Business

CUTTING OFF SUPPLIES

DAVID SQUARE September 1 2003
Business

CUTTING OFF SUPPLIES

DAVID SQUARE September 1 2003

CUTTING OFF SUPPLIES

Business

Will the big drug companies kill the Internet pharmacies?

DAVID SQUARE

OVER THE PAST 2½ years, it has brought hundreds of jobs and a sense of security to many small towns suffering from drought and the closure of the U.S. border to cattle. Now, barely up and running, Manitoba’s flourishing Internet drug business is living under the shadow of the delete button. Online pharmacies across Canada are selling $650 million to $1 billion worth of drugs a year, say industry watchers, about $500 million of that from the 60 operations in Manitoba. But the huge, multinational drug companies don’t relish seeing these businesses selling their patented drugs to Americans at up to 80-per-cent less than their retail price in the U.8. The pharmaceutical giants, says Winnipeg lawyer John Myers who speaks for the e-pharmacies, are trying to put the Canadian operations out of business by starving them of drug supplies.

Americans who can’t afford or don’t want to pay U.S. prices have been flocking to the cheaper Canadian outlets since they started offering drugs on the Internet at Canada’s regulated, lower prices in March 2001. Always critical, many of the biggest brand-name suppliers are moving into boycott mode. So far, says Meyers, they include GlaxoSmithKline (maker of Paxil and Eltroxin), AstraZeneca (Losec and Nexium), Wyeth (Effexor and Premarin), and Pfizer, the world’s largest (Lipitor and Aricept). “Merck Frosst [Fosamax and Vioxx] will be next,” says Daren Jorgenson, owner of one of Manitoba’s largest e-pharmacies, CanadaMeds.com.

“When that happens, over 45 per cent of the pharmaceuticals we sell will no longer be available. This will kill our industry.” Jorgenson says e-pharmacies cannot operate with access only to generic drugs. That’s because most of their clients want the patented drugs, which offer them bigger savings. And the Canadian operations are still able to make a profit on them because they buy their supplies in Canada, where federal regulations keep prices much lower than in the U.S. free market. The Manitoba operators failed in the spring to convince the Competition Bureau of Canada to address Glaxo’s boycott. But they haven’t given up. “Now that more drug companies are involved,” says Meyers, “it may be possible to convince the bureau to look at this as lessening competition in a distinct Canadian market.” Also under consideration:

suing the boycotting companies, says Colin MacArthur, a lawyer for the Manitoba International Pharmacists’ Association.

MIPA president Kris Thorkelson says some of Manitoba’s smaller e-pharmacies, from the so-called “split” outlets where small Internet businesses run alongside their retail operations, will soon shut down. In the longer run, if the entire on-line industry had to darken its terminals, Manitoba’s rural economy would face a devastating hit. The Internet pharmacies, mainly based in small towns, provide more than 1,000 jobs for people who would otherwise be hard-pressed to find work locally. In Minnedosa, for instance, a community of 2,400 about 200 km west of Winnipeg, 200 people work for MediPlan (RxNorthcom), the largest employer in town and one of the largest e-pharmacies in Canada.

Flush with new business, MediPlan has built a $1-million warehouse and order centre in the town of Niverville, 30 km south of Winnipeg. But the new facility remains unoccupied in the uncertain business climate. Before the battle with the drug giants began, there was talk of more than 200 new jobs in Niverville. Now, the company intends to open the building in September with only 25 to 35 new people. Niverville’s mayor, Gordon Daman, says that’s a setback for the town, but he takes comfort from a Biblical precedent. “David slew Goliath,” notes Daman, “and I believe the Internet pharmacies will prevail.” IS1