CANADA SEEKS REGULATORY PRESCRIPTION FOR INTERNET

UNCLAS SECTION 01 OF 02 OTTAWA 000525

SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD SOCI CA
SUBJECT: CANADA SEEKS REGULATORY PRESCRIPTION FOR INTERNET
PHARMACIES

REF: OTTAWA 141


1. (U) Summary: Health Canada Minister Ujjal Dosanjh's
response to reimportation of drugs from Canada to the United
States has been increasingly negative in the past months. In
the wake of the U.S. task force report, Health Canada seems
poised to act in order to limit or prohibit drug sales from
Canada to the United States. However, the House of Commons
Standing Committee on Health has requested a delay until they
can conduct further hearings. Initial questioning from
Members of Parliament on the standing committee focused
heavily on whether there is any need to eliminate the
internet pharmacy industry; all eyes are watching
developments in Congress, since a law allowing bulk
reimportation would seem to require GOC steps to protect
Canadian drug supplies. Private industry has already taken
steps to stem the flow of drugs across the border, with seven
major pharmaceutical companies restricting sales to internet
pharmacies that export drugs from Canada to the United
States. It may be difficult for Health Canada to impose
restraints, as the internet pharmacy business has become a
major source of income and jobs, particularly in Manitoba,
and pharmacy regulation is primarily the responsibility of
the provinces. End summary.

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Introduction and Recent Developments
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2. (U) In the past, Canadian government efforts to respond
to booming internet pharmacy exports have been stymied by the
conflict between traditional pharmacists and internet
exporters, supported by provinces that see them as engines of
economic growth. Since his arrival in July, however, Health
Minister Dosanjh has expressed his determination to act to
protect the Canadian drug supply. Anecdotal evidence seems
to support his position; a November study by the Canadian
Pharmacists Association (CPhA) reported that 80 percent of
pharmacists who responded to the survey had experienced drug
shortages in the previous week, forcing them to spend time
hunting for supplies. Traditional busloads of senior
citizens invading from the south have never caused much
concern, but booming internet exports, and the threat of a
bigger boom caused by legalization in the United States, may
finally galvanize Canadian authorities into action.

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Health Canada: Considering its Options
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3. (U) Health Canada's response to the HHS report is thus
far restrained. In testimony before the Standing Committee
on Health, Health Canada representatives confirmed that they
are working on recommendations, with no definite timeline in
mind (Comment: Industry interlocutors say that Health Canada
may act by the end of this month.) Despite the Health
Minister's interest in moving aggressively to restrain
exports, timing of the decision may depend on developments in
Congress on bills that allow bulk importation from Canada.
Health Canada's proposed responses include: stricter
enforcement of the requirement that a doctor see the patient
for whom he or she prescribes (that is, elimination of the
practice of Canadian doctors co-signing U.S. prescriptions);
requirements that Canadian doctors only write prescriptions
for people present in Canada; and the compilation by Health
Canada of a list of medications that could be in short supply
in Canada and therefore cannot be exported.


4. (U) Health Canada would have to rely on provinces to
enforce these rules, however. The practice of pharmacy in
Canada is regulated by the provinces, and any licensed
pharmacy that offers internet services must meet the
standards of practice within its own province. Whether
provincial premiers (specifically Manitoba premier Gary Doer)
will be willing to comply with federal demands remains to be
seen.

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Pharmaceutical Industry Response
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5. (U) Industry representatives did not testify in
Committee, but have been privately pushing what they call the
"Spanish option" which would exclude exports from federal
price controls and would require new reporting from
pharmaceutical warehouses. This option was raised by MPs in
committee who had obviously been briefed by the industry, but
it does not seem to be currently under consideration by
Health Canada. In the absence of a regulatory remedy, much
of the U.S. pharmaceutical industry have already acted to
protect the two-tier North American pricing system: last
month, Merck and Co. joined GlaxoSmithKline, Pfizer Inc., Eli
Lilly and Co., Aventis, Astra Zeneca, and Wyeth
Pharmaceutical in cracking down on pharmacies that sell to
the United States.

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Internet Pharmacy Industry Response: the flipside
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6. (U) In a counter-proposal to Health Canada's possible
actions, David McKay of the Canadian International Pharmacy
Association (CIPA) proposed to committee that federal
authorities prohibit only bulk exports. This option is
obviously popular with the internet pharmacy companies; not
only would it leave them in business, but it would protect
them from future competition by bulk dealers. McKay argued
that there is a natural limit for internet drug sales to the
United States. Their consumer base consists of uninsured or
underinsured Americans on maintenance medication who are
willing to use the internet, a population that CIPA numbers
at a maximum of 3 million individuals, or roughly a third
more than current levels. Therefore, Health Canada should
not interfere with individual internet sales but should
instead act to block any bulk trade that could potentially
begin with the passing of new laws in the United States.

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It Always Comes Back To Trade
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7. (U) Some MPs and the internet pharmacy representatives
tried to frame the question in terms of free trade. CIPA
representatives repeatedly used parallel trade in the EU as
an example of how 'free trade' in pharmaceuticals does not
damage the exporting country. As Health Canada pointed out
in testimony, however, the United States is an outlier in
terms of pricing of pharmaceuticals, and therefore the EU
comparison is of limited value.


10. (U) However, many members of the committee appeared to
agree with McKay that a certain number of U.S. patients will
inevitably buy cheaper drugs over the internet and that
Canadian companies might as well exploit that market. The
representative of the International Pharmacy Association of
British Columbia argued with some heat that employment in his
province has been decimated by the softwood lumber disputes
with the United States, so why should the internet pharmacy
industry also have to be eliminated?


11. (U) There is lingering suspicion among MPs and interest
groups that Health Canada's "sudden" interest in regulating a
four-year industry is due to pressure from U.S. interests.
When asked why GOC is only now considering regulating an
industry that had its start almost five years ago, the Health
Canada representative said that GOC sees a potential for
rapid expansion and that "recent developments in the United
States have triggered greater concern." A liberal PM put it
more bluntly, saying "Big pharma got to Bush, and Bush got to
Paul Martin," and also describing Minister of Health Dosanjh
as a "shill for big pharma." McKay, for his part, dismissed
concerns over the risk of unregulated cross-border campaign
as an "FDA smear campaign".

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What (Regulatory) Prescription for GOC?
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13. (U) Future testimony from Health Canada requested by
the Standing Committee on Health may provide clearer insight
into GOC's next intended move. The situation, however, will
continue to be complicated by international and domestic
disagreements. Although Health Minister Dosanjh has
reiterated his determination to act to protect the Canadian
drug supply, he may not get Parliamentary backing until
imminent U.S. legalization breaks the logjam.

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