On May 30, 2017, in Impression Products vs. Lexmark, the Supreme Court reversed a Federal Circuit decision over the right by Lexmark to stop the import of refurbished Lexmark printer cartridges into the US. The Court ruled, through the opinion written by Chief Justice John Roberts, that, regardless of where the sale occurs (in the US or abroad), the seller gives up all patent rights when the sale occurs, even if the buyer agrees not to resell the product to anyone else.
This decision is of minor import to the sale of printers but has immense consequences in other industries, in particular in the pharmaceuticals industry. It opens the door to the legal gray market import of FDA-approved drugs into the US from lower-tiered-priced countries.
Professor Frederick M. Abbott is Edward Ball Eminent Scholar Professor of International Law at the Florida State University College of Law, and has generously agreed to answer our questions:
"FUD: Professor Abbott, is it now legal, as of today, for a consumer to purchase an FDA-approved patented drug out of an online pharmacy in Mexico or Canada?
FA: The decision of the Supreme Court in Impression Products v. Lexmark was addressed solely to the patent issue, and not to FDA-related questions. The FDA in its website guidance cautions against importation of prescription drugs, including from Canada, but grounds this on the premise that “drugs from other countries that are available for purchase by individuals often have not been approved by FDA for use and sale in the United States”. As I noted in my commentary in IP-Watch that you posted, a drug which is produced in an FDA approved facility outside the United States and approved for commercial sale in the United States should be permitted for importation, though there are still some technical regulatory requirements (such as packaging) that require attention. Patented drugs are strictly speaking only available for “parallel importation” if the drug was initially placed on the market outside the United States (e.g., in Canada) with the consent of the US patent owner. That would typically be the case, though there may be situations where counterfeits, etc. are involved. In other words, the Supreme Court has taken patents out of the equation provided the drug was first sold outside the United States under the authority of the patent owner.
Another rule to be aware of concerns the reimportation of prescription pharmaceuticals initially manufactured in the United States and exported, where the consent of the US manufacturer is required for “reimportation” of prescription pharmaceuticals. That is an FDA rule, not a patent rule.
So, the answer is “maybe yes”, but it depends on compliance with a complicated set of regulatory requirements. I cannot provide guidance on how much risk the individual patient takes if for some reason the technical details are not fully in compliance. This is a complex area of law where rules tend to be the subject of substantial litigation before results are definitive. I expect it is going to be some time before the parameters of the “new situation” are clarified.
FUD: Is it legal, as of today, for a parallel importer to import insulin from Canada and resell it to a pharmacy in the US if they follow other regular pharmaceutical drug regulations?
FA: You are probably more familiar than I am regarding whether “insulin” specifically is subject to FDA importation rules that other drugs may not be. As an “injectable” drug, there may be some additional requirements regarding storage, transport, etc. I would need to undertake additional research specifically with respect to this drug product. More generally, the answer above touches on a substantial part of this. Again, the Supreme Court cleared the way of patent issues for drugs initially put on the market with the consent of the US patent owner (wherever the sale takes place). A parallel importer that complies with other FDA rules, should be able to import from Canada and resell to a US pharmacy. My hope is that an outfit like Costco or Walmart will step into their customary role as parallel importers (of all kinds of products) and see this as an opportunity on the prescription drug side. The lawyers for these outfits can do the “heavy lifting” in terms of potential compliance issues. The reason Congress thought it should adopt legislation specifically addressing imports from Canada was for circumstances that do not involve FDA approved drugs, or are not manufactured in FDA approved plants. But, the fact that Congress thought some legislation was needed introduces some ambiguity into the whole area. Again, FDA rules allow importation when various criteria are met, but we can expect the pharmaceutical industry to find objections.
FUD: Do you expect specific reactions or regulations from the FDA?
FA: Ultimately, yes, though the FDA could conclude that its existing regulatory framework is sufficient. How quickly new regulations or guidance would develop is difficult to say. There are bills regarding importation of drugs from Canada and other countries pending in Congress, and I expect that the pharmaceutical originator industry will be in Congress lobbying for new rules.
FUD: What do you expect the reaction to this decision to be among pharmaceutical corporations?
FA: I expect the originator industry will be in Congress lobbying for rules to block imports of prescription drugs from outside the United States. This will run up directly against legislation that has been introduced to authorize such importation. Your guess is as good as mine as to what “faction” will prevail. There will be an ancillary issue regarding potential imports of drug supplied under discriminatory pricing programs in favor of low income countries. I will not address that here.
FUD: How do you think this decision will impact drug prices in the US?
FA: If an operator like Costco or Walmart steps in, you could see a meaningful decline in US prescription drug prices, but not “so dramatic”. The reason is that parallel imports are products (like drugs) initially put on a foreign market with the consent of the patent owner, and then exported (e.g., to the United States). Pharmaceutical originators will not expand overseas supplies to fill new demand for parallel imports in the United States. Some of the bills introduced in Congress try to address potential efforts to restrict the quantity of goods available for parallel trade, but this is a difficult business, and in any case remains to be seen.
FUD: What can pharmaceutical corporations do to skirt the consequences of this decision, as to the import of patented gray market drugs into the US? Are there loopholes on the horizon?
FA: As noted above, they will try to limit the total supply placed on overseas markets, and I expect they will introduce additional contractual restrictions on overseas purchasers.
FUD: Do you foresee specific legislative needs in Congress to support or frame this decision? Do you have a wish list?
FA: There is already legislation introduced that covers aspects of this, and I will not try to go beyond that here. As a general observation, parallel importation of patented medicines is part of a potential solution to excessive drug prices, but Congress has more direct tools at its disposal, which it declines to use. That is a quite broad subject on which I (and others) have written quite a bit.
This is a complicated regulatory area and the subject of a great deal of litigation. Because we are now dealing with a “new situation”, I expect there will be a period of uncertainty as things get worked out. The answers I have provided are not intended as “legal advice” for specific individuals who may be in somewhat different situations. And, depending how the industry reacts, individuals might be at some risk on the legal side even if they are making a best effort at compliance. That’s just the way it is…"
Thanks so much, Professor Abbott, for taking our questions!
