Federal Circuit Court of Appeals Issues Trade Agreements Act Decision in Acetris Health, LLC v. U.S.

On February 10, the U.S. Court of Appeals for the Federal Circuit issued an opinion in Acetris Health, LLC v. United States, regarding the sourcing of a drug’s active pharmaceutical ingredient (“API”) from a non-designated country under the Trade Agreements Act (TAA).  The Federal Circuit decision indicated that pharmaceutical companies can source the API from non-designated countries, such as India or China, and still offer the end product for sale to the U.S. Government as “TAA-compliant,” as the TAA analysis turns on where a product is manufactured, versus where the API is sourced. Based on this analysis, the Court held that a pill manufactured in the United States was TAA-compliant even though the pill’s API was sourced from India.

For pharmaceutical and medical/surgical suppliers, alike, this decision could open up additional sources of supply once considered non-TAA-compliant. However, suppliers will still need to assess where a product is “substantially transformed” for purposes of the TAA before seeking to sell the product to the Government.