INTERNET PHARMACIES: MANITOBA LEADS THE WAY IN

UNCLAS SECTION 01 OF 03 OTTAWA 001383

SIPDIS

STATE FOR WHA/CAN PNORMAN AND EB/DCT
USDOC FOR ITA GWARD AND CBUSQUETS
DEPT PASS USTR SCHANDLER
DEPT ALSO PASS FDA DAUTOR AND MECKLES


E.O. 12958: N/A
TAGS: ECON ETRD EIND CA
SUBJECT: INTERNET PHARMACIES: MANITOBA LEADS THE WAY IN
EXPORTS TO THE U.S.

REFTEL: 2002 OTTAWA 2048


1. SUMMARY - WITH STRONG SUPPORT FROM THE PROVINCIAL
GOVERNMENT AND REGULATOR, MANITOBA HAS BECOME A HUB FOR
THE GROWING CROSS-BORDER TRADE IN PHARMACEUTICALS FROM
CANADA TO THE U.S. CANADIAN INTERNET PHARMACIES, SOME OF
WHICH FILL MORE THAT 1000 PRESCRIPTIONS A DAY, HAVE BEEN
SUCCESSFUL IN TAKING ADVANTAGE OF THE DISPARATE U.S. AND
CANADIAN MARKET PRICES FOR PHARMACEUTICALS AND LEGAL
UNCERTAINTIES ON BOTH SIDES OF THE BORDER. MANITOBA'S
STRONG PROMOTION OF THE INDUSTRY IS IN STARK CONTRAST
WITH THE CAUTIOUS APPROACH TAKEN BY OTHER PROVINCES,
ESPECIALLY ONTARIO. THE FUTURE OF THE INDUSTRY WILL
DEPEND ON THE INTERNET PHARMACIES' ABILITY TO RESPOND TO
THE INCREASING PRESSURE ON THE SUPPLY OF PHARMACEUTICALS
AND NAVIGATE THE MURKY LEGAL AND ETHICAL WATERS
SURROUNDING THE TRADE. END SUMMARY.

--PHARMACEUTICAL EXPORTS - A BOON FOR MANITOBA--


2. MANITOBA HAS BECOME A MAJOR HUB IN A GROWING TRADE IN
PRESCRIPTION PHARMACEUTICALS FROM CANADA TO THE U.S.,
MUCH OF WHICH IS NOW ORDERED OVER THE INTERNET AND
FULFILLED BY MAIL. MANITOBA-BASED INTERNET PHARMACIES
ACCOUNT FOR WELL OVER HALF OF THE ESTIMATED USD 500
MILLION WORTH OF PRESCRIPTION DRUGS SOLD TO THE U.S. FROM
CANADA LAST YEAR. THE MANITOBA PHARMACEUTICAL
ASSOCIATION (MPA),WHICH REGULATES PHARMACIES IN THE
PROVINCE, ESTIMATES THAT 53 MANITOBA PHARMACIES ARE
INVOLVED IN CROSS-BORDER TRADE WITH THE UNITED STATES.
THE INDUSTRY HAS CREATED UPWARDS OF 2000 JOBS IN TOWNS
THROUGHOUT THIS TRADITIONAL MANUFACTURING AND FARMING
PROVINCE.


3. KRIS THORKELSON, CHAIRMAN AND CEO OF CANADA DRUGS, ONE
OF THE LARGEST INTERNET PHARMACIES IN MANITOBA, INVITED
MISSION PERSONNEL FOR A TOUR OF THE COMPANY'S FACILITIES
TO HELP DEMONSTRATE THAT THE NEW INTERNET PHARMACIES ARE
NOT "FLY BY NIGHT" OPERATIONS, AND THAT THEY HAVE
INVESTED HEAVILY IN BRICKS AND MORTAR, AS WELL AS
SOPHISTICATED COMPUTER AND ELECTRONIC TRACKING SYSTEMS.
CANADA DRUGS FILLS OVER 1000 PRESCRIPTIONS A DAY, ALL FOR
EXPORT TO THE UNITED STATES. CUSTOMERS INITIATE AN ORDER
BY FAXING OR MAILING TO CANADA DRUGS A COPY OF THEIR U.S.
PRESCRIPTION, TOGETHER WITH A POWER OF ATTORNEY FORM THAT
WAIVES THE CANADIAN PHARMACIST OF LIABILITY, AND A
PATIENT QUESTIONNAIRE. AN IN-HOUSE PHARMACIST AT CANADA
DRUGS REVIEWS MATERIALS, A CANADIAN PHYSICIAN CO-SIGNS
THE PRESCRIPTION, AND THE PHARMACIST REVIEWS IT A SECOND
TIME AFTER A TECHNICIAN FILLS THE ORDER, AND ONCE MORE
BEFORE IT IS SHIPPED OUT. EACH ORDER IS CONFIRMED BY
PHONE WITH THE CUSTOMER BEFORE IT IS SENT. CANADA DRUGS
HAS 18 PHARMACISTS ON STAFF, OVER 40 PHARMACEUTICAL
TECHNICIANS, AND APPROXIMATELY 170 STAFF IN TOTAL.

--PROVINCE STEPPING IN TO SUPPORT THE INDUSTRY--


4. THE GOVERNMENT OF MANITOBA (GOM) IS A STRONG SUPPORTER
OF THE PHARMACEUTICAL EXPORT INDUSTRY AND VIEWS THE NEW
BUSINESSES AS A KEY COMPONENT OF ITS PROVINCIAL GROWTH
STRATEGY. EXPORTS FROM CANADA STILL ONLY ACCOUNT FOR
LESS THAN ONE-HALF OF ONE PERCENT OF THE U.S.
PRESCRIPTION DRUG MARKET. THE GOM IS WORKING WITH THE
MPA AND THE MANITOBA COLLEGE OF PHYSICIANS AND SURGEONS
(MCPS) ON SMOOTHING OUT THE REGULATORY PROCESS TO
LEGITIMIZE THE INDUSTRY. AS FAR AS THE GOM IS CONCERNED,
EXPORTING PHARMACEUTICALS TO THE U.S. IS NOT ILLEGAL
UNDER CANADIAN LAW, AND THEY ARE NOT INTERESTED IN
ENFORCING U.S. PROHIBITIONS ON PHARMACEUTICAL PRODUCTS IF
THE FDA WILL NOT ENFORCE THEM. THE GOM IS INSTEAD
FOCUSED ON ENSURING THAT THE PRACTICE IS SAFE, MEETS
CANADIAN FEDERAL AND PROVINCIAL GUIDELINES AND PRACTICES,
AND THAT INTERNET PHARMACIES PROVIDE U.S. CONSUMERS WITH
THE SAME SAFEGUARDS AND LEVEL OF SERVICE AS CANADIAN
CITIZENS.


5. ONE OF THE BIGGEST CONCERNS FOR THE PROVINCIAL
REGULATORY AUTHORITIES ACROSS CANADA HAS BEEN THE
PRACTICE OF CANADIAN PHYSICIANS CO-SIGNING, OR RE-WRITING
PRESCRIPTIONS FOR U.S. PATIENTS THEY HAVE NEVER SEEN.
REGULATORS HAVE QUESTIONED WHETHER SIGNING OFF ON
PRESCRIPTIONS WITHOUT PERFORMING AN APPROPRIATE PHYSICAL
EXAMINATION IS TANTAMOUNT TO PROFESSIONAL MISCONDUCT.
THE MPA HAS WORKED WITH THE MCPS TO CLAMP DOWN ON THE
MOST EGREGIOUS CASES WHERE PHYSICIANS WERE "RUBBER
STAMPING" MORE THAN 1000 PRESCRIPTIONS A DAY. DESPITE
THESE CONCERNS, THE MPA, THE MCPS, AND MANITOBA'S
INTERNET PHARMACIES RECENTLY SIGNED OFF ON A GOM PLAN TO
ELIMINATE CO-SIGNING BY A CANADIAN PHYSICIAN ALTOGETHER
AND TO ACCEPT PRESCRIPTIONS FROM U.S. PHYSICIANS ON PAR
WITH THOSE FROM CANADA. THE GOM IS EXPECTED TO ANNOUNCE
THEIR PROPOSAL SHORTLY AND SEEK THE NECESSARY LEGISLATIVE
CHANGES TO DO AWAY WITH CO-SIGNING IN THE FALL. THE
FEDERAL GOVERNMENT WILL LIKELY CHALLENGE THIS PROVINCIAL
LEGISLATION.


6. THE STRONG PROMOTION OF THE INDUSTRY FROM MANITOBAN
OFFICIALS IS IN STARK CONTRAST TO THE CAUTIOUS APPROACH
OF OTHER PROVINCIAL GOVERNMENTS AND REGULATORS. ONTARIO
HAS TAKEN THE STRONGEST STANCE AGAINST INTERNET
PHARMACIES, QUESTIONING BOTH THE LEGITIMACY OF THE CROSS-
BORDER TRADE IN PRESCRIPTION PHARMACEUTICALS AND THE
ABILITY OF THE PROVINCIAL REGULATORS TO EFFECTIVELY
MONITOR THE SALE OF PRESCRIPTION DRUGS SOUTH OF THE
BORDER. THE COLLEGE OF PHYSICIANS AND SURGEONS OF
ONTARIO, THE SELF-REGULATING BODY FOR THE PROVINCE'S
MEDICAL PROFESSION, HAS STATED THAT "IT IS NOT ACCEPTABLE
FOR A PHYSICIAN TO SIGN OR CO-SIGN A PRESCRIPTION WITHOUT
ATTENDING THE PATIENT." THE ONTARIO COLLEGE OF
PHARMACISTS HAS ALSO WEIGHED IN STATING THAT PHARMACISTS
"SHALL NOT FACILITATE OR ENTER INTO AGREEMENTS WITH
PHYSICIANS FOR THE PURPOSES OF CO-SIGNING OR REWRITING
PRESCRIPTIONS FOR OUT-OF-COUNTRY PATIENTS." IN JUNE THE
ONTARIO COURTS WILL HEAR A CASE AGAINST A NUMBER OF
INDIVIDUALS AND COMPANIES DOING BUSINESS WITH AN ONLINE
PHARMACY, THE CANADIAN DRUG STORE INC., WHICH IS ACCUSED
OF UNLAWFULLY OPERATING AN UNACCREDITED INTERNET PHARMACY
AND FILLING PRESCRIPTIONS WRITTEN BY U.S. PHYSICIANS FOR
U.S. PATIENTS.

--CLOUDS LOOMING OVER THE INDUSTRY--


7. DESPITE THE INDUSTRY'S RECENT GROWTH, THE ENORMOUS
POTENTIAL FOR LOWER-PRICED PRESCRIPTION DRUGS IN THE U.S.
MARKETPLACE, AND STRONG SUPPORT FROM GOVERNMENT AND
REGULATORY OFFICIALS, THE LONG-TERM VIABILITY OF THE
CROSS-BORDER INTERNET PHARMACEUTICAL TRADE IS TENUOUS.
IN ADDITION TO A POSSIBLE CRACKDOWN ON IMPORTERS BY THE
FDA OR A LEGISLATIVE FIX BY CONGRESS TO PROVIDE SENIORS
WITH PRESCRIPTION DRUG COVERAGE, THERE ARE SEVERAL
DOMESTIC FACTORS THAT COULD SEVERELY DAMAGE THE CANADIAN
INDUSTRY.


8. BRITISH PHARMACEUTICAL MANUFACTURER GLAXOSMITHKLINE
(GSK),WHICH ANNOUNCED IN JANUARY THAT THEY WOULD NO
LONGER SUPPLY THEIR PRODUCTS TO CANADIAN PHARMACIES
SELLING TO THE U.S. MARKET, IS APPLYING THE GREATEST
PRESSURE. PHARMACEUTICAL MANUFACTURES ARE CONCERNED THAT
THE GROWING CROSS-BORDER TRADE COULD LEAD TO A NUMBER OF
PROBLEMS: SHORTAGES OF BOTH CANADIAN PHARMACISTS AND DRUG
PRODUCTS FOR CANADIAN CONSUMERS, DRUGS UNAPPROVED IN THE
U.S. BEING DISPENSED TO U.S. PATIENTS, INFRINGEMENT OF
U.S. PATENTS, AND POTENTIAL LIABILITY FOR CANADIAN DRUG
COMPANIES. IN PRIVATE WE HAVE ALSO BEEN TOLD THAT FOR
THE FIRST TIME COMPANIES HAVE EXPERIENCED DECREASED SALES
OF KEY DRUGS IN NORTHERN BORDER STATES.


9. KRIS THORKELSON FROM CANADA DRUGS ADMITTED THAT
SUPPLIES OF SOME GSK DRUGS ARE STARTING TO RUN SHORT.
THE COMPANY HAS BEEN ABLE TO SECURE SUPPLIES THROUGH
OTHER CANADIAN PHARMACIES, BUT IS BEGINNING TO EXPERIENCE
DELAYS AND IS CONCERNED THAT THEY MAY NO LONGER BE ABLE
MEET THE DEMAND. EFFORTS BY THE PHARMACEUTICAL EXPORTERS
TO COUNTER GSK'S ACTIONS WERE DERAILED WHEN CANADA'S
FEDERAL COMPETITION BUREAU RULED IN MARCH THAT GSK HAD A
"REASONABLE BUSINESS JUSTIFICATION" TO BLOCK THE EXPORTS.
ASTRAZENECA'S RECENT ANNOUNCEMENT THAT THEY WILL LIMIT
SUPPLIES OF THEIR PRODUCTS TO CANADIAN PHARMACIES AND
WHOLESALERS HAS COMPOUNDED THE SUPPLY PROBLEMS FOR
INTERNET PHARMACIES.


10. A RELATED, AND YET UNTESTED, QUESTION IS HOW FEDERAL
AND PROVINCIAL GOVERNMENTS WILL REACT IF THE DEMAND FROM
INTERNET PHARMACIES BEGINS TO AFFECT THE SUPPLY OF DRUGS
TO TRADITIONAL PHARMACIES SERVING CANADIAN PATIENTS. THE
GOM IS PROMOTING A "MANITOBA FIRST" POLICY TO ENSURE THAT
MANITOBANS ARE NOT DENIED ACCESS TO DRUGS IF THERE IS A
SHORTAGE, BUT THE POLICY LACKS THE REGULATORY TEETH THAT
WOULD FORCE PHARMACIES TO SELL TO THE MANITOBA MARKET.
FEDERAL REGULATIONS DO NOT STIPULATE THAT PHARMACIES MUST
MAINTAIN AN ADEQUATE SUPPLY OF DRUGS OR COMPEL THEM TO
GIVE FIRST PRIORITY TO CANADIAN CONSUMERS. BOTH HEALTH
CANADA AND INDUSTRY CANADA ARE MONITORING THE CANADIAN
DRUG SUPPLY AND HAVE INDICATED THAT THEY WOULD INTERVENE
IN EMERGENCY CIRCUMSTANCES, AS THEY DID WHEN THERE WAS A
RUN ON CIPRO DURING THE ANTHRAX SCARE IN 2001.


11. PROVINCIAL EFFORTS TO PROMOTE THE PHARMACEUTICAL
EXPORT INDUSTRY ARE ALSO BEING CLOSELY WATCHED BY THE
FEDERAL GOVERNMENT. PROVINCIAL REGULATORS SET AND
ENFORCE THE PROFESSIONAL STANDARDS FOR PHYSICIANS AND
PHARMACISTS, BUT HEALTH CANADA, THROUGH THE HEALTH ACT
AND FOOD AND DRUG ACT, IS ULTIMATELY RESPONSIBLE FOR THE
SAFETY OF FOODS, DRUGS AND HEALTH PRODUCTS. IN A RECENT
MEETING WITH USG OFFICIALS, DAVID EDWARDS, LEGAL COUNSEL
AT HEALTH CANADA, NOTED THAT ACCORDING TO THE HEALTH ACT,
A "PRACTITIONER" MUST BE A CANADIAN, AND THAT IT WOULD
NOT BE POSSIBLE FOR THE GOM TO ELIMINATE THE NEED FOR A
CANADIAN DOCTOR TO CO-SIGN A PRESCRIPTION BEFORE IT COULD
BE FILLED BY A CANADIAN PHARMACIST.

--COMMENT-


12. DEPENDING ON WHOM ONE SPEAKS WITH AND THEIR RELATION
TO THE PHARMACEUTICAL INDUSTRY, BI-NATIONAL TRADE IN
PRESCRIPTION PHARMACEUTICALS IS EITHER A MARKET WITH HUGE
GROWTH POTENTIAL FOR RURAL CANADIAN COMMUNITIES, OR A
LEGALLY QUESTIONABLE BUSINESS THAT HAS ACHIEVED TEMPORAL
SUCCESS ARBITRAGING GAPS IN REGULATIONS AND PRICES. THE
LEGAL FRAMEWORK SURROUNDING THE CROSS-BORDER TRADE HAS
NOT BEEN SOLIDIFIED ON EITHER SIDE OF THE BORDER, AND
UNTIL IT IS MANY OF THE ISSUES WILL REMAIN OPEN TO
INTERPRETATION. OTHER PROVINCES ARE PAYING CLOSE
ATTENTION TO DEVELOPMENTS IN MANITOBA TO SEE HOW THE
INTERNET BUSINESS MODEL WILL RESPOND TO CHANGES IN THE
MARKETPLACE AND WHAT IMPACTS THIS MAY HAVE FOR THE
CANADIAN HEALTH CARE SYSTEM.

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