On January 5, 2024, the U.S. Food and Drug Administration (FDA) authorized Florida’s proposal under the Section 804 Importation Program (SIP) to allow Florida to proceed to the next steps in the regulatory process to import certain drug products that were approved by Health Canada.

FDA’s authorization represents the Agency’s determination that the proposal meets the statutory standard for significant cost reduction without posing additional risk to health and safety. Nevertheless, Florida will still need to overcome several significant hurdles before it can begin to import any Canadian drugs. Accordingly, Florida still has a long way to go before importing any Canadian drugs, and litigation and other actions taken by certain stakeholders will likely further complicate, delay, and possibly even prevent such importation for the longer-term.

Pre-Import Request

Before Florida can import any Canadian drugs, FDA would need to grant for each drug that would be imported under Florida’s proposal a Pre-Import Request that must be submitted by the Importer. The requirements for the Pre-Import Request are almost as lengthy as the requirements for the SIP proposal itself. For each drug product proposed for import, the Pre-Import Request requires submission of vast amounts of detailed information, including the following:

  • Statutory Testing. Statutory Testing must be conducted by the manufacturer or Importer for each drug to test for authenticity, degradation, and to ensure that the eligible prescription drugs are in compliance with established specifications and standards. 21 USC 384(e)(1). For each drug, a Statutory Testing plan must include: (A) a description of the sampling plan for testing each shipment; (B) the name and location of the qualifying U.S. laboratory that will conduct the testing; and (C) a description of the testing method(s) that will be used. See 21 CFR 251.5(c)(4)(xi).
  • Basis of expiration date. A complete description of how the expiration date for the relabeled drug was determined using the manufacturer’s stability studies “in accordance with the FDA-approved NDA or ANDA.” 21 CFR 251.5(c)(4)(viii).
  • Attestations. Within 30 days of receiving the importer’s request, the manufacturer must provide detailed attestations and information to establish that the drug proposed for import meets the same conditions in the FDA-approved NDA or ANDA, other than the (Health Canada approved) labeling, including confirmation that the Canadian drug was manufactured in accordance with the conditions described in the FDA-approved drug’s NDA or ANDA, including with regard to the facilities and manufacturing lines that are used, and in compliance with current good manufacturing practice requirements. 21 CFR 251.5(c)(4)(xii); 251.5(d).

Other requirements

Florida will also have to demonstrate to FDA that, as the SIP sponsor, it is able to effectively implement all aspects of the plan that FDA has authorized, including requirements for manufacturers, foreign sellers, Importers, and qualifying laboratories, including:

  • Registration of foreign sellers;
  • Reviewing and updating registration information for foreign sellers;
  • Official contact and U.S. agent for foreign sellers;
  • Supply chain security requirements for eligible prescription drugs;
  • Qualifying laboratory requirements;
  • Laboratory testing requirements;
  • Importation requirements; and
  • Post-importation requirements.

Expiration, suspension, or revocation of SIP authorization

Despite all the work that Florida needs to get done to start importing Canadian drugs, its SIP authorization will be terminated if Florida’s Importer or customs broker fails to file an electronic import entry for shipment of an eligible drug under the SIP within one year of the date of FDA’s January 5, 2024 letter. However, FDA must grant the Pre-Import Request before Florida can even offer for import a drug to meet this one year deadline. FDA advises submission of the Pre-Import Request more than 30 days before the date of arrival or entry to allow FDA sufficient time to conduct its review, but FDA has no deadline for the completion of its review of a Pre-Importation Request. Considering that it took Florida over three years to obtain FDA authorization for its SIP proposal, Florida will have to take aggressive action to submit a timely and complete Pre-Import Request far in advance of the one year deadline.

If Florida is able to meet this one year deadline, its authorization will be effective for two years from the date its Importer or broker files the first electronic import entry for its first shipment. FDA may extend the authorization period for up to 2 years at a time, provided that an extension request is submitted at least 90 days before the SIP’s authorization period will expire.

In addition, FDA will oversee activity under the authorized SIP proposal and Pre-Import Request submissions, including review of extensive quarterly reports that must be submitted by a SIP Sponsor. In addition to other information demonstrating compliance with the applicable requirements for each drug imported, the quarterly reports must include data, information and analysis on the SIP’s cost savings for the drugs imported. FDA retains ample authority to suspend or revoke a SIP authorization, including if the required cost savings cannot be demonstrated, which would prohibit subsequent importation.

Other challenges

First, we anticipate imminent and robust litigation challenging FDA’s authorization of the Florida SIP proposal and FDA’s denial on January 5, 2024 of the Citizen Petition submitted by PhRMA and other petitioners requesting that FDA refrain from authorizing Florida’s SIP proposal. On November 23, 2020, PhRMA and other Plaintiffs sued to block FDA from finalizing and implementing the relevant drug importation regulations. This case was ultimately dismissed on February 6, 2023, based on lack of standing — mostly because FDA had not taken any action to authorize a SIP proposal. With the citizen petition denial and the FDA action authorizing the SIP proposal, PhRMA and the other plaintiffs should have stronger arguments on standing and final agency action.

Second, the Canadian government is likely to oppose implementation of any SIP proposal based on concerns that it may lead to drug shortages for Canadian citizens and threaten supply chain security for both U.S. and Canadian markets. The Canadian Government has pledged to “employ all necessary measures to safeguard its drug supply and preserve access for Canadians to needed prescription drugs.” Moreover, Canada issued an order that prevents the distribution of a drug outside of Canada if distribution can cause or exacerbate a drug shortage. .

Third, Florida may find it difficult to find and maintain foreign sellers who are willing and able to sell drugs for export to the U.S. under a SIP. Pharmaceutical manufacturers that currently sell drugs to Canada and also directly to U.S. markets will likely explore options to limit or restrict drugs that will be exported from Canada to the U.S. under any SIPs that FDA authorizes. Understandably, pharmaceutical companies would be hesitant to increase the supply of drugs to Canada, in excess of the needs of Canadian patients, in order to facilitate export to U.S. markets through SIP proposals. In a recent report to its General Assembly, Colorado explained that because “drug manufacturers in Canada have contract terms with wholesalers, including any FDA-required foreign seller, that prohibit the exportation of drugs to the U.S., Colorado is unable to secure drug supply absent direct negotiation, and ultimately a contractual agreement, with manufacturers.” We can expect Florida to encounter similar contractual issues in securing supply under the SIP.

Taken together, these challenges are likely to severely constrain the eligible Canadian drugs available for export under a SIP, which will make it even harder to demonstrate the statutorily required cost-savings.

Hogan Lovells – David Horowitz and Jason Conaty

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