Demystifying Drug Importation after Impression v. Lexmark

Guest post by Professor Erika Lietzan of the University of  Missouri School of Law.  This is cross-posted on the new FDA Law blog “Objective Intent” created by Professor Lietzan and GSU Law Professor Patti Zettler.

On May 30, the Supreme Court surprised many of us by ruling that exhaustion of U.S. patent rights occurs even when sale of the item takes place in a foreign country.  There is a great deal more to the ruling, and there are now very interesting questions about the characterization of transactions as something other than “sales” and about the use of contractual provisions to prevent resale into the United States following first sale of patented products elsewhere.  But for now, let’s stop with the bare bones description: U.S. patent rights are exhausted when an item is sold overseas.  This means that shipping an already-sold product into the United States for subsequent-sale to a U.S. consumer will not infringe the patents in question.  Depending on how patent owners structure their transactions overseas going forward, this ruling could give U.S. consumers access to products that are intended for foreign markets and that are priced for those markets — lower, for instance.

One of the many topics circulating now: what are the implications for pharmaceutical companies and for U.S. consumers of pharmaceuticals

I’m not taking up that issue.  (Professors Lisa Ouellette and Daniel Hemel addressed it in a blog entry cross-posted at Written Description and Whatever Source Derived.  And Professor Sarah Wasserman Rajec touched on it as well, at PatentlyO).

Instead, I am going to demystify the FDA framework that comes in to play.  There are three basic principles to know.

First, it’s illegal to import new drugs that are not FDA approved.  Section 505 of the Federal Food, Drug, and Cosmetic Act (FDCA) prohibits the introduction into interstate commerce of any “new drug” (which includes virtually every prescription drug) that is not the subject of an approved new drug application (NDA) or abbreviated new drug application (ANDA).  Importation counts as introduction into interstate commerce, so the approval requirement applies.  In plain English: it’s illegal to import a new drug that FDA has not approved, and most prescription drugs count as new drugs.

Second, it’s illegal to import the foreign version of a new drug that FDA has approved.  Approval of a new drug is specific to that particular product, made and labeled exactly as described in the application that FDA reviewed. If a product is manufactured in a different facility from the facilities listed in the NDA, or if it is manufactured according to different specifications, it is considered an unapproved new drug — even if it is made by the same company.  (Great explanation from FDA, here.)

To make this more concrete:  Pfizer sells Viagra in the United States under an NDA that FDA has approved.  Pfizer also sells Viagra in Europe.  That drug is marketed pursuant to authorization by the European Commission on the basis of a separate marketing application that complied with European law.  If the European product is made at a facility that is not listed in the U.S. application, or if it is manufactured according to different specifications, or if it is composed differently (different inactive ingredients for instance), then it cannot be imported into the United States.  Certainly it is labeled in accordance with European labeling rules, and the European labeling is not the same as the FDA-approved labeling, so again it cannot be imported into the United States.  In plain English: it’s illegal to import the foreign version of a company’s product, even if that same company sells an FDA-approved version to U.S. consumers.  (The same great explanation from FDA, here.)

Third, all of this is true even if the drug was made in the United States.  Don’t confuse where something was manufactured with which country has approved it. Companies have manufacturing facilities all over the world.  Some drugs available in other countries are manufactured in the United States and then exported.  Some drugs sold here are manufactured (in part or entirely) overseas.  What matters for purposes of importation into the United States is whether the drug fully aligns with an NDA that the U.S. FDA has approved.  If the product in question does not fully align with an approved U.S. new drug application, it is an unapproved new drug and cannot be imported.

Now things get a little more complicated.

You may be wondering . . .

What about so-called “reimportation”?  Aren’t the rules different if the company brings the drug back itself?  Well, yes and no.  A new drug that lacks an approved NDA cannot be imported, period, full stop.  But it is theoretically possible that the FDA-approved product is circulating in another country.  I think this is probably a null set, but let’s suppose it is not.  Suppose there is an FDA-approved product, with FDA-approved labeling, circulating in another country.  Can it be imported?  It depends.

Now it depends on where the drug was made.  Section 801(d) of the statute — which was added in the late 1980s and appears at 21 U.S.C. 381(d) — changes that.  If the product was made here and shipped overseas for a foreign market, and actually happens to be completely identical to the U.S. approved product (complies with the NDA in every respect), then the only company that can bring it back to the United States is the original manufacturer.  (Check the same link as above, for FDA’s explanation.)  We sometimes call these “American goods returned.”

And if that foreign-circulating FDA-approved drug wasn’t made here?  Then, yes, that product can be imported by anyone.  This follows from all of the rules I’ve already explained.

Here is a simpler way of putting it.  The statute prohibits importation of unapproved new drugs.  It permits importation of approved new drugs (as long as they don’t appear adulterated or misbranded), with one exception — American goods returned.  That is: if the product was made here and shipped out of the country, then the only entity permitted to bring it back is the original manufacturer.

What about personal importation?  Isn’t there a de minimis exception?  If you have seen Dallas Buyers Club, you may be wondering, why did FDA allow Woodroof back into the country, once he claimed that all of the boxes in his car were for his personal use?  The answer: it’s not a de minimis exception to the law; it is a long-standing policy of enforcement discretion.  (See section 9-2 of the Regulatory Procedures Manual, here.)

This policy applies if the drug is clearly intended for personal use. (FDA will presume commercial use if the supply exceeds what one person would take in three months, which explains some of the exchange at the border in the movie.)  More importantly for our purposes, the drug has to be intended for treatment of a serious condition for which satisfactory treatment is not available in the United States, and the drug cannot be approved in the United States.  This means: as drafted, the policy does not permit you to bring back a foreign version of a drug that is actually available in the United States.  No Canadian Januvia, for instance.  That said, in practice, FDA doesn’t have the resources (or, I suspect, inclination) to stop those packages.  But the agency does go after middlemen that set up storefronts or websites to facilitate foreign orders.

And it’s important to remember that this is an enforcement discretion policy; importation fully within the four corners of this policy is still illegal.

What about section 804 of the statute: doesn’t it explicitly authorize importation?  Yes, and no.  Here’s section 804.  It directs FDA to promulgate regulations permitting pharmacists and wholesalers to import prescription drugs from Canada. But notice subsection (l): “this section shall become effective only if the Secretary certifies to the Congress that the implementation of this section will (A) pose no additional risk to the public’s health and safety; and (B) result in a significant reduction in the cost of covered products to the American consumer.”  That certification has never happened. So it’s not in effect.

Also, notice that under 804(c) the imports in question must comply with section 505 of the statute.  That’s the approval requirement.  Section 804 is not about importing foreign versions of FDA approved drugs.  It is an “American goods returned” provision.

So where does this leave us?  The bottom line is that it is illegal to import the foreign version of a medicine approved in the United States.

And what does this have to do with Impression Products v. Lexmark?  That might be a post for another day.  But on the question whether the Supreme Court’s decision has thrown open the gates for access to cheaper foreign medicines, the answer is no.  Not so long as the federal government enforces the law that ensures products in the U.S. distribution system are  FDA-approved.  But it may be important to remember that only the government can enforce this.  There is no private right of action under the FDCA.

Dennis Crouch

About Dennis Crouch

Law Professor at the University of Missouri School of Law. Co-director of the Center for Intellectual Property and Entrepreneurship.

85 thoughts on “Demystifying Drug Importation after Impression v. Lexmark

  1. I think this article misses the mark. It’s not about drug importation. Here’s how I see it:

    Brand drug is approved in US (say Jan. 2017) with a composition of matter patent on the drug (expiry 2035) listed on the Orange Book. Brand drug is approved in CA, but because of the CA pricing review board, company has decided to abandon all patents in CA in order to not fall under the board’s jurisdiction. The drug is sold in CA (a non-patented foreign jurisdiction). Generic Co. buys drug on open market in Canada for “research purposes.”

    Generic Co. then files its ANDA in US in 2021. Generic Co. argues it does not infringe the COM patent because the CA sale of the drug to it exhausted the US patent rights, see Lexmark. US Court agrees. Brand looses COM patent protection. Generic enters market after only 5 years of regulatory exclusivity.

    Please tell me I where and how I am wrong? in this scenario?

    1. What do you mean by “argues it does not infringe the COM patent“…?

      As I understand the term “COM,” that is not a US patent, but instead is a European Community Patent.

      Am I off on this understanding?

        1. Thanks.

          That helps (and helps to understand the important distinction between some Euro-style and inapplicable argument for a US patent under discussion).

          However, your statement of “Brand looses COM patent protection.” is a bit of an overstatement ‘govnuh.

          They have not lost anything that they had a right to. They STILL get their first dip with their choice of selling into CA.

          Any “Generic enters market after only 5 years of regulatory exclusivity.” that you want to overstate is merely the normal presence of this thing called secondary markets – for which normal composition of matter patents have never included as having a right to control.

          Put into proper perspective, your statements reduce to the mundane, and certainly do not have the same gravitas as you may have desired.

          1. The patent exhaustion doctrine was borne out of the concept that the patentee has received his reward for allowing the sale and use of the patent article.

            If you believe that patents are national rights (or regional in the case of the PCT), then, in my opinion, the exhaustion doctrine should mirror the geographic limitation and only apply on a national basis. If the sale occurred in the nation where the sovereign nation has authority to grant the patent, then exhaustion should apply in that nation.

            At that is Here’s where you and I disagree. You appear to believe that no matter where the sale occurred, exhaustion in the US should apply. This is a global mindset played on a national level.

            I could agree with you about a sale taking place anywhere in the world triggering exhaustion if, and only if, the exhaustion applied to all patents. Not just your US patent.

            1. The patent exhaustion doctrine was borne out of the concept that the patentee has received his reward for allowing the sale and use of the patent article.

              Not necessarily.

              It was born out of the common law against restraints on chattels after title has passed. The owner of a chattel owns it free of encumbrances.

                1. Anon – yes, I am talking about exhaustion of rights in the US with respect to imported products (that have been sold by the patentee in another country).

                  My experience is that courts considering acts that occurred outside of their jurisdiction (eg employment of an inventor) determine the legal significance of those acts (eg whether an employer is entitled to claim ownership of an employee’s invention) by reference to the law of the jurisdiction in which the relevant acts occurred.

                  Thus, with regard to foreign sales, is it relevant for the US courts to consider whether sale in the relevant (foreign) country exhausts the patentee’s rights under the law of that country?

                  Many countries do not have a common law system, and I would question whether many (if any) of those countries have explicit, statutory basis for exhaustion (by sale) of the relevant rights.

                2. Look up a comment already made in reply to Distant Perspective who likewise wanted to set up a hypothetical wherein, for a foreign sovereign, that sovereign had set its laws so that the sale of an item did not include all the aspects of the item (the patentee retained some strings).

                  Of course, the not-so-subtle point of distinction is that you are of course not just talking about the stream of commerce there, but – necessarily – the stream of commerce here.

                  No matter how hard you try to obfuscate the aim, that aim surfaces: the control of a secondary market based on US patent rights.

                  Your problem of course, is that US patent rights have never provided that right.

                3. Anon – just address the question. Which law would the US courts use to determine whether title has been transferred by the sale? The foreign law or US law?

                  Whether you like it or not, it is a pertinent question. Pretending that it does not exist simply makes you look like you are deliberately avoiding the question because you fear what the answer might be.

                  By the way, your “stream of commerce” argument is complete balderdash.

                  For products coming into the US, the courts are going to analyse from whom they were purchased. Not even you would argue that sale of identical items by a “copycat” manufacturer would exhaust the patentee’s rights. If the products were purchased from the patentee, then SCOTUS believes that rights have been exhausted because title to the products has (under common law principles) passed from the patentee to the purchaser.

                  So, whichever way you cut it, a crucial prerequisite to a finding of exhaustion of rights is the transfer of title from the patentee to the purchaser. Right?

                  But now consider that the sale takes place abroad. Do you understand now why it may be relevant to consider whether, in the jurisdiction where the sale takes place, “title” to the products is transferred in the manner required by SCOTUS? Or are you too afraid to answer?

                4. asked and answered – as I indicated, Distant Perspective already advanced the question that you ask here.

                5. Well, it would have been a lot more helpful if you had repeated your answer rather than have me sift through hundreds of comments on three different threads. However, having completed that exercise, I can now see why you are a little shy about repeating your response.

                  With regard to the question that I posed, the only even vaguely relevant response from you to Distant Perspective on any thread contains this little nugget:
                  “The consistent application of exhaustion – in what the term itself means – simply has no room for any arbitrary domestic/foreign insertion of inconsistent application”.

                  So, in essence, it seems that your response to the question of “Which law would the US courts apply to the sale?” is “There is no room for that question”. Do I understand you correctly?

                  The problem for you here is that there IS an answer to the question. I am guessing that either you do not know the answer, or that you cannot figure out a way of making the answer fit with the conclusion at which you have already arrived.

                6. However, having completed that exercise, I can now see why you are a little shy about repeating your response.

                  You are still doing that “trying to see with your eyes clenched tight” thing…

                  And no, you have not yet grabbed the response to Distant Perspective. Hint: look for his hypo in which the hypothetical country sets up a law that permits a sales contract to not be enforced.

                  as to “The problem for you here is that there IS an answer to the question.

                  You imagine a problem for me based on your continued error and inability to see that you are the one trying to make the Second Dip necessarily tied to the First Dip – and that NO ONE is arguing against the First Dip.

                  It is very Malcolm of you to try to spin this as a me problem: “I am guessing that either you do not know the answer, or that you cannot figure out a way of making the answer fit with the conclusion at which you have already arrived.” when it is easily seen (but you do have to unclench your eyes) that the problem is one that you have: Double Dipping.

                7. Anon – as ever, you’re long on assertion and short on substantiation.

                  Given how terrified you appear to be in directly addressing the question that I posed, your mythical dragon is starting to look less like a goat and more like a chicken.

                  Let me make it easy for you. Complete the following preposition with detailed (and substantiated) legal analysis:
                  “When a patentee sells his product in a foreign country, this transfers title in the product (thereby exhausting his US patent rights in that product) to the purchaser in a manner consistent with / equivalent to transfer of title under US common law because…”

                8. Given how terrified you appear to be in directly addressing the question that I posed,

                  I am not the one who is afraid of dealing with straight forward issues – like you and your fear of dealing with the plain fact that you are trying to make the Douple Dip somehow be a necessity to the First Dip.

                  Anon – as ever, you’re long on assertion and short on substantiation.

                  I am the one that has provided nearly all of the substantiation in our dicussion. You are the one that remains tryign to assert that control of secondary markets somehow comes with the patent right.

                  It is NOT a matter of you “wanting to make it easy for me.”

                  It IS a matter that YOU have not provided the framework by which you can rightfully claim some (any) control of secondary markets.

                  THAT is the bottom line here COnfused – and THAT is what you have never come close to dealing with.

                  The onus remains on you, no matter how much you may want to “make it easy on me.”

                9. Anon – it is OK to admit that you don’t know the answer to my question. I wouldn’t be asking it if I had all of the answers. Also, answering honestly won’t stop you from reserving your position on exhaustion in the US.

                  So, with all that in mind, are you prepared to engage with an analysis of how / whether title is passed to the purchaser by sale in any given foreign jurisdiction?

                  By the way, if you think that repeated references to vague concepts such as “dips” counts as legal analysis, then you need to have a word with yourself!

                10. So, with all that in mind, are you prepared to engage

                  You are STILL trying to deflect, Confused.

                  By the way, if you think that repeated references to vague concepts such as “dips” counts as legal analysis, then you need to have a word with yourself!

                  LOL – it is enough of a legal analysis to see you scrambling for cover.

                  Let’s settle the main point here first, then play your parlor games.

              1. Quick question: what happens if the sale takes place in a country that does not recognise (this aspect of) common law?

                Do the US courts treat it as if the sale had taken place under US legal norms, or does it enter into an enquiry regarding the rights (if any) retained by the patentee under the laws of the country where the sale occurred?

                If your answer is the former, then it seems that the Lexmark decision will have more of an ex-US effect than on just the actions of the patentee… in that it will apply US law to foreign sales.

                1. …you are still talking about the US patent here right? (I want to make sure that you have not switched to some other COM patent that may not be pertinent to the case under discussion…)

              2. Ned,

                I hope I could find comfort in your statement: “restraints on chattels after title has passed.” One argument would be that the generic in CA could only resale in the US that particular lot of drugs it bought from the band in CA. So for that lot (that chattel) title has passed; and for that lot, my patent rights in the US are exhausted.

                My patent rights in the US would NOT be exhausted for generic co’s drug that it made (not bought) in CA and imported into the US (even after the generic company bought drugs from Brand in CA). Would you agree to that?

                If so, wouldn’t Leximark as applied to pharmaceuticals be more akin to the EUs parallel trade importation rules than anything else?

                1. xtian – why would your rights be exhausted by someone else’s sale? I have never understood exhaustion of rights to apply to goods other than those sold by the patentee.

                2. I hope I could find comfort in your statement: “restraints on chattels after title has passed.”

                  I also am hoping that we can find comfort in Ned’s point. This seems to me very much like an issue about which only time will tell. I gather that the idea is that the U.S. patentee retains ownership of the lots of drugs that are physically located in some wholesaler’s warehouse or in the retailer’s stockroom. Title only passes when the individual bottle of pills is dispensed to some druggist’s customer.

                  In theory, that is good enough for branded pharma to maintain its business model. In practice, though, I worry about the possibility of unscrupulous middle men inventing fictitious crowds of “individual customers” on paper to account for a sale of a couple hundred pallets out of a warehouse. As I read Lexmark, that would leave the patentee with nothing but contract remedies against a counterparty who is only amenable to suit in a foreign court of dubious impartiality.

                  Incidentally, given that we are talking about sales in (e.g.) Mexico, whose law governs the question of whether title has transferred? This seems another bedeviling detail that may or may not totally obviate the consolation that Ned is suggesting to us.

                3. I feel as if I am begging for an answer (as opposed to begging a question 😉 ), but why are you so concerned about secondary markets Greg?

                  If your concern is with a contract matter (or perhaps fraud), why are you wanting more than contract law (or fraud) avenues of redress?

                  It’s almost as if you want to equate all possible ills (and transgressions against other laws) with the mere presence of secondary markets.

                  What did secondary markets ever do to you?

                4. xtian, we are in agreement.

                  And, for the reasons previously stated, this will not have a big impact on worldwide drug prices as prices will still be market by market because the drug companies can control when title passes and can sue infringers who deal in products made by strangers.

                5. Ned,

                  As you indicate, the First Dip is perfectly fine.

                  And yet, those wanting the Double Dip will continue their hue and cry for control of the secondary market.

            2. If you believe that patents are national rights..

              We are talking about property.

              Was it “the patent” that was sold in Canada?

              You view here confuses some positive attribute (selling a thing covered under a patent) with the negative right of the patent itself.

              Your “should” is based in this error.

              There is NO need to venture further into your attempt to characterize this as some type of “ global mindset played on a national level” – it is merely understanding basics of property law, patent law and the consistent meaning of exhaustion (the sale of property anywhere earns “the reward for allowing the sale and use of the patent article” (your words – I would change that to be more than just mere “use of” because of what property and what ownership mean).

              I could agree with you about a sale taking place anywhere in the world triggering exhaustion if, and only if, the exhaustion applied to all patents. Not just your US patent.

              No one has (yet) had that discussion.

    2. Two responses:

      (1) Why is all the folderol about abandoning Canadian patents in your hypo? Do you understand this to make a difference, because I cannot see how it does? If so, I would be obliged if you could explain why you think the presence or absence of a Canadian patent affect the outcome in the U.S. litigation.

      (2) I am having a hard time wrapping my head around this one. The lawsuit that results from the paragraph IV certification is not based on §271(a) infringement for selling the gray market imports from Canada. Rather, the lawsuit is based on the §271(e) (constructive) infringement that results from checking the paragraph IV box. The “infringing article” in §271(e) litigation is the ANDA itself, not the physical drug imported from Canada. When the FDA gives the ANDA applicant approval, that is approval to sell the drug tout court, not approval to sell “this particular lot of drug.” The FDA has no mechanism to make the ANDA applicant swear “I promise only to sell inventory that I have purchased from the patent holder,” so I am not sure how the court can say that the ANDA is not infringing, merely because the ANDA applicant has promised to sell only Canadian import inventory.

      After all, if this strategy were actually workable, then one would not even need the recent Lexmark decision to make it work. Even before Lexmark, the ANDA applicant could have bought a lot of patented drug from a U.S. wholesaler, and then checked the paragraph IV box on the logic that the sale from the U.S. wholesaler exhausted the patent. Once the ANDA applicant has its sales authorization, it could sell that purchased-in-the-U.S. lot at a loss, which would erode the U.S. market price, until the price falls to a level where the ANDA holder can then make a profit buying the (now cheaper) wholesale lots in the U.S. and selling them at something between the loss-leader price and the pre-ANDA price.

      The fact that this does not happen tells me that either (1) “exhaustion” is not a viable category of defense in Orange Book litigation or (2) no attorney has yet been creative enough to see this strategy as viable. Given the near infinite creativity of attorneys were there is a buck to be make with sharp practices, I am inclined to credit explanation #1.

    3. xtian, is it the case that even generics have to have their manufacturing facilities approved? I do not see how a generic buying secondhand drugs in Canada could say that they have a legitimate manufacturing facility for manufacturing the FDA licensed drug.

      1. “I do not see how a generic buying secondhand drugs in Canada could say that they have a legitimate manufacturing facility for manufacturing the FDA licensed drug” This is a non sequitor, and I don’t see how that relates to my hypothetical. If it helps, most generics have manufacturing capabilities in IL or IN or MX. How is this relevant ot my hypo?

        My hypo was supposed to point out a way for generics to claim the US composition of matter patent was exhausted via the sale of the drug to them in CA to avoid the Hatch-Waxman litigation in the US.

          1. He does appear to be confusing the negative right of a patent and the positive article of a thing sold which may fall under the protection of a patent….

            1. What confuses me is the application of Lexmark to pharmaceuticals.

              Would you agree that the concept of patent exhaustion applies only to those chattels which the patent owner sold? In other words, just because one sale of a chattel has occurred shouldn’t mean the patent owner’s right is exhausted for all chattels that fall under that patent.

              1. xtian,

                You appear to still not be able to distinguish between what a patent it (negative right) and items sold that have protection under the patent (positive items).

                I do not see why you are attempting to draw a distinction with the application to pharmaceuticals.

                That’s a red herring.

                I will note though, that BEYOND the concept of exhaustion, there are some interesting OTHER laws that may affect trade in pharmaceuticals based on FDA requirements.

                But it clearly is a mistake to confuse what is going on vis a vis exhaustion with any separate consideration based on the item being exhausted happening to be in the sub-class of a pharmaceutical that will have that separate FDA restraints.

                Bottom line here, xtian: the only “confusion” being generated is the confusion of FUD in order to attempt to have control over secondary markets that simply does not come in patent law.

                I know that people don’t like the word, but the word fits: double-sipping.

                People want to obtain the benefit of the bargain with a first sale (first dip) AND still exert control of the secondary market which naturally arises out of the sale of the chattels (second dip).

                And those same people are the ones “upset” when you plainly point out that control of secondary markets is not something that comes with your patent.

              2. Would you agree that the concept of patent exhaustion applies only to those chattels which the patent owner sold?

                Correct. Believe it or not, the Lexmark court reaffirmed that principle, albeit only obliquely (discussion of Boesch, slip op. at 16).

  2. Dennis, you say importation for personal use is prohibited. But, how is importation for personal use considered “introduction into interstate commerce”?? Seems that, by definition, importation for purely personal use is antithetical to “introduction into interstate commerce,” in which case it would not br prohibited.

      1. Personal use can certainly “affect” interstate commerce, and may therefore fall under federal authority (as held in Wickard). But section 505 specifically prohibits “introduction to interstate commerce,” which goes beyond simply exerting an effect on interstate commerce.

        1. How do you have an effect without an “introduction”…?

          Wickard subsumes your concern, as one cannot have an effect without there being some type of “introduction.” Right or wrong, that case stands for the plain fact that mere existence is enough to “introduce.”

          1. Wickard does not at all deal with whether personal use of a product “introduces” that product to interstate commerce.

            It deals with whether personal use affects interstate commerce. Personal use does “affect” interstate commerce, because personal use would drive down demand, which would impact price, which would affect interstate commerce. Hence, personal use falls under regulatory powers of Fed government, which as the ability to regulate “practices which affect prices”.

            There is no doubt the federal government has the power to regulate personal use of medicines. The question is wheter Section 505, as written, does so. The language of Section 505 of FDA is not “practices which affect prices,” it is narrower than that, requiring “introduction to interstate commerce”.

            The definition of “introduce for interstate commerce,” and whether this definition encompasses personal use, is in no way addressed by Wickard .

          2. link to fda.gov

            “Questions have been raised as to whether a person who manufactures an electronic product for which a standard has been prescribed, for use solely in his own commercial activities or manufacturing process, has introduced the product into “commerce”.

            POLICY:

            Such a person would not have introduced the product “into commerce” within the meaning of Section 538(a)(1). ” […]

            1. The assembly and use of an electronic product by a person “engaged in the business” of assembling that product (as defined in Section 531(2) for commercial purposes in his own facility affects interstate commerce; thus Section 534(h) would require that the manufacturer certify that the product conforms to the relevant standard. However, if that person in no way receives compensation for the assembly and use of the product, he would not be “engaged in the business” and therefore would not be a “manufacturer” subject to Section 534(h) and 538(a)(5).

              Sounds an awful lot like they recognize Wickard (why on Earth would they otherwise be so convoluted?)……

  3. 6, please explain.

    Just yesterday Trump said he was privatizing air traffic control — because the private sector could actually do a better job.

    Wouldn’t the same be true of a privatized FDA?

    If the drug companies opposed privatization, what would that tell us?

    If generics opposed it, what would that tell us?

    Would doctors oppose it? If so why?

    Would consumer advocates seeking lower prices oppose it, and if so why?

    Would a private agency do a worse job considering they would be liable for damages? Would they take longer, or less time, and why?

    I don’t know why we should not consider these issues and simply not explore them at all.

    1. Careful Ned, the path of privatization may eventually lead to talks of privatizing the examination function…

      …of course, instilling a sense of responsibility in the work of examination – as opposed to the “getting what you measure” bureaucracy – would be a necessary first step.

      1. “Careful Ned, the path of privatization may eventually lead to talks of privatizing the examination function…”

        I’m all for it, I’ll start the company and make a bazillion in dollas. Each examination will cost 20k and I will put a smiley on the examination package.

    2. “Just yesterday Trump said he was privatizing air traffic control — because the private sector could actually do a better job.”

      I’m going to have to look about that. Though directing air traffic (just trying to get airplanes safely to where they need to be with everyone involved generally interested in that happening) isn’t quite the same as preventing people from poisoning other people etc. for $$$ in a con etc. which is more of a lawl enforcement duty.

      “Would doctors oppose it? If so why?”

      Probably because they don’t generally like huge numbers of poisoned/sick people all up ins their hospitals and would prefer to keep that to a minimum while simultaneously at least trying to keep their profession (prescribing drugs) at peak legitimacy.

      “Would a private agency do a worse job considering they would be liable for damages? Would they take longer, or less time, and why?”

      Would likely depend on just how liable and the whole setup of such a corp. Still, a right horrible idea imo. If not for any other reason than what Greg et al. stated below.

  4. This is more angst where there should be none.

    So long as the manufacturer does not transfer title until the drug reaches the end user, there is not exhaustion. There is never going to be a large market for used drugs.

  5. Washington Post reporter Robert Costa told MSNBC on Tuesday that the president would directly respond to Comey on Twitter as the testimony is underway.

    “I was just talking to some White House officials this morning and their view is that the president himself wants to be the messenger, his own warrior, his own lawyer, his own spokesman,” Costa explained. …

    How many coats of rich thick feces will the Republikkkans gleefully apply to themselves in their desperate last-ditch attempt to seize control of the country forever? That’s the question.

    Not enough popcorn in the universe for this.

  6. do we really need an FDA? Could not a private agency approve or disapprove of new drugs at the risk of liability if the approved drug that proved dangerous? I think that would eliminate political bias in the “agency.”

    LOL

    News flash: “political bias” isn’t a big problem provided that we don’t elect incompetent gaping —h0les who want to destroy everything and/or sell it to their friends/family.

    I know this is a really hard thing for you to wrap you tiny peabrain around.

  7. Fair enough, although the regulations of both agencies were invoked by the White House to control what researchers could do:

    link to washingtonpost.com

    Jay Lefkowitz, a White House adviser who helped craft the Bush policy, said the administration was aware that the stem cell lines Bush approved for funding had been mixed with mouse cells and would come under the FDA’s xenotransplant rules….

    Opinion among scientists is mixed about how much of a problem the xenotransplant issue will be, but at the least, they say, it presents yet more practical difficulties in the execution of a policy already rife with them.

    My point is that the “politicization” of government regulatory agencies has always been a thing and the FDA has been a target of Republican administrations since Saint Ronnie and the brilliant strategery of crippling the government, blaming its failure on liberals, while selling the country to the highest bidder.

  8. Great information.

    Worth noting that there is no “FDA” equivalent to the general grey market that much of recent dialogue on this blog has been concerned with.

            1. Grey markets are NOT limited to drugs.

              Okay, I think what you meant to say is that outside the non-food/pharma context, so-called grey market goods typically are not subject to government agency regulation.

              It was your phrase “equivalent to the general gray market” that confused me.

              1. I think that what you meant to say

                No.

                I said what I meant to say.

                What I said was eminently clear, and it was only your myopia with the class of goods being FDA controlled drugs that prevented you from understanding the plain and direct words that I used.

        1. Are you? I am just as baffled as MM. I just do not know what the phrase “‘FDA’ equivalent to the general grey market” (with “FDA” in quotes) is supposed to mean. It may be quite simple, what you meant, but it is not quite clear to a third-party reader.

          1. The case kicking the discussion off was not dealing with the FDA or its control on imports.

            What percentage of imports will be drugs controlled (also) by the FDA?

            So while this thread opens with great information, and certainly the subset of exhaustion-impacting discussions will have FDA-specific implications, the vast majority of cases dealing with exhaustion and importation will not have any equivalent to the FDA to impact the take-away from the Lexmark case.

            The notion then of “general grey market” is in direct (and should be easy to understand) distinction to the non-general and very specific grey market that will be concerned with those things that the FDA can control.

            1. Either I am still not quite understanding what you mean to say, or else you have your facts backwards. The overwhelming majority of drugs sold in this country are FDA approved drugs (there are a very few that were already sold before the FFDA was enacted, and those are exempt from FDA oversight). Therefore, the overwhelming majority of overseas drug products will still be subject to an import barrier*, even now that Lexmark has instituted an international exhaustion regime.

              * Except when the administration in power chooses not to enforce that barrier.

              1. Greg, I think what Anon is trying to say, in his typically curt and often unhelpful way, is that most products that might be imported under Lexmark are NOT drugs, and therefore there are no FDA regulations to prevent their importation.

            2. The overwhelming majority of drugs sold in this country are FDA approved drugs…

              Perhaps, to be more clear, what I should have said is that the overwhelming majority of drugs sold in this country are drugs that may not be sold in the U.S. without prior FDA approval.

  9. And it’s important to remember that this is an enforcement discretion policy; importation fully within the four corners of this policy is still illegal.

    I think that this line gets at the most serious development that is likely to result from Lexmark vis-à-vis gray market drugs: the FDA is going to become a political football. As Pres. Obama showed in the immigration context, it is somewhat astounding what policy outcomes can be achieved by a really aggressive use of prosecutorial discretion. Just as a whole class of almost-legal aliens can be created simply by deciding not use resources to deport them, so too a whole class of almost-legal drug imports can be achieved by deciding not to stop the safe-&-effective ones from crossing the border.

    However, in the same way that Pres. Obama’s discretion not to apprehend DACA aliens is subject to immediate rescindment by Pres. Trump, so too one administration’s preferences about gray market drugs can be reversed at a stroke by the next administration.

    When patent laws stood as a second line barrier against gray market imports, the mutability of FDA policy was fairly unimportant. The drugs were going to be kept out regardless of FDA enforcement priority. Now that there is no patent barrier to entry, however, I expect we can look to the FDA becoming something of a political football (rather like the NLRB or the INS or the DEA) that changes rather dramatically in outcome and effect according to the party in control of the White House.

    1. The FDA has been “politicized” for a long time.

      Whether that’s a problem boils down to competence and fairness in the execution of the policy.

      I seem to recall that Mango Hairball promised to kneecap the FDA’s enforcement of requirements for clinical data in many instances because “freedom to buy dangerous drugs from charlatans” is the American way. Whatever happened with that?

      1. The FDA has been “politicized” for a long time.

        Hm. I cannot agree. Have you something specific in mind? My own impression and experience of the FDA has been fairly consistent across the change of administrations.

        1. That’s because most administrations aren’t trying to destroy the so-called administrative state (with useful “law enforcement” thugs excepted, of course) and/or neuter regulatory agencies that provide basic essential services.

          But there’s also specifics, e.g., Bush’s “politicization” of embryonic stem cell research. Truly he was an astounding humanitarian when it came to frozen tissue rights.

          1. “with useful “law enforcement” thugs excepted, of course”

            I’m not sure I would call them part of the “administrative” state. More just “the state”. But yes, they’re the best part about the state :). I did lol at the “thug” part though. Good one!

      2. MM, do we really need an FDA? Could not a private agency approve or disapprove of new drugs at the risk of liability if the approved drug that proved dangerous? I think that would eliminate political bias in the “agency.”

        As well, even if a drug was dangerous, if the danger was known, is still might be beneficial to certain patients given that their particular circumstances.

        1. As a related example, accounting firms often certified books of companies the purposes of investor confidence. Those accounting firms can be sued if there review the books was negligent causing harm.

        2. Despite FDA approval, Drug companies are still held liable for dangerous drugs. Approval is not a shield to liability.

        3. MM, do we really need an FDA? Could not a private agency approve or disapprove of new drugs at the risk of liability if the approved drug that proved dangerous? I think that would eliminate political bias in the “agency.”

          A few thoughts here:

          (1) The FDA reviews for two requirements: safe & effective. As between the two, “safe” is fairly cheap to satisfy (phase I trials are not that expensive), while “effective” is incredibly expensive and time consuming. When people complain about the FDA delaying the progress of a valuable drug, it is almost always the “effective” review that is holding up approval, not the “safe” review.

          (2) I think it is worth considering whether FDA approval is needed for “effective.” If we tinkered appropriately with standards of prove in tort law and class certification standards, we could probably outsource at least some of the “effective” review to tort lawyers, who would bring suit for consumer fraud if someone were selling (harmless) snake oil.

          (3) I think it is a profoundly bad idea, however, to leave it to the tort system to take care of the “safe” review. An unsafe drug can do really serious damage. This is the classic example of a case where after-the-fact damages can never make the tort victim whole. Ex ante regulation is much the better policy in that circumstance.

          (4) Why do you think that a private agency doing review would lead to a better outcome than a government agency doing the review? The private agency would be acting with a government monopoly, so it would be effectively the same as a government agency, except with somewhat less political accountability. This seems like a distinction without a difference to me.

            1. Could not a private agency approve or disapprove of new drugs…

              Why do you think it should be a monopoly?

              I am sorry, I thought that when you said “a private agency,” you meant one. Are you envisioning a situation in which anyone who wants can set themselves up as a drug approval agency? This seems problematic along many dimensions.

              (1) Imagine Applicant submits the drug approval application to private Agency A and private Agency B. A issues a disapproval notice and B issues an approval notice. Is the Applicant now free to market (based on the approval by B) or not free (based on the disapproval by A)?

              (2) If there are multiple competing authorization agencies, and approval by any one is enough to get you on the market, this will fairly quickly devolve into a race to the bottom, where the agency with the loosest approval standards will get the lion’s share of business.

              (3) I gather that your check on this “race to the bottom” problem is to make the private approval agencies liable for the harms engendered by bad drugs that the agency approved. That sort of liability, however, is only a problem for someone with a lot of assets. If I charter “DeLassus Drug Approvals” as a Belizean LLC, whose revenues are distributed in a series of Swiss bank accounts, good luck collecting against me for my slipshod approval of 100 mg arsenic tablets to treat headache.

              (4) In other words, if you are to set up private approval agencies to do the drug reviews, with private liability as the principal check against “race to the bottom,” then you are going to need a government regulator breathing down those private agencies’ necks to make sure that they are not just judgment-proof shell companies. You will have to require huge stocks of U.S. assets to make that private liability provision have any teeth. In practice there will be only a very few market entrants, given this heavy regulation. At that point, how are you better off than you were with the government regulator?

              1. Just let the market sort it out. Sure, a few hundred thousand people will die horrible deaths, probably most of them poor and probably a lot of children, too. But it’s a small price to pay for freedom from regulation by the government.

                Government! <— s00per scary! Saint Ronnie said so.

                /glibertarian off

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