Volume 1, Issue 15
Updated July 2003
The Legalities Involved
The New Chat Rooms
Getting Music Online
Internet Business Models
Ecommerce In Canada
Buying Cars Online
Telematics in Cars
Online Gambling News
The recent pressure on Canadian Internet pharmacies could spell the end to cheap pharmaceuticals for U.S. residents. Charges, which had been laid May 14, 2002 in Canada by the Ontario College of Pharmacists, have finally been resolved.
On June 23 the Canadian Drugstore Inc. pleaded guilty to one offence contrary to the Regulated Health Profession Act, 1991 (RHPA), and four charges contrary to the Drug and Pharmacies Regulation Act (DPRA).
The charges against the owner of Canadian Drugstore Inc. William Shawn included filling prescriptions written by U.S. doctors for U.S. residents and with unlawfully operating an unaccredited pharmacy.
William Shawn's site was the first Canadian Internet pharmacy to be charged but according to Layne Verbeek, the Communications Manager for the Ontario College of Pharmacists, he doubted it would be the last. He said it takes a lot of work to lay charges and he suspected other sites were contravening the laws.
Stephen Bederman, an Ontario registered pharmacist, was also charged in association with the site for unlawfully supplying prescription and non prescription drugs to U.S. residents. The Ontario College of Pharmacists has since requested that all outstanding charges under the DPRA and RHPA against Bederman, Birchmount Pharmacorp operating as Pharmasave, and a related company, SB Enterprises, be withdrawn.
However, as a result of their alleged involvement in the Canadian Drugstore Inc. scheme as suppliers of prescription drugs, Bederman and Birchmount Pharmacorp will be the subjects of a December 2003 hearing before the Discipline Committee of the Ontario College of Pharmacists.
The drug wholesaler, Rep-Pharm Inc., had also been charged with supplying medications that should have only been sold to a licensed pharmacy. Rep-Pharm Inc has since pleaded guilty to the offence.
In some cases Americans pay as much as a half to three quarters less when buying their pharmaceuticals from an online Canadian pharmacy.
According to the FDA it is illegal for anyone to ship prescription drugs not approved by the FDA into the U.S., even though the drug may be legal to sell in the pharmacy's own country.
Canadian online pharmacy operates take exception with the U.S. law.
"Is it legal to ship to the states?" asks one Canadian pharmacy site operator located in Ontario and who asked not to be identified. "If you look at the letter of the law no it's not legal, not according to the FDA. But if that's the case why do you have so many congressmen and physicians in the U.S. directing their patients to us? It is the illegal U.S. or offshore pharmacies that are selling narcotics and steroids that the authorities need to be concerned with", he said. "Not Canadian sites that follow the processes."
He believes his own online pharmacy is legal in Canada because it ships directly to American physicians. His site is covered under the physician export provision of Canadian law, which makes it entirely legal to ship medicine from Canada with the exception of narcotics and controlled substances.
As long as the package is clearly labeled medicine and is fully declared, it is legal, he said. Once they ship it to American physicians it is then up to those doctors to distribute the medicine to their patients.
Is it legal for American doctors to receive Canadian drugs for their patients? Not according to the FDA but some doctors are willing to take the risk on behalf of their patients.
Last March Kevin Tibbles of NBC News reported that Vermont's United Health Alliance was even supplying the order forms. "It's a grassroots effort, with some doctors ignoring U.S. law, unwilling to make their patients wait for lower drug costs. "They can't wait, they can't wait," says Dr. Elizabeth Wenner, of the United Health Alliance. "They can die though. And I'm not gonna sit around and think that I waited or watched. I will do something to make a difference.""
Ironically some of the same Canadian drugs that are shipped to American patients are manufactured in the same plants as the drugs that American pharmacies receive.
According to the Canadian drug site operator, the reasons that these drugs are considered illegal by the FDA is because of the packaging. Legally all drugs packaged in the U.S. must carry a special identification number.
He said, drugs packaged for Canada have slightly different requirements and identification numbers. For instance all drugs packaged in Canada must have instructions written in both English and French. It is the problem of packaging that lets the FDA restrict all drugs coming from Canada even though they are essentially the same drugs that Americans are shipped, which are produced in the same FDA approved facilities.
The Ontario site operator doesn't believe that all Americans will jump on the bandwagon of buying cheaper drugs from Canadian sites because of the involved process that people have to go through.
What goes on in Canada is a very small part of the $187 billion dollar U.S. drug industry. He said the largest Internet drug store in Canada employs about 80 people and sells about $2-$3 million dollars a month to the U.S., which accounts for about $36 million a year.
It appears, however, that lots of Americans are still willing to go through the procedure for the cheaper medicine. Tibbles quoted Canadian pharmacy website owner Daren Jorgenson as saying, "We've seen our business grow from where we were doing a half a million a year to doing over $4 million a month."
Tibbles reported that "Stateside, a 90-day supply of the arthritis drug Celebrex sells for $197. In Canada, the same drug is $90. Lipitor, for high cholesterol is $241 in the U.S., $132 in Canada, and Tamoxifen, a breast cancer treatment is $287 in the U.S., only $28 in Canada."
These prices don't even take into account the exchange on the dollar. The American dollar fluctuates but over the past year it has been worth anywhere from 1.49 to 1.59 Canadian.
Although Canadian online pharmacies have been selling drugs to Americans for the past several years there has been recent pressure by the FDA to force Canadian regulatory agencies to investigate the practice.
Last November Tom Arnold of the National Post wrote that four Canadian Internet sites "were under investigation by the FDA for selling, 'ciprofloxacin and numerous other medicines.' It sent letters to three companies in Manitoba and one, CanadaRX.net in Ontario...."
Arnold quoted David Horowitz, acting director of the FDA's office of compliance, as saying, "The agency is taking steps to warn our citizens that drugs promoted and sold via the Internet from foreign sources, may not be approved for marketing in this country, and many not be legally imported."
"He warns the FDA is advising the U.S. Customs Service through an "Import Alert" that all shipments into the U.S. 'as a result of your activities may be detained and subject to refusal of entry.'"
Arnold reported that Health Canada launched its own investigation but by the time of his article, the agency had cleared two Manitoba sites and was still investigating two others. No charges have yet been laid.
Verbeek said many jurisdictions come into play in the regulation of Internet pharmacies. Laws apply from both the federal and provincial governments in Canada as well as laws in the United States.
The Canadian Drugstore Inc. had advertised on the Internet that it was a source of low cost Canadian drugs for American patients. American patients would then fax their prescriptions, written by their U.S. doctors, directly to the Canadian Drugstore who would then arrange for the prescription to be co-signed by an Ontario doctor.
The co-signed prescription would then be faxed to an Ontario pharmacy for filling. The filled prescriptions were returned to Canadian Drugstore Inc. who then delivered the prescriptions to their American patients by parcel post.
According to Verbeek, the practice directly contravenes current policies of both the Ontario College of Pharmacists and the College of Physicians and Surgeons of Ontario in Canada.
Last May Verbeek said the charges were just the "tip of the iceburg" and solutions to this growing problem were just beginning to emerge. He said there has been talk of governments working together to come up with answers.
The U.S. Food and Drug Administration (FDA) inspired clamp down has left some Canadian site operators shaking their heads in disbelief.
The Canadian site operator, who asked not to be identified, said he believes the authorities are fishing to see what they can get to stick in the courts. All Canadian sites have long and laborious processes on them so that they do follow the laws, he said.
He said that he and other Canadian operators are concerned about what has happened to the Ontario drugstore site.
He said the site never pretended to be an actual pharmacy but clearly stated that it was acting as a go between U.S. patients and a Canadian pharmacy.
The site had a power of attorney agreement on it. It received patient information, which was then cosigned by an Ontario doctor and filled by an Ontario pharmacy.
Once the prescriptions were filled, the Canadian pharamcy personnel picked them up and shipped them to the U.S. patients, he said.
According to the Canadian Pharmacist Association, it is only legal to run Internet pharmacies in Canada when they are directly linked to brick and mortar pharmacies, which are regulated provincially.
Registrar of the Manitoba Pharmaceutical Association, Ronald Guse said "Pharmacies located in Manitoba must receive a written or verbal prescription from a Canadian licensed practitioner in order for the prescription to be valid."
"American written orders are not valid unless authorized by a physician licensed in Canada. The 'rubber stamping' of orders is not acceptable according to the medical standards set by provincial medical licensing boards."
Tom Arnold reported in the National Post last May that Canadian doctors were warned in November not to approve prescription drugs by patients they had not examined or they could face disciplinary action.
In an effort to stop the flow of cheap prescription drugs to the United States, GlaxoSmithKline Inc., the second largest drug maker in the world, announced on January 21 that it would no longer supply to Canadian pharmacies that sell to U.S. consumers at lower prices.
Letters had been sent from the Canadian arm of GlaxoSmithKline in early Januray to drug wholesalers, including Calgary based Prairie Supply Cooperative, that shipments would be cut off as of January 22, if the wholesalers continued to supply pharmacies that they knew were retailing to Americans.
Toronto Star reporter Madhavi Acharya-Tom Yew, interviewed Laurie Gauthier, founder and head of the cooperative who said that as the deadline approached Glaxo had assured them that the suppy wouldn't be cut off and that they were committed to finding a fair and equitable solution to the problem.
However, Yew had also interviewed Mary Anne Rhymes spokesperson for Glaxo who said the company was planning to reduce shipments to wholesalers that supply medicine for sale to the United States. She was quoted as saying, "We're trying to accomplish more than one goal here. One is to protect the supply of medicines in Canada. One is to protect the safety of American consumers...."
Yew reported that Gauthier was skeptical of the safety claims. "One would think if there were really safety concerns, surely somebody would have stepped in somehwere along the line. It has nothing to do with safety. They're concerned about their bottom line," he was quoted as saying.
Some of the more common drugs shipped by Glaxo include Flonase, an anti-inflammatory nasal spray used to relieve allergies, Zyban for quitting smoking, Valtrex used to treat shingles, genital herpes and cold sores, and Paxil, an anti-depressant.
Canadian pharmacies are able to continue supplying Americans Glaxo drugs until their stocks run out. The operators of CanadaRx.net include information on their site telling their American consumers to take action by contacting their U.S. Senators, GlaxoSmithKline and the Canadian Competition Bureau. Their concern is that if other drug manufactureres follow Glaxo’s lead, it could very well leave the Canadian pharmacies unable to serve any Americans patients at all.
Other Glaxo drugs included in the ban are Advair, Agenerase, Augmentin, Avandia, Bactroban, Combivir, Coreg, Epivir-HBV, Flovent, Hycamtin, Imitrex, Malarone, Requip, Serevent, Timentin, Ventolin, Wellbutrin SR, Ziagen and Zofran.
The ban could affect the needs of many poor Americans, especially seniors who rely on the Canadian companies to supply their medications.
Policy makers in the U.S. have been trying for several years to provide solutions to the high cost of drugs but the pharmaceutical industry along with the FDA have thwarted them at every turn. This is because of the magnitude of the political power the pharmaceutical industry wields in the United States.
Last April 1, Fortune 500 reported that the pharmaceutical industry was the most profitable industry in the U.S. even beating out commercial banks.
According to Families USA the rankings came on the heels of a report released last March by the National Institute for Healthcare Management detailing another year of near 20 percent increases in prescription drug costs. It pointed to the hypocrisy of the drug industry's refrain that high drugs costs are necessary for research and development.
In his July 1999 report Boston University researcher Dr. Alan Sager dismissed drug manufacturers claims that they needed higher prices to fund research. He pointed out that in 1997, Merck and Pfizer averaged only 11% of revenue in research and development. In contrast, they spent 29% for marketing and administration and 19% was profit.
Dr. Sager attributed government inaction over the high cost of pharmaceuticals to the drug manufacturers political clout and campagin contributions.
Last August Jennifer Washburn of the American Prospect reported that President Bush, had received contributions of $456,000 from the pharmaceutical industry during his 2000 election campaign.
Compounding the problem is the close association the FDA has with the pharmaceutical industry.
Washburn cited an investigation conducted in 2000 by USA Today. It was reported that more than half the outside experts hired by the FDA to advise it on the safety and effectiveness of new medical products had financial relationships with pharmaceutical companies that would be affected by their decisions.
It was the FDA that blocked the reimportation law passed by the House of Representatives in 2000.
The law would have allowed pharmacists, wholesalers and distributors to reimport U.S. made pharmaceuticals that were sold more cheaply in other countries like Canada. The drugs would then have been resold to American consumers at a cheaper rate.
The FDA was able to block the legislation by using a provision in it that would require the government to guarantee the medicines' safety.
The legislation was refined and reintroduced again in July 2001. At that time, Associated Press reported that lawmakers voted 324-101 to make it legal for Americans to buy prescription drugs from other countries through the mail. They rejected arguments by the pharmaceutical industry and the Food and Drug Administration that it could result in consumers being sold counterfeit or contaminated drugs.
The passing of the law was irrelavant however, since the FDA was able to once again block the legislation. Associated Press reported that Health and Human Services Secretary Tommy Thompson reaffirmed a decision made in December 2000 by his predecessor, Donna Shalala, that the FDA could not certify the safety of reimported drugs.
The broader measure that had passed in 2000 allowing distributors to reimport American made drugs was turned down by the House, 267-159 when it was reintroduced the second time.
Senate supporter, Vermont independent James Jeffords, was quoted as saying he was disappointed by the FDA ruling especially since '"the FDA was at the table as we were drafting this legislation," Jeffords said. "This new analysis contradicts my understanding of their earlier positions."'
A senate hearing was held into the issue on Septmeber 5 2001 chaired by Senator Byron Dorgan. Both Senator James Jeffords and William Hubbard, Senior Associate Commissioner for Policy Planning Legislation at the FDA spoke at the hearing.
Jeffords said, "Last year we were able to enact the Medical Equity and Drug Safety, or the "MEDS" Act. It was designed to allow safe, FDA approved medicines, that are manufactured in plants approved by the FDA and sold abroad, to be purchased by American pharmacists and wholesalers and reimported into the United States."
"We worked closely with the FDA in developing this law. We sought the agency's advice about provisions that were necessary to ensure the safety and quality of these medicines. We accepted that advice and included stringent controls in the MEDS Act."
"But now, we are essentially being told that the goal-posts have moved. We are now being told that what the FDA then said would have worked to ensure safety, will now no longer work. That the controls the FDA advised us to include in the MEDS Act are now inadequate."
At the hearing Chairman Dorgan focused on the safety of the Canadian system. He said the U.S. decided the Canadian safety inspection system was fine for meat, which allows Canadian meat to come into the U.S. uninspected.
Dougan questioned why the FDA had no confidence in the Canadian system in regards to drugs, when in fact the drugs were FDA approved and manufactured in FDA inspected plants. "We do it in a dozen other areas, but you can't do it with respect to medicine?"
Hubbard's main argument was that once the product left the United States the FDA lost control of it. "We do not know, then, when it comes back what it is, where it came from, whether it's safe."
Dorgan said, "And you're saying that you can't assure safety if a registered U.S. pharmacist goes to a Winnipeg pharmacy and brings it back and passes the savings along to a consumer."
In his speech Hubbard said that one of the reasons drugs were so high in the U.S. was because most developed countries have controls on drug prices and the U.S. does not. "We're the only major developed country that does not set such price controls."
He said drugs are sold to patients in Canada and Europe for up to one-half the U.S. price. Those paying cash also paid more than those for whom a third party payer could negotiate a better price. The elderly were often the hardest hit.
Center for Policy Alternatives reported earlier last year that if the retail cost for a particular dosage and quantity of a brand name prescription drug was $100, on average an uninsured resident would pay $100 for that prescription. Medicaid and large HMOs would pay $65. Federally qualified health centers would pay $54 (called the "340B" price) and the federal government (largely, the U.S. Departments of Defense and Veterans Affairs) would pay $46 or less.
What these stats mean is that the poorest people in the U.S. are essentially paying the most for prescription drugs. The center pointed out that drug manufacturers were still making a healthy profit on all of the prices.
Some individual states have been doing their part to help negotiate lower costs for the uninsured. In May 2001 the U.S. First Circuit Court of Appeals put back in operation the Maine Rx Program, which allowed the state to negotiate lower drug prices for Maine's uninsured residents and cleared the way for other states to follow suit.
The Center for Policy Alternatives reported that "during the 2001 state legislative sessions, 27 states introduced legislation modeled after Maine's landmark Rx Program, but these efforts were essentially brought to a standstill because of the federal injunction.
"Now that the Appeals Court has wiped away the stigma of unconstitutionality we expect the Maine approach to move like wildfire across the country," said Bernie Horn, Policy Director of the Center for Policy Alternative, who has worked with state leaders on innovative solutions to lower prescription drug costs.
"There's 71 million Americans without access to prescription drugs. It's simply unconscionable to let this continue. States have the interest, enthusiasm and now the power to lower prices and put medicine in the hands of those who need it most.""
In Canada they also sell more generic drugs than they do in the United States. Loopholes in patent laws in the U.S. have prevented the development of cheaper generic drugs.
Jackie Judd of ABCnews.com reported on "patent stacking" in May 2001 saying that legislation was being introduced in Congress to reform the laws regulating when particular drugs may be sold in their generic form.
Pharmaceutical companies have the exclusive right to sell the drugs they develop for 20 years, during which time the drugs may not be sold in their cheaper, generic form, Judd reported.
Nancy Chockley of the National Institute for Healthcare Management, was quoted as saying, "You're seeing more and more brand name manufacturers keeping generic drugs out of the market place by effectively manipulating the patent system."
Judd gave the example of Astrazeneca, the manufacturer of Prilosec, which recently won new patents that were not related to how the drug works in the body but rather how it is made in the factory.
"The strategy is called "patent stacking," where companies stack on any patent they can, just as its original patent is about to expire.
"Some of them are as frivolous as the color of the bottle," says William Nixon of the Generic Pharmaceutical Association in Washington, D.C. "Every new patent that they can put through the patent and trademark office wins them another two and a half year windfall at the expense of the consumer.""
The bill, the Greater Access to Affordable Pharmaceuticals Act (GAAP), is expected to tighten the laws in the Drug Price Competition and Patent Restoration Act of 1984 (Hatch-Waxman Act) that have allowed brand name drug companies to keep generic drugs off the market.
Frank Clemente, director of Public Citizen's Congress Watch was quoted in the Public Citizen in May 2001 as saying "This legislation will close loopholes that brand name drug companies exploit to extend their lucrative patents and deny consumers access to lower cost generics...This will translate into billions of dollars of savings for consumers."
Last July Associated Press reported that an amendment was being considered as an appropriations bill for the Agriculture Department and the FDA providing them with $1 million to check patent claims by pharmaceutical companies trying to delay approval of generic versions of their drugs.
It was also reported that The Federal Trade Commission was looking into whether brand-name drug companies were using "improper or untimely listing of patents" to block generics.
Reuters reported last February that President Bush's annual budget also called for a $190 billion, 10 year program to reform Medicare and help seniors pay for prescription drugs. It was a revised version of a plan that failed to win congressional support in 2001.
Bush also brought forth a modified version of his plan for outpatient prescription drug discount cards for seniors. The cards had received criticism around the country and were to face an uphill battle in Congress where many in both parties had advocated different and more costly approaches.
Chris Mooney reported last August in the American Prospect that there was debate over whether the cards could deliver real price breaks for Medicare's 14 million beneficiaries who lacked prescription drug coverage. He said the program would benefit giants like AdvancePCS, Express Scripts, Caremark, Merck-Medco, and Wellpoint who were queuing up to run Bush's program as a self regulated consortium.
Mooney further reported that "in theory, the cards were to use aggregate buying power to negotiate discounts from pharmacies and manufacturers. But since drug manufacturers enjoy monopolies over patented drugs, they are free to set wholesale prices at whatever level they like."
Mooney quoted John Rector, general counsel of the National Community Pharmacists Association (NCPA), which had filed a lawsuit against the administration over the cards, saying "Generally, what are called cash discount cards are scams."
According to Mooney,"...the president's scheme is mainly a marketing bonanza for companies endorsed by the program. Not only do the companies get to hype their discount service to everyone participating in Medicare...but they can also pitch their other products to the same lucrative target audience, all under the government's auspices."
Reuters reported that "last year both parties in the Senate and House placed Medicare prescription drugs at the top of their agenda, but failed to agree on a plan. The issue fell by the wayside after the Sept. 11 attacks because of competing priorities and a worsening economy."
Meanwhile, the online Canadian pharmacies have been filling the gap but how long the practice will be allowed to continue remains to be seen. Also in question is how much authority the FDA really has in Canada and whether American laws will factor into the Internet pharmacy legal debate in Ontario and other provinces.
Until the issues are resolved, it's fair to say that Canadian Internet Pharmacies and their American clients will be in for a rough ride.
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