Foreign drug import is now legal: SCOTUS decision

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Today’s new Supreme Court decision on foreign patent rights appears to makes it legal to import drugs that are FDA-approved from lower-priced markets into the US.

In Impression Products vs Lexmark, the Supreme Court just ruled that patent rights are exhausted when a patent holder sells a product abroad, meaning that they cannot stop the product from being imported into a third country by claiming it violates patent rights.

This is a MAJOR shift, that may have momentous consequences on the price of drugs in the US.

The discussion thread for this post is here.
This thread will continue to be updated throughout the next few daya, as news develop. We will attempt to make sure it remains authoritative on the subject, and references all significant sources.
Last update: 6/1/2017 at 1:10 AM PST

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Daniel J. Hemel, Assistant Professor of Law at the University of Chicago, and Lisa Larrimore Ouellette, Assistant Professor of Law at Stanford University, published recently, before the decision was announced, a deep analysis of the consequences of possible decisions on the international drug market in the Columbia Law Review.

Essentially, the expected effect is that:

  • the decision opens the door to gray market import of patented medical drugs from low-priced markets back into the US or other high-priced markets;

  • it is likely to bring price changes into tiered priced markets;

  • consumers in low-priced tiers will see prices go up; some may be priced out of the drug entirely;

  • consumers in high-priced markets will see prices go down.

What patent lawyers think consequences will be with pharmaceuticals

  • Professor Frederick Abbott, of LSU Law School, believes that we will see some limited parallel imports into the US that will exert some downward pressure on drug prices. He considers that such imports are already authorized by the SCOTUS decision if “if such medicines are produced in FDA-inspected and approved facilities abroad, the medicines have been approved for sale in the United States and chain of custody records are satisfactory.” Other circumstances may require further legislative action by Congress. Professor Abbott considers it possible that the FDA may, in the future, regulate such parallel imports.

  • Professor Lisa Ouelette, of Stanford Law School, believes that the SCOTUS decision makes it impossible for drug manufacturers to rely on patent protection to stop such reimports, but mentions that some consider that existing FDA regulations would still not allow for such direct reimports, for instance because of foreign labeling.

  • Case Collard, of Dorsey & Whytney, believes that drug manufacturers will attempt to enforce the contracts they have with their distributors. Since drug companies deal with limited numbers of distributors, going after them is easier [than Lexmark going after many more retail customers]

  • Isaac Ashkenazi, of Paul Hastings, suggests that new distribution contracts may include clauses that require specific steps from the distributor to ensure clients will not export drugs back [into the US or other higher-tiered-pricing markets]

  • Nick Williamson, of Bryant Cave, believes that drug manufacturers may take over distribution where the danger of re-export is too high

  • Kevin Nelson, of Schiff Hardin, expects existing FDA regulations to be a significant barrier to import into the US. He explains that different versions of a drug [from overseas] may be treated differently by the FDA and require new approval.

  • Biotechnology Innovation Organization (BIO), an industry trade group, had filed a friend-of-the-court brief favoring Lexmark, and its deputy general counsel, Hans Sauer, warns that some low-priced countries may see their access to critical drugs jeopardized by re-export into high-price markets.

The discussion thread for this post is here.
This article will continue to be updated throughout the day, as news develop.
Last update: 6/1/2017 at 1:10 AM PST

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FAQs

  • Isn’t it the FDA that forbids drugs from getting imported in the US?

The FDA forbids drugs that have not been authorized for use in the US from being imported. It does not limit the import of drugs that are FDA-approved. In fact, even for unapproved drugs, it has a limited exception, covering personal use and no more than a 3-month supply:

FDA FAQs on personal import of drugs into the US

  • Can drug manufacturers forbid the import of drugs another way?

Drug manufacturers typically sell drugs through resellers, with whom they have contracts that prohibit the resale into territories that are not authorized (such as other countries). They can still use contract law to stop their resellers from selling in forbidden territories. This is a very common contract clause. When it is violated, the manufacturer will typically void the contract and change the preferred pricing into a worse pricing category. However, in the case of drugs, it is often retail outlets (who buy from resellers) that sell back into the US, making it much harder to enforce.

  • All all plants manufacturing an FDA-approved drug inspected by the FDA?

It appears they are: FDA FAQ on plant inspection

  • Does this apply to insulin?

It applies to all branded and patented insulin analogues that are FDA-approved in the US. The following is a list of drugs that are branded that are or were patented (in some cases, such as Lantus, patent has run out): Affrezza, Apidra, Basaglar, Humalog, Humulin, Lantus, Levemir, Novolin, Novolog, Toujeo, Tresiba, ). Fiasp is not FDA-approved, and is not covered by this decision.

  • Does this mean that I am now allowed to buy my insulin in Canada or Mexico?

The Supreme Court decision appears to means that, if your insulin is FDA-approved in the US, you can buy it anywhere you want inside or outside the US, and it is not illegal for you to do so. However, there may be some catches, such as chain of custody or labeling requirements, that may still create issues for such purchases.

  • What are the pharmaceutical companies going to do about this ruling?

It is difficult to predict what they will do, but most likely they won’t lay low. Lisa Ouellette and Daniel Hemel have started discussing some possible loopholes in the ruling. The ones they listed there don’t apply to pharma – but more than likely there will be attempts to skirt SCOTUS’ ruling.

The discussion thread for this post is here.
This article will continue to be updated throughout the day, as news develop.
Last update: 6/1/2017 at 1:10 AM PST

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References

Thanks to Rachel Sachs (@RESachs on Twitter), Associate Professor of Law at Washington University in St Louis, for tweeting about it: https://twitter.com/RESachs/status/869564400063176704

The discussion thread for this post is here.
This article will continue to be updated throughout the day, as news develop.
Last update: 6/1/2017 at 1:10 AM PST

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Please check out our exclusive interview with Professor Frederick Abbott over likely consequences of the SCOTUS decision on insulin prices and imports into the US!

The discussion thread for this post is here.
This article will continue to be updated throughout the day, as news develop.
Last update: 6/1/2017 at 12:00 PM PST