Generic Meds Trade Group Knocks CBP Approach to Country of Origin of Pharmaceuticals

CBP’s approach to determining the country of origin of finished pharmaceuticals is inconsistent and makes it more expensive for government agencies like the Department of Veterans Affairs to procure drugs for vulnerable patients, the Association for Accessible Medicines said in an amicus brief filed with the Court of International Trade on Oct. 1. AAM filed its brief in support of Acetris Health, a company challenging CBP’s determination that its drugs were not substantially transformed by U.S. finishing operations and are of Indian origin for government procurement purposes. In a set of rulings issued in January, CBP had applied its longstanding policy that the country of origin of Acetris’ Indian active pharmaceutical ingredients sets the origin of the entire finished pharmaceuticals, regardless of the extent of operations necessary to turn that API into medicine.

The generics trade group says that approach is internally inconsistent. First, CBP only started taking that approach in 1993, after it had issued a series of rulings that found the API did not necessarily determine country of origin. Those rulings were never revoked, AAM said. The approach also departs from CBP’s normal “substantial transformation” test by focusing “almost exclusively” on a single factor -- the origin of the API -- ignoring factors it usually considers, like value added, capital investment and change in tariff classification.

The approach also ignores a 2003 CIT decision that found the active ingredient of a herbicide does not determine the country of origin of the finished herbicide, AAM said. CBP had argued to the contrary, but CBP said the active ingredient could not function without the finishing operations performed by Drexel Chemical and had become “an article of commerce with a different character.

Finally, the framework also contradicts that in place for NAFTA marking rules. CBP has found that when non-NAFTA APIs are finished in Canada and Mexico, those finished drugs meet the requirements for NAFTA duty-free entry. But under the substantial transformation test administered by CBP in the government procurement context, those drugs would not be considered products of Canada or Mexico. “The lack of consistency and of any clear or predictable basis for the shift in the general trend of the agency's conclusions regarding the processing of bulk APIs is a source of significant confusion for pharmaceutical manufacturers and calls into doubt the reasonableness of CBP' s approach,” AAM said.

CBP’s restrictive approach makes it difficult for government agencies like the VA to procure affordable medicines, AAM said. “CBP's cramped approach to determining the origin of pharmaceutical products, in conjunction with the reality that significant API sourcing occurs in China and India, makes it increasingly difficult for agencies to locate manufacturers that can provide products with an acceptable origin,” the brief said. That “results in significant limitations on the government's ability to access affordable, lower-cost pharmaceutical options for vulnerable patient populations,” it said.

Email ITTNews@warren-news.com for a copy of the brief.