International sourcing has historically offered self-funded employers an alternative way to manage the growing cost of high-cost medications. By sourcing select prescription drugs from pharmacies outside of the United States, where the same or similar therapies may be available at substantially lower prices, these programs can create savings opportunities while also reducing out-of-pocket costs for some members.
New U.S. customs requirements, increasing legal challenges, supply chain concerns, and continued regulatory uncertainty are raising questions about the long-term sustainability of international sourcing.
How international sourcing works
International sourcing involves obtaining select medications from pharmacies or suppliers outside the United States. While Canada is the most common source country, programs may also source from other “Tier 1” markets, including:
- Australia
- Israel
- Japan
- New Zealand
- Switzerland
- South Africa
- Members of the European Union
These programs often focus on high-cost specialty and brand medications available abroad at lower prices. Employers generally do not manage the process. Typically, PBMs, specialty vendors, or other partners coordinate eligibility, pharmacy fulfillment, and delivery to participating members.
Importantly, international sourcing is different from drug importation. International sourcing programs generally focus on individual patient access, while drug importation refers to formal, FDA-authorized programs under Section 804 of the Federal Food, Drug, and Cosmetic Act.
Possible disruption factors for international sourcing
International sourcing programs have previously relied on relatively streamlined personal importation processes.
One of the primary disruption concerns stems from U.S. customs changes coming in January 2027, which will require additional documentation for medications shipped from international pharmacies, including new importer-of-record documentation. The increased regulatory requirements and documentation could potentially complicate fulfillment pathways.
Beyond increased regulations, supply chain issues have affected these programs in the past, and shortages, drug availability interruptions, and export restrictions from foreign governments could add an additional layer of complexity.
Recent U.S. federal trade and manufacturing policies have also placed greater emphasis on domestic pharmaceutical production, and programs such as TrumpRx are focused on improving domestic affordability rather than expanding broad international sourcing.
Some vendors may be able to adapt their operating models, while others may reduce or discontinue international sourcing programs. Some are already discontinuing programs or have said they will not add new clients in 2027.
Legal challenges are increasing
Because most programs rely on FDA enforcement discretion rather than a formal pathway, manufacturers are testing the uncertainty in court. In 2026, Novartis and Genentech filed litigation alleging improper importation of Xolair through an alternative funding arrangement, part of a growing number of lawsuits targeting alternative funding models that use foreign-sourced drugs.
In August 2026, a federal appeals court upheld a preliminary injunction prohibiting the alternative funding organizations involved in Gilead’s lawsuit from supporting international sourcing of its products. This decision highlights a legal avenue for manufacturers to challenge these arrangements and raises the possibility of similar litigation in the future.
Outcomes will vary by program, but litigation adds another consideration for employers weighing long-term viability. Employers should ask vendors how they structure their programs, what legal risk those programs carry, and what happens to members if a program ends or changes.
What plan sponsors can do now
These pressures on international sourcing program viability carry both financial risk and potential member impact.
If a program slows or stops, the savings it was built to deliver can shrink quickly, and members on high-cost specialty medications may face gaps in therapy while transitioning back to domestic fulfillment. Plan sponsors also serve as fiduciaries for these members, so proactive communication and help with potential cost increases matter.
To prepare, plan sponsors and benefits consultants should:
- Ask about 2027 readiness. Understand how vendors plan to address upcoming customs and fulfillment changes.
- Look beyond advertised savings. Evaluate how much the plan would actually save after accounting for rebate losses, vendor fees, contract implications, and the number of members likely to use the program.
- Prepare for member disruption. Determine how employers and vendors will support members who need to transition back to domestic fulfillment in case of international sourcing disruption.
- Consider alternative strategies. Evaluate international sourcing alongside options such as formulary optimization, biosimilars, manufacturer assistance strategies, and benefit design enhancements.
International sourcing has not disappeared as a cost-management strategy, but its outlook is changing. As 2027 approaches, ongoing oversight and reassessment will be increasingly important. Employers should continue asking questions, monitoring their programs closely, and ensuring they have a plan in place if international fulfillment becomes more difficult.
