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Feb. 7, 2005. 01:00 AM
No good reason to bow to U.S. pharma's lobbying


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.

Michael Geist
is the Canada

Research Chair in Internet and

E-commerce Law at the University of Ottawa. He is on-line at The

opinions expressed herein are personal and do not necessarily reflect those of the University

of Ottawa.

Additional articles by Michael Geist

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