Unauthorized Drug Importation by Alternative Funding Programs: What Pharmaceutical Companies Need to Know and Options on How to Respond

Some entities known as Alternative Funding Programs (AFPs) are engaged in the unauthorized importation of specialty drugs into the United States and may pose a growing threat to the U.S. drug supply. Article authored by Benjamin B. Correa and Kathy P. Lee.

AFPs commonly purport to reduce the cost of medications for employer-sponsored health plans by requiring patients to obtain medications from so-called international pharmacies. Some AFPs then import into the United States drugs intended for and approved in other countries, in potential violation of the Federal Food, Drug, and Cosmetic Act (FD&C Act), trademark law, and various state laws.

The importation of drugs intended for foreign markets is generally prohibited under current law. The FDA has established two pathways for importing certain prescription drugs intended for foreign markets. The first pathway applies only to drug manufacturers for their own products under Section 801 of the FD&C Act, and the second pathway — which has, to date, never been utilized — is the Section 804 Importation Program, which requires prior approval by the FDA and is limited to states and American Indian tribes.

In addition, guidance from the FDA outlines the agency’s intent to exercise enforcement discretion, in limited circumstances, for the importation of drugs for personal use. However, this guidance does not apply to prescription drugs that are commercialized in the U.S. In sum, none of these avenues provide a legal basis for AFPs to import into the U.S. prescription drugs intended for foreign markets.

The implications for patients and affected pharmaceutical companies can be profound. These arrangements pose significant risks to patient safety and can improperly erode the value of companies’ brand exclusivity and intellectual property rights in the U.S. market.

Indeed, with respect to patient safety, products intended for other markets may not meet the quality and regulatory standards set forth by the FDA. For example, an imported product may have differences in labeling on risks to patients, may have labeling in a different language, may not comply with temperature-controlled shipment requirements, or may be manufactured at non-FDA approved facilities. Unauthorized importation of drugs also heightens the risk of counterfeit medications due to the lack of transparency in sourcing and that these shipments take place outside the regulated U.S. drug supply chain.

The problem of unauthorized drug importation appears to be growing and widespread. Many AFPs publicly advertise services arranging the importation of drugs from international sources. These AFPs claim to source a broad range of products, including specialty and generic drugs, from pharmacy partners in various countries, including Canada, the United Kingdom, India, Turkey, Australia, and New Zealand.

Moreover, this may be just the tip of the iceberg — there are likely many more entities that are less transparent about their involvement in unapproved importation. Notably, certain consultants now even offer publicly available webinars to advise employers and others on how to set up international drug-sourcing programs.

Pharmaceutical companies are beginning to respond to this growing problem and have brought successful litigation against entities engaged in the unauthorized importation of drugs. Legal action can be brought under the Lanham Act and various state law theories and aims to obtain injunctions against specific entities to cease illegal importation of a company’s products.

Pharmaceutical companies may wish to consider taking proactive steps to address this issue and protect the integrity of their products in the U.S. supply chain, such as:

• Regular and Periodic Monitoring: Analyze post-marketing surveillance and drug diversion data on a periodic basis for signs of unauthorized importation and adverse events.
• Conduct Proactive Investigations: Investigate and assess the scope of unauthorized importation if monitoring indicates suspicious activity.
• Engage with Regulators: Reach out to U.S. and foreign regulators if such activity is identified and provide evidence to support agency evaluation and action.
• Pre-Litigation and Litigation Strategies: If potentially troubling activity is identified, consider whether notice letters, cease and desist communications, or litigation may be viable options.

These strategies can help mitigate the risks associated with unauthorized drug importation, ensure that patients receive safe and effective medications, and protect intellectual property.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.