Key Takeaways
- High U.S. prescription drug costs drive the rise of Alternative Funding Programs (AFPs) sourcing medications overseas.
- Regulators and the Department of Homeland Security deem AFPs illegal and a safety risk due to unverified foreign drug supply chains.
- AFPs target employers, including public entities, offering savings by importing lower-cost drugs, sometimes mandating their use.
- The FDA's personal importation policy is misapplied by AFPs, which commercially import unapproved drugs for widespread distribution.
- Despite legal challenges and safety concerns, patients often view AFPs as their only option to afford essential, high-cost medications.
- Gilead Sciences and other pharmaceutical companies are suing AFPs and related entities for illegal drug importation.
Deep Dive
- U.S. prescription drug costs are nearly three times higher than in other high-income countries, according to a 2024 Rand report.
- AFPs promise access to medications at little or no cost by sourcing them overseas, targeting self-insured employers like school districts and unions.
- CNBC's investigation, based on over 10,000 pages of documents, indicates AFPs are increasingly prevalent across various employer health plans.
- Regulators and a Department of Homeland Security official state these programs are illegal and pose safety risks to patients.
- Department of Homeland Security Special Agent Nicole Johnson states AFPs use unverified overseas suppliers, evading customs and FDA oversight.
- Shabir Imber Safdar of the Partnership for Safe Medicines reported approximately $5 million in illegally imported unsafe medicine distributed in the past two years.
- A former FDA official stated AFPs illegally import misbranded and unapproved foreign drugs, often originating from less regulated international fulfillment centers.
- U.S. laws for drug safety and supply chain security are stringent, and pharmaceuticals from other countries may not meet these standards, posing risks.
- Some employers, like the city of Lebanon, Missouri, require staff to use AFPs, leaving employees to obtain medications through these programs or pay full price.
- Bruce Zimmerman, diagnosed with multiple sclerosis, used PriceMDs, offered by his employer, for all-expense-paid trips to the Cayman Islands and Bahamas.
- Turkish customs data revealed PriceMDs rerouted over 1,200 drugs, valued at more than $2.7 million, from Germany through Turkey to the Cayman Islands between 2020 and 2023.
- A Homeland Security official noted AFPs exploit a loophole by having patients pick up drugs abroad, as direct shipment to the U.S. would be illegal and seized.
- AFPs claim legality through the FDA's personal importation policy, but the FDA states it only applies to unapproved or unavailable U.S. medications for individual use (limited to a 90-day supply) and not commercial imports.
- Canarex's general counsel argues their business is legal, interpreting FDA guidance to include affordability as a factor in drug availability and citing a law allowing for waivers.
- The FDA issued a warning letter to Canarex in 2019 for importing unapproved drugs, and later to ElectRX for health risks associated with overseas drug importation.
- Despite Canarex claiming adherence to high safety standards, an FDA document expressed concern over a potentially counterfeit menopause gel received by a patient.
- An expert asserts that FDA officials do not have discretion to approve AFP operations, deeming them unacceptable under any circumstance.
- ElectRX maintained its personal importation program was legal despite an FDA warning and continued offering overseas medications, eventually taking its website offline.
- Department of Homeland Security official Nicole Johnson believes AFPs should be shut down due to illegality and risks to American lives.
- The House Appropriations Committee has expressed concern over health risks and directed the FDA to report on strengthening oversight.
- Gilead Sciences filed a lawsuit in December against companies including Meritain Health (owned by CVS Health) and AFP RX Valet, alleging illegal importation of its medications.
- A preliminary injunction was issued in June to block such imports, with Gilead later expanding its lawsuit to include Canarex, ElectRX, and Script Sourcing.
- RX Valet CEO Greg Santulli defends sourcing high-cost medications from countries like Canada and Australia as legal and safe, despite concerns about Turkey as a source of counterfeit medicines.
- CVS Health stated it does not support or contract with companies for non-FDA approved imported drugs; defendants are appealing the injunction.