Why Canada Won't Be Our Pharmacy

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As the flu-vaccine shortage began, Canada quickly emerged as a potential life buoy. Ujjal Dosanjh, Canada's Health Minister, personally phoned Tommy Thompson, the U.S. Secretary of Health and Human Services, and offered to share whatever surplus Canada had to help meet the 48-million-dose shortfall. "I assured him that if there was anything we could do to assist our American friends, we would be happy to do that," Dosanjh told TIME. But it wasn't long before Dosanjh was spelling out the limits of what his country could do. "Canada cannot be the drugstore of the United States," he said last week in a speech at Harvard. "Neither American consumers nor Canadian suppliers should have any illusions otherwise."

The Canadian pharmacy, replete with cheap medicines, is a seductive image for Americans struggling with ever more expensive prescription drugs: If Canada's vaccine supplies can help solve the flu crisis, why can't its cheap drugs do the same for the larger problem of rising health-care costs? So far, the Bush Administration says it will not allow large-scale reimportation of prescription drugs from Canada, where they are 60% to 70% cheaper, unless the U.S. can guarantee that they are safe. Critics call the Bush policy a delaying tactic designed to protect drug companies' profits. The federal Task Force on Drug Importation must submit its report on safety by Dec. 8. When it does, Thompson could authorize reimportation, a move that would appease those who clamored for it during the campaign. Drugmakers, meanwhile, trying to block an end run around their U.S. business, have warned that a flood of Canadian drugs would stifle innovation by bringing in Canadian-style price controls. Experts say the U.S. can't import its way out of high drug prices, and they complain that the noise over reimportation is obscuring larger health- care problems, such as the 45 million uninsured.

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"It's become a symbolic issue," says Drew Altman, president of the Kaiser Family Foundation, a health-policy research group based in Menlo Park, Calif. Even though online pharmacies account for an estimated 90% of U.S. drug sales from Canada, the busloads of seniors trekking over the border for their meds have become an indelible image. Bringing in cheaper drugs from next door looks like a simple step that could provide immediate relief. "People can relate to it," says Uwe Reinhardt, an economist and health-policy expert at Princeton University.

But even if the government opened the gates to reimportation, that alone might not have much of an effect on drug prices. With only about one-tenth of the U.S.'s 300 million population, Canada's market is much too small to support the demand from the U.S. Canadian Internet pharmacies posted sales of $1 billion in 2003, compared with the $200 billion market in the U.S. "It's too much volume for us to sustain," says David MacKay, executive director of the Canadian International Pharmacy Association.

Nonetheless, reimportation has already set drug companies on the offensive. Pfizer, the giant behind blockbusters such as Lipitor, Celebrex and Viagra, sent letters early this year threatening to cut off supply to more than 100 Canadian pharmacies that had been exporting its drugs in violation of their contracts. GlaxoSmith Kline took similar action. "When you import price controls, you undercut the system that pays for R. and D.," says Nancy Pekarek, a Glaxo spokeswoman.

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