Importation: Review Your Agreements

Senator Byron Dorgan (D-ND) is trying to staple his infamous importation bill to the 2,000+ pages (and counting!) Senate health care bill and claims that Senate Majority Leader Harry Reid (D-NV) will allow a vote on it (per the Puffington Host).

The odds of commercial drug importation legislation are higher than anytime in recent memory. What would it mean in practice?

• Commercial buyers—drug wholesalers, brick-and-mortar pharmacies, mail-order pharmacies—will be sorely tempted to purchase brand-name drugs from overseas sellers.
  
  
• Pharmaceutical manufacturers will have a hard time structuring commercial agreements to reduce or block importation. Manufacturers will also have little choice about whether to do business with known US importers or non-US exporters.

Anyone getting ready to negotiate a wholesale or pharmacy distribution agreement—buyers and sellers—should be paying attention to the language in the importation amendment.

IMPORTATION REDUX

About a year ago, I explained how cross-border drug importation could benefit intermediaries such as drug wholesalers and pharmacies. See Drug Importation and Global Wholesale. As I see it, importation won’t actually save very much money for U.S. consumers because 80% or more of the cross-border price differential will be absorbed by the distribution channel (just like parallel trade in Europe).

Note that wholesale and pharmacy trade associations are still officially opposed to permitting the commercial importation of pharmaceuticals into the United States. See HDMA's Position Statement and NACDS' recent letter opposing the amendment.

My previous posts summarize the safety issues and shaky economics of drug importation.

ENTER THE DORGAN

Click here to read the text of the Dorgan’s Importation of Prescription Drugs amendment.

The Dorgan amendment contains essentially the same text as previously proposed bills. Most notably, the bill explicitly limits manufacturer tactics such as direct distribution, dual pricing, supply quotas, or quantity allocation. The prohibited practices seem to be modeled on approaches used in the EU.

As a service to Drug Channels readers, here’s the list of the unlawful (!) actions listed from the section titled “(n) Unfair and Discriminatory Acts and Practices” on page S12080 of the amendment.

(1) IN GENERAL.--It is unlawful for a manufacturer, directly or indirectly (including by being a party to a licensing agreement or other agreement), to--

(A) discriminate by charging a higher price for a prescription drug sold to a registered exporter or other person in a permitted country that exports a qualifying drug to the United States under this section than the price that is charged, inclusive of rebates or other incentives to the permitted country or other person, to another person that is in the same country and that does not export a qualifying drug into the United States under this section;

(B) discriminate by charging a higher price for a prescription drug sold to a registered importer or other person that distributes, sells, or uses a qualifying drug imported into the United States under this section than the price that is charged to another person in the United States that does not import a qualifying drug under this section, or that does not distribute, sell, or use such a drug;

(C) discriminate by denying, restricting, or delaying supplies of a prescription drug to a registered exporter or other person in a permitted country that exports a qualifying drug to the United States under this section or to a registered importer or other person that distributes, sells, or uses a qualifying drug imported into the United States under this section;

(D) discriminate by publicly, privately, or otherwise refusing to do business with a registered exporter or other person in a permitted country that exports a qualifying drug to the United States under this section or with a registered importer or other person that distributes, sells, or uses a qualifying drug imported into the United States under this section;

(E) knowingly fail to submit a notice under subsection (g)(2)(B)(i), knowingly fail to submit such a notice on or before the date specified in subsection (g)(2)(B)(v) or as otherwise required under paragraphs (3), (4), and (5) of section 10004(e) of the Pharmaceutical Market Access and Drug Safety Act of 2009, knowingly submit such a notice that makes a materially false, fictitious, or fraudulent statement, or knowingly fail to provide promptly any information requested by the Secretary to review such a notice;

(F) knowingly fail to submit an application required under subsection (g)(2)(F), knowingly fail to submit such an application on or before the date specified in subsection (g)(2)(F)(iii), knowingly submit such an application that makes a materially false, fictitious, or fraudulent statement, or knowingly fail to provide promptly any information requested by the Secretary to review such an application;

(G) cause there to be a difference (including a difference in active ingredient, route of administration, dosage form, strength, formulation, manufacturing establishment, manufacturing process, or person that manufactures the drug) between a prescription drug for distribution in the United States and the drug for distribution in a permitted country;

(H) refuse to allow an inspection authorized under this section of an establishment that manufactures a qualifying drug that is, or will be, introduced for commercial distribution in a permitted country;

(I) fail to conform to the methods used in, or the facilities used for, the manufacturing, processing, packing, or holding of a qualifying drug that is, or will be, introduced for commercial distribution in a permitted country to good manufacturing practice under this Act;

(J) become a party to a licensing agreement or other agreement related to a qualifying drug that fails to provide for compliance with all requirements of this section with respect to such drug;

(K) enter into a contract that restricts, prohibits, or delays the importation of a qualifying drug under this section;

(L) engage in any other action to restrict, prohibit, or delay the importation of a qualifying drug under this section; or

(M) engage in any other action that the Federal Trade Commission determines to discriminate against a person that engages or attempts to engage in the importation of a qualifying drug under this section.

Don't say that I didn't warn you!

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