and listing the drug pursuant to FDA’s 21 C.F.R. Part 207 regulations.  

Where the importer arranges for the relabeling to be conducted by another entity (and thus is solely a private label distributor), there is some ambiguity in the proposed rule as to how the NDC requirements would apply.  The proposed rule provides that that the importer would be responsible for ensuring that the eligible prescription drug incorporates the importer’s proposed NDC (using the importer’s labeler code).  The proposed rule also provides, however, that the importer must ensure “that the entity relabeling an eligible prescription drug on its behalf proposes an NDC pursuant to § 207.33 of this chapter and lists each eligible prescription drug pursuant to § 207.53 of this chapter.” 21 C.F.R. § 251.12.  It is unclear whether FDA is proposing that the repackager/relabeler submit a listing solely using the importer’s NDC or also submit an listing using the repackager’s/relabeler’s NDC.  Under FDA’s current NDC framework, private label distribution drugs are required to be listed with NDCs with two different labeler codes. 

FDA is seeking comments on whether having multiple otherwise identical drugs in the marketplace with different NDCs will create any issues, such as with pharmacy dispensing or otherwise, and, if so, if there are steps that can be taken to mitigate such issues.

20. Describe the proposed cost savings requirements for SIP drugs?

As proposed, each SIP sponsor would be required to provide FDA with data and information about its SIP, including the SIP’s cost savings to the American consumer.  As part of a SIP Proposal, a Sponsor would need to explain why the Sponsor expects the proposal would result in a significant reduction in the cost to the American consumer of the prescription drugs that the Sponsor seeks to import.  The explanation regarding the significant reduction in the cost of covered products to the American consumer would need to include any assumptions and uncertainties and would need to be sufficiently detailed that it can be evaluated by another component of HHS, as directed by the Secretary, which would make a recommendation to FDA.  FDA is seeking comments on the factors that should be
considered in determining whether a reduction in the cost of covered products is significant.

Post-importation, SIP sponsors would be required to provide FDA with data and information on the SIP’s cost savings to the American consumer as further specified in the proposed rule.

21. What other post-importation requirements would apply to a SIP drug? 

There are a variety of post-importation requirements relating to a SIP drug with which SIP sponsors and participants would be required to comply. For example, SIP sponsors would be required to submit quarterly reports to FDA providing information and data on the SIP.  Importers would be required to submit adverse events, medication errors, field alerts, and other reports to the drug manufacturer and FDA.  Importers would also be subject to recordkeeping requirements relating to adverse events and medication error safety reports, regardless of whether they are reported to FDA.   Importers would also be required to develop written procedures to aid in the detection, receipt, evaluation, and reporting of such events.  Supply chain security requirements are addressed below beginning with Question 23.

If FDA or any participant in a SIP determines that a recall is warranted, the SIP sponsor would be responsible for effectuating the recall.  The proposed rule would require each SIP to have a written recall plan that describes the procedures for performing a recall and that specifies who will be responsible for performing the procedures.

22. How will SIP drugs be covered under Federal healthcare programs or subject to US drug price reporting requirements?

The Pathway 1 Proposed Rule does not address this issue.  By statute, Medicare Part D plans, for example, may reimburse only “Covered Part D Drugs,” which are defined in part as products “described in subparagraph (A)(i), (A)(ii), or (A)(iii) of [Social Security Act] section 1927(k)(2) [the Medicaid Rebate Statute].”14   These provisions of the Medicaid Rebate Statute reference, for example, drugs approved under FDCA sections 505 (NDA approvals) and 505(j) (ANDA approvals), but do not reference products sold under a Canadian approval and imported under FDCA section 804.15   These provisions of the Medicaid Rebate Statute also govern which US drug products are subject to Medicaid Rebate reporting and payment obligations.  

The proposed rule does not explicitly address the statutory basis under which SIP drugs would be approved for sale in the US.  Accordingly, it is unclear whether HHS intends for Medicare Part D plans to cover SIP drugs or for these drugs to be subject to Medicaid Rebates (or price concessions under other similar Federal drug pricing programs).  Regarding these topics, the Pathway 1 Proposed Rule notes only that it is “not intended to address the applicability of the Medicaid drug rebate program for drugs under a SIP, which may be addressed in further guidance or rulemaking from HHS as appropriate.”16   The Pathway 1 Proposed Rule also does not address the further issue of whether the Importer’s sales of a SIP drug product could affect a US manufacturer’s drug price reporting obligations, although a sale by another party generally is not taken into account in a manufacturer’s Average Manufacturer Price or Best Price determinations.  Should FDA finalize its proposed rule, US drug manufacturers should consider documenting their reasonable assumptions on these topics. 

Supply Chain Security

23. Would a manufacturer be required to provide pre-US supply chain information to an importer?

Yes.  FDA proposes that a manufacturer provide to the importer all relevant documentation about the transaction that it provided to the foreign seller, upon its transfer of ownership of the product for the Canadian market.  The rule would not require any additional information about such transaction that is otherwise not maintained or submitted in accordance with Canadian law, or in the normal course of business for products the manufacturer intends to introduce to the Canadian market.

24. What supply chain security requirements would apply to foreign sellers?

Under the proposed rule, the foreign seller would need to assign a section 804 serial identifier (SSI) to each package and homogenous case of drug in that portion.  The rule proposes that: 
  • “package” means the smallest individual salable unit of product for distribution that is intended by the foreign seller for sale to the importer located in the United States, and,
  • “individual saleable unit” means the smallest container of product sold by the foreign seller to the importer.
  • “SSI” consists of a unique alphanumeric serial number of up to 20 characters.
As proposed, the SSI would need to occupy blank space on the package and homogenous case, and not obscure any other labeling information, including the manufacturer-labeled Canadian Drug Identification Number (DIN) that was on the package and homogenous case at the time the foreign seller received the product from the manufacturer.  If the product already contained a manufacturer-affixed DSCSA-compliant product identifier at the time the foreign seller receives it, the foreign seller would not be required to assign an SSI to the product before further engaging in a transaction with the importer.

In addition, FDA proposes that the foreign seller would:
  • Need to maintain records identifying its process for serializing and affixing the SSI onto each package and homogenous case, including an explanation of the controls in place to ensure the stamp or adhesive sticker is properly affixed;
  • Otherwise comply with all cGMP requirements and 21 C.F.R. Part 211 labeling and packaging requirements;
  • Need to maintain records associating the SSI with the DIN and all the records it received from the manufacturer upon receipt of the original shipment intended for the Canadian market.
25. What track and trace information would the foreign seller need to provide to the importer?

FDA proposes that prior to or at the time of each transaction (transfer of ownership of a product) with the importer in which the foreign seller transfers ownership of the product to the importer, the foreign seller would need to provide the importer with a statement and information that is comparable with transaction information and transaction statement.  This would include the SSI (as applicable) and the Canadian DIN for each product transferred.  These requirements would be in addition to the statutory requirement under section 804(d)(1)(G) of the FDCA that the importer obtain from the foreign seller, and submit to FDA, documentation specifying the original source of the prescription drug (i.e., identifying the original foreign manufacturer) and the quantity of each lot of the drug the foreign seller originally received from the manufacturer.

Further, foreign sellers would be required to send information about the transaction with the importer to FDA in connection with a recall or for purposes of investigating a suspect product or an illegitimate product.

26. Could an importer purchase product from a foreign seller if they are not an “authorized trading partner”?

Yes.  FDA proposes that importers could conduct transactions with foreign sellers even though they are not “authorized trading partners” under section 581 of the FDCA.

27. What information must an importer confirm when receiving product from a foreign seller?

The importer must first confirm if the imported product includes the foreign seller-affixed SSI, the original Canadian labeling, and the Canadian DIN.  FDA proposes that it would exempt importers from the prohibition on receiving products that are not encoded with a product identifier (as defined under the DSCSA), as long as the product has an SSI from the foreign seller. 

28. Would the importer be required to receive track and trace information from the foreign seller, as required by the DSCSA?

No.  FDA proposes that importers that are wholesalers or dispensers would be exempt from the requirement not to accept ownership unless the previous owner provided the TH/TI/TS.  The importer would just be required to receive the information noted above in question #2 of this section.

29. Would the importer have to affix a product identifier to the imported required, as required by the DSCSA?

Yes.  If the importer will further distribute the product in US commerce, FDA proposed that the importer must affix or imprint a product identifier (as defined by Section 581(14) of the FDCA), on each package and homogenous case of product that it receives from the foreign seller, “at the same time at which the drug is being relabeled with the required US labeling.”  FDA proposed that the importer may relabel the product itself or contract with a separate entity.

If, however, the importer intends to directly administer the product to patients (e.g., the importer is a dispenser or pharmacist with a valid license under State Law (i.e., “authorized” under the DSCSA)), a product identifier would not be required.

30. When affixing or imprinting the SNI portion of the product identifier, can the importer use the same serial number (i.e., the SSI) as the foreign seller?

Yes, or it may elect to assign a new serial number.  

31. Where can importers ship eligible drugs to?

Importers could then sell the product to either another entity in the United States (if it is a wholesaler) or dispense the product itself to patients (if it is a pharmacist).

32. What other DSCSA obligations would apply to importers?

For any subsequent transactions for relabeled product, importers would have to comply with all other DSCSA requirements for dispensers or wholesalers (e.g., passing along track and trace information, verification requests, suspect and illegitimate product). 

33. What must an importer do with information it obtains from a manufacturer regarding a product’s pre-US supply chain?

The importer would be required to use this information to help determine whether the supply chain was intact, by comparing the information about the transaction between the manufacturer and foreign seller to that received by the importer from the foreign seller, as required under this rule.

Overview of Pathway 2 Draft Guidance 

1. What is the purpose of the Pathway 2 Draft Guidance?

The Pathway 2 Draft Guidance is intended to facilitate importation of drugs pursuant to “Pathway 2” of the Safe Importation Action Plan.  The guidance specifically addresses the importation of FDA-approved drugs that were also authorized for sale in a foreign country in which the drugs were originally intended to be marketed (‘‘MMA product’’).  This guidance describes: (1) the process for submitting a supplement to an approved FDA application for an MMA product; (2) the recommended labeling for an MMA product; (3) the process for registration and listing and for obtaining an NDC for the MMA product; (4) the security chain requirements; (5) recommendations related to procedures for importation of the MMA product; and (6) other FDA requirements applicable to MMA products.17   

2. Who could import drugs under Pathway 2?  How would this differ from Pathway 1?  

Under Pathway 2, drug manufacturers can import FDA-approved drugs originally intended to be marketed and authorized for sale in a foreign country. This greatly differs from Pathway 1, which requires a SIP sponsor to be a State or another non-federal governmental entity or potentially wholesalers and pharmacists (under the “Option 2” alternative).  There are various other difference between the two pathways including e.g., significant process differences, that Pathway 2 is not limited to importation from Canada, and that Pathway 2 can be used to import certain products that are excluded from importation under Pathway 1 (e.g., biological products licensed under a BLA). 

3. From which countries could drugs be imported under Pathway 2? 

Pathway 2 does not require that drugs be imported from certain countries. As such, provided the requirements for importation are satisfied, it appears drugs could be imported from any foreign country. 

4. What is a multi-market approved (MMA) product?  

For purposes of the draft guidance, an MMA product is an FDA-approved prescription drug or FDA-licensed biological product that is authorized for sale in a foreign country in which the drug was originally intended to be marketed. With respect to biological products, Pathway 2 is limited to those licensed pursuant to Section 351 of the Public Health Service Act (42 U.S.C. § 262).

The draft guidance further specifies that an MMA product: (i) was originally manufactured outside of the US and authorized for sale by a foreign regulatory authority; (ii) is subject to an NDA or BLA supplement (see Question 7); (iii) is imported into, and authorized by the manufacturer to be marketed in, the US; (iv) continues to meet the quality standards for marketing in the originally intended foreign market; and (v) differs only from the FDA-approved or FDA-licensed product with regard to the labeling statement described below. 

5. What would the requirements for importation be under Pathway 2?  

As described in the Pathway 2 Draft Guidance, a manufacturer could import an FDA-approved drug, originally intended to be marketed in a foreign country and also authorized for sale in that country, if (consistent with section 801(d)(1)(B) of the FDCA) the drug is manufactured outside of the US and the manufacturer has authorized the drug to be marketed in the US and has caused the drug to be labeled to be marketed in the US.  In addition to other requirements, under section 801(a) of the FDCA to be lawfully imported into the US, Pathway 2 drugs must not be in violation of section 505 of the FDCA or be adulterated or misbranded.

FDA’s recommendations for importers of MMA products are set forth in Section VII of the draft guidance.  Of note, any shipment of a purported MMA product that is offered for importation would be subject to refusal unless the manufacturer has authorized the drug to be marketed in the US.  To ensure that a particular shipment is authorized, and to help mitigate the potential for counterfeiting, FDA recommends that the manufacturer provide information that is sufficient for FDA to verify that each shipment of an MMA product has, in fact, been authorized by the manufacturer to be marketed in the US. The recommended information is described in the draft guidance.

6. What labeling requirements would apply to MMAs under Pathway 2?  

Under the procedures described in the Pathway 2 Draft Guidance, an MMA product, like any FDA-approved prescription drug, must be accompanied by the FDA-approved labeling (e.g., Prescribing Information).  FDA explains that this means that if a product is marketed outside the US with a trade name that differs from that of the US-approved drug, the MMA product labeling must match the FDA-approved labeling, including the proprietary name used in that approved labeling.

FDA also recommends that the labeling on or within the package from which an MMA product is dispensed include a statement to differentiate the drug from other drugs that are not the subject of the guidance (if finalized).  The statement should be sufficiently prominent to help a pharmacist readily distinguish the MMA product without obscuring required or recommended information.

7. Describe the FDA supplemental approval requirements that would apply to an MMA.  

In the Pathway 2 Draft Guidance, FDA sets forth procedures by which the holder of an approved application may obtain marketing approval of the MMA product and describes recommended information to be submitted with the appropriate supplement for the labeling changes to approved application.  Significantly, FDA in the draft guidance recommends that an application seeking to market an MMA product under an NDA or a BLA submit a labeling supplement (under § 314.70 or § 601.12(f), respectively) because the recommended labeling statement differentiating Pathway 2 drugs (see Question 6 above) would not be appropriately submitted in an annual report. 

The specific information to be included in NDA supplements and BLA supplements for MMA products is detailed in Section IV of the draft guidance.  For NDA supplements, some of the information that FDA recommends be submitted includes (i) information to demonstrate that the product originally intended for sale in another country is the FDA-approved product and is manufactured in accordance with the FDA-approved NDA (with the exception of limited differences described in the guidance), (ii) information to establish that the composition of the drug product, as well as the entirety of the manufacturing process, meets all of the specifications in the CMC section in the NDA and any submissions incorporated by reference, (iii) an attestation stating that the MMA product has the active ingredient(s), inactive ingredients, dosage form, strength, and route of administration described in the NDA, and (iv) the potential impact of shipping conditions, including holding and warehousing, necessary to import the MMA product on the identity, quality, purity, or potency of the drug product, especially drug product stability.

8. What registration and listing requirements would apply to MMAs?  

The Pathway 2 Draft Guidance provides that the procedures for registration and listing, and proposing an additional NDC for MMA products, are the same as the procedures for all FDA-approved drugs (set forth in 21 C.F.R. Part 207).  One distinction is that FDA recommends that manufacturers list MMA products under the marketing category for multi-market approved products, which FDA intends to add to the registration and listing system.

9. How may manufacturers obtain an additional NDC for use with drugs to be imported under this pathway?  

To obtain an additional NDC for an MMA product, the Pathway 2 Draft Guidance provides that the manufacturer should propose an NDC for the MMA product following the procedures set forth in 21 C.F.R. § 207.33 (FDA’s current NDC assignment regulations).  The draft guidance appears to suggest, however, that FDA would consider it appropriate for manufacturers to assign MMAs with NDCs with a different product code segment than their FDA-approved counterparts, stating: “To avoid potential confusion between product packages with the same name, the change to the NDC for the MMA product should not be solely with the package code.“18  This recommendation appears to be a departure from what FDA’s current NDC regulations require, which appear to limit assignment of a new product code to scenarios where there are certain specified changes in a drug (i.e., a change in the drug's established name or proprietary name, any active pharmaceutical ingredient or the strength of any active pharmaceutical ingredient, the dosage form, the drug's status, between prescription and nonprescription, or a change in the drug's intended use between human and animal).  See 21 C.F.R. § 207.35(b).

10. What supply chain security requirements would apply to MMAs? 

Under FDA’s Pathway 2 Draft Guidance, all DSCSA requirements would apply to MMA product, including the provision of track and trace information, product identifiers, authorized trading patterns, verification requests, and suspect and illegitimate product.  For example, if a manufacturer transfers ownership of a DSCSA-covered MMA product to a wholesale distributor, the wholesale distributor generally shall not accept ownership of a product unless the manufacturer has, prior to or at the time of the transaction, provided the transaction history, transaction information, and a transaction statement for the product

FDA’s Pathway 2 Draft Guidance recommends that MMA product be imported into the US by the manufacturer of such product or by an authorized trading partner a, when such importation is facilitated by the manufacturer.

In addition, each package and homogenous case of a product intended for marketing in the US requires a product identifier. FDA further recommends that manufacturers affix or imprint the required product identifier to the DSCSA-covered MMA product at the time at which the FDA approved label is applied.

11. What other requirements would apply to MMAs?  

An MMA product is subject to all relevant requirements of applicable statutes, including those implemented by FDA such as the FDCA and the Public Health Service Act; applicable implementing regulations under those authorities; and other relevant statutes, including the Social Security Act and the Controlled Substances Act.  The provisions implemented by FDA include, but are not limited to, provisions related to adulteration and misbranding, and requirements related to adverse event reporting, recalls, and REMS.

12. Are US government pricing requirements implicated by the sale of drugs imported into the United States under Pathway 2, and would US Federal healthcare program reimbursement be available for these drugs? 

Yes, this appears to be the case.  Unlike Pathway 1, it appears that Pathway 2 drugs would be sold under supplements to manufacturers’ US BLAs and NDAs.  Thus, it appears that Pathway 2 drugs would be “Covered Part D Drugs” and “Covered Outpatient Drugs,” and therefore would be eligible for reimbursement under Medicare Part D and subject to Medicaid rebates.  Should a manufacturer avail itself of Pathway 2, it may wish to consider documenting drug price reporting reasonable assumptions that address this topic, as well whether Pathway 2 drugs may affect the Medicaid Rebate and other drug price reporting metrics of the manufacturer’s drug products that were not imported into the US.  (In general, CMS guidance provides manufacturers with flexibility regarding the extent to which their sales of drug products may be blended.  Also, it is not clear under Pathway 2 that the manufacturer itself would necessarily sell the Pathway 2 product in the US because the product apparently could instead be sold by an agent.)

13. Will imported drugs be associated with the National Drug Code (NDC) under which they are currently marketed and sold in the United States?

Not necessarily. The Pathway 2 Draft Guidance describes the recommended procedures for manufacturers to obtain an “additional NDC” for FDA-approved drugs imported into the United States under Pathway 2.  According to the draft guidance, “FDA has become aware that some drug manufacturers may be interested in offering certain of their drugs at lower costs and that obtaining additional NDCs for these drugs may help them to address certain challenges in the private market.” The draft guidance explains that its procedures are designed to permit manufacturers to obtain an additional NDC pursuant to an FDA-approved product supported by an NDA or BLA, “which would provide an additional avenue through which drugs could be sold at a lower cost in the US market.”19   As explained in the response to question 9, FDA recommends that manufacturers obtain a different NDC-9, rather than merely a different NDC-11.  That is, the new NDC would include a different product code, rather than merely as representing a unique package size of the same drug.  FDA also specifies that it will create a new “marketing category” to distinguish MMA drugs.  The Draft Guidance states: “[T]he manufacturer should propose an NDC for the MMA product . . .  To avoid potential confusion between product packages with the same name, the change to the NDC for the MMA product should not be solely with the package code. FDA recommends that the MMA product be listed under the marketing category for multi-market approved products, which FDA intends to add to the registration and listing system.”20 

As noted, comments on the Pathway 1 Proposed Rule are due by March 9, 2020, and comments on the Pathway 2 Draft Guidance are due by February 21, 2020.  Our team would be happy to answer your questions regarding this proposal and draft guidance.

© Arnold & Porter Kaye Scholer LLP 2019 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.


  1. 84 Fed. Reg. 70796, 70801 (December 23, 2019).

  2. Id.

  3. Id. at 70802

  4. Id.

  5. FDCA § 804(l)(1)l 21 U.S.C. § 384(l)(1).

  6. Id. at 70799.

  7. Id. at 70803.

  8. Id.

  9. Id. at 70803.

  10. Id. at 70797.

  11. Id. at 70804.

  12. Id.

  13. Id. at 70832.

  14. SSA § 1860D-2(e)(1).

  15. These Medicaid Rebate Statute provisions also reference certain pre-1962 products and Public Health Service Act section 351 products (neither of which are relevant here).

  16. Pathway 1 Proposed Rule at 23.

  17. 84. Fed. Reg. 70557, 70667 (December 23, 2019).

  18. Pathway 2 Draft Guidance at 9.

  19. Pathway 2 Draft Guidance at 2.

  20. Pathway 2 Draft Guidance at 6.