DRUG FIRM MOVES TO BLOCK RX IMPORTS

MARLTON, N.J. -- Cheap prescriptions from Canada are becoming a big business, with estimates placing its value as high as $650 million, but last month GlaxoSmithKline here launched an initiative to staunch the flow.The drug maker implemented a plan to halt the supply of prescription drugs to Canadian pharmacies that export to the United States. This latest development is another attempt to stop the

MARLTON, N.J. -- Cheap prescriptions from Canada are becoming a big business, with estimates placing its value as high as $650 million, but last month GlaxoSmithKline here launched an initiative to staunch the flow.

The drug maker implemented a plan to halt the supply of prescription drugs to Canadian pharmacies that export to the United States. This latest development is another attempt to stop the revenue bleeding at U.S. retail pharmacies like supermarkets.

U.S. pharmacies, including those in supermarkets, are increasingly competing with Canadian pharmacies and Internet pharmacies, as a cottage industry of Canadian operators has sprung up to supply Americans with prescription drugs. Prescription drugs from Canada can cost as much as 40% less than U.S. prices because the country regulates drug prices as a part of its health care system.

The skyrocketing costs of prescription drugs combined with recent failures to put a meaningful senior drug benefit plan in place have caused more and more American consumers to make the trip across the border, or into cyberspace, and take sales away from U.S. retailers.

"People are looking for alternatives [to high drug costs in America], and Canada is certainly an option," said John Fegan, corporate vice president of pharmacy, Ahold USA, Chantilly, Va.

This burgeoning business has caused flak among retailers, particularly pharmacies in the border states like Michigan, citing lost revenue, safety concerns and legality issues.

"There are lots of concerns on the legality of bringing in prescriptions in from another country. People are waiting for the FDA to take action and that hasn't happened," said one retail pharmacy source near the Michigan-Canadian border. "Everyone's been saying it's impacting their businesses."

Scott Hartwig, director, pharmacy, Harding Family Markets, Plainwell, Mich., told SN that the retailer's pharmacy business hasn't been negatively affected because the retailer's stores are three hours away from the border.

"We've seen a greater impact with mail order [taking away business], though any sort of erosion hurts our bottom line," he said. "It would be helpful to have similar pricing structures for both countries. We're not on the same playing field. Drug manufacturers decided that America is where they're going to make their money."

Rough estimates find about 80 Canadian companies in the business of exporting drugs to U.S. customers, and total annual revenues are believed to be as high as $650 million, according to published reports.

GlaxoSmithKline, producer of popular medications like Paxil, pulled the reins on prescription drug exports last month by writing to pharmacies believed to be exporting prescription drugs to America.

"If we believe an Internet pharmacy is exporting, we'll halt shipment except for what it needs for Canadians," said Patricia Seif, spokeswoman, GSK. "We don't want to disrupt supply to Canadian patients."

However, GSK must directly approve of all product shipments through wholesalers and retailers to ensure the quantities match orders for Canadian patients only, noted Mary Anne Ryne, spokeswoman.

"We will continue to monitor the situation," she told SN.

Consumers should take advantage of GSK's Orange Card and the Together Rx card, created by the National Association of Chain Drug Stores, Alexandria, Va., Seif emphasized. The two discount drug cards give consumers savings on medications similar to the savings they would receive in Canada.

Meanwhile, Canadian companies and government officials said GSK's plan violates free trade laws.

U.S. retailers aren't just fighting against the busloads of senior citizens flocking to Canada. They've also begun to lose business to U.S.-based operators that take prescriptions signed by American doctors and relay orders to Canadian pharmacies, thus saving consumers significant dollars without having to cross the border.

"It's a great benefit for seniors right now," said a source that represents a company that distributes Canadian drugs to U.S. consumers, speaking on condition of anonymity.

Another company, Discount Drugs of Canada, Delray Beach, Fla., has seen booming business since opening its doors three months ago, said Michael Myers, spokesman for the company.

Discount Drugs assists American consumers with filling and ordering prescriptions from Canadian pharmacies.

"Business has been unbelievable. No one can believe there's been this level of interest in such a short period of time," he said.

As Discount Drugs of Canada facilitates hundreds of prescription orders per day, the company is in the process of opening 10 to 15 affiliate locations across the country, Myers noted.