Upstart Texas Firm Makes Stir With Cheap Drugs From Canada

By Sarah Lueck
The Wall Street Journal, October 21, 2002

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The outfit, SPC Global Technologies Ltd. of Temple, Texas, is offering a way for up to 20,000 people enrolled in health plans that are SPC clients to obtain medicines from Canada, where prices are much lower than they are in the U.S. While SPC is a relatively minor player in the national health-care trade, its audacious strategy is certain to rattle the powerful pharmaceutical industry both by setting a possible precedent and by reviving public debate over why brand-name drug prices are so much higher in the U.S. than they are in much of the rest of the world. The move comes shortly after insurer UnitedHealth Group Inc. said it waived a requirement that prescription drugs be purchased in the U.S. in order to be covered.

The SPC approach could draw regulatory scrutiny, because the importation of foreign-issued pharmaceuticals is technically illegal by anybody other than a drug maker or its affiliates. Even so, the Food and Drug Administration signaled that SPC may not be doing anything illegal. The FDA has warned patients they're taking a health risk in buying drugs from outside the U.S. (The FDA plans to propose Monday a rule designed to speed the introduction of generic drugs, to help lower drug costs. See related article.)

SPC isn't the only player now trying to make less costly drugs from across the border available to U.S. consumers. The SPC plan, however, appears to go further than other programs by facilitating the purchase and prescription of Canadian drugs, rather than leaving it to individuals to make their own arrangements.

Last month, UnitedHealth Group notified 97,000 AARP members whom the company insures that it would cover the costs of drugs they purchased in Canada or other foreign countries. Busloads of seniors and other Americans with high prescription-drug costs cross into Canada and Mexico regularly in search of cheaper medicines. Dozens of Internet pharmacies have sprouted in Canada, where the weak currency and government price caps make brand-name prescription drugs relatively cheap for U.S. residents. In California, Gov. Gray Davis has encouraged health insurers to come up with plans to allow residents of his state, especially Mexican immigrants, to get medical care at lower cost in Mexico.

SPC is a six-year-old company that processes claims and designs health plans for hospices, unions, managed-care companies and others. Its Canadian drug plan was created in July by Texas pharmacist Tom Curb, a principal SPC shareholder. He estimates the program so far has filled 2,000 prescriptions, compared with a million or so U.S. prescriptions the company processes annually. Mr. Curb says the average discount on the drugs offered through the Canada program is 67% off the normal U.S. price SPC clients receive.

Mr. Curb, 61 years old and a self-described "gray-headed hell-raiser," recognizes that he is operating amid legal uncertainties. While importing drugs is illegal for anyone other than drug companies, the FDA usually allows individuals to bring small amounts of medication across the border, and shipments through the mail tend to get past typically overwhelmed government inspectors at the border.

"It was common knowledge that members of benefit plans were going outside the U.S. for pharmaceuticals, especially after their [drug] benefit expires," Mr. Curb says. The SPC system seeks to do this more safely by monitoring patients' prescriptions in the U.S. and Canada for dangerous drug interactions and other potential problems, he says.

"If that's bad, lynch me," Mr. Curb says.

For now, Mr. Curb is counting on importation being enough of a political hot potato that regulators and politicians, uneasy about taking cheaper prescription drugs out of the hands of seniors, won't do anything. "It would take an extremely courageous politician, especially in an election year, to say, 'We don't have money to give you folks a Medicare benefit and at the same time we're going to prevent you from getting drugs as cheaply as you can,' " he says. Congress failed this year to enact legislation that would have added a drug benefit to Medicare, the federal program for the elderly and disabled.

Here's how the SPC program works: A list of about 250 drugs -- including such big-sellers as Pharmacia Corp.'s arthritis drug Celebrex and Merck & Co.'s cholesterol-lowering Zocor -- that are cheaper in Canada is sent to consumers. The patients obtain a prescription through their U.S. doctor and order the drugs through SPC affiliate Expedite-Rx, which is also based in Temple. That company places the order with Cross Border Pharmacy Ltd., a closely held licensed pharmacy in Calgary, Alberta, which forwards the orders to Canadian doctors. They rewrite the prescriptions, as required by Canadian law. Cross Border then fills the prescriptions and sends the drugs to the beneficiaries.

William K. Hubbard, senior associate commissioner of the FDA, declined to comment specifically on the SPC system but said such companies aren't necessarily doing anything wrong because they don't handle the drugs. "If they're not actually importing drugs, I don't know what enforcement role we would have," Mr. Hubbard said. "Our message to all these groups has been that they need to be cognizant of the fact that these drugs are not FDA-approved and their safety can't be assured." He added that the agency has asked UnitedHealth to include warnings of the risk of importation in the materials it sends to consumers.

Peter Barton Hutt, a drug-industry lawyer and a former FDA general counsel, says the law is clear. "There is absolutely no legal ambiguity here. ... The people who are causing the illegal importation of drugs are as guilty as the people who have shipped them in." In 2000, Congress passed legislation allowing pharmacies, wholesalers and individuals to import drugs from abroad. But the law was never implemented because of safety concerns by the Clinton and Bush administrations. This year, the Senate again approved a provision to allow the importation of drugs from Canada, but the House didn't act on the issue.

Jeff Trewhitt, a spokesman from the Pharmaceutical Research and Manufacturers of America, declined to comment on the SPC program, saying the drug-industry trade group hadn't seen the details. He called importation from Canada a "risky proposition" and likened it to "playing Russian roulette with patients" because of the risk of receiving substandard drugs.

Some U.S. pharmacists, who fear losing business if prescriptions are diverted to Canada, have complained about the SPC system. The Kansas Pharmacists Association sent a letter in August to the Consolidated Associations of Railroad Employees, an SPC client also based in Temple that provides health benefits for 9,500 railroad employees and retirees, including some who live in Kansas. The letter complained that CARE had begun to offer the SPC Canadian program. "You are encouraging U.S. citizens to violate federal law," it read, in underlined, bold-face type. The pharmacists' association also sent the letter to the state attorney general's office and to the Kansas Board of Pharmacy, the state agency that regulates pharmacies and pharmacists.

Susan Linn, executive director of the state board, says she's worried that the SPC program will endanger patients. "My biggest concern is I can't license a Canadian pharmacy, so it's sort of buyer beware," she says. The state attorney general's office declined to take any action, noting in a letter to the Kansas board that the matter was "primarily the responsibility of the FDA."

Shelly Hawk, chief executive and administrator of CARE, says that after learning that many members were already buying their prescriptions in Canada on their own, CARE wanted to be sure they were getting the right medications and using them correctly. She says CARE, which is a nonprofit organization, doesn't benefit financially if its members use the Canada drug-purchasing program. "The safety issue -- that was the driving force," Ms. Hawk says.