US embassy cable - 05OTTAWA525

UNCLAS SECTION 01 OF 02 OTTAWA 000525 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, SOCI, CA, Health, Ujjal Dosanjh 
SUBJECT: CANADA SEEKS REGULATORY PRESCRIPTION FOR INTERNET 
PHARMACIES 
 
REF: OTTAWA 141 
 
1.  (U)  Summary:  Health Canada Minister Ujjal Dosanjh's 
response to reimportation of drugs from Canada to the United 
States has been increasingly negative in the past months.  In 
the wake of the U.S. task force report, Health Canada seems 
poised to act in order to limit or prohibit drug sales from 
Canada to the United States.  However, the House of Commons 
Standing Committee on Health has requested a delay until they 
can conduct further hearings.  Initial questioning from 
Members of Parliament on the standing committee focused 
heavily on whether there is any need to eliminate the 
internet pharmacy industry; all eyes are watching 
developments in Congress, since a law allowing bulk 
reimportation would seem to require GOC steps to protect 
Canadian drug supplies.  Private industry has already taken 
steps to stem the flow of drugs across the border, with seven 
major pharmaceutical companies restricting sales to internet 
pharmacies that export drugs from Canada to the United 
States.  It may be difficult for Health Canada to impose 
restraints, as the internet pharmacy business has become a 
major source of income and jobs, particularly in Manitoba, 
and pharmacy regulation is primarily the responsibility of 
the provinces.  End summary. 
 
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Introduction and Recent Developments 
------------------------------------- 
 
2.  (U)  In the past, Canadian government efforts to respond 
to booming internet pharmacy exports have been stymied by the 
conflict between traditional pharmacists and internet 
exporters, supported by provinces that see them as engines of 
economic growth.  Since his arrival in July, however, Health 
Minister Dosanjh has expressed his determination to act to 
protect the Canadian drug supply.  Anecdotal evidence seems 
to support his position; a November study by the Canadian 
Pharmacists Association (CPhA) reported that 80 percent of 
pharmacists who responded to the survey had experienced drug 
shortages in the previous week, forcing them to spend time 
hunting for supplies.   Traditional busloads of senior 
citizens invading from the south have never caused much 
concern, but booming internet exports, and the threat of a 
bigger boom caused by legalization in the United States, may 
finally galvanize Canadian authorities into action. 
 
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Health Canada: Considering its Options 
-------------------------------------- 
 
3.  (U)  Health Canada's response to the HHS report  is thus 
far restrained.  In testimony before the Standing Committee 
on Health, Health Canada representatives confirmed that they 
are working on recommendations, with no definite timeline in 
mind (Comment: Industry interlocutors say that Health Canada 
may act by the end of this month.)  Despite the Health 
Minister's interest in moving aggressively to restrain 
exports, timing of the decision may depend on developments in 
Congress on bills that allow bulk importation from Canada. 
Health Canada's proposed responses include: stricter 
enforcement of the requirement that a doctor see the patient 
for whom he or she prescribes (that is, elimination of the 
practice of Canadian doctors co-signing U.S. prescriptions); 
requirements that Canadian doctors only write prescriptions 
for people present in Canada; and the compilation by Health 
Canada of a list of medications that could be in short supply 
in Canada and therefore cannot be exported. 
 
4.  (U)   Health Canada would have to rely on provinces to 
enforce these rules, however.  The practice of pharmacy in 
Canada is regulated by the provinces, and any licensed 
pharmacy that offers internet services must meet the 
standards of practice within its own province.  Whether 
provincial premiers (specifically Manitoba premier Gary Doer) 
will be willing to comply with federal demands remains to be 
seen. 
 
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Pharmaceutical Industry Response 
-------------------------------- 
 
5. (U)  Industry representatives did not testify in 
Committee, but have been privately pushing what they call the 
"Spanish option" which would exclude exports from federal 
price controls and would require new reporting from 
pharmaceutical warehouses.  This option was raised by MPs in 
committee who had obviously been briefed by the industry, but 
it does not seem to be currently under consideration by 
Health Canada.  In the absence of a regulatory remedy, much 
of the U.S. pharmaceutical industry have already acted to 
protect the two-tier North American pricing system: last 
month, Merck and Co. joined GlaxoSmithKline, Pfizer Inc., Eli 
Lilly and Co., Aventis, Astra Zeneca, and Wyeth 
Pharmaceutical in cracking down on pharmacies that sell to 
the United States. 
 
--------------------------------------------- ---- 
Internet Pharmacy Industry Response: the flipside 
--------------------------------------------- ---- 
 
6.  (U)  In a counter-proposal to Health Canada's possible 
actions, David McKay of the Canadian International Pharmacy 
Association (CIPA) proposed to committee that federal 
authorities prohibit only bulk exports.  This option is 
obviously popular with the internet pharmacy companies; not 
only would it leave them in business, but it would protect 
them from future competition by bulk dealers.  McKay argued 
that there is a natural limit for internet drug sales to the 
United States.  Their consumer base consists of uninsured or 
underinsured Americans on maintenance medication who are 
willing to use the internet, a population that CIPA numbers 
at a maximum of 3 million individuals, or roughly a third 
more than current levels.  Therefore, Health Canada should 
not interfere with individual internet sales but should 
instead act to block any bulk trade that could potentially 
begin with the passing of new laws in the United States. 
 
----------------------------- 
It Always Comes Back To Trade 
----------------------------- 
 
7.  (U)  Some MPs  and the internet pharmacy representatives 
tried to frame the question in terms of free trade.  CIPA 
representatives repeatedly used parallel trade in the EU as 
an example of how 'free trade' in pharmaceuticals does not 
damage the exporting country.  As Health Canada pointed out 
in testimony, however, the United States is an outlier in 
terms of pricing of pharmaceuticals, and therefore the EU 
comparison is of limited value. 
 
10.  (U)  However, many members of the committee appeared to 
agree with McKay that a certain number of U.S. patients will 
inevitably buy cheaper drugs over the internet and that 
Canadian companies might as well exploit that market. The 
representative of the International Pharmacy Association of 
British Columbia argued with some heat that employment in his 
province has been decimated by the softwood lumber disputes 
with the United States, so why should the internet pharmacy 
industry also have to be eliminated? 
 
11.  (U) There is lingering suspicion among MPs and interest 
groups that Health Canada's "sudden" interest in regulating a 
four-year industry is due to pressure from U.S. interests. 
When asked why GOC is only now considering regulating an 
industry that had its start almost five years ago, the Health 
Canada representative said that GOC sees a potential for 
rapid expansion and that "recent developments in the United 
States have triggered greater concern." A liberal PM put it 
more bluntly, saying "Big pharma got to Bush, and Bush got to 
Paul Martin," and also describing Minister of Health Dosanjh 
as a "shill for big pharma."  McKay, for his part, dismissed 
concerns over the risk of unregulated cross-border campaign 
as an "FDA smear campaign". 
 
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What (Regulatory) Prescription for GOC? 
--------------------------------------- 
 
13.  (U)  Future testimony from Health Canada requested by 
the Standing Committee on Health may provide clearer insight 
into GOC's next intended move.  The situation, however, will 
continue to be complicated by international and domestic 
disagreements.  Although Health Minister Dosanjh has 
reiterated his determination to act to protect the Canadian 
drug supply, he may not get Parliamentary backing until 
imminent U.S. legalization breaks the logjam. 
 
Visit Canada's Classified Web Site at 
http://www.state.sgov.gov/p/wha/ottawa 
 
CELLUCCI