International drug sourcing FAQs: What every employer needs to know to cut pharmacy spend.

With U.S. brand-name drug prices now 3-4x higher than other countries, employers are eyeing international sourcing to save up to 10% on pharmacy costs. Here’s what you need to know:

What is international drug sourcing?

International drug sourcing is the practice of purchasing medications from licensed pharmacies outside the U.S. through a contracted PBM or vendor. These medications are typically:

• Shipped directly to members.

• Identical or clinically equivalent to U.S. versions.

• Sourced from areas with strong regulatory standards like Canada, the UK, or the EU.

The goal of international drug sourcing is to offer members lower prices for the same medications without disrupting care.

Employers can save up to 10% on total pharmacy spend through international sourcing. 

Why are prescription drug prices higher in the U.S. compared to other countries?

U.S. prices for brand-name drugs are over 3x higher than prices in comparable countries, even after rebate adjustments. Drug pricing in the U.S. is higher than in most developed countries due to four key factors:

1. No centralized price negotiation: In most developed countries, national health systems negotiate directly with drug manufacturers to set prices. In contrast, private insurers, PBMs, and employers negotiate prices in the U.S., which means less leverage and higher prices.

2. Higher innovation costs: U.S. drug prices often reflect not just the cost to manufacture a medication, but the cost to bring it to market. This includes years of research, clinical trials, and regulatory approvals, plus the sunk costs of failed drug candidates.

3. Strict regulatory standards: U.S. distribution requirements mandate serial numbers, barcoding, and tracking of all prescription drugs from manufacturer to pharmacy. These protections reduce the risk of counterfeit drugs but also raise packaging, logistics, and compliance costs compared to markets with less stringent requirements.

What types of drugs are typically sourced internationally?

Not all medications are a good fit for international sourcing. The strategy tends to focus on:

• High-cost brand-name drugs where price differentials are most dramatic.

• Select generics that are cheaper abroad despite being off-patent.

• Drugs with low or no rebates where savings from sourcing outweigh rebate value.

• Specialty or maintenance medications that members take regularly and can receive via mail-order.

Each case requires a cost-benefit analysis to determine sourcing suitability.

How much can employers save with international drug sourcing?

Employers can save up to 10% on total pharmacy spend through international sourcing, depending on the mix of drugs and member participation. The greatest savings are often found in drug classes where rebate structures offer minimal offsets to high list prices.

That said, results vary. Sourcing works best as part of a broader pharmacy strategy, not a standalone solution.

Is international drug sourcing legal?

International sourcing falls into a complex regulatory space. Many international sourcing models are built around U.S.-based vendors who coordinate fulfillment from pharmacies licensed and regulated in their home countries. Employers must work with reputable vendors who can demonstrate compliance with applicable regulations and transparency in their sourcing and shipping practices. It’s important to ensure:

• Vendors are licensed and operate under clear regulatory authority.

• Products are sourced from legitimate pharmacies in countries with comparable safety standards.

• Fulfillment and tracking comply with customs laws and any relevant FDA guidance.

Is international drug sourcing impacted by tariffs?

At this time, tariff discussions mostly target bulk imports and China-made generics, not the mail-order programs that would be used in employer-sponsored international sourcing.

These programs typically rely on FDA enforcement discretion, which permits individuals to import up to a 90-day supply of non-controlled medications for personal use. Trusted vendors remain compliant with all licensing, safety, and shipping regulations, keeping these programs protected from current trade policy risks.

How should employers evaluate international sourcing as a cost-containment strategy?

When considering international sourcing, organizations should carefully weigh:

• Net cost savings: Will savings from lower drug prices outweigh the loss of manufacturer rebates?

• Member impact: How much effort will enrollment, transfers, and fulfillment require from members?

• Operational fit: Does the program integrate smoothly with current benefits and pharmacy vendors?

International sourcing is not a fit for every drug or every member population, but it can be a strong addition to a cost-containment strategy when used correctly.

Will international drug sourcing impact the member experience?

Yes, but the impact can be managed. Members must engage more directly in the process than with standard retail or mail-order pharmacy use. Typical steps or changes include:

• Enrolling in the international sourcing program and providing insurance information, shipping address, and payment details.

• Having prescriptions transferred to an international partner pharmacy.

• Receiving 90-day supplies by mail.

There may be some initial friction and longer lead time on first fills, but some vendors and pharmacy benefit managers (PBMs) provide support teams to help members navigate the transition. Over time, members benefit from predictable 90-day supplies and often lower out-of-pocket costs.

International sourcing is just one piece of the puzzle. To see what else is shaping the future of pharmacy benefits cost management, read up on the 4 key trends in PBM.