Seizures of Canadian Drugs Rise as Congress, Customs Spar
July 24, 2006 by John Carreyrou, The Wall Street Journal
Eileen Bloom, a retiree who lives in the lakeside town of Sebring, Fla., has long ordered her medications from Canada, saving up to 50 percent on her prescription-drug bills. But twice in the past nine months, her medicine hasn’t arrived.
Ms. Bloom, who suffers from diabetes, is one of tens of thousands of Americans whose drugs have been seized by U.S. Customs and Border Protection. The seizures are the result of a quiet policy change at Customs last November, which has come under fire from members of Congress who say it is intended to protect U.S. drug makers’ sales at high domestic prices.
Most prescription-drug importations are illegal under current U.S. law. But Customs and the Food and Drug Administration had tended to turn a blind eye to small mail orders coming across the border from Canada, where the national health-care system negotiates cheaper prescription-drug prices than in the U.S. On Nov. 17, that abruptly changed when Customs began systematically confiscating packages mailed to U.S. consumers by Canadian pharmacies.
The number of seized packages has now reached 37,154, angering members of Congress who have been deluged by complaints from constituents. “Some consumers have had their lives put in jeopardy. If you’re on heart medication, you can’t miss a day or two,” says Dan McLaughlin, a spokesman for Sen. Bill Nelson, a Florida Democrat who has been rallying opposition to the new policy.
Earlier this month, the Senate voted 68-32 to approve an amendment to the Homeland Security appropriations bill that would bar Customs from using federal funds to seize prescription drugs imported by individuals from Canada. The House passed a similar amendment in May. However, it remains unclear whether the amendment will make it into law. Drug-industry lobbyists are expected to push to scrap it when the bill goes to conference in coming weeks. The Bush administration and Republican congressional leaders have supported the industry’s stance against Canadian imports.
The skirmish between Customs and Congress is the latest flash point in the rising debate over high U.S. drug prices. Pharmaceutical companies earn the bulk of their profits in the U.S., one of the only markets in the world where the government doesn’t exercise control over drug prices. Canadian imports, which have enabled American consumers to circumvent high U.S. prices, have been a sore point with the industry.
Last year, Canadian Internet pharmacies catering to U.S. consumers purchased $373 million of prescription drugs from wholesalers, according to IMS Health, a pharmaceutical data-research firm. Adding in retail markups, dispensing fees and non-Internet sales to Americans who physically cross the border to buy medicine, sales by Canadian pharmacies to U.S. consumers likely exceeded $500 million in 2005. The number is expected to be lower this year, partly because of many U.S. seniors’ enrollment in Medicare Part D, a new prescription-drug benefit that provides them private-insurer coverage.
Customs says it began seizing packages late last year because of concerns that the prescription drugs coming across the border in the mail were unsafe an argument the drug industry has been pushing since the rise of Canadian Internet pharmacies six years ago.
A spokeswoman for Customs, Lynn Hollinger, cites a joint Customs-FDA operation in August 2005 at New York, Miami and Los Angeles airports, showing that a large percentage of drugs purportedly coming from Canadian pharmacies actually originated in India, Israel, Costa Rica and other countries, and many were counterfeit.
In a statement issued last week responding to the Senate amendment, Ken Johnson, senior vice president of the Pharmaceutical Research and Manufacturers of America, the drug industry’s trade group, said: “Consumers may be risking their health by purchasing imported prescription drugs from purported Canadian Internet pharmacies which have been known to sell fake and potentially unsafe medicines to unknowing American consumers and may be run by shady dealers in countries such as India, China and North Korea.”
Congressmen from both parties have cast doubt on the safety argument, noting that drugs ordered from licensed Canadian pharmacies are approved and vetted by Health Canada, Canada’s equivalent of the FDA. They also criticize Customs for not making its new policy public until after the fact, leaving thousands of Americans without their medications.
Andy Troszok, president of Canada’s Extended Care Pharmacy, says his sales to U.S. customers so far this year have been down about 15 percent from last year, but he thinks seizures are only one factor. Medicare Part D and the Canadian dollar’s fluctuations against the U.S. dollar probably play a bigger role, he says. Extended Care notched about $13 million in sales last year. Mr. Troszok says the company’s shipments blend in with regular mail but they don’t try to conceal what is in the packages because that would go against their effort to establish credibility with U.S. customers.
Extended Care has seen a rise in sales from Nevada: It is one of four Canadian pharmacies that the state licensed in May, flouting federal law to allow residents to order drugs from them. “I had Nevada inspectors in my pharmacy,” Mr. Troszok says, “and they certified me. That has completely removed the safety argument.”
Ms. Bloom, whose packages were seized without warning in November and January, says she suspects a “ploy to get seniors to sign up for Medicare Part D.” Ms. Bloom doesn’t qualify for the drug benefit because she is 61, and it is available only for seniors 65 and older.
Ms. Hollinger, the Customs spokeswoman, denies any connection with Medicare Part D, which went into effect Jan. 1, six weeks after the wave of seizures began. “We’re an independent government agency and we are charged with enforcing the law,” she says. While enrollment in Medicare Part D plans ended May 15, Customs has continued the seizures. Ms. Hollinger says the agency has no plans to stop them, unless the Congressional amendment makes it into law.
Margaret Glavin, the FDA’s associate commissioner for regulatory affairs, says the agency was initially taken aback by Customs’ decision to start seizing packages, but it now supports the move because it takes a strain off the FDA’s limited enforcement resources.
Previously, Customs had referred a small number of packages to FDA employees deployed at mail facilities across the country. But “it wasn’t even a finger in the dyke” of prescription drugs flowing in from abroad, she says. Ms. Glavin says the FDA and Customs are now working hand in hand on the issue, with FDA staffers providing Customs agents technical and scientific assistance.
For their part, drug companies didn’t wait for Customs’ policy change to fight the imports. Canadian pharmacies serving Americans say the big pharmaceutical companies have starved them of inventory since 2003.
Sen. Nelson has asked the Senate’s Homeland Security Committee to look into allegations that British drug company GlaxoSmithKline PLC conspired with other big drug companies to put Canadian pharmacies that filled American prescriptions out of business.
The allegations stem from a civil lawsuit filed by Minnesota Attorney General Mike Hatch against Glaxo. The suit alleges that Glaxo “orchestrated a concerted pharmaceutical industry boycott of Canadian drug imports to protect drug company profits,” in violation of the state’s antitrust statutes. Large numbers of Minnesotans buy medicine in Canada.
Mr. Hatch has subpoenaed 45 secret documents from Glaxo that he says prove the conspiracy. According to people familiar with the case, the documents show that the boycott was first discussed by representatives from Glaxo and a half-dozen other big drug companies at a meeting in Boca Raton, Fla., in December 2002. At another meeting, representatives from the same companies met with federal officials and discussed using the threat of terrorism to dissuade seniors from buying Canadian drugs, these people say.
Glaxo has been fighting in court for two years to keep the documents confidential. The Minnesota Supreme Court is expected to rule in coming weeks on Mr. Hatch’s motion to make the documents public. A spokeswoman for Glaxo, Gail Renegar, says the company’s actions complied with U.S. law banning foreign drug importations and thus should exempt Glaxo from antitrust scrutiny. Drug firms squeeze Canadian imports; They seek to bar resales to U.S.
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Drug firms squeeze Canadian imports; They seek to bar resales to U.S.
January 30, 2005 by Judith Graham, Chicago Tribune
As state and federal lawmakers debate proposals to help Americans buy cheap drugs from Canada, the supply of drugs available to Americans from their northern neighbor is rapidly drying up.
Seven major drug companies are now declining to sell their products to Canadian pharmacies that send medications south.
The prohibition affects almost one-third of the drugs previously available through Canada’s online pharmacies, according to David MacKay, executive director of the Canadian International Pharmacy Association.
Americans haven’t felt the shortages yet because Canadian Internet pharmacies have stocked up on products and cobbled together arrangements to purchase medications from colleagues. But those undercover arrangements are fragile at best, and no one expects them to last much longer.
“I think consumers will really start feeling the impact in the next two to three weeks,” said Lee Graczyk, legislative director of the Minnesota Senior Federation, which runs a Canada drug-buying program for 30,000 members.
American consumers probably won’t be able to get brand-name drugs from their usual Canada sources, he said, and will be forced instead to purchase generics from Canada, buy medications from overseas, pay more for the drugs in the U.S., or simply go without.
Entire classes of medications are being affected. For instance, two leading anti-cholesterol therapies, Lipitor and Zocor (made by Pfizer Inc. and Merck & Co., respectively) are now on drug companies’ “don’t sell” list for Canadian online pharmacies, along with a third cholesterol-buster, Mevacor (another Merck product).
About 2 million Americans seeking relief from soaring drug prices buy more than $700 million in discounted prescription medications from Canada each year. The medications cost up to 50 percent less north of the border because Canada’s government negotiates price breaks with pharmaceutical companies. Most countries impose price controls on drugs, but the U.S. doesn’t.
Two weeks ago, Merck & Co. became the latest pharmaceutical company to close its drug pipeline to Canada’s online pharmacies. Among Merck’s top-selling drugs are Fosamax, a treatment for osteoporosis that is thought to be the best-selling imported medication from Canada.
“We ask that you confirm to us that you are not selling, and will not in the future sell, directly or indirectly, to … parties who are selling Merck drug products into the U.S.,” the company’s Canadian subsidiary wrote in a Jan. 14 letter to an undisclosed number of pharmacies. Those who don’t sign the agreement won’t receive Merck’s medications, according to Tony Plohorous, a company spokesman.
Other firms that have cracked down on Canada’s online pharmacies include GlaxoSmithKline, Pfizer Inc., Eli Lilly and Co., Aventis, Astra Zeneca, and Wyeth Pharmaceutical.
Five Republican and three Democratic lawmakers–including Illinois Democrat Rahm Emanuel–put the importation issue on Congress’ agenda again last week with a new bill that would allow Americans to buy drugs from Canada and other countries. A similar proposal, bitterly opposed by the drug industry, failed last year. Initiatives aimed at facilitating imports also are being considered in several states, including Washington and Connecticut.
Illinois launched a program, I-SaveRx, that allowed residents to buy drugs from Canada, Ireland and the United Kingdom last year.
Meanwhile, the squeeze on medication is contributing to a major shift in the online drug business. In a bid to keep operations going, Canadian Internet pharmacies are hatching plans to move to the United Kingdom, forging partnerships or buying interests in European druggists, and developing networks that can supply medications across the world, officials say.
“We have pharmacies now in almost 30 countries ready to ship to U.S. consumers,” said Daren Jorgenson, owner of Canadameds.com, one of Canada’s largest Internet pharmacies.
A new generation of online pharmacies is being developed in the United Kingdom to step into the breach if Canadian pharmacies become unable to serve U.S. customers, experts say. Although an ocean sits between that country and the U.S., there are no language barriers, and quick delivery wouldn’t be a problem.
Pharmacies’ polls indicate that customers are ready to consider alternatives.
“About 99 percent of our customers tell us they’d accept product from the U.K.; 97 percent feel the same way about Australia and New Zealand,” said Andy Troszok, president of Extended Care Pharmacy, an Internet drug outlet in Calgary, Alberta. The firm has plans to establish European operations before the summer, he said.
Drug companies’ actions aren’t the only threat to Canada’s online drug outlets. The federal government in Ottawa has indicated it likely will impose strict new regulations. Options under consideration include requiring Canadian physicians to examine American customers, mandating that customers travel to Canada to buy medications or putting drugs on a do-not-sell list if shortages seem imminent.
While reports this month suggested government action was imminent, Ken Polk, a spokesman for Canada’s Health Ministry, says: “the department is still working up recommendations. There is no time frame on this.”
Seven U.S. governors, including Illinois’ Rod Blagojevich, have asked Canadian Prime Minister Paul Martin for a meeting and requested that he allow Canadian drug exports to the U.S. to continue. Canada’s government is reviewing the request, Polk said, and is “happy to sit down with the governors, but a resolution to the issue of high drug prices needs to be found in the U.S., not in Canada.”
Meanwhile, Illinois is beginning to take action against drug companies shutting off supplies to online pharmacies. The state has reduced business with the companies by $1 million so far and plans to remove many of their drugs from state-approved formularies in the year ahead, said Abby Ottenhoff, a spokeswoman for Blagojevich.
In Minnesota, Atty. Gen. Mike Hatch is investigating industry practices and plans to widen antitrust action against drug companies in the coming year.
Hatch sued the first drug company to cut off supplies to Canada’s Internet pharmacies, GlaxoSmithKline, last summer. In a telephone interview, he said he planned to extend that lawsuit this year to Pfizer, Eli Lilly, Merck, Aventis, Astra Zeneca, and Wyeth, which have followed GlaxoSmithKline.
“A company on its own may decide who they want to sell to and who they want to boycott,” Hatch says. “But if a company collaborates with other companies [in making these decisions], that’s a violation of antitrust laws.”
Hatch says he has documents from GlaxoSmithKline substantiating a “conspiracy” among drug companies to stop selling drugs to Canadian pharmacies serving U.S. customers. The documents are sealed, and Hatch is petitioning the Minnesota Supreme Court to lift a court order that prevents their contents from being disclosed.
Nancy Pekarek, a Glaxo-SmithKline spokesman, said the firm acted independently and insisted that the antitrust allegations have no merit.
In any event, U.S. drug companies now face an unprecedented challenge: a growing global trade in discounted drugs, being pushed by some Canadian pharmacies, that will allow Americans to buy cheap medications via the Internet.
A look at Canadameds.com’s Web site shows what the future holds. Its home page announces “Worldwide supplier of discount medications. … Not just from Canada anymore. You choose the country and you choose the savings.”
Search for price information on a popular drug such as Prozac, an antidepressant made by Eli Lilly, and entries pop up showing the cost of drug orders from the U.K. ($145.87 for 90 capsules), Australia ($208.94 for 84 capsules), Israel ($69.72 for 56 capsules), Chile ($172.65 for 84 capsules) and Canada ($206.11 for 90 capsules).
But how comparable are these drugs’ doses to those available in the U.S.? How safe are practices at the pharmacies that dispense them? How reliable is government oversight in these nations?
These are issues raised by Jeff Trewhitt, a spokesman for Pharmaceutical Research and Manufacturers of America, the industry’s major trade group, who said, “Taking imported medicines can be like playing Russian roulette.”
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