Cross-border headache

CANADA
Health care in Canada

Jan 13th 2005
From The Economist print edition

A dispute over internet pharmacies

NORTH of the 49th parallel, the government pays for most pharmaceutical drugs and controls their prices. South of it, drug companies are free to set prices as high as the market will bear. The result: some branded drugs are at least a third cheaper in Canada than in the United States. This disparity has spawned a growing cross-border trade in prescription drugs—and now a rumbling political row in Canada.

It began with busloads of elderly Americans travelling north to buy their medicines. They were joined by legislators from states such as Illinois and Wisconsin, seeking budget economies. Some 270 online and mail-order pharmacies based in Canada have now entered the market. They receive prescriptions from American doctors, which are then signed off by Canadian medics before the drugs are popped in the post. In all, drugs worth perhaps $700m flowed south across the border in 2003.

The Bush administration—and, less surprisingly, the drug industry—takes a dim view of this trade. Last month, a report from the Department of Health and Human Services said that Americans buying drugs abroad are running “a significant risk” since the safety of such products is hard to verify (no more so than those approved by the Federal Drug Administration, cynics might retort). It is illegal for individuals to import foreign pharmaceuticals into the United States, though hitherto this ban has seldom been enforced.

Canada's government is starting to worry too. Ujjal Dosanjh, the federal health minister, fears that Canada could face drug shortages. Others worry that drug companies might limit supplies to the country. He is looking at ways to halt the trade, such as banning the export of some drugs or requiring Canadian doctors to see the patient before signing a prescription (which would kill the internet trade).

But any crackdown will spark a political battle. Regulation of doctors and pharmacists is mainly a matter for provinces or professional bodies, not the federal government. And at least one province objects to Mr Dosanjh's plans. Gary Doer, the premier of Manitoba, where 2,000 work in mail-order or online pharmacies, has vowed to defend those jobs against Ottawa. In fact, there is little evidence that the cross-border trade has caused widespread drug shortages—and it is unlikely to unless large-scale American buyers are allowed to source drugs in Canada. According to Steve Morgan, of the University of British Columbia, a far bigger problem is a shortage of pharmacists. Graduates are snapped up by internet pharmacies, leaving hospitals and corner drugstores short-staffed—especially in Manitoba.

Copyright © 2005 The Economist Newspaper and The Economist Group. All rights reserved.