Canada's Internet pharmacies hurting from industry steps to hal

TORONTO -- Major drug companies have embarked on a campaign to strangle supplies to Canadian Internet pharmacies, driving up the prices of drugs and frustrating American consumers looking for cheaper medicine north of the border.

In the last eight months, the outlook for Daren Jorgenson's CanadaMeds.com business has gone from upbeat to uncertain.

"I still think there's quite a bit of savings, but as time goes by, as prices go up, it could really limit the growth of the industry," said Jorgenson, the chief executive officer of CanadaMeds.com.

U.S.-based Pfizer Inc., the world's largest pharmaceutical maker, in August became the fourth drug company to act against the sale of discounted Canadian prescription drugs to Americans, following similar moves by GlaxoSmithKline, AstraZeneca Pharmaceuticals LP and Wyeth.

A letter Pfizer sent to dozens of Canadian pharmacies said it only would sell its products directly to the pharmacies instead of through wholesalers. If a Canadian pharmacist orders more than its domestic market dictates, Pfizer can cut the supply to prevent the medicine from being resold to Americans.

The squeeze on supplies has forced some Canadian operations out of business, while others are raising prices and buying stock from friends in the business to fill U.S. orders still rushing in.

"Until further notice we are not accepting any more orders," says the Web site for Canada Discount Pharmacy, www.canadadiscountpharmacy.com. It goes on to say the domain and associated software are for sale.

The end result could be a crippled industry that so far has enjoyed a brief but profit-filled existence mailing lower-priced Canadian medicine to American customers.

"I would expect by the end of this year that the 100 pharmacies who are in it will be down to 10 or so," predicted Dave Robertson, the founder of crossborderpharmacy.com, one of the largest Canadian operations. "Strategically the drug companies are doing a very good job. ... They are whittling away our will to survive."

In Berkeley, Calif., 80-year-old Peggy Hammerquist said Robertson's crossborderpharmacy.com recently was unable to guarantee her three-month supply of Celexa, an anti-depressant. She was down to seven pills -- or one week's worth -- when the pharmacy got a new shipment and filled her order.

"It was iffy," she said. The Celexa and two other prescriptions have been filled regularly by crossborderpharmacy.com at a total cost of $364 every three months -- well below the $540 she would pay at home, Hammerquist said.

Reduced supplies of drugs from the four companies has forced Canadian Internet pharmacies to seek alternative sources, usually other Canadian operations willing to sell their stocks at a profit. That raises the price for U.S. customers.

"CanadaMeds' Glaxo products have gone up 28 percent in price since the freeze," Jorgenson noted.

Andy Troszok of the Canadian International Pharmacy Association said smaller operators have failed, and the situation is "threatening to the industry as a whole."

While the drug companies cite safety concerns in their decisions, saying Americans cannot trust the quality of the Canadian drugs, the pharmacies say the companies only want to protect profit margins.

"Pfizer's not concerned about the safety of a patient in Ohio who will run out and can't afford to resupply at an American pharmacy," Jorgenson, the chief executive officer of CanadaMeds.com, said. "We've been doing this for four years as an industry across Canada. Nobody's been killed."

At its height, Canada's Internet pharmacy industry had revenue of more than $600 million a year. Canadian drugs are cheaper because of government price controls, and the businesses flourished as drug prices in America skyrocketed.

It is illegal to import drugs from Canada, but the U.S. Food and Drug Administration has allowed the mail order service direct to customers under a "compassionate non-enforcement" policy to help Americans unable to afford the higher-cost medicine at home.

Also, the U.S. House of Representatives recently passed a bill allowing the reimportation of drugs manufactured in the United States, which would permit the sale of less-expensive products from Canada. A Senate version of the measure is more restrictive, and tough negotiations on a compromise version are expected in coming months.

Meanwhile, the drug companies continue to argue that the restrictions make good business and public policy. Some have said the Internet pharmacies that sold to Americans were reducing the amount of drugs available for Canadians -- a concern shared by many Canadians.

"Our system wasn't set up to service the United States," said Barbara Wells, executive director of the National Association of Pharmacy Regulatory Authorities, a non-profit association of industry regulators.

Out in Berkeley, Hammerquist has her own theory.

"The primary motivation of the pharmaceutical companies is profit," she said.