Pressure
on Canada's Online Drug Sellers
By Bernard Simon, the New York Times
December 10, 2003
Chantelle
and Mark Rzepka, and Andrew and Catherine Strempler, above, the owners of
Mediplan, a big Canadian Internet drug seller, go through some of the
hundreds of orders they get every day.
Neither Mark Rzepka's colleagues nor his competitors were amused when The
Winnipeg Free Press published a two-part series recently about the lavish
way Mr. Rzepka and his wife had decorated their new 6,800-square-foot
house in this prairie city.
Mr. Rzepka is a co-founder of Mediplan
Health Consulting, the biggest of a number of Canadian Internet drugstores
that sell lower-priced prescription drugs to Americans, arousing
admiration from some quarters and anger from others.
"The last thing we need is the
impression that this is a get-rich-quick business," said David
MacKay, executive director of the Canadian International Pharmacy
Association, which represents about 20 of the online operations, including
Mediplan. Mr. MacKay has advised Mr. Rzepka and the association's other
members to cultivate a less ostentatious image.
Such advice reflects the intensifying
scrutiny that the online drugstores are attracting from politicians,
regulators and consumers on both sides of the border.
With prices that are typically one-half to
two-thirds of what drugstores charge in the United States, the Canadian
online pharmacies supply a growing number of Americans - about one
million, by their latest estimate - with drugs costing some $700 million a
year.
The cross-border retail sales of
prescription drugs rely on the Food and Drug Administration's discretion
to allow imports of small quantities of medicines for personal use. Many
state and local politicians have said they favor easier access to cheaper
imported drugs for Americans, but the major drug makers have lobbied
against the idea, seeing it as a threat to their biggest and most
profitable market. The new Medicare law legalizes cross-border drug
purchases, but only for foreign drugs that the secretary of health and
human services certifies are safe; any certifications are not likely to
happen soon.
Of the roughly 140 Canadian pharmacies now
shipping drugs across the border, 64 are based in Manitoba, where they are
generating as much heat as they do in Washington. Ron Guse, the registrar
of the Manitoba Pharmaceutical Association, which regulates the province's
pharmacies, said that the furor over the Internet drugstores had polarized
his profession. "Some say, Let it run," Mr. Guse said.
"Some say, Why are we spending so much time deciding how to get
medication to Americans?"
So far, the provincial government in
Manitoba has encouraged the online pharmacies as a model of
entrepreneurship. "It's quite safe and quite legal," said Scott
Smith, the province's industry minister. Noting that online commerce had
become a fact of life, Marcia Thomson, an assistant deputy minister of
health, said, "We've got to regulate this, but not run away from
it."
Mediplan has its headquarters in Minnedosa,
a small town two hours' drive west of Winnipeg. Its 250 employees account
for one-tenth of the population, and it donates to local projects like a
golf course expansion and a scholarship program. Last month, Mediplan
opened a 18,000-square-foot distribution center and warehouse in
Niverville, another small Manitoba town. The $700,000 center was paid for
by the town and leased to the company.
"We get support no matter what, because
we create jobs," said Andrew Strempler, Mr. Rzepka's partner and
Mediplan's president.
Not everyone sees the business as
beneficial, though. Regulators are concerned about the lack of a personal
relationship between patients and physicians that is absent from online
prescription sales. Under Canadian law all prescriptions must be signed by
a doctor with a Canadian license, but the online pharmacies get around the
requirement by hiring local doctors to review American doctors'
prescriptions, typically at 10 Canadian dollars ($7.70) each. The College
of Physicians and Surgeons in Manitoba has censured four Canadian doctors
for doing so without having any personal contact with the patients
involved.
Even though the pharmaceutical association
has licensed dozens of online drugstores and relies in part on the fees
they pay, the association backed a proposal last month to ban the export
of prescription drugs from Canada. Saying that an "almost gold rush
attitude" had emerged, Mr. Guse, the association's registrar, said,
"When you have someone attracted financially to the industry, you
have a tougher time convincing them that there's a health care
component."
Some critics say the rapid growth of online
drugstores is responsible for creating a shortage of pharmacists in
Manitoba. Bob Clarke, who owns a drugstore in Thompson, a mining center in
the province's thinly settled north, estimated that pharmacists' wages had
soared by about 50 percent since mid-2002. Mr. Clarke said he recently had
to close his second store in Thompson because he was unable to attract
qualified employees.
But others say the online drugstores are
filling an important market niche. According to Bob Fraser, director of
pharmacy at CanadaDrugs.com, "The service that Americans are getting
from this pharmacy is superior to anything they're getting retail in the
United States." Showing a reporter around the company's new
distribution center in an industrial park on the outskirts of Winnipeg,
Mr. Fraser said that the prescriptions his company fills were seen by
three pharmacists and that a Canadian doctor was a co-signer on each
prescription.
Mr. Fraser was also host last month to Gov.
Tim Pawlenty of Minnesota, who said afterward that he saw no health risk
involved in Americans buying their drugs in Canada.
The online drugstores dismiss the suggestion
that they have caused a shortage of druggists. The online companies, they
say, employ only about 100 of the province's 1,150 pharmacists. The
problem, they say, is a result of big-box retailers adding pharmacy
counters in their stores.
Several online drugstore executives said
that while business remained brisk, sales growth was slowing. "It's
getting more competitive," said Michael Hooker, president of Canada
Discount Rx, a midsize company with 75 employees, also based in Winnipeg.
Profits are contracting because of the recent surge in the Canadian
dollar, and companies are fighting harder over market share. "The way
we get customers is getting to be a bit of a secret," Mr. Hooker
said.
Many online pharmacies, in fact, do
extensive offline marketing as well. Mr. Strempler of Mediplan said his
company received more orders through ordinary mail than from its Web site.
And some 10 to 15 percent of total sales are generated through what he
called affiliates in the United States - insurance brokers, senior
citizens' groups and charities that are paid a commission for referrals.
For example, Patient Advocates for Advanced Cancer Treatments, a nonprofit
group in Grand Rapids, Mich., gives Mediplan publicity in its monthly
newsletter.
Manitoba politicians generally cheer the
online drug entrepreneurs in public statements, but one official, who
spoke on condition of anonymity, said that the government was taking a
cautious approach to policy on cross-border drug sales, out of concern
that the boom may be short-lived.
Having the United States ease its
restrictions on cross-border drug sales would not necessarily be good for
the Manitoba entrepreneurs. "Canada cannot sustain an open
border," Mr. MacKay said. If drug wholesalers and big retailers were
free to ship to the United States at will, "it would blow the whole
industry out of the water." The harm to the cross-border drug sellers
would result from large distribution companies filling patient orders
directly if legal obstacles were removed.
Shipments by the distributors to the
cross-border sellers have fallen sharply as manufacturers have clamped
down. Now, the Internet sellers get their medicine supplies from
conventional pharmacies that are able to get more than they need from the
manufacturers' distributors. In addition, each Internet seller is required
by Canadian law to have an actual pharmacy; such pharmacies are often able
to get supplies from distributors as any other drugstore does.
Some experts predict that with new laws or
without them, the price gap between the United States and Canada is sure
to narrow eventually. And once the new Medicare prescription drug benefit
takes effect in 2006, many older Americans may no longer see much
advantage in buying from Canada.
"Some seniors may not need our business
anymore," Mr. Strempler of Mediplan said.
Still, he seemed unruffled as he walked
through Mediplan's new building in Niverville, most of it still unused.
The operation can process up to 25,000 prescriptions a day, Mr. Strempler
said, but if orders from the United States dry up, "we'll turn it
into a gymnasium or a skating rink."
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