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Skyrocketing prescription drug prices in the United States have pushed employers, health plans, and patients to seek creative—and controversial—solutions. One fast-growing approach involves **Alternative Funding Programs (AFPs)**, which promise dramatically lower costs for expensive specialty medications by sourcing them from overseas. Federal authorities, however, describe many of these operations as illegal drug importation schemes that bypass safety regulations and expose patients to potential risks.

A CNBC investigation, part of its “RiskyRX” series, highlighted how these programs have spread across employer-sponsored health plans, affecting private companies, cities, counties, school districts, and unions. As U.S. drug prices remain nearly three times higher on average than in other high-income countries, according to a 2024 RAND report, the incentive to look abroad has intensified.

### The Rise of Alternative Funding Programs

Specialty drugs used to treat complex conditions such as multiple sclerosis, cystic fibrosis, cancer, and HIV can cost tens or even hundreds of thousands of dollars per year in the U.S. Employers struggling with rising health care premiums increasingly turn to AFPs. These third-party vendors contract with self-funded health plans to “carve out” high-cost drugs. In exchange for a fee or a share of the savings, the AFP arranges for patients to receive the medications—often at little or no out-of-pocket cost.

The savings come from importing versions of the drugs intended for foreign markets, primarily from countries like Canada, but sometimes routed through other locations. Proponents market the programs as a practical antidote to unaffordable pricing, with some even offering incentives such as travel perks to encourage participation. In certain cases, employers make enrollment in the AFP mandatory for patients needing these specialty drugs.

CNBC’s review of thousands of pages of contracts, emails, invoices, and public records showed the programs gaining traction nationwide as drug costs continued to climb.

### Why Federal Authorities Call It Illegal

Under the Federal Food, Drug, and Cosmetic Act, importing prescription drugs that are already approved and commercially available in the United States is generally prohibited for anyone other than the manufacturer. The FDA has stated that in most circumstances, individuals or entities cannot import foreign versions as substitutes for U.S.-approved drugs.

Former FDA officials and current regulators emphasize that AFPs do not qualify under the agency’s narrow personal importation policy, which applies mainly to individuals bringing in drugs unavailable domestically for their own use. Leigh Verbois, who served nearly 23 years at the FDA—including as director of the Office of Drug Security, Integrity, and Response—described the AFP model as “illegal – full stop.” She noted there is no legal gray area when the drugs are FDA-approved and sold in the U.S. market.

A Department of Homeland Security Investigations official told CNBC that these programs should be shut down due to their illegality and the serious safety risks they pose to patients. Criminal investigations into some AFP operations were reportedly ongoing.

### Safety and Supply Chain Concerns

Regulators and patient advocates warn that medications sourced through these channels may not meet stringent U.S. standards for manufacturing, labeling, storage, or quality control. Drugs produced for foreign markets can have different formulations, packaging, or inspection histories. There are also heightened concerns about counterfeits, contamination, or substandard products entering the supply chain.

Patient groups, including those focused on HIV and hepatitis, have urged courts to intervene, arguing that forcing individuals onto these programs jeopardizes health and safety. In one court filing, advocates described the practice as exposing patients to “unknown medicines from unlicensed overseas” sources.

AFPs strongly defend their operations. They maintain that the drugs are safe, legally obtained under personal importation interpretations, and provide a necessary service by making life-saving treatments affordable. Some program operators have pushed back against regulators, insisting their model helps patients who might otherwise ration or skip medications due to cost.

### A Symptom of Broader Drug Pricing Challenges

The proliferation of AFPs reflects deeper tensions in the U.S. pharmaceutical market. Brand-name and specialty drugs often launch at high prices, with manufacturers implementing annual increases. While policies like the Inflation Reduction Act have enabled Medicare to negotiate prices for certain drugs, they have not fully addressed costs in employer-sponsored plans, which cover most working-age Americans.

Other efforts to lower prices include state-level Canadian importation pilots, though these operate under strict FDA oversight and have moved slowly. Broader debates continue around patent protections, generic and biosimilar competition, and the fact that high U.S. prices help subsidize global research and development.

As of early 2026, the FDA declined to issue specific new guidance clarifying its stance on AFPs despite requests from health policy groups. Meanwhile, bipartisan concern has grown, with calls for stronger enforcement to protect patients while addressing the root issue of affordability.

The CNBC investigation underscores a difficult tradeoff: soaring domestic prices create strong demand for workarounds, but those workarounds carry legal and health risks that federal agencies prioritize. For patients facing serious illnesses, the choice often feels like one between financial relief and assured safety under the regulated U.S. system.

True long-term solutions likely require a mix of greater pricing transparency, faster market competition for generics and biosimilars, and reforms that balance innovation incentives with patient access. Until then, programs like AFPs are likely to remain a flashpoint in the ongoing battle over American drug costs.