Drug Companies Crack Down on Canadian Internet Pharmacies

WINNIPEG, Manitoba, Feb. 7, 2005 — -- Trying to circumvent soaring prescription drug prices in the United States, an estimated 2 million Americans buy their medications from Internet pharmacies in Canada, which employs government price controls. Some major pharmaceutical companies are now aggressively trying to stop the cross-border sales.

The biggest pharmacy in all of Canada -- where many of the Internet pharmacies are based -- does not sell one pill to a Canadian.

"Our clientele is 100 percent American and we dispense over 3,000 prescriptions per day," said Bob Fraser, lead pharmacist for the Web site CanadaDrugs.com.

At least 80 Internet pharmacies in Canada cater to Americans -- selling Fosomax for osteoporosis, Paxil and Effexor for depression, Nexium for heartburn, Lipitor for high cholesterol -- all for 30 percent to 40 percent cheaper than U.S. prices.

What started out five years ago with one Canadian pharmacist selling Nicorette gum to Americans via the online auction site eBay has turned into an $800 million-a-year business.

That business is threatening the drug industry's profits in the United States, and several drug makers are now blacklisting the online pharmacies.

Pharmaceutical companies including Pfizer, Wyeth and Eli Lilly have all cut off supplies to any Internet pharmacy selling drugs to Americans.

Documents obtained by ABC News show how Merck's Canadian subsidiary -- Merck Frosst -- approached drug wholesalers that supply the Internet pharmacies. The company demanded " a written statement that you have not sold and will not sell Merck Frosst's drug products to entities which are selling, or enabling for sale, such products into the United States," according to one document.

"I believe it is to drive us out of business because it is a complete cutoff," said Dave MacKay, chief executive of the Canadian International Pharmacy Association.