[Ip-health] Pfizer moves to stem Canadian Drug Imports

[Joy Spencer]

August 7, 2003
Pfizer Moves to Stem Canadian Drug Imports
By GARDINER HARRIS

Just days after the House of Representatives voted to legalize the
import of cheap prescription drugs from Canada, Pfizer has moved to
squelch the nascent trade at its source.

The company confirmed yesterday that it had sent letters to 50 Canadian
pharmacies that it believes are exporting to the United States, telling
them that they would have to begin ordering their drugs directly from
Pfizer, rather than from wholesalers. If Pfizer decides that the
pharmacies are ordering more drugs than they need to meet Canadian
demand, it will cut off or curtail shipments to them, the company said.

"We feel the need to take appropriate steps to be able to enforce our
terms of sale with these customers, including a long-standing provision
that these medicines not be exported from Canada," a Pfizer spokesman,
Nehl Horton, said.

The action by Pfizer, the world's biggest drug maker, follows similar
moves by GlaxoSmithKline, AstraZeneca and Wyeth, all of which have
sought to stem the tide of cheap Canadian drugs into the United States.

Last year, drug prices in the United States were 67 percent higher than
in Canada, a report by a Canadian health agency found. As a result,
cross-border prescription drug sales have soared to as much as $650
million a year, according to IMS Health, a company that tracks drug sales.

Asked about Pfizer's move, Billy Shawn, chief executive of the Canadian
Drugstore Inc., an Internet pharmacy, said that it could lead to product
shortages and price increases on his and other Web sites selling to
Americans. "We're pretty resourceful at getting product, but if they
really stick to this policy, it could affect our business in a big way,"
Mr. Shawn said.

The United States is the last industrialized country where drug
manufacturers are allowed to set prices without government interference.
The pharmaceutical industry earns half of its revenues and most of its
profits in the United States, profits that it says are essential to pay
for drug research.

Drug makers also argue that imported drugs can be dangerous, noting that
neither American nor Canadian health authorities assure their quality.
Indeed, the Food and Drug Administration has repeatedly cited the risks
from imported drugs, and regulators in recent months have sought to shut
down small stores springing up across the country that help Americans
buy imported drugs.

But the growing disparity between American and foreign drug prices has
led to a surge of sentiment against the industry in Congress, even among
Republicans, who have been the recipients of most of the drug makers'
campaign contributions. The industry has become the largest contributor
to federal political campaigns, donating about $21 million to parties
and candidates during the 2002 election, according to the Center for
Responsive Politics.

The House passed legislation to allow drug imports on July 25. But the
provision faces an uncertain future in a conference with the Senate that
must also reconcile competing proposals for adding a drug benefit to
Medicare. Fifty-three senators have signed a letter circulated by the
drug industry saying that they oppose drug imports.

In Chicago today, Representative Gil Gutknecht, a Republican from
Minnesota, and Representative Rahm Emanuel, a Democrat from Illinois,
are holding what they say will be the first of many town-hall meetings
to build support for the drug importation measure.

Mr. Emanuel's office last night released a letter from the AARP, which
lobbies on behalf of older Americans, endorsing the concept of legal
reimportation of prescription drugs from Canada.

"That country is already the source of considerable de facto
re-importation, and safety violations appear to be minimal in extent and
insignificant in nature," William D. Novelli, the organization's chief
executive, wrote in the letter to Mr. Emanuel and Mr. Gutknecht.

The steps by Pfizer and other drug makers to restrict sales of their
drugs in Canada, however, could help safeguard the industry's profits
even if the measure becomes law.

Drug companies have sophisticated means of controlling imports.
Data-tracking companies keep close tabs on doctors' prescriptions, so
companies are keenly aware of actual local demand in much of the
industrialized world. The companies also closely track buying trends.
When drug orders at a particular pharmacy spike in the absence of a
similar jump in nearby doctors' prescriptions, executives investigate.

Drug wholesalers also help manufacturers track these trends. "Together
with the manufacturers, we have worked to identify the pharmacies that
have been shipping back illegally," said Larry Kurtz, a spokesman for
the McKesson Corporation, one of the largest drug wholesalers in the
United States and Canada.

A spokeswoman for GlaxoSmithKline, Nancy Pekarak, said her company began
using similar measures against Canadian exporters in January. She said
they were meant to ensure that drugs needed by Canadians were not
diverted to the United States.

--
Joy Spencer

Consumer Project on Technology
1.202.387.8030 (p)
1.202.234.5176 (f)
joy.spencer@cptech.org