Canada's Internet pharmacies thriving on business from U.S.

Low costs of prescriptions attract seniors, criticism

December 21, 2003|By Cyril T. Zaneski | Cyril T. Zaneski,SUN STAFF

WINNIPEG, Manitoba - Encased by iron bars and hidden behind frosted windows of what looks like an abandoned storefront, one of Canada's most successful Internet pharmacies is quietly thriving on a street known for a different kind of drug traffic.

Like a speakeasy from the U.S. Prohibition era, the company, CanadaMeds.com, ushers employees and visitors into the building through a secret, guarded side entrance.

"We don't want the neighbors to get any ideas about what's behind these walls," chief executive Mike Hicks said.

But tens of thousands of American seniors have found the company, sometimes with help from their Web-savvy grandchildren and children. Every day, they send about 1,000 prescriptions by fax and phone to this storefront, which - along with more than 175 other Internet pharmacies in Canada - is booming beyond their owners' wildest expectations.

Enticed by bargain prices for prescription drugs across the border, the budget-conscious seniors are defying a U.S. Food and Drug Administration ban on importing prescription drugs. They are expected to spend about $900 million this year on drugs from Canada.

The grass-roots rebellion has spread to statehouses and city halls, which face their own cash crunch meeting double-digit increases in prescription drug costs as tax revenues plunge.

Governors of at least 13 states and elected officials in dozens of jurisdictions - including Boston; Burlington, Vt.; and Montgomery County, Md. - are drawing up plans to help employees and retirees import drugs. Springfield, Mass., has already begun direct imports from Canada for its employees, saying it expects to cut its annual $18 million drug bill in half.

Montgomery County, whose County Council expects to take up the import issue next month, could shave $8 million to $30 million off its annual $68 million drug bill by buying north of the border for its 40,000 employees, according to the plan's sponsor, Councilman Tom Perez.

Unconvinced by FDA claims that Internet purchases from Canada might be allowing unsafe counterfeit drugs into the U.S. market, Perez said: "The real safety issue is the suffering of Americans who need drugs and can't afford them."

With the tide of prescription drug imports rising, the politically powerful pharmaceutical industry lobbied heavily to defeat measures in Congress this year that would have legalized the cross-border drug trade; it has moved recently to restrict drug supplies in Canada.

The Bush administration, meanwhile, has turned up the volume on warning consumers that buying imported drugs is illegal and could open the gate for a flood of counterfeit medicines funneled through Canada.

Seeds for the Internet pharmacy business were planted in this prairie province in late 2000, when a twenty-something pharmacist made a bundle selling Nicorette gum at half the U.S. price on eBay.

Today, Manitoba - whose barrel-chested economy is built on a foundation of manufacturing, farming, mining and forestry - is gaining a reputation for cultivating Internet pharmacy companies as well as wheat crops. The industry is fertilized by affordable real estate, low wages and a supportive provincial government.

Change without notice

"There are 65 of these pharmacies here that I know of, but that number may have already changed since this morning," said Ron Guse, registrar of the Manitoba Pharmaceutical Association, which regulates provincial pharmacies. "It's a phenomenally lucrative business and it is growing all across Canada."

The new pharmacies are gobbling up corners of suburban office parks and building shiny new offices in tiny farm towns. Others, like CanadaMeds, have expanded into several vacant storefronts, including that of a traditional drugstore that moved across the street.

The nation's largest Internet pharmacy, Mediplan Health, which sprouted in March 2001 from the Nicorette gum sales, claims 140,000 U.S. customers that it serves from a former farm machine shop more than two hours west of Winnipeg.

Girding for continued growth, Mediplan, which does business on three Web sites as RxNorth.com, CanadianDrugstore.com and Mediplanhealth.com, opened a gleaming 18,000-square-foot office across from a chicken farm a half-hour south of Winnipeg, in Niverville.

The new plant, which employs 12 people now, is expected to have 200 at work by early next year, said Suzy Funk, Mediplan's assistant director of operations.

"We expect we're going to be doing 2,000 prescriptions a day here by the end of January," Funk said.

The Internet pharmacies' expectation for continued growth comes despite President Bush's signing this month of landmark legislation that will add a prescription drug benefit to the Medicare program in 2006 to help 40 million elderly and disabled Americans.

Seeking larger share

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