US embassy cable - 03OTTAWA1383

UNCLAS SECTION 01 OF 03 OTTAWA 001383 
 
SIPDIS 
 
STATE FOR WHA/CAN PNORMAN AND EB/DCT 
USDOC FOR ITA GWARD AND CBUSQUETS 
DEPT PASS USTR SCHANDLER 
DEPT ALSO PASS FDA DAUTOR AND MECKLES 
 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, EIND, CA, Manitoba, Trade 
SUBJECT: INTERNET PHARMACIES: MANITOBA LEADS THE WAY IN 
EXPORTS TO THE U.S. 
 
REFTEL: 2002 OTTAWA 2048 
 
1. SUMMARY - WITH STRONG SUPPORT FROM THE PROVINCIAL 
GOVERNMENT AND REGULATOR, MANITOBA HAS BECOME A HUB FOR 
THE GROWING CROSS-BORDER TRADE IN PHARMACEUTICALS FROM 
CANADA TO THE U.S.  CANADIAN INTERNET PHARMACIES, SOME OF 
WHICH FILL MORE THAT 1000 PRESCRIPTIONS A DAY, HAVE BEEN 
SUCCESSFUL IN TAKING ADVANTAGE OF THE DISPARATE U.S. AND 
CANADIAN MARKET PRICES FOR PHARMACEUTICALS AND LEGAL 
UNCERTAINTIES ON BOTH SIDES OF THE BORDER.  MANITOBA'S 
STRONG PROMOTION OF THE INDUSTRY IS IN STARK CONTRAST 
WITH THE CAUTIOUS APPROACH TAKEN BY OTHER PROVINCES, 
ESPECIALLY ONTARIO.  THE FUTURE OF THE INDUSTRY WILL 
DEPEND ON THE INTERNET PHARMACIES' ABILITY TO RESPOND TO 
THE INCREASING PRESSURE ON THE SUPPLY OF PHARMACEUTICALS 
AND NAVIGATE THE MURKY LEGAL AND ETHICAL WATERS 
SURROUNDING THE TRADE.  END SUMMARY. 
 
--PHARMACEUTICAL EXPORTS - A BOON FOR MANITOBA-- 
 
2. MANITOBA HAS BECOME A MAJOR HUB IN A GROWING TRADE IN 
PRESCRIPTION PHARMACEUTICALS FROM CANADA TO THE U.S., 
MUCH OF WHICH IS NOW ORDERED OVER THE INTERNET AND 
FULFILLED BY MAIL.  MANITOBA-BASED INTERNET PHARMACIES 
ACCOUNT FOR WELL OVER HALF OF THE ESTIMATED USD 500 
MILLION WORTH OF PRESCRIPTION DRUGS SOLD TO THE U.S. FROM 
CANADA LAST YEAR.  THE MANITOBA PHARMACEUTICAL 
ASSOCIATION (MPA), WHICH REGULATES PHARMACIES IN THE 
PROVINCE, ESTIMATES THAT 53 MANITOBA PHARMACIES ARE 
INVOLVED IN CROSS-BORDER TRADE WITH THE UNITED STATES. 
THE INDUSTRY HAS CREATED UPWARDS OF 2000 JOBS IN TOWNS 
THROUGHOUT THIS TRADITIONAL MANUFACTURING AND FARMING 
PROVINCE. 
 
3. KRIS THORKELSON, CHAIRMAN AND CEO OF CANADA DRUGS, ONE 
OF THE LARGEST INTERNET PHARMACIES IN MANITOBA, INVITED 
MISSION PERSONNEL FOR A TOUR OF THE COMPANY'S FACILITIES 
TO HELP DEMONSTRATE THAT THE NEW INTERNET PHARMACIES ARE 
NOT "FLY BY NIGHT" OPERATIONS, AND THAT THEY HAVE 
INVESTED HEAVILY IN BRICKS AND MORTAR, AS WELL AS 
SOPHISTICATED COMPUTER AND ELECTRONIC TRACKING SYSTEMS. 
CANADA DRUGS FILLS OVER 1000 PRESCRIPTIONS A DAY, ALL FOR 
EXPORT TO THE UNITED STATES.  CUSTOMERS INITIATE AN ORDER 
BY FAXING OR MAILING TO CANADA DRUGS A COPY OF THEIR U.S. 
PRESCRIPTION, TOGETHER WITH A POWER OF ATTORNEY FORM THAT 
WAIVES THE CANADIAN PHARMACIST OF LIABILITY, AND A 
PATIENT QUESTIONNAIRE.  AN IN-HOUSE PHARMACIST AT CANADA 
DRUGS REVIEWS MATERIALS, A CANADIAN PHYSICIAN CO-SIGNS 
THE PRESCRIPTION, AND THE PHARMACIST REVIEWS IT A SECOND 
TIME AFTER A TECHNICIAN FILLS THE ORDER, AND ONCE MORE 
BEFORE IT IS SHIPPED OUT.  EACH ORDER IS CONFIRMED BY 
PHONE WITH THE CUSTOMER BEFORE IT IS SENT.  CANADA DRUGS 
HAS 18 PHARMACISTS ON STAFF, OVER 40 PHARMACEUTICAL 
TECHNICIANS, AND APPROXIMATELY 170 STAFF IN TOTAL. 
 
--PROVINCE STEPPING IN TO SUPPORT THE INDUSTRY-- 
 
4. THE GOVERNMENT OF MANITOBA (GOM) IS A STRONG SUPPORTER 
OF THE PHARMACEUTICAL EXPORT INDUSTRY AND VIEWS THE NEW 
BUSINESSES AS A KEY COMPONENT OF ITS PROVINCIAL GROWTH 
STRATEGY.  EXPORTS FROM CANADA STILL ONLY ACCOUNT FOR 
LESS THAN ONE-HALF OF ONE PERCENT OF THE U.S. 
PRESCRIPTION DRUG MARKET.  THE GOM IS WORKING WITH THE 
MPA AND THE MANITOBA COLLEGE OF PHYSICIANS AND SURGEONS 
(MCPS) ON SMOOTHING OUT THE REGULATORY PROCESS TO 
LEGITIMIZE THE INDUSTRY.  AS FAR AS THE GOM IS CONCERNED, 
EXPORTING PHARMACEUTICALS TO THE U.S. IS NOT ILLEGAL 
UNDER CANADIAN LAW, AND THEY ARE NOT INTERESTED IN 
ENFORCING U.S. PROHIBITIONS ON PHARMACEUTICAL PRODUCTS IF 
THE FDA WILL NOT ENFORCE THEM.  THE GOM IS INSTEAD 
FOCUSED ON ENSURING THAT THE PRACTICE IS SAFE, MEETS 
CANADIAN FEDERAL AND PROVINCIAL GUIDELINES AND PRACTICES, 
AND THAT INTERNET PHARMACIES PROVIDE U.S. CONSUMERS WITH 
THE SAME SAFEGUARDS AND LEVEL OF SERVICE AS CANADIAN 
CITIZENS. 
 
5. ONE OF THE BIGGEST CONCERNS FOR THE PROVINCIAL 
REGULATORY AUTHORITIES ACROSS CANADA HAS BEEN THE 
PRACTICE OF CANADIAN PHYSICIANS CO-SIGNING, OR RE-WRITING 
PRESCRIPTIONS FOR U.S. PATIENTS THEY HAVE NEVER SEEN. 
REGULATORS HAVE QUESTIONED WHETHER SIGNING OFF ON 
PRESCRIPTIONS WITHOUT PERFORMING AN APPROPRIATE PHYSICAL 
EXAMINATION IS TANTAMOUNT TO PROFESSIONAL MISCONDUCT. 
THE MPA HAS WORKED WITH THE MCPS TO CLAMP DOWN ON THE 
MOST EGREGIOUS CASES WHERE PHYSICIANS WERE "RUBBER 
STAMPING" MORE THAN 1000 PRESCRIPTIONS A DAY.  DESPITE 
THESE CONCERNS, THE MPA, THE MCPS, AND MANITOBA'S 
INTERNET PHARMACIES RECENTLY SIGNED OFF ON A GOM PLAN TO 
ELIMINATE CO-SIGNING BY A CANADIAN PHYSICIAN ALTOGETHER 
AND TO ACCEPT PRESCRIPTIONS FROM U.S. PHYSICIANS ON PAR 
WITH THOSE FROM CANADA.  THE GOM IS EXPECTED TO ANNOUNCE 
THEIR PROPOSAL SHORTLY AND SEEK THE NECESSARY LEGISLATIVE 
CHANGES TO DO AWAY WITH CO-SIGNING IN THE FALL.  THE 
FEDERAL GOVERNMENT WILL LIKELY CHALLENGE THIS PROVINCIAL 
LEGISLATION. 
 
6. THE STRONG PROMOTION OF THE INDUSTRY FROM MANITOBAN 
OFFICIALS IS IN STARK CONTRAST TO THE CAUTIOUS APPROACH 
OF OTHER PROVINCIAL GOVERNMENTS AND REGULATORS.  ONTARIO 
HAS TAKEN THE STRONGEST STANCE AGAINST INTERNET 
PHARMACIES, QUESTIONING BOTH THE LEGITIMACY OF THE CROSS- 
BORDER TRADE IN PRESCRIPTION PHARMACEUTICALS AND THE 
ABILITY OF THE PROVINCIAL REGULATORS TO EFFECTIVELY 
MONITOR THE SALE OF PRESCRIPTION DRUGS SOUTH OF THE 
BORDER.  THE COLLEGE OF PHYSICIANS AND SURGEONS OF 
ONTARIO, THE SELF-REGULATING BODY FOR THE PROVINCE'S 
MEDICAL PROFESSION, HAS STATED THAT "IT IS NOT ACCEPTABLE 
FOR A PHYSICIAN TO SIGN OR CO-SIGN A PRESCRIPTION WITHOUT 
ATTENDING THE PATIENT."  THE ONTARIO COLLEGE OF 
PHARMACISTS HAS ALSO WEIGHED IN STATING THAT PHARMACISTS 
"SHALL NOT FACILITATE OR ENTER INTO AGREEMENTS WITH 
PHYSICIANS FOR THE PURPOSES OF CO-SIGNING OR REWRITING 
PRESCRIPTIONS FOR OUT-OF-COUNTRY PATIENTS."  IN JUNE THE 
ONTARIO COURTS WILL HEAR A CASE AGAINST A NUMBER OF 
INDIVIDUALS AND COMPANIES DOING BUSINESS WITH AN ONLINE 
PHARMACY, THE CANADIAN DRUG STORE INC., WHICH IS ACCUSED 
OF UNLAWFULLY OPERATING AN UNACCREDITED INTERNET PHARMACY 
AND FILLING PRESCRIPTIONS WRITTEN BY U.S. PHYSICIANS FOR 
U.S. PATIENTS. 
 
--CLOUDS LOOMING OVER THE INDUSTRY-- 
 
7. DESPITE THE INDUSTRY'S RECENT GROWTH, THE ENORMOUS 
POTENTIAL FOR LOWER-PRICED PRESCRIPTION DRUGS IN THE U.S. 
MARKETPLACE, AND STRONG SUPPORT FROM GOVERNMENT AND 
REGULATORY OFFICIALS, THE LONG-TERM VIABILITY OF THE 
CROSS-BORDER INTERNET PHARMACEUTICAL TRADE IS TENUOUS. 
IN ADDITION TO A POSSIBLE CRACKDOWN ON IMPORTERS BY THE 
FDA OR A LEGISLATIVE FIX BY CONGRESS TO PROVIDE SENIORS 
WITH PRESCRIPTION DRUG COVERAGE, THERE ARE SEVERAL 
DOMESTIC FACTORS THAT COULD SEVERELY DAMAGE THE CANADIAN 
INDUSTRY. 
 
8. BRITISH PHARMACEUTICAL MANUFACTURER GLAXOSMITHKLINE 
(GSK), WHICH ANNOUNCED IN JANUARY THAT THEY WOULD NO 
LONGER SUPPLY THEIR PRODUCTS TO CANADIAN PHARMACIES 
SELLING TO THE U.S. MARKET, IS APPLYING THE GREATEST 
PRESSURE.  PHARMACEUTICAL MANUFACTURES ARE CONCERNED THAT 
THE GROWING CROSS-BORDER TRADE COULD LEAD TO A NUMBER OF 
PROBLEMS: SHORTAGES OF BOTH CANADIAN PHARMACISTS AND DRUG 
PRODUCTS FOR CANADIAN CONSUMERS, DRUGS UNAPPROVED IN THE 
U.S. BEING DISPENSED TO U.S. PATIENTS, INFRINGEMENT OF 
U.S. PATENTS, AND POTENTIAL LIABILITY FOR CANADIAN DRUG 
COMPANIES.  IN PRIVATE WE HAVE ALSO BEEN TOLD THAT FOR 
THE FIRST TIME COMPANIES HAVE EXPERIENCED DECREASED SALES 
OF KEY DRUGS IN NORTHERN BORDER STATES. 
 
9. KRIS THORKELSON FROM CANADA DRUGS ADMITTED THAT 
SUPPLIES OF SOME GSK DRUGS ARE STARTING TO RUN SHORT. 
THE COMPANY HAS BEEN ABLE TO SECURE SUPPLIES THROUGH 
OTHER CANADIAN PHARMACIES, BUT IS BEGINNING TO EXPERIENCE 
DELAYS AND IS CONCERNED THAT THEY MAY NO LONGER BE ABLE 
MEET THE DEMAND.  EFFORTS BY THE PHARMACEUTICAL EXPORTERS 
TO COUNTER GSK'S ACTIONS WERE DERAILED WHEN CANADA'S 
FEDERAL COMPETITION BUREAU RULED IN MARCH THAT GSK HAD A 
"REASONABLE BUSINESS JUSTIFICATION" TO BLOCK THE EXPORTS. 
ASTRAZENECA'S RECENT ANNOUNCEMENT THAT THEY WILL LIMIT 
SUPPLIES OF THEIR PRODUCTS TO CANADIAN PHARMACIES AND 
WHOLESALERS HAS COMPOUNDED THE SUPPLY PROBLEMS FOR 
INTERNET PHARMACIES. 
 
10. A RELATED, AND YET UNTESTED, QUESTION IS HOW FEDERAL 
AND PROVINCIAL GOVERNMENTS WILL REACT IF THE DEMAND FROM 
INTERNET PHARMACIES BEGINS TO AFFECT THE SUPPLY OF DRUGS 
TO TRADITIONAL PHARMACIES SERVING CANADIAN PATIENTS.  THE 
GOM IS PROMOTING A "MANITOBA FIRST" POLICY TO ENSURE THAT 
MANITOBANS ARE NOT DENIED ACCESS TO DRUGS IF THERE IS A 
SHORTAGE, BUT THE POLICY LACKS THE REGULATORY TEETH THAT 
WOULD FORCE PHARMACIES TO SELL TO THE MANITOBA MARKET. 
FEDERAL REGULATIONS DO NOT STIPULATE THAT PHARMACIES MUST 
MAINTAIN AN ADEQUATE SUPPLY OF DRUGS OR COMPEL THEM TO 
GIVE FIRST PRIORITY TO CANADIAN CONSUMERS.  BOTH HEALTH 
CANADA AND INDUSTRY CANADA ARE MONITORING THE CANADIAN 
DRUG SUPPLY AND HAVE INDICATED THAT THEY WOULD INTERVENE 
IN EMERGENCY CIRCUMSTANCES, AS THEY DID WHEN THERE WAS A 
RUN ON CIPRO DURING THE ANTHRAX SCARE IN 2001. 
 
11. PROVINCIAL EFFORTS TO PROMOTE THE PHARMACEUTICAL 
EXPORT INDUSTRY ARE ALSO BEING CLOSELY WATCHED BY THE 
FEDERAL GOVERNMENT.  PROVINCIAL REGULATORS SET AND 
ENFORCE THE PROFESSIONAL STANDARDS FOR PHYSICIANS AND 
PHARMACISTS, BUT HEALTH CANADA, THROUGH THE HEALTH ACT 
AND FOOD AND DRUG ACT, IS ULTIMATELY RESPONSIBLE FOR THE 
SAFETY OF FOODS, DRUGS AND HEALTH PRODUCTS.  IN A RECENT 
MEETING WITH USG OFFICIALS, DAVID EDWARDS, LEGAL COUNSEL 
AT HEALTH CANADA, NOTED THAT ACCORDING TO THE HEALTH ACT, 
A "PRACTITIONER" MUST BE A CANADIAN, AND THAT IT WOULD 
NOT BE POSSIBLE FOR THE GOM TO ELIMINATE THE NEED FOR A 
CANADIAN DOCTOR TO CO-SIGN A PRESCRIPTION BEFORE IT COULD 
BE FILLED BY A CANADIAN PHARMACIST. 
 
--COMMENT- 
 
12. DEPENDING ON WHOM ONE SPEAKS WITH AND THEIR RELATION 
TO THE PHARMACEUTICAL INDUSTRY, BI-NATIONAL TRADE IN 
PRESCRIPTION PHARMACEUTICALS IS EITHER A MARKET WITH HUGE 
GROWTH POTENTIAL FOR RURAL CANADIAN COMMUNITIES, OR A 
LEGALLY QUESTIONABLE BUSINESS THAT HAS ACHIEVED TEMPORAL 
SUCCESS ARBITRAGING GAPS IN REGULATIONS AND PRICES.  THE 
LEGAL FRAMEWORK SURROUNDING THE CROSS-BORDER TRADE HAS 
NOT BEEN SOLIDIFIED ON EITHER SIDE OF THE BORDER, AND 
UNTIL IT IS MANY OF THE ISSUES WILL REMAIN OPEN TO 
INTERPRETATION.  OTHER PROVINCES ARE PAYING CLOSE 
ATTENTION TO DEVELOPMENTS IN MANITOBA TO SEE HOW THE 
INTERNET BUSINESS MODEL WILL RESPOND TO CHANGES IN THE 
MARKETPLACE AND WHAT IMPACTS THIS MAY HAVE FOR THE 
CANADIAN HEALTH CARE SYSTEM. 
 
CELLUCCI#