Patient advocates are calling on the US court to stop AFP’s prescription operations

In a photo illustration, prescription medications are seen next to a pill bottle in New York on July 23, 2024.

Spencer Platt | Getty Images News | Getty Images

A coalition of patient advocacy groups is asking a federal court to stop the practices of third-party companies that buy drugs from countries outside the FDA-regulated U.S. supply chain, which the groups say endangers the health of U.S. patients.

The lawsuit follows a CNBC investigation that documented how these third-party providers – commonly referred to as alternative financing programs, or AFPs – have expanded into employer-sponsored health plans nationwide. As part of the growing business model, AFPs source expensive specialty drugs from abroad at lower prices and charge employers a fee or a percentage of the savings. The AFPs then provide the medications to patients at little or no cost.

AFPs are particularly attractive to small employers such as local school districts, county governments and others that pay their employees’ health care costs out of their own pockets. But there’s a trade-off: Federal officials at the U.S. Department of Homeland Security and the Food and Drug Administration told CNBC that these drugs are being imported illegally and endangering patients’ lives. A Homeland Security Investigations official told CNBC last year that a criminal investigation into AFPs was underway.

The petition, filed Dec. 26 in a U.S. appeals court in Maryland, was led by the HIV+Hepatitis Policy Institute, a nonprofit organization that advocates for safe and affordable treatment for people with HIV and viral hepatitis.

“Forcing an individual with employer-sponsored health insurance to sign up with an unknown third-party provider to obtain their life-saving medication from abroad is not only illegal, but also endangers the health and safety of patients,” Carl Schmid, executive director of the HIV+Hepatitis Policy Institute, wrote in a press release. “While federal regulators should shut them down, in the meantime the courts must step in to protect patients.”

In the court filing, the patient groups said the agreements could delay treatment, confuse patients and expose them to medications that are different from those distributed through the highly regulated U.S. system. They warned that patients with chronic and life-threatening illnesses should not be forced to trade the safety of approved U.S. supply chains for lower costs for employers.

The amicus brief was filed in a case filed by Gilead Sciences after the company learned that an HIV patient had received Gilead medication labeled in Turkish. Gilead claims that the drug came through an unsecured supply chain that does not comply with U.S. law. U.S. officials say Turkey is a known hotbed for counterfeit drugs.

Gilead sued several companies involved in administering health insurance plans for employers, including the alternative financing program Rx Valet.

Greg Santulli, the CEO of Georgia-based AFP, told CNBC last year that he was confident in the safety of the drugs his company sources, adding that Turkey is a “modern, sophisticated country” capable of tracking drugs throughout its supply chain.

The lawsuit also named Meritain Health, which manages the patient’s employee health plan and is owned by CVS Health.

A CVS Health spokesperson told CNBC last year that the company “has a long-standing policy of not supporting programs for non-FDA-approved drugs purchased from outside the United States and does not contract with companies to facilitate the importation of non-FDA-approved drugs from abroad.”

A federal judge issued a preliminary injunction barring anyone involved from importing Gilead drugs from overseas. The defendants are appealing the verdict. Meritain argues the injunction is unnecessary and would adversely affect its business. Rx Valet said in a court filing that the injunction undermines access to safe medicines, adding that Gilead’s HIV drug supplied from Turkey is the same as what is sold in the United States at a much higher price.