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Cross-Border Shopping: Will Canada's Pharmaceutical Industry Survive?

In his talk February 18, W. Neil Palmer offered a twist on the adage that when the US sneezes, Canada gets a cold. With more than 100 Internet pharmacies operating here, it might be said that Canadian entrepreneurs are proffering a bulk box of hankies to Americans who find US drug prices something to sneeze at.

Palmer, principal consultant of Palmer d'Angelo Consulting Inc. in Ottawa, reviewed the many facets of the cross-border shopping debate and the implications of current political, economic and industry developments.

As of 2002, Canadian drug prices were about 60% of those in the US, due to consistent ex-factory pricing and restricted markups. Despite hefty premiums charged by Internet pharmacies, cross-border shopping has clear appeal for US consumers and several cost-conscious state and municipal governments.

The US Food and Drug Administration and pharmaceutical industry contend that cross-border drug shopping compromises patients' safety and the chain of accountability; that abuse (eg, multi-pharmacy shopping) and drug counterfeiting may ensue; and that buying in Canada limits funds returned to research. It has been suggested that large drug shipments to the yawning US market could mean a shortage for Canadians. At least two manufacturers have said they'll limit supplies to the Internet businesses or wholesalers who sell to them. Other industry measures aimed at limiting the impact of cross-border drug shopping include pressure to eliminate price controls in Canada or to set global list prices closer to those in the US. A possible follow-on would be US-style differential pricing, said Palmer.

The pressure to encourage higher prices in Canada may be short-sighted, he commented. "If you can import drugs from Canada, you can import from Europe." He added that "some elements" of the Canadian government support limiting exports to the US, especially if that means continued price protection for Canada. Still, a theme in Canadian government comments on the issue is that the US should enforce its own laws against bulk importation of drugs.

Other recent events may erode the Internet pharmacies' allure, at least for drugs that aren't substantially cheaper in Canada. These include the appreciation of the loonie against the US dollar and a new Medicare law including a drug price discount for seniors.

Appropriate advice for Canadian marketers would appear to be 'stay tuned'. "Quite clearly this issue is going to continue in the United States and continue here in Canada because we're going to get the fallout," Palmer observed.

By Carol Duthie, a freelance medical writer/editor based in Beaconsfield, Quebec.

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