International Drug Sourcing: Examining the Risks and Potential Rewards

With rising drug costs representing one of the most substantial risks to self-funded health plans, employers are looking for new and creative ways to lower their pharmacy spend. Many employers in search of savings consider international drug sourcing, but while cost-saving opportunities do exist, there are several risk factors to be aware of when considering this as a strategy. 

In its simplest term, international drug sourcing is the act of bringing prescription medicine from other countries into the United States. This is primarily done one of two ways: 

  1. The plan sponsor may acquire the drug through a vendor who works with a domiciled pharmacy – one that uses the U.S. as its primary place of business – that has international shipping capabilities. 
  2. Alternatively, an individual may travel abroad and bring medication back with them. This is sometimes offhandedly referred to as “pharmaceutical tourism.” 

For employers, either of these methods can be seen as an opportunity to purchase medications at a lower price to achieve long-term savings for their self-funded plan. 

Why are drugs more expensive in the U.S.? 

As drug costs continue to rise, and manufacturers push back against manufacturer copay assistance and patient assistance programs being used by plan sponsors to reduce costs, there’s a renewed interest in international sourcing as an alternative means for lowering pharmacy spend for plans. 

It can be cheaper to purchase medications from countries outside the U.S. A 2020 Commonwealth Fund reportfound that despite the U.S. representing fewer than 25% of international drug sales, the total spending on those sales exceeds that of 32 other countries combined. Several factors influence the price of medications – resulting in those high spending figures – in the U.S. For one thing, a drug manufacturer’s prices must offset the cost of research and development for that drug and any of its other drugs that have failed to go to market – and with most drug innovation and research occurring in the U.S., a disproportionate amount of that expense falls on U.S. drug manufacturers. Secondly, the U.S. has high-quality standards set by the FDA to ensure our drug supply isn’t tarnished by the introduction of counterfeits into the marketplace. With this increased regulation that isn’t seen internationally, costs naturally increase. 

Additionally, patients in the U.S. have greater access to medications than patients abroad. In single-payer health systems, which are common among other countries, limited access to therapies reduces overall costs. This isn’t true in the U.S., where we have access to a much broader range of medications. If a medication is deemed safe and effective, the U.S. doesn’t restrict access to reduce costs. 

Lastly, PhRMA (Pharmaceutical Research and Manufacturers of America, a pharmaceutical industry trade group) argues that substantially reducing the price of medications in the U.S. to what is seen internationally will hinder innovation and further research on new lifesaving treatments currently in the pipeline. 

Employers might see companies like CanaRx or PriceMD that advertise to help employees obtain needed products from other countries. While this can be an attractive prospect, employers must consider a number of factors and weigh the risk vs. the benefits of importing.  

What to consider when weighing an international drug sourcing option 

While patients can’t generally purchase medications in other countries and bring them into the U.S.,current FDA guidanceprovides for two exceptions that may allow individuals to import prescription drugs legally. First, patients may obtain prescriptions from other countries if the drug isn’t used to treat a serious condition and there’s no known significant health risk. Another less common circumstance allows for the importation of drugs if an effective treatment for a serious condition is not available in the U.S. – in that case, the medicine may be imported as long as: 

  • it poses no apparent health risk to the patient compared to the potential benefit, 
  • the patient affirms in writing it’s for personal use, 
  • the quantity is limited to a 90-day supply, and 
  • the prescriber’s contact information is provided. 

In this instance, when a drug is not approved in the U.S., the patient would travel abroad to procure the drug. 

The logistical process of obtaining medications is a concern for members hoping to import those medications. When weighing the pros and cons of drug importation, you first need to look at the pharmacy benefits management strategy and how your employer clients want to be perceived by their members. Members could become frustrated at being required to travel outside of the country or having to use an international vendor for medication that was once available a short ride away at their local pharmacy. 

It’s critical that employers consider the shortcomings in this approach to lowering pharmacy spend. Five key areas to consider when guiding your self-funded clients through this approach are legal and safety issues, clinical management, travel considerations, supply chain, and financial misrepresentation. 

Learn more about what’s impacting the pharmacy benefits decisions of employers in our new eBook: What’s Trending in Pharmacy Benefits?

Legal and Safety Concerns 

The potential legal and safety risks of international drug sourcing are critical factors to keep in mind. The FDA has put in place numerous safety mechanisms to protect consumers from unfavorable outcomes related to their medications. A drug coming from outside of the country isn’t subject to the same reporting requirements if there were any safety concerns, mislabeling, or adverse effects from the product. 

While there are safety concerns around drug utilization review, members must be thorough in their medical history reporting to limit impact. Members purchasing medications from international vendors will have to provide their medical and drug history themselves, which may be incomplete and result in drug interactions. Typically, these potential interactions are caught by PBMs and pharmacists at the pharmacy. Also, it is important that patients are proactive in pursuing international medication since investigations at the border could lead to delays in delivery, leaving members without their needed medication. 

Working with a reputable partner helps to limit concerns with product integrity.  This is primarily a concern when dealing with a drug with a narrow therapeutic index – one where the difference between a safe dose and an unsafe dose for a patient is very small. Additionally, factors like refrigeration should be considered when dealing with international vendors.  

Biosimilar drugs provide another consideration. Biosimilars approved overseas are all designated interchangeable, with no switching studies needed, as in the U.S., manufacturers are not required to demonstrate that switching between two biosimilar drugs will result in the same efficacy and risk level.  

It’s worth noting that the FDA has issued warnings to multiple international sourcing vendors about the distribution of unapproved and misbranded drugs to U.S. consumers and has stated that the warning also applies to individuals doing business with these vendors, including plan sponsors.  

Another point to consider is how international drug sourcing is impacted by the Drug Supply Chain Security Act (DSCSA). The DSCSA, established in 2013, outlines certain requirements that must be met by manufacturers, repackagers, wholesale distributors, and dispensers with the goal of protecting patient safety and ensuring integrity and authenticity of drugs in the supply chain. As part of the Act, certain identifiers are required on drug products, the products must be traceable, and drug manufacturers must have a process to verify the product in the drug package is the same as the product on the package. These enhanced drug distribution security requirements went into effect November 27, 2023. Drugs sourced internationally won’t have these security requirements that allow the product to be tracked and traced, meaning vendors supplying these medications will be in direct violation of the DSCSA. 

While there are several factors individuals and plan sponsors should consider when selecting an international sourcing vendor, there is an opportunity to deliver quality treatment to members at a reduced cost when done properly.  

Clinical Management Concerns 

An unnecessary prescription is always a waste of money. Therefore, we must focus on asking the right question first: Is the drug appropriate? When we think about patients taking medications, it’s important to determine whether they’re taking the right medication, at the right dose, and for the right duration. Employers who include ‘pharmaceutical tourism’ as an option within the benefit, eliminate the clinical management protection they have in place that helps ensure the prescription is appropriate and necessary. Otherwise, it’s more money added to the plan spend, not to mention additional dollars wasted on travel expenses. 

Travel Concerns 

Travel issues are perhaps the most practical concern when it comes to international drug sourcing due to the financial impact. These expenses must be factored into the projected overall savings. Paying for a member to travel abroad to obtain a drug at a lower price may not make sense when these costs are considered. 

Supply Chain Concerns 

The big question regarding drug importation and the supply chain is how it will benefit consumers. While state policymakers are looking at ways to lower drug prices (which arestill seeking FDA approval), including allowing the importation of prescription drugs from Canada, experts strongly suspect that drug manufacturers would not increase the supply at a rate to fulfill demand should that happen. If the U.S. allowed residents to access prescriptions in Canada, the demand would likely outweigh the supply, resulting in potential drug shortages, price increases, and rationing. Additionally, Canada has stated it will ban importation if these programs lead to decreased access to medication for their residents. A more scalable way to lower medication costs is needed. 

Financial Misrepresentation Concerns 

While quoted cost savings may appear substantial, they may not always represent the lowest net cost to the plan sponsor. When rebates, discounts, and manufacturer coupons are taken into consideration, as well as fees collected by international sourcing vendors, there may not be significant savings for your client. 

Additionally, implementing an international drug-sourcing solution may actually steer members to higher utilization of brand medications instead of lower-cost, equally effective generics. 

The Bottom Line 

The potential financial benefit of international drug sourcing is the driving factor in this approach to providing a more affordable option to lower drug costs for both the employer and members. But while this method might make sense for the right type of patient, international drug sourcing isn’t a one-size-fits-all approach for lowering overall prescription drug costs for self-funded plans. 


Originally Published: July 14, 2023

Updated On: March 22,2024

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