What a drag it is getting old. Consider the 72-year-old San Leandro resident we'll call "Carlo." A retired former recycler with no health insurance, he must regularly take a cholesterol-lowering drug called Lipitor, which normally costs local residents $94 a month. To cut back on his medical costs, he used to make clandestine trips to Canada where, thanks to government price controls on prescription drugs, many pharmaceuticals are dramatically cheaper than they are in the United States. These days, Carlo doesn't need to go so far from home. For the past few months, he has been ordering his medication through American Drug Club Oakland, the first Bay Area example of a national phenomenon -- storefront operations that help their clients order cheap prescription drugs from Canadian pharmacies.
While Internet drugstores with links to Canadian pharmacies have existed for several years, storefronts set up to serve people without computer access or those reluctant to order medicines over the Internet are a relatively new phenomenon. Clients bring in a prescription, and the staff of American Drug Club helps them place an order with Winnipeg's Point Douglas Pharmacy. The orders are shipped directly to the client three weeks later by mail -- no drugs will ever pass through the office itself. The American Drug Club Oakland storefront, which is technically in San Leandro, is only the second of 360 franchise stores the company hopes to open nationwide -- the first opened in Florida this April. Pharmacy technician Emily Toro, the San Leandro office's general manager, believes her site is the only such storefront in California. Customers also can order directly from their Web site.
Toro says her pharmacy's services are a boon to historically underinsured populations such as students and seniors, as well as workers who may find that some expensive medicines are not covered by their HMO's formulary. She can point to satisfied clients such as Carlo, who says ordering through the club has reduced his Lipitor costs by one third. "If I can get it cheaper, why should I pay that much?" he asks.
Ask the FDA. It isn't altogether clear whether the drug club's activities are legal, and brick-and-mortar storefronts may draw more regulatory attention than their Internet counterparts. The federal government has historically turned a blind eye to individuals who travel to Canada or Mexico to buy cheaper prescription drugs for their personal use. But within the past few months, the Food and Drug Administration has begun warning companies similar to American Drug Club that they are violating federal laws that forbid anyone but pharmaceutical companies from importing drugs. Even worse, they allege, such companies may be endangering the health of their clients. The FDA warns that users cannot be assured of the quality and safety of drugs imported from another country, and has threatened to take legal action or seize the properties of companies importing drugs from Canada.
Technically, American Drug Club isn't importing anything. Still, although it hasn't been contacted by the FDA, the club's fuzzy legal status hasn't done much to reassure some of its clients. After a few minutes on the phone, Carlo gets nervous. "Am I going to jail?" he suddenly asks sharply. "Are you from the government?" And then he hangs up.
Even though it's a fairly new industry, bringing in prescription drugs from Canada is becoming a lucrative business. Depending on the study, an estimated one million Americans ordered between $650 million and $700 million worth of drugs from Canada last year, representing lost revenues of around $1.3 billion to American pharmaceutical makers. Note the difference between what those drugs cost north of the border and what they would have been worth here -- that's the effect of Canadian price controls. Toro says for her customers, "typically the costs are 30 to 80 percent less than in the United States." That can make a big difference to people on long-term medications. Her office's most common orders are treatments for chronic ailments -- Lipitor, Prilosec (for stomach ulcers), and Celebrex and Vioxx (for arthritis).
It can also make a big difference to seniors, who tend to be the largest demographic group affected by prescription drug regulations. "We are one-third of the population, roughly, and take between 40 and 45 percent of all prescription drugs," says Bill Powers, legislative director of the Congress of California Seniors, which links on its Web site to a Canadian Internet pharmacy. Advocates for seniors point out that elderly people living on limited budgets are sometimes forced to choose between paying for rent and food or shelling out for their prescriptions; others may cut their pills in half, or stop taking their medicine altogether to make ends meet. AARP, a national advocacy group for seniors that has taken no position on the Canadian pharmacy issues, has made no bones about criticizing drug-industry pricing and the effect it is having on seniors. "It's kind of disgraceful that our own citizens have to go outside the country to afford drugs," says AARP spokesman Mark Beach.
But the government and US pharmaceutical makers say businesses that import drugs from abroad are potentially exposing their clients to health risks. In the recent warnings sent to CanadianDiscountDrugs and Rx Depot, two businesses similar to American Drug Club, the FDA stated that foreign versions of US-approved drugs are not considered FDA-approved. The agency warns that drugs that do not have its approval may turn out to be outdated, counterfeit, contaminated, or labeled incorrectly. And even when all the Canadian pharmacy is doing is simply shipping American-made drugs back to American clients, or "re-importing" them, drugmakers say there's no guarantee of the drugs' safety. "Even if the drugs were made here, you have no idea what happens once they go up to Canada -- how they were stored, if they were repackaged," says Mark Grayson, spokesman for the Pharmaceutical Research and Manufacturers of America, which lobbies on behalf of the medicine makers.
Their opponents say these safety concerns are exaggerated, and that drug makers are talking about Canada as though it were a Third World country, not an industrialized nation known for its excellent health-care system. "The safety issue is one that's been overblown by those that are trying to stop this," Powers says. "There have been no reported quality issues. These are the same drugs for the most part that are manufactured here in the US and shipped to Canada. And they have their own [regulatory] system up there that is equal to ours in quality."
Toro agrees: "All the drugs we sell are approved by Health Canada, which is the equivalent of the FDA." She says that Point Douglas Pharmacy, American Drug Club's Canadian affiliate, verifies each prescription with the patient's doctor, and also double-checks patients' medical histories before filling each order to prevent negative drug interactions and allergic reactions.
The debate really has less to do with medicine than money. Drug makers point out that US law makes it illegal for any entity except a pharmaceutical company to bring drugs into America, and that similar laws exist to protect other industries, such as car manufacturing. Businesses that ship drugs back from Canada are trying to skirt that law, they say. "It's basically almost akin to smuggling," Grayson says. He attributes the high prescription drug prices in the United States to the relative wealth of American consumers, and defends the expense as the necessary burden that makes it possible for US companies to finance the invention of cutting-edge medicines. "We've always tried to price medicines according to different countries' economies," he says. "The US is the most prosperous market. Why are we pricing drugs cheaper in Africa? Those people make a lot less. The average Canadian makes a third less than the average American." But critics say the drug industry sets its prices high not because it must, but because it can. They say that most of those profits go not into designing innovative medicines, but into marketing existing ones.
Within the last few months, both sides of the debate have come out swinging. Pharmaceutical giants GlaxoSmithKline and AstraZeneca Pharmaceuticals have threatened to cut off supplies to Canadian wholesalers and pharmacies that "re-import" their products to the United States. Although concerns were raised that Canadian consumers might have difficulty getting medicines they need, the Canadian government upheld GlaxoSmithKline's position after a legal challenge. In retaliation, US civic groups including the Congress of California Seniors have launched a boycott of nonprescription products manufactured by GlaxoSmithKline, such as Contac, Tums, Geritol, Sominex, and Vivarin. Other disgruntled consumers will simply continue supporting businesses like American Drug Club or making drug-buying trips over the border.
But although online and mail-order Canadian pharmacies seem to be a growth industry -- some expect it to double next year -- there are doubts about sustainability as drug manufacturers crack down. "Buying drugs from foreign countries is not a long-term solution," says the AARP's Beach. "What the AARP wants is optional, affordable, and comprehensive prescription drug coverage as part of the existing program of Medicare." A legislative solution may be in the works -- Congress is currently kicking around two different proposals for how Medicare could subsidize seniors' medication purchases starting in 2006. But the House and Senate bills differ substantially, and there's no speedy resolution in sight.
In the meantime, the fate of American Drug Club Oakland is up in the air. The California Board of Pharmacy considers drug re-importation a federal issue, and is therefore taking a wait-and-see approach, looking for guidance from the FDA before it decides what to make of businesses like the San Leandro storefront. That said, the agency has its own concerns: since the board derives its regulatory power from licensing pharmacies and pharmacists, it worries that Internet pharmacies are avoiding state regulation by staffing their storefronts with nonpharmacists. "We urge people to be cautious and educated before they put something in their body," says Department of Consumer Affairs spokeswoman Pamela Mares. "For your own safety, check to make sure you're dealing with a licensed professional."
Meanwhile, Toro reports that although business at the San Leandro storefront was initially slow, customers have warmed to the mail-order concept and the office is getting close to its break-even point of thirty to fifty orders a day. After all, for now at least, American Drug Club is a lot more convenient than Canada.