Canadian Drug Exports A Bitter Pill for Some
by Margret Kopala

Published in the Ottawa Citizen, June 12, 2004

If all U.S. residents bought their prescription drugs from Canada, the nation’s supply would be exhausted in 38 days.

These findings from a study by the University of Texas-Austin are the latest bombshell in a saga that began a few years ago as furtive cross-border shopping expeditions by American seniors seeking cheaper drugs in Canada. Thanks to the miracle of cyberspace, these expeditions have ballooned into a billion dollar industry and elevated drug pricing issues to a crisis pitch in the U.S. Now, congressmen are commissioning studies and considering legislation to legalize importation of prescription drugs from Canada and other countries.

The findings also foreshadow a new global dynamic which fundamentally shifts the relationship between governments, consumers and multinational companies and indicate Canada – where political parties are promising catastrophic drug coverage - won’t emerge unscathed.

Leading the revolution are 81 of Canada’s 221 internet pharmacies located in Manitoba. By selling low cost Canadian prescription drugs to Americans, these pharmacists are becoming Canada’s newest dotcom millionaires.

This is possible because, in 1987, Canada created the Patent Medicine Prices Review Board to stabilize prescription drug prices. In return for patent protection, the pharmaceutical companies agreed prices would be no higher than those of comparable drugs already available. Any new drug would be priced as an average of all its prices outside the United States where market prices remain in effect. Today, an estimated 1.5 million grateful Americans spend $1 billion annually filling 10 million internet prescriptions at a fraction of the price they would pay in the US.

Others, on both sides of the border, are less happy.

Pharmaceutical companies, for one, don’t like the fact their American revenues - which pay for research and development of new drugs and subsidize everyone else’s lower prices- are being undercut by their own less expensive Canadian product. In retaliation, Pfizer, Eli Lilly, and other drug manufacturers are restricting internet pharmacies to quantities required by Canadians only. Pointedly, a Pfizer spokesman says, “The export of pharmaceuticals from Canada represents a violation of our long-standing business terms.”

Similarly, the U.S. Food and Drug Administration insists drug importation is illegal, even though it has never prosecuted individual customers and several state legislatures, bowed by expensive drug plans, are pursuing Canadian supplies.

In Canada, where exportation is legal, the battleground is Manitoba.

Speaking for the Pharmacy Alliance for Canadians (PAC), whose membership includes Canada’s largest chains, chairman Greg Skura of Brandon’s 27 year old Super Thrifty Drugs, admits his stores benefited from the early days of cross border shopping. “Americans had to see a Canadian doctor before they could get a prescription; now Canadian doctors in the U.S. are collecting fees from internet pharmacies to co-sign prescriptions.”

PAC worries that cross-border sales will divert resources from Canadian to American consumers and imperil Canada’s supply of prescription drugs. If importation into the US becomes legal, Canada’s federal price-control regime could collapse.

David MacKay of the Canadian International Pharmacy Association (CIPA) in Winnipeg disagrees. He sees internet global marketing as cutting edge and is urging U.S. congressmen to craft a bill that would limit importation to personal mail-order. This, he says, would preserve a system which might otherwise collapse if a commercial wholesale channel of trade is allowed. Closing cross border trade is out of the question, he adds, because Americans might then seek pharmacy products from other sources, including the growing counterfeit drug market. He also wants Canada and the U.S. to integrate their safety standards.

It is widely expected Congress will approve drug importation even as various states consider prosecuting the pharmaceutical giants for collusion and anti trust violations. Astonishingly, U.S. pharmacies, unlike their counterparts in the wheat and lumber industries, seem indisposed to trade action against Canadian pharmacies. Of course, this might rile the voluble and powerful American seniors’ lobby who like their Canadian prescription drugs.

Still, the battle is far from over. While the pharmaceutical industry is squeezed between the U.S. Congress, Canada’s Patent Review Board and escalating demand, anything could pop, including prices and the internet pharmacy business itself. Certainly major negotiations are in the cards for some if not all the relevant parties.

As for Canada’s next government, a minority situation means little pressure to deliver on promises. It’s just as well. Our political parties may need a few elections to reconfigure their plans for catastrophic drug coverage.

Margret Kopala’s column on western perspectives appears weekly.

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