Cross-border pharmacies may be a prescription for disaster
December 9, 2003 - The cost of prescription drugs has risen dramatically, especially in the U.S. To side-step pricey prescriptions, many Americans take advantage of the low Canadian dollar and less expensive prescription drugs in Canada, buying their medication online from Canadian pharmacies.
So American patients get their medication at prices they find affordable and Canadian pharmacies benefit by tapping into the enormous U.S. market. Everyone's happy, right?
No. The U.S. has strict regulations regarding pharmaceutical imports. In 1987, long before the Internet wormed its way into our lexicon, Congress passed a law forbidding the import of prescription drugs.
But with the advent of the Internet, enforcement has been difficult. The U.S. Food and Drug Administration (FDA) and U.S. Customs have occasionally intercepted mail-order packages of prescription drugs from Canada, but to date have never prosecuted any Americans. In 2000, Congress tried to stem the drug flow by passing a law forbidding the re-importation of American-made drugs from abroad, but the act was never implemented because then-president Bill Clinton claimed the final draft was “full of loopholes.” And as the cross-border sales continue, the chance increases for much larger trade disputes.
A University of Alberta professor warns that recent efforts by U.S. authorities to slash cross-border trade of prescription drugs could get nasty. “If the Americans tighten up the border, we can get into serious trouble for our exports,” said Rolf Mirus, a professor of business economics and an expert on international trade.
He believes pharmaceutical crackdowns could not only slow shipment of other products between Canada and the U.S., they may eventually decrease the potential for foreign investment in Canada.
In the wake of a court order that temporarily shut down a chain of 80 U.S. store-front pharmacies that provided Americans with prescription drugs from Canada, the Food and Drug Administration (FDA) announced plans to shut down the pipeline of pharmaceuticals flowing into the U.S. from Canada altogether.
The backlash extends to drug manufacturers, too. One U.S. manufacturer, GlaxoSmithKline, stopped shipping products to Canadian mail-order pharmacies, most of them based in Manitoba. A number of other manufacturers are threatening to do the same. Officials from Health Canada met FDA commissioner Mark McLennan in Ottawa Nov. 11 to discuss the issue.
The FDA's actions have pitted pharmaceutical industry groups in Canada against one another. The National Association of Pharmacy Regulatory Authorities, a Canadian regulatory group, supported the U.S. move, claiming the mail-order pharmacy trend has compromised Canadians' access to health care. The Canadian International Pharmacy Association, a group representing national mail-order pharmacies, dismissed the allegations and called NAPRA’s stance "Draconian."
The FDA and its supporters claim the primary motive for the plan is in the interest of public safety, despite declarations by federal Health Minister Anne McLellan that Canada has one of the most rigorous drug approval systems in the world.
Mirus, who doesn't buy the FDA's public safety argument, believes the plan is a scare tactic to intimidate Americans--who already pay more for pharmaceuticals than any other country in the world--from engaging in cross-border transactions and to protect pharmaceutical interests.
"We have Canadian rules with respect to drug safety and we obviously abide by them," he said. "The pharmaceutical industry says they need high prices somewhere to afford the research. Their argument is right now Americans pay high prices and indirectly subsidize research for the rest of the world."
Prices are at the heart of the cross-border issue. Americans who order Canadian drugs by mail or through the Internet have been known to save as much as 50 per cent on pharmaceutical costs, a boon to seniors on limited incomes.
However, the activity, estimated to be generating around $1 billion in sales annually, has prompted drug companies--claiming that the transactions will result in up to $600 billion (U.S.) of lost profits over the next 10 years if the practice continues--to push for higher drug prices in Canada.
“I don’t think we should be raising our drug prices; we’ve been doing fine with making medication affordable,” said Mirus.
"It's a potentially serious trade irritant between the countries. There are very powerful lobbies involved in the U.S. and we have limited ways of responding to the big pressures, but we do think we can maintain our drug prices and have some kind of compromises if this cross-border trade continues."
Aside from beneficiaries of cross-border medicine, the practice has a number of U.S. supporters, including Minnesota Governor Tim Pawlenty, who last month flew to Winnipeg to talk to pharmacists and provincial government officials about helping his state's residents receive drugs from Canada. Incensed over the fact that Americans absorb the bulk of industry costs, Pawlenty referred to the situation as "the prescription drug equivalent of the Boston Tea Party."
Drug exports are also a concern in Europe, where countries have jurisdiction over their own drug plans and language differences prevent cross-border pharmaceutical trade.
"In Europe, however, there exists an administrative law by which over time, directives can be given," said Mirus. "The process can merge the national plans to a European plan."
But Mirus doesn't see such a merging of jurisdictions happening in North America. "We have national jurisdiction and we eagerly protect our sovereignty by not being part of the U.S. medical system. The way the national drugs and medical systems and pharmaceutical systems are built up are a national choice."
The cross-border dispute could also trickle into international waters. In October, the federal government announced it would allow generic drug manufacturers to ship cheap AIDS pharmaceuticals to Third World countries, a deal reluctantly approved by NAFTA partners Mexico and the United States.
"There are concerns that if we ship AIDS drugs at low prices to Africa, some of them will not end up there but get traded to some other places where the prices are higher," said Mirus.
"It's an aspect of globalizing. The technology makes it possible through the Internet to do business and try to circumvent national rules. By having the outside alternative, you look at the high price at home and the low price abroad, and you are very easily aware of the differences."
Related links – internal
Dr. Rolf Mirus's U of A website:
http://www.bus.ualberta.ca/rmirus/
The U of A Department of Marketing, Business Economics and Law website: http://www.bus.ualberta.ca/MBEL/Members.htm
Related links – external
United States Food and Drug Administration website: http://www.fda.gov/
The National Association of Pharmacy Regulatory Authorities website: http://www.napra.org/
The Health Canada website: http://www.hc-sc.gc.ca/english/
