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Consumer Reports

Drug companies curbing sales from Canadian pharmacies to U.S. consumers | (KRT) Canadian Internet pharmacies that sell discounted prescription drugs to U.S. consumers are struggling to find new suppliers in response to tough new sales restrictions imposed by major drug companies.

The companies include giants like Pfizer Inc., Wyeth Pharmaceuticals, GlaxoSmithKline and AstraZeneca.

Reimporting prescription drugs from Canada and other countries is illegal, but it's become a multi-million dollar industry due to lax enforcement by the Food and Drug Administration and consumer frustration with spiraling U.S. drug costs. Canada's Internet drug sales were projected to double this year to $1.4 billion, according to Jupiter Research, a business and technology research firm in Darien, Conn.

The drug industry insists that the restrictions are intended to ensure product safety. Consumer advocates and Internet drug sellers say they're a thinly veiled effort to recoup profits lost when Canadian companies buy drugs cheaply due to government price controls and resell them to Americans accustomed to much higher prices. The ploy, called reimportation, can save U.S. customers 50 percent or more on some drugs.

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However, GlaxoSmithKline, whose U.S. operations are based in Philadelphia and Research Triangle Park, N.C., now requires Canadian wholesalers and pharmacies to certify that they don't export the company's medications. Those that don't take the pledge are cut off.

Wyeth, based in Collegeville, Pa., and the British drug maker, AstraZeneca, say they're watching Canadian pharmacies and wholesale customers for spikes in sales volume that could be evidence of reimportation.

"We've restricted the amount we're shipping to suppliers based on their previous orders," said Jenifer Antonacci, a Wyeth spokesperson.

New York-based Pfizer, the world's largest drug company, no longer permits wholesalers to sell its drugs to 46 Canadian pharmacies known to export to U.S. customers. The company now sells directly to those 46 pharmacies, and their sales are closely monitored to avoid surpluses that could end up back in the United States.

"This is an effort to better enforce our terms of sale that require that the medicines not be exported," said Nehl Horton, a Pfizer spokesman.

"We believe there are health and safety risks associated with (re)importation and we don't want to be a part of a supply system that's in violation of the law," Horton added.

Canadian drug exporters say the crackdown is causing shortages, raising prices and slowing deliveries.

"The restrictions are having a desired effect from the brand name pharmaceuticals' point of view. They've created huge difficulties. They've slowed the whole process down," said Dave Robertson, owner of, a Calgary pharmacy that fills several thousand Internet prescriptions a day - 96 percent of them for U.S. consumers.

Will other drug companies join the crackdown?

"We've heard grumbling that Merck & Co., Abbott Laboratories and Eli Lilly are next," said Andy Troszok, vice president of the Canadian International Pharmacy Association in Calgary. "No official word has come from any of them yet."

To cope with drug supply shut-offs, Robertson and other Internet pharmacists are turning to wholesalers and other Canadian pharmacies that haven't been affected by the restrictions. But those outlets are charging as much as 30 percent more for drugs because they also risk supply cutoffs for assisting blacklisted counterparts.

"We have to find pharmacies that are sympathetic to our situation and will help us out," Robertson said. "Obviously that will affect our costs and the costs for our customers."

Prices for GlaxoSmithKline drugs have increased 22 percent at online Canadian pharmacies since March, according to, a Web site that compares online pharmacy prices. Some pharmacies have increased prices 50 percent on certain Glaxo products. The company's crackdown - the first in the industry - started in January. AstraZeneca adopted curbs in April, Wyeth in June and Pfizer in August.

The supplier restrictions work, Robertson said, because most Canadian pharmacies that fill Internet prescriptions are small corner drugstores whose U.S. Internet customers make up only five to 10 percent of their business. They're likely to drop their U.S. customers if it jeopardizes the bulk of their trade.

One big supplier that's been affected is The American Drug Club, which operates a walk-in pharmacy in Winnipeg, Manitoba, and an online unit at that serves about 60,000 U.S. customers. Pfizer and Glaxo no longer supply drugs to the Internet outlet and, according to Brandy O'Reilly, the pharmacy's director of operations, have created additional paperwork that delays filling prescriptions for walk-in clients in Canada.

"It can take an extra three weeks if they get their prescriptions at all," O'Reilly said. "Sometimes we have to say `unfortunately, we can't supply you because they won't supply us.' "

Last month, the FDA weighed in on the drug industry's side in a related matter, warning U.S. municipal health plan managers against turning to Canada for cheaper drugs. Some have dropped co-payments or added other incentives for plan members who buy reimported Canadian drugs. The FDA warning and the drug industry's crackdown come as House and Senate negotiators working on a Medicare prescription drug bill are considering a House-passed proposal to make reimporting drugs legal and easier.

The drug industry vehemently opposes the measure, citing drug safety concerns, especially the possibility of drug tampering and counterfeit medicines. Although raised in the context of reimported drugs, those worries apply also to U.S. markets.

Most Internet pharmacies, both domestic and Canadian, require a doctor's prescription. However, some do not, and health experts fear that potent drugs could end up in the wrong hands.

"I think there is some legitimacy to that concern," said Todd Brown, vice chairman of the school of pharmacy at Northeastern University in Boston. "As the use of Canadian pharmacies increases, you're bound to see more problems," Brown said. "Eventually something's going to happen."

Opponents say that's unlikely because Canada has similar rules governing the sale, manufacture and distribution of prescription drugs. Critics say the industry's real concern with reimportation is lost U.S. profits.

Reimportation isn't likely to become law due to strong opposition among congressional negotiators. But as Congress, consumers and insurers press for lower drug prices, industry officials increasingly view reimportation as a revenue drain that must be filled.

Said Michael Gluck, an associate professor at the Health Policy Institute at Georgetown University in Washington, D.C.: "We are the largest market in the world (without price controls) and drug companies have strong financial incentives for making sure American customers buy at American prices."


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© 2003, Distributed by Knight Ridder/Tribune Information Services