Cover Story: UH-OH, CANADA!

May 5, 2003

U.S. regulators target the new gold rush--prescription drug imports from across the border.

 

COVER STORY

UH-OH, CANADA!

U.S. regulators target the new gold rush—prescription drug imports from across the border

For an illegal practice, drug importation from Canada has taken on all the trappings of a thriving, legitimate pharmacy business: big-time advertising, press releases bragging about exploding growth, high pharmacist salaries, and even insurance plan coverage.

Indeed, more than one million Americans, mostly hard-pressed seniors, are entrusting their money and their health to Canadian Internet-based mail-order pharmacies dispensing medications on the cheap to the tune of an estimated $1.4 billion this year. The business is growing so fast that one operation reportedly went from zero credit card transactions to $30 million six to eight months later. It's not hard to figure out how the operations cash in. For example, the Ontario newspaper National Post reported that one Web site listed the U.S. price of Pravachol at $370, compared with its list price of $166. However, at retail, it costs Canadians about $37.

The north-of-the-border outfits have forged ties with dozens of U.S. storefront brokerages that shuffle paper. The agents take in prescriptions, collect patient profiles, and secure a waiver of liability and a limited power of attorney. They often return the script to the patient and then fax the information off to the mail-order pharmacies in return for a cut of the cost of the drugs.

The cross-border partners are raking in enough dough to thumb their noses at the law and are now enticing U.S. pharmacists with hefty referral fees that outstrip the usual paltry third-party reimbursement. And elected officials in the United States are trying to make political hay by championing Granny's right to import meds even if it means flouting the nation's drug laws.

But all is not so sunny on the other side of the cross-border street. Public health officials, regulators, and pharmacists are sounding the alarm about the dangers from drugs, including counterfeits, pouring into America through foreign pharmacies. Canadians fret that this latter-day gold rush is siphoning off the drugs their own citizens need, and salaries double the going rate are luring pharmacists away from traditional practice settings, creating a shortage.

On the offensive

The sheer volume of trade and flouting of U.S. drug laws is so blatant that federal and state officials have begun to flex their regulatory muscles to protect the nation's drug supply. The Food & Drug Administration has teamed up with state pharmacy boards to put importers on notice that the watchdogs are awake and ready to crack down on illegal drug importation.

In its first shot across the bow of the U.S. storefront outfits, the FDA sent a letter to an attorney representing a U.S. operation with ties to Canadian Internet pharmacy. The letter warned of civil penalties but added that "those who aid and abet a criminal violation of the 1998 Prescription Drug Marketing Act or conspire to violate the act can also be criminally liable."

Just to be sure no one mistook the letter as a one-shot wonder, the FDA then joined the Arkansas State Board of Pharmacy in a two-pronged offensive against a Lowell outlet of RxDepot, a multistate Rx brokerage operation based in Oklahoma. In a March letter, the FDA charged RxDepot with running an illegal operation that is a risk to public health and misleads the public about the safety of its imported drugs. The agency gave RxDepot 15 days to lay out in writing the specific steps it would take to get on the right side of U.S. law. The agency is considering the firm's request for a 30-day extension to respond, according to a spokeswoman.

In concert with the FDA, the Arkansas pharmacy board ordered RxDepot to immediately cease its unlawful conduct as an unlicensed pharmacy. The company was given 10 days to tell the board how it intends to come into compliance with state laws. And next door in Oklahoma, the state pharmacy board's counsel filed for an injunction to shut down Tulsa-based RxDepot until it stops breaking state laws.

"RxDepot is open and will remain open," said a defiant and clearly angry Carl Moore, president of the storefront brokerage chain he cofounded six months ago. He said the FDA and state pharmacy boards have no jurisdiction over the venture because drug importation is legal and the storefronts are not pharmacies. The company currently runs 16 storefronts and is opening new outlets at the rate of one per week. He declined to reveal how much money RxDepot is earning through a per-script fee paid by a Canadian pharmacy.

"It's all a bunch of hooey," said Moore. "We're going to get a lot of bugs on our windshield because we're leading the pack. I'll tell you in no uncertain terms, Arkansas or Oklahoma or any other state pharmacy boards have no jurisdiction over us, absolutely none. The FDA has no jurisdiction in this either. I'm only being polite to the FDA. They couldn't do anything even if they wanted to. The truth is senior citizens in this country desperately need help, and we're giving it to them. So this thing is all driven by big pharmacy that wants to take away this tiny niche senior citizens finally have to help themselves. We are not doing one thing that's against any laws in this country. I resent all these accusations, and we definitely can challenge each and every one of them. If I were doing anything illegal, my doors would be padlocked."

The FDA's RxDepot warning letter is the "opening salvo against a commercial operation aiding and abetting a foreign distributor of drugs illegally imported into the United States," said Thomas McGinnis, R.Ph., FDA director of pharmacy affairs. "If RxDepot does not respond within 15 days, we are prepared to go with an injunction. The FDA will try to continue to do that, working with state boards of pharmacy and taking action against storefront operations."

A Birmingham outlet of another major storefront broker, Discount Drugs of Canada, is operating as an unlicensed pharmacy, and its owners are acting like unlicensed pharmacists, according to the Alabama pharmacy board. In March, the board got a temporary restraining order to shut down the storefront until a court hearing is held on its request for a permanent injunction.

Flood tide

What started as a trickle has become a tidal wave of more than three million drug packages expected to pour through America's 13 international mail facilities this year, said McGinnis, who added that given its resources, the FDA simply cannot cope with the volume of Rx packages.

"It's going to get worse," McGinnis warned. "Last year at this time, we had about five Canadian pharmacies shipping to the United States. Today, it's 75, mostly in Manitoba, and we expect it to be 95 in two or three months. As the money grows, more and more unscrupulous characters will get into the business. We're trying to convince seniors that these medications may not be what they're purported to be. For example, there's a beautiful Web site with the word Canada in the title. However, when we drilled down to find where the site is registered, it came out in Thailand. Who knows where these imported drugs are coming from?"

The FDA is working itself into a regulatory snit to lay down a smoke screen to protect big drug companies, according to some members of Congress who promptly blasted the agency's warning letters. The most vocal supporter of U.S. seniors' access to cheaper Canadian drugs has been Rep. Bernie Sanders (I, Vt.). Not surprisingly, he was the politician who yelled the loudest when the agency sent the RxDepot warning letter.

Charging that the FDA has taken a pro-drug-company stance, Sanders said, "At a time when millions of Americans are struggling to afford the outrageously high price of prescription drugs in the United States, we cannot allow the FDA to slam the door on a source of safe and affordable medicine—namely, Canada. This is a matter of life and death."

Sanders saved his greatest ire for GlaxoSmithKline's decision in January to stop shipping its products to Canadian mail-order pharmacies and the wholesalers that supply them. He's so incensed that he introduced a bill barring such restrictions and tacked on a $1 million fine to punish Rx manufacturers that don't comply.

"The fact that Congress is doing a bill that penalizes companies for obeying a law passed in 1988 that made companies co-conspirators if they know about drug diversion but don't stop it is pretty creative," said John Rector, senior VP of legislative affairs and general counsel for the National Community Pharmacists Association. "They're going to punish the companies trying to obey the law and then enable [Canadian mail-order pharmacies] competing with our members to break the law. It sounds like some mob operation. We think it's a wrongheaded approach."

Some suggest that one way out of the illegal drug importation maze would be implementation of Public Law 106-387 allowing U.S. pharmacists and wholesalers to reimport FDA-approved drugs directly. Passed in October 2000, the law gave the final go-ahead to the secretary of Health & Human Services. But in the waning days of the Clinton Administration, Donna Shalala declined to implement it. Likewise, Tommy Thompson has kept the law bottled up, ostensibly over drug safety concerns.

Rep. Marion Berry (D, Ark.), an Arkansas pharmacy owner, introduced a bill to force implementation of the reimportation law, Rector said. In addition, he said there are "lots of rumors about a consumer lawsuit" being filed to force the Bush Administration to implement the 2000 law.

Wooing pharmacists

Select members of Congress aren't the only ones blithely ignoring U. S. drug importation and state pharmacy laws. Several American companies continue to operate and open new storefront Rx brokerage operations across the country. It's not hard to do. All it takes is a handshake with a Canadian pharmacy, a desk, a fax machine, and a credit card reader to get into the drug importation business.

Not content with storefronts, some Canadian mail-order pharmacies are now wooing U.S. pharmacists to be their partners in crime. Some are willing to pay cooperating R.Ph.s 5% to 10% of the prescription's value or a flat fee of $12 or even $15. For example, AmericaMEDS boasts that its Canadian pharmacy is directly accessible only by member R.Ph.s, and patients have to order their prescriptions through participating independent pharmacies, which are paid a referral fee.

Saying it was "undeterred by the FDA warnings, American Drug Plan intends to open 360 Rx brokerage operations inside U.S. customer service centers, many inside pharmacies, to transmit Rxs to its Canadian mail-order operation. The Vancouver firm is trying to recruit U.S. pharmacists who would be paid a fee to man the centers and counsel patients.

While faxing scripts for a fee is like finding gold in the streets, U.S. R.Ph.s who succumb to the siren song are risking their licenses to practice, not to mention possible prosecution on felony charges. Many state pharmacy board executives told Drug Topics that it is illegal for licensed pharmacists and pharmacies to participate in such drug importation schemes and that they would seek prosecution.

Canadian mail-order pharmacies make consumers agree not to sue them if something goes wrong. So any aggrieved U.S. consumers looking for deep pockets to sue would most likely zero in on the participating U.S. pharmacists. The joker in this stacked deck is that malpractice liability insurance does not cover pharmacists engaged in illegal activity.

"Basically, if what happened was illegal and the drugstore owner knew it was illegal and did it anyway, there would be no coverage," said Ken Baker, R.Ph., J.D., VP-general counsel, Pharmacists Mutual Insurance Co. "But if you're going to violate laws, you've got much bigger worries than your liability coverage. Your biggest worry is whether they throw you in jail."

Pharmacy fights back

Losing the very patients most in need of their services to Canadian mail-order pharmacies sticks in the craw of U.S. pharmacists. Denied the legal right to import cheaper drugs from Canada themselves, they are angry that American officialdom has, until recently, allowed foreign competitors to steal their senior patients, the only cash-paying customers managed care hasn't corralled behind AWP minus 15% reimbursement rates.

Not content to watch its members get whacked, NCPA launched a campaign last December to raise public awareness that drug importation is illegal and to urge federal agencies to enforce the law. The campaign also discourages the media from accepting ads for Canadian drugs.

The NCPA campaign has scored some victories. For example, last month the National Rifle Association raised the white flag of surrender after members who also belong to NCPA complained about an ad in the NRA magazine touting drug importation. NRA has decided it will no longer accept such ads. In January, protests from NCPA members who belong to the Kiwanis Club led Kiwanis International to scrap a Canadian mail-order Rx plan.

The enforcement actions of the FDA and state pharmacy boards to protect the U.S. drug supply and patients were applauded by the National Association of Chain Drug Stores. The group is also working to help low-income seniors gain access to drug company-sponsored drug discount cards and patient assistance programs, said spokeswoman Crystal Wright. NACDS is also committed to working with Congress for passage of a Medicare outpatient drug benefit, which would undercut cross-border Rx importation by giving seniors access to affordable drugs.

Educating consumers about the dangers of imported drugs that leave pharmacists out of the medication management loop has been the focus of the American Pharmacists Association. However, a classified ad in its Pharmacy Today magazine for the storefront operation American Drug Club left APhA with egg on its face.

"It was an unfortunate error," said Susan Winckler, VP for policy and communications-general counsel. "We use an outside firm that secures the classified ads. There is typically a review process and that fell down. It is the last ad of that type that will appear."

On the regulatory front, the National Association of Boards of Pharmacy recently issued a 12-page position paper declaring drug importation to be illegal. Noting that 43 state pharmacy boards require nonresident pharmacies to register if they ship drugs to patients in-state, the paper pointed out that foreign pharmacies are, practically speaking, beyond the boards' reach.

"Without jurisdiction over foreign sellers, it is and will continue to be impossible to ensure the products being sent to the United States are approved, safe, effective, and not adulterated, contaminated, or counterfeit," said NABP. "Until there is equity in the pricing of prescription medications, it may be impossible to completely stop U.S. patients from obtaining medications from Canada, Mexico, and other countries. We are deeply concerned that illegitimate pharmacy Web sites could be a front for criminals seeking to introduce adulterated medications, counterfeit drugs, or worse to the American public."

It remains to be seen whether regulators can ever get their arms around drug importation or whether Congress will choose to legalize the practice. But given the volatile and often emotional political, economic, and social forces entailed, perhaps NABP executive director Carmen Catizone summed it up best when he said, "What a mess!"

Carol Ukens

Political posturing

Several bills have been introduced in Congress to deal with issues tied to drug importation from Canada. They include the following:

In the House of Representatives, Ron Paul (R, Texas) proposed H.R. 616, which has one cosponsor. Among other things, the bill would prohibit the secretary of Health & Human Services from taking any action under the Food, Drug, and Cosmetic Act (FDCA) with respect to any Internet drug sale, if such sale were made in compliance with FDCA and state laws and the Web site posted accurate information about its compliance with those regulations. It would also permit a person who meets legal requirements to be a drug importer after getting HHS approval of a drug import application. The bill is in the House Subcommittee on Health.

Rep. Marion Berry (D, Ark.) introduced H.R. 780 to force implementation of a law passed in 2000 allowing pharmacists and wholesalers to reimport FDA-approved drugs from Canada and other countries. The bill calls for testing and licensing requirements to ensure the quality of the drugs. The bill, which has 23 cosponsors, was referred to the House Subcommittee on Health.

Also in the House, 55 representatives have signed on as cosponsors of what amounts to a "teach-GlaxoSmithKline-a-lesson" bill proposed by Bernard Sanders (I, Vt.), the outspoken critic of Glaxo's ban on sales of its products to Canadian Internet-based mail-order pharmacies. H.R. 847 amends FDCA to direct HHS to write regulations prohibiting discrimination against imports of Rx drugs from Canada. It carries a civil penalty of $1 million against manufacturers that violate the act. The bill is in the House Subcommittee on Health.

On the Senate side, Sen. Tom Daschle (D, S.D.) wants to let pharmacists and wholesalers import Rx drugs from Canada under a proposed bill with 21 cosponsors. Such drugs would have to comply with FDCA. The bill also bars discrimination by drug manufacturers against a pharmacist or wholesaler by offering Rx drugs on terms that are less favorable than those provided foreign purchasers or by restricting their access to an Rx drug that can be legally imported into the United States. The HHS secretary would be able to grant individuals a waiver to import a 90-day supply of a Food & Drug Administration-approved drug with a valid Rx from a licensed pharmacy. Such drugs would have to be imported from Canada through a seller registered with HHS. The bill is currently in the Senate Committee on Finance.

FDA, you've got mail

The Food & Drug Administration has good reason to admit that it cannot possibly stem the tide of the estimated three million drug parcels headed into the United States this year.

In early 2001, the FDA and U.S. Customs conducted a five-week study to get a handle on the volume and types of drugs being imported through the Carson City, Calif., mail facility. It was not a pretty picture.

Of the estimated 16,500 international parcels Customs officials said rated FDA review, the agency was able to examine only 1,908 shipments during the five-week period. Even with more than the usual staffers on hand working 40-hour weeks, the agency could not keep up with the volume of packages.

The study also found that 721 (38%) of the examined packages that originated in 19 countries were detained and addressees were notified that the drugs appeared to be unapproved for use in the United States, misbranded, and/or required a script.

An FDA analysis of the drugs found serious public health risks associated with many of the 197 different drugs in the 761 seized parcels. Patient risks stemmed from taking drugs of unknown quality or origin and taking them without getting an Rx from a physician who has oversight of care.

Almost 10% of the shipments contained antibiotics, and a number of controlled substances were identified. Some packages contained drugs that had been FDA-approved but were later withdrawn. About 8% of the shipments contained drugs that could not be identified because of a lack of labeling, and some were labeled only in a foreign language. Most of the drugs were shipped in plastic bags and in one package, the drugs were taped between magazine pages.

Incident reports keep growing

The National Association of Boards of Pharmacy fielded seven consumer complaints about foreign pharmacies between October 2002 and February 2003.

Three consumers said they had been defrauded because they had paid for an order they never received. Two patients reported having gotten what appeared to be counterfeit drugs. Another patient from Great Britain reported receiving Meridia in a loose baggie from Thailand. And one person, an employee of a U.S. drug manufacturer apparently testing the system, reported that she was able to get Rx drugs without a prescription from a Canadian Internet pharmacy.

In a February survey of state pharmacy boards, NABP found that at least six boards have received complaints about foreign pharmacies. They are as follows:

  • Nevada consumers have complained about delayed deliveries and receipt of the wrong product. In addition, one complaint covered a bait-and-switch scheme involving a pharmacy advertising Canadian drugs that then encouraged the customer to accept a drug from Sri Lanka. The pharmacy apparently makes a bigger profit on Sri Lankan drugs, which are even cheaper than Canadian products.

  • New York's pharmacy board received a complaint about a drug labeled in a foreign language.

  • South Dakota reported complaints about drug switching that involved Zoloft and Paxil.

  • Minnesota's board got an earful from a consumer who had charged $300 worth of drugs on a credit card but never received the medications.

  • Oregon's board heard from a consumer about a medication error in which a breast cancer patient received lisinopril instead of tamoxifen. She took lisinopril for three months before the error was discovered.

  • North Dakota's board reported incidents of duplicate therapy. One was due to slightly different names of U.S. and Canadian drugs and the other due to the filling of two different drugs from the same therapeutic category for the same condition by both a U.S. and a Canadian pharmacy.

Just the facts, Ma'am

Consumers who favored drug importation from Canada changed their minds when given information about the practice, according to a recent survey of 1,005 adults conducted for the National Association of Chain Drug Stores Foundation.

The survey, conducted in March by Wirthlin World, found that when first polled:

  • 67% of the respondents favored importing drugs from Canada, although only 2% had done so.

  • 58% said they would encourage a family member or close personal friend to buy medications from Canada.

After receiving information from the Food & Drug Administration and consumer groups on the consequences and dangers of illegal drug importation, consumers changed their minds as follows:

  • 58% now opposed drug importation.

  • 64% said they would discourage family and close friends from importing medications.

  • 77% agreed that if it's illegal to import drugs from Canada, people should not do it.

  • 81% said they were more opposed to the practice after learning that importation is creating large-scale counterfeit drug operations.

On the Web

Among the Web sites with information about the Canadian drug importation issue are the following:

The National Association of Chain Drug Stores site has a cache of regulatory/industry/legislative nuggets. Go to www.nacds.org, click on Government Affairs, and then choose Drug Importation.

The National Association of Boards of Pharmacy has posted its drug importation paper at www.nabp.org.

Policy wonks can read proposed drug importation legislation by going to http://thomas.loc.gov/ and running a search by bill number or key words.

BetterPills is an on-line pharmacy, but it also has a brief overview of drug importation polices by country. It's posted at www.betterpills.com/drug_importation.htm.

The Texas Board of Pharmacy has an interesting drug importation article posted at www.tsbp.state.tx.us/Newsletter/canadian14.htm.

Congressman Bernie Sanders (I, Vt.), champion of seniors' right to import drugs, is at www.bernie.house.gov. Go to Issues and Legislation and then click on Prescription Drugs to get a pro-import perspective.

 

Carol Ukens. Cover Story: UH-OH, CANADA!. Drug Topics May 5, 2003;147:37.