View Full Version : Internet Drug Exporters Feel Pressure in Canada

12-11-2004, 07:48 AM

Published: December 11, 2004

WINNIPEG, Manitoba Dec. 7 - Five years ago, a young Manitoba pharmacist fresh out of school started selling Nicorette chewing gum over e-Bay. From that modest beginning the Canadian online pharmacy industry took off, racking up cross-border sales of more than $800 million a year, upsetting United States drug companies and prompting a debate over prescription drug prices in the American presidential election.

But now an industry that thrived on discrepancies between the country's regulated drug prices and America's higher, largely unregulated prices has run into regulatory, political and economic pressures at home that promise not just to change the business fundamentally, but possibly to drive it out of Canada altogether.

Canadian officials, worried about the threat of liability lawsuits and the problem of maintaining an adequate, reasonably priced supply of prescription drugs for their own population, are casting an increasingly wary eye on the industry.

At the same time, online pharmacies are having an ever more difficult time finding supplies because, they say, the major pharmaceutical companies are threatening wholesalers who do business with them.

American consumers of prescription drugs, most of whom are elderly, are not likely to notice the changes anytime soon, if at all. But as the industry casts about the world to fill its growing orders, the drugs that people think they are getting from Canada may actually be supplied by pharmacies in Europe, Australia, Israel and Latin America.

Even in Manitoba, the birthplace of the business, regulators warned the province's pharmacists that their licenses could be suspended in January if they continued to fill American prescription orders without proper physician oversight.

Currently, before a pharmacy can fill a prescription, a Canadian doctor co-signs an American customer's prescription, after reviewing the original doctor's diagnosis and prescribed treatment. But the practice of co-signing a prescription without examining a patient may be a violation of professional medical standards. Stiffening those requirements would remove the threat of lawsuits but, if extended to other provinces as the industry fears, also kill the online industry in Canada.

Canada's health minister, Ujjal Dosanjh, has raised this issue repeatedly and indicated that he would shut down the industry if he felt it was necessary. "We will do the right thing, and if the consequence is that cross-border Internet pharmacies don't exist anymore, then that's the consequence," he said in a recent television interview.

The industry has warned the Manitoba regulatory agency that it will be held accountable for any damages. Yet this week Mr. Dosanjh backed the pharmaceutical association's position, saying, "The practice by some doctors of countersigning prescriptions without actually having a relationship with the patient and properly assessing the patient is absolutely unethical and unprofessional."

The provincial health minister of Manitoba, Tim Sale, called this week for compromise, and the Internet pharmacists and the regulatory body will meet next week to seek an arrangement.

The industry's proponents dismiss the liability issue, saying their practices are safe and pointing out that there has never been a problem with a faulty prescription or drug.

Another commonly expressed fear is that the online drug industry may ultimately reduce supplies for Canadians, raise prices and jeopardize the financial health of provincial governments, which finance purchases of prescription drugs.

"It is difficult for me to conceive of how a small country like Canada could meet the prescription drug needs of approximately 280 million Americans without putting our own supply at serious risk," Mr. Dosanjh said in a speech last month. "Canada cannot be the drugstore of the United States."

A further problem the industry faces is the rapid decline of the American dollar, which is slicing into profits on some drugs by up to 15 percent this year, although prescription drugs are still cheaper here than in the United States because of price controls.

All of these new stresses have only exacerbated supply pressures on the 270 Canadian online pharmacies - which are essentially mail-order houses for maintenance drugs for chronic conditions like erectile dysfunction, high blood pressure and high cholesterol - after American pharmaceutical firms began threatening to cut supplies to Canadian wholesalers last year.

"As an industry we are juggling between ducking fastballs thrown at us, looking at contingencies to survive and constantly upgrading our service," said Daniel Norman, business development officer at universaldrugstore.com, one of the largest online pharmacies.

Sales are still increasing, though at a much slower rate than in previous years, and several of the largest online companies are making drastic changes in their business models.

Many are opening pharmacies abroad, particularly in Britain, to shelter themselves from Canadian regulators and drug supply squeezes caused by what they describe as blacklisting by American drug companies. They note that American companies would find it much more difficult to put pressure on wholesalers in a dozen or more European countries, where drug prices are also low compared with the United States.

CanadaMeds.com recently closed its pharmacy in Winnipeg, Manitoba's capital, but enlarged its operations in Calgary, considered to be more business-friendly. It has also formed partnerships with pharmacies in Australia, Chile, Israel and Britain this year. Others simply shop around the world for available drugs.

"The strong will survive and the weak will be gone," said Robert Fraser, director of pharmacy at CanadaDrugs.com, another industry leader that is diversifying its investments and recently acquired an interest in a mail-order pharmacy in Texas. "The beauty of this industry is you don't have to be located in a prime area of the world these days to carry on a viable business."

But there have already been some disruptions.

CanadaRx.net of Hamilton, Ontario, set up a pharmacy operation in Freeport in the Bahamas during the summer to purchase European drugs for resale in the United States. But one of its early shipments of 450 packages was seized at the Miami airport by customs agents, whose suspicions were raised by the size and provenance of the shipment.

While it remains illegal to import prescription drugs into the United States, the Food and Drug Administration continues to take a somewhat relaxed enforcement stance over shipments to individuals.

No one was arrested in the Miami incident, but CanadaRx.net had to refill the prescriptions for the customers in Vermont, Wisconsin and Minnesota who had purchased the drugs not knowing where they would come from.

"There's pressure from every angle," said David MacKay, executive director of the Canadian International Pharmacy Association, a trade group representing most of the major online pharmacies. "The screws are being tightened."

The changes promise to overhaul an industry that serves up to 100,000 mostly uninsured or underinsured Americans and has created more than 5,000 jobs for Canadian telephone salespeople, administrators and pharmacists. It has also brought extra income to scores of Canadian doctors who co-sign prescription orders originally signed by American doctors as they reconfirm that treatment and dosage are appropriate.

Industry leaders are trying to ease concerns in Canada that their businesses could reduce Canadian supplies by emphasizing that they are interested only in filling the needs of uninsured and underinsured Americans. They do not want to overreach and antagonize the Canadian government by making bulk sales to American insurance companies, health maintenance organizations and state governments seeking to pass on savings.

The online businesses remain optimistic about the prospects of their industry, at least publicly.

"I continue to invest heavily in our operations and our future," said Andrew Strempler, president of RxNorth.com, a company in Minnedosa, Manitoba, that sold more than $60 million of drugs to American customers in the fiscal year that ended Sept. 30, a 10 percent increase from the 2003 fiscal year.

Mr. Strempler's company last week closed a pharmaceutical facility in Niverville, Manitoba, which it opened only a year ago to service its growing American clientele, raising fresh fears that the industry was closing down. But Mr. Strempler said that he was adding to his call center in Winnipeg and that he had just opened an online pharmacy with more than $500,000 worth of inventory in England to serve American customers.

"Those of us who are innovative enough will get through these challenges," said Mr. Strempler, 30, who got the industry started by selling the Nicorette gum.

So far, United States officials have expressed skeptical but not wholly antagonistic views on an industry that is saving a lot of Americans money and has so far not caused any known harm. "It's O.K. at this current level," the ambassador to Canada, Paul Cellucci, recently told reporters.

Representatives of the United States drug industry, which has threatened to cut supplies to countries that re-export medicines, say the greatest threat posed by online pharmacies is from drug counterfeiting, especially in developing countries.

"It opens up the door for counterfeits to enter the United States," said F. J. Fingland, senior director of communications for the Pharmaceutical Researchers and Manufacturers Association, "and there is nothing Health Canada can do to regulate these products."

In a June report on Internet pharmacies, the United States General Accounting Office identified few problems with the Canadian operations. But the agency found that among the operations it had looked at, "None of the foreign pharmacies outside of Canada included dispensing pharmacy labels that provide instructions for use, few included warning information and 13 displayed other problems associated with the handling of the drugs."

Health Canada, the primary federal health authority, issued a report last month concluding that Canadian online pharmacies generally complied with regulations. But it did find that some pharmacies were packaging and shipping temperature-sensitive products inappropriately and selling prescription drugs "based on prescriptions signed using rubber stamps or electronic prescriptions signed with electronic signatures."

Industry leaders said they were taking action to redress those concerns.

Link (http://www.nytimes.com/2004/12/11/international/americas/11canada.html?hp&ex=1102827600&en=a6ac7d6f37334476 &ei=5094&partner=homepage)