The Canadian Drug Importation Rule Survives Industry Challenge, But Don’t Expect Canadian Drugs at Your Pharmacy Just Yet

February 13, 2023By Faraz Siddiqui

In November of 2020, plaintiffs representing the pharmaceutical industry sued the U.S. Department of Health and Human Services (HHS) to block a rule that would allow the importation of Canadian prescription drugs (see our blog post on the complaint).  Last week, the D.C. District Court dismissed the suit for lack of standing because plaintiffs could not show any concrete risk of harm.

Despite the apparent green light, it will be a while before we see Canadian drugs on our pharmacy shelves. The final rule does not itself permit any drugs to be imported. Rather than creating its own importation program under Section 804 of the Federal Food, Drug, and Cosmetic Act (FDC Act), the Food and Drug Administration (FDA) used the statute to create a pathway for States and Indian Tribes (“Sponsors”) to develop such programs (called Section 804 Importation Programs, or SIPs).

The final rule’s requirements for SIPs tracked the various statutory criteria of Section 804. Significantly, the final rule also required U.S. manufacturers to authorize the use of their FDA-approved labeling to importers and either test the imported products or give information to importers to test the products so the importers can submit pre-import requests to the FDA. The industry lawsuit challenged the final rule based on constitutional and procedural grounds. It alleged imminent harm because FDA had already received SIP proposals from several states.

As a final check, the statute also required HHS to certify that any Section 804 importation program will produce significant savings for American consumers without risking the public’s safety. Then HHS Secretary Alex Azar issued a “conditional” certification—valid only for SIPs implemented through the final rule, and subject to FDA’s approval of the SIP and pre-import requests. The industry lawsuit also challenged this certification.

Court Found No Imminent Harm and No Associational Standing

Judge Timothy Kelly noted that plaintiffs’ alleged harms did not show that there was “a substantial risk that a future harm will occur” because they failed to show if, when, and how even one of their members would be harmed by an approved SIP or a pre-import request.

According to the court, the plaintiffs could either show that threatened injury is certainly impending, or a substantial risk that a future harm will occur. The court found that plaintiffs’ members’ injuries hinged on, at the very least, the approval of a SIP and the filing of a pre-import request. FDA’s discretion to deny any SIP proposal vitiated any claim that a harm is certainly impending.

The court next focused on whether the plaintiffs showed an increased risk of future harm. The court held that the plaintiffs’ claims are concrete but not imminent because drug importation is still subject to regulatory processes and approvals. The court’s asked three questions to assess the “imminence” of this future harm: will the agency approve the application, when will it do so, and what will the terms of the approval be?  According to the court, “even if the Court assumes an SIP will eventually be approved . . . the Court could only speculate about when such an approval will occur and, more importantly, on what terms.” Decision at 15-16. The final rule specified no timeframe for FDA to act on a SIP proposal. And without knowing the terms of such an approval, the court could not identify which, if any, member of a plaintiff association would suffer the alleged injury. The plaintiffs simply asserted a likelihood that some of their members face a risk of harm.

Plaintiffs Other Alleged Harms Must Also Fail

The judge next discussed plaintiffs’ allegations of past and present “compliance costs.” Twelve members of the plaintiffs submitted declarations of having to expend financial resources for potential pre-import requests. Although the court agreed that these administrative costs were concrete and particularized, it held that the cognizability of such costs “depend[ed] on whether Plaintiffs have met the standard for alleging a ‘substantial increase in the risk of harm’”—which they had not. Decision at 23.

The judge also addressed plaintiffs’ allegations of procedural injury, including an assertion that the HHS Secretary’s certification required an independent opportunity for notice and comment. He dismissed them noting that these kinds of injuries also depend on a showing of “substantial probability of future harm,” which they had not done.

Finally, the judge saw plaintiffs’ allegations of harm to their own organizations (e.g., harm to the shared interest in the safety of U.S. drug supply; being forced to spend additional resources to curtail the circulation of adulterated drugs) as assertions of organizational standings. He dismissed them as “prototypical statements of harm to ‘abstract social interests.’” Decision at 25.

Where Does The Final Rule Go From Here?

Since the Trump Administration issued the final rule, the federal government has been working in earnest on the importation policy. In July 2021, the Biden Administration directed FDA to work with States and Indian tribes to develop SIP proposals. At least six states reportedly submitted SIP proposals to FDA including Colorado, Maine, New Hampshire, New Mexico, Vermont, and Florida, but have not received a decision from the FDA. In March 2022, FDA met with representatives from several states to discuss the development of their SIP proposals.  In August, Ron DeSantis, the governor of Florida, announced a lawsuit against the Biden administration for “reckless delay” of reviewing Florida’s SIP.

Only after FDA approves a SIP will we see how the rest of the pieces of the final rule are implemented—and whether the rule will be challenged again in court.