For global studies, investigational material and active pharmaceutical ingredients (API) are often shipped to sites in different countries from a central manufacturing base.
This means that tax or VAT must be paid on the product upon entry to each country, and with every country having different procedures in place, this can be confusing to navigate for companies that have little to no experience in running global studies.
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Investigational products do not have a set price since they are not yet available on the market, but a price must be in place for companies to pay the appropriate levies. While managing shipping requirements for participant-blinded studies that require a placebo, which is not taxed in the same way, something as simple as an unblinded shipping label may unblind the trial, significantly affecting operations.
Matthew Leets, head of global trade compliance at Alkermes, says that preparation is key in addressing the challenges faced for shipping investigational products. In a conversation with Clinical Trials Arena, Leets outlines the potential solutions for shipping challenges, and touches upon the most recent supply chain questions in light of the US-Israel war with Iran.
Leets will be presenting on this topic at the upcoming Arena International Clinical Trial Supply (CTS) New England conference on 14 April.
This interview has been edited for length and clarity.
Abigail Beaney (AB): What are the main complexities that pharma companies face when it comes to global trade compliance in clinical trials?
Matthew Leets (ML): The key things are what I call the Holy Trinity – customs valuation, customs description, and the country of origin. For customs purposes, those are the required elements for any transaction. There are additional complexities with clinical trial material that intersect with, say, the Ministry of Health or the US Food and Drug Administration (FDA) or equivalent government agencies and their requirements, like import permits to gain entry into the destination country. Other complications depend on how the recipient countries’ jurisdictions are structured, or which entities have concerns about the nature and type of the material.
AB: How do pharma companies value items that are not yet on the commercial market or products used as placebo comparators?
ML: Most of the issues surface due to different compliance requirements, and we are a very marginal use case within the global space. Rules are written principally for global trade, the exchange of goods and services that have a tangible cost attached. As a result, we are a unique edge case in that we have to adapt ourselves to the rules, rather than requesting a special exemption.
Typically, the price of goods that do not have a market value would be a calculated value based on the cost of inputs to produce something. For example, the API and a contract of a given value to manufacture a certain quantity of the API. So, you have to consider the cost of the contract to produce the product and the yield. For example, if you had a 25mg pill, you could calculate the cost per kilogram, and add that to the cost of drug products at the next step, and the cost for packaging and labelling, and any intermediate steps. You’re forming a stepwise function at each of these steps, where you’re successfully adding the value of the previous step.
For placebo-controlled studies, normally, the cost is the same as the matching active drug, minus the cost of the API, unless there are other factors to consider, like significantly divergent values.
Often, companies may “blind” the entire customs invoice. The partially compliant solution I have landed on in the past is to elevate the value of all line items in the invoice to the highest value. But the downside is having to pay extra VAT and taxes. Still, it’s the best compliant solution to keeping an invoice blinded.
AB: We’ve seen some geopolitical shifts in recent months with the Iran conflict and the closing of the Strait of Hormuz, as well as US pharma tariffs. How are these impacting the speed and the cost of moving clinical trial products in and out of the US?
ML: I am not a geopolitical analyst, but I think the cost of the closing of the Strait of Hormuz and ongoing global conflicts is likely to impact us in a generalised way – in that fuel prices are likely to increase, which impacts the cost of obtaining goods to transport them. Unless your air transportation route crosses or has crossed one of those emerging conflict zones, I would not see a material impact on clinical trial distribution.
With respect to tariffs, the pharma sector, for a long time, has been given a great deal of grace, especially in the development side of things. Starting 31 July 2026, as per the new US Administration, this grace will be reduced and impacted by a number of factors associated with the nature of finished clinical trial material.
One example is that blinded and unblinded trial material will have differential tariff rates. Companies may be eligible to make use of certain waivers for imports into the US, typically in Chapter 98 of the Tariff Schedule, or all the duty would be liable on those materials. I’ve not seen any kind of reciprocity against medicines, either at the commercial or clinical stage, by other nations, so exports should not be impacted.
AB: What are some of the best ways for companies to expedite challenges they face due to country of origin and customs description?
ML: Rather than expediting these challenges when they occur, I prefer to have early notice and do proper investigation, write rationales, and prepare for anything because those movements and the necessity to declare these elements to customs are imminently foreseeable.
We tend to know the country list for studies ahead of time, so the complexities can be tackled in advance, country by country. It is also very important to loop in your trade compliance colleagues or seek an external source of staff through a consultant or trade council. This is something I will focus on in my presentation at the conference; that including folks with this expertise early and often helps smooth things out, [and gets you to] the point where ideally you don’t have these problems.
Click here to view a detailed agenda of the CTS New England conference, taking place on 14-15 April in Boston, Massachusetts.
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