Regulators, industry try to halt Canadian drugs

NEW YORK -- The battle over importing prescription drugs is erupting into a border war of sorts.

Lured by the chance to cut costs in half, state governments hope to join the one city and legions of Americans who get their medicines from Canada, even as federal regulators and the pharmaceutical industry insist it's illegal and unsafe and step up efforts to stop it.

Mistrust hangs over the issue.

Drug purchasers say there's no reason for prices to be as high as they are in the United States and that the Food and Drug Administration's stance is colored by drug companies' generous political donations. State officials, meanwhile, say rising prescription drug costs may force them to cut other services.

Manufacturers argue that they need the revenue to develop new treatments. In an attempt to cut the flow of drugs south, some have begun limiting the amount shipped to Canada in the first place.

"It feels like we are in an atmosphere of mutually assured destruction," said Illinois Gov. Rod R. Blagojevich.

Drugs are up to 50 percent cheaper in Canada than the United States because of government price controls.

Springfield, Mass., has been paying for drugs imported by its workers from Canada since July. Illinois, Michigan, Iowa and Minnesota all recently announced they are exploring that option because rising prescription drug costs are forcing them to cut other services.

Other cities and states are said to be considering similar actions, while an estimated 1 million to 2 million Americans already buy Canadian drugs through the Internet, storefront operations or by crossing the border.

Four drug companies have begun limiting supply to Canada to curb importing, and the attorney general of Minnesota is investigating whether GlaxoSmithKline, the first company to do that, is violating antitrust laws.

Predicts backlash

Blagojevich predicts that if the industry doesn't lower prices, it will face a backlash that could limit or end the monopoly drug companies enjoy through patents.

The standoff hit a major crossroads last week in a Tulsa courtroom where the Justice Department sought an injunction to close a chain of 85 storefronts that help seniors purchase drugs from Canada.

The Justice Department complaint said the chain is a threat to public health and violates importation regulations. Carl Moore, founder of the chain that operates under the names of RX Depot and Rx of Canada, insists drug companies are gouging Americans and that he is breaking no laws.

A decision is expected after Oct. 31 and the outcome will have major implications for the importation debate, according to former FDA Associate Commissioner Marc Scheineson, now a partner at the Washington, D.C., law firm Reed Smith. An injunction would likely mute states' attempts to import drugs; a ruling in Moore's favor would clear the way for more imports.

Congress is attempting to create a Medicare drug benefit that would help senior citizens pay for prescription drugs, but its outcome is unclear and that wouldn't help cash-strapped cities and states, anyway.

The House passed a bill that would allow drugs to be imported from several countries without FDA certification, but there is no corresponding bill in the Senate. A provision in the Senate Medicare bill would allow importation only if the U.S. government approves the drugs' safety.

FDA Associate Commissioner William Hubbard said the agency would be willing to craft a system where it can have authority over drugs imported to insure safety, but he said there are no good options on the table.

Hubbard said he understands the frustration over the costs but worries that Americans are sacrificing safety for savings. He also dismissed the notion that the agency is beholden to the drug industry.

"No one is vouching for the safety of these drugs," Hubbard said.

Last week, the FDA conducted a spot check of 1,153 packages from abroad believed to contain prescription drugs and found that 88 percent contained illegal drugs.

'Bunch of baloney'

Hubbard conceded the drugs hadn't been tested for safety, and that in most instances drugs imported by consumers are illegal regardless of their safety. The remainder of the packages either didn't contain prescription drugs or were being imported by the manufacturers, which is legal.

The report did nothing to sway those who favor importing drugs.

"That report sounds like a bunch of baloney," Blagojevich said.

"If all these drugs are so unsafe, why does the FDA let it happen?" he demanded. "They are protecting the pharmaceutical industry. The pharmaceutical industry is powerful and has friends in high places."

He maintains that if there were widespread safety issues with imported drugs, there would be a rash of lawsuits seeking damages.

"My trust in the federal government on the drug issue is zero," said Minnesota Attorney General Mike Hatch. No one, he added, has complained to his office about the quality of the drugs purchased in Canada.

"This is just a case of political influence," Hatch said.

In the 2002 election cycle, the pharmaceutical industry donated $21.9 million to candidates, 80 percent of them Republicans. The industry is the 13th-largest contributor to candidates.

Drug industry officials say safety is only one issue. They insist it is wrong to import a system of socialized medicines because price controls don't generate enough money for future innovation.

Jeff Trewhitt, spokesman for the Pharmaceutical Research and Manufacturers of America, said free-market pricing in the United States makes the drug industry here the strongest in the world.

"Our system may not be perfect, but it is far more successful than anyone that features government-mandated prices," Trewhitt said.

Other disagree. Minnesota spent $68 million last year purchasing drugs for employees and their families -- a 20 percent increase from 2001. It predicts drug spending will increase 15 percent to 20 percent next year, which is why Gov. Tim Pawlenty is exploring importing drugs from Canada and Europe.

"This system is unsustainable," Pawlenty said. "It seems odd to me that in this crisis situation the federal government and the industry have a white-knuckle grip on the status quo."