The Battle over Canadian Internet Pharmacies

[David Farber <dave () farber net>]

------ Forwarded Message
From: Michael Geist <mgeist () pobox com>
Date: Mon, 07 Feb 2005 07:06:32 -0500
To: <dave () farber net>
Subject: The Battle over Canadian Internet Pharmacies

Dave,

Of possible interest to IP -- my regular Toronto Star Law Bytes column
assesses the
current battle over Internet pharmacies. As you may know, despite support
from several U.S. states, the Canadian government has sent clear signals
that it intends to shut down the practice following significant pressure
from the U.S. federal government (President Bush reportedly raised the issue
on a visit to Canada late last year).  The column argues that the Canadian
and U.S. governments, supported by PhARMA, have relied on a series of
demonstrably false premises to stir fear among the Canadian and American
public. It concludes that while there may be good reasons to shut down the
industry, the public has yet to hear them.  Column at
<http://geistnetpharmacies.notlong.com>

MG

No good reason to bow to U.S. pharma's lobbying

Michael Geist
Toronto Star

During the Internet boom of the 1990s, analysts frequently extolled the
virtues of e-commerce, envisioning a world in which clicks would replace
bricks. While the dot-com bust put a damper on many of those dreams, in
reality e-commerce has revolutionized many business sectors including book
sales, music distribution and travel services, to name a few.

The pharmaceutical sector has faced enormous upheaval as Canadian
Internet-based pharmacies have bridged the gap on pharmaceutical pricing by
selling cheaper brand-name products to the United States. This opportunity
was created primarily by Canadian regulations that grant the Patented
Medicine Prices Review Board (PMPRB) the right to set limits on the prices
of brand name pharmaceutical products.  As a result, many of the
most-prescribed pharmaceutical products sell for at least 40 per cent less
in Canada than in the United States.
Seemingly overnight, hundreds of Canadian Internet pharmacies have sprung
up, employing thousands of people and selling as much as $1 billion in
pharmaceuticals to millions of Americans each year. The pharmacies are
particularly popular with uninsured seniors, some of whom face the dilemma
of being forced to choose between purchasing necessary medicines or paying
for food and their monthly rent.
The success of this Internet industry has generated alarm among major
pharmaceutical companies.
 Led by Pharmaceutical Research and Manufacturers of America (PhRMA), the
leading U.S. pharmaceutical trade association, the industry has engaged in a
vigorous lobbying campaign in both Canada and the U.S. in an effort to shut
down the Canadian Internet pharmacies.
In recent weeks, comments from federal Health Minister Ujjal Dosanjh
suggests that their efforts are paying off since it appears that Canada is
on the verge of enacting regulatory changes that will effectively kill the
Canadian Internet pharmacy industry. According to recent reports, the
government is eyeing several measures including a prohibition on Canadian
doctors co-signing prescriptions for U.S. patients (a pre-requisite for
filling a prescription in Canada), a ban on the export of certain
pharmaceutical products, and a new requirement that patients appear in
person in order to have their prescription filled.

While there may be good reasons for adopting these tough measures, the
Canadian government has yet to articulate them. Instead, the Canadian and
U.S. governments, supported by PhRMA, have relied on a series of
demonstrably false premises to stir fear among the Canadian and American
public.
These include claims that online sales of pharmaceuticals from Canadian
Internet pharmacies are dangerous, that they will lead to reduced
pharmaceutical research and development, and that the sales could result in
product shortages in Canada.

The argument that online pharmaceutical sales are dangerous is directed
primarily at U.S. consumers. The claims, found in advertisements and policy
papers, intimate that pharmaceuticals coming from Canadian sources may be
counterfeit or not subject to the same oversight as products found in the
U.S.

Several studies, including recent analysis from the U.S. General Accounting
Office and Health Canada, refute these arguments. The GAO study, released in
June 2004, surveyed dozens of Internet pharmacy sites worldwide. It found
that Canadian sites were more likely than their U.S. counterparts to require
a physician prescription before filling an order.
A Health Canada study released in November 2004 arrived at much the same
result, concluding that the sites it surveyed were in compliance with
Canadian law and were selling drugs approved for sale in Canada. In fact,
while criticizing Canadian Internet vendors, major pharmaceutical companies
generate more than $30 billion (U.S.) in sales in the U.S. annually from
online and direct mail sales.
Claims of a link between Internet pharmacies and reduced pharmaceutical
research and development are similarly specious. While PhRMA typically
argues that it costs over $800 million to bring a new drug to market,
Harvard Medical School's Dr. Marcia Angell, the former editor of the New
England Journal of Medicine and author of The Truth About the Drug
Companies, has marshaled persuasive evidence that the actual figure is
closer to $100 million and therefore a small reduction in revenues is
unlikely to have a significant impact on R&D activity.
The prospect for reduced Canadian pharmaceutical research and development is
particularly open to question since the brand-name pharmaceutical companies
conduct relatively little R&D in Canada when compared to their commitments
in other developed countries. A 2002 PMPRB study found that Canada ranked
last among a group of leading developed countries (which included the U.S.,
U.K., France, Germany, Sweden, Switzerland, and Italy), for pharmaceutical
R&D expenditures.
 Finally, suggestions that Internet pharmacies will lead to pharmaceutical
shortages in Canada underestimate the federal government's ability to
protect consumers. Even though several major pharmaceutical companies,
including GlaxoSmithKline, Pfizer, AstraZeneca, and Merck, have begun to
stop supplying product to pharmacies that resell to the U.S., there are at
least two reasons why that approach should not lead to a Canadian drug
shortage.
First, the refusal to supply drugs is already being challenged in both
Canada and the U.S. with several pending antitrust lawsuits as well as
complaints before the Canadian Competition Bureau. Second, the Canadian
government could respond to the pharmaceutical companies by issuing
compulsory licenses that would allow their generic pharmaceutical
competitors to manufacture the same product in Canada provided the
brand-name companies are given reasonable compensation. While such an
approach would spark an outcry from the industry, no industry should be
permitted to hold a country hostage with threats that undermine public
health.
Rather than repeating tired and discredited arguments, it is time for the
federal government to come clean. It is evident that Ottawa's proposed
policy is being driven by heavy lobbying from U.S. President George W. Bush
(who reportedly raised the issue on his visit to Canada last year) and the
U.S. pharmaceutical industry, which retained former American ambassador to
Canada Gordon Giffin to lobby Canadian officials on the Internet pharmacy
issue.
While there may be good reasons for shutting down the online pharmaceutical
industry - it is not Canada's place to solve the inequities in the U.S.
pharmaceutical market - the public has yet to hear them. Given the fact that
the proposed approach will not only curtail one of Canada's e-commerce
success stories but also lead to significant job losses, Canadians deserve
some straight talk on this issue.
-- 
**********************************************************************
Professor Michael A. Geist
Canada Research Chair in Internet and E-commerce Law
University of Ottawa Law School, Common Law Section
57 Louis Pasteur St., Ottawa, Ontario, K1N 6N5
Tel: 613-562-5800, x3319     Fax: 613-562-5124
mgeist () pobox com              http://www.michaelgeist.ca


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