George Allen’s Alzheimer’s disease left him crying uncontrollably all day and pacing all night. After several medications failed to stop the 74-year-old’s tears or continuous walks, a caregiver at his assisted living home in Mesa found the magic bullet: Zoloft, the nation’s most prescribed antidepressant drug, made by Pfizer Inc.
"Right now he’s calm and at peace," said Patti Jones.
George’s 75-year-old wife, Betty, works full time to pay for her husband’s medicines and overall care. "It takes everything I make plus a little more to take care of him,’’ she said.
So it helped greatly when Jones found a way to cut George’s annual drug bill in half, to $2,000, by turning to Blue Marble Meds in Fountain Hills, which helped her buy prescription drugs from Canada. George’s Zoloft bill dropped from $261 for a three-month supply to $167.
It is that kind of savings that has drug manufacturers worried.
Fearing a significant loss of revenue from U.S. consumers, the industry giants have wrapped a tight grip around the supply and distribution of brand-name prescription drugs in Canada.
The clampdown has made it tough for East Valley businesses that help customers buy drugs from Canada. Many have been forced to find new ways and new places to get the cheaper drugs that customers depend on.
Nine of the nation’s largest drug companies have launched aggressive measures, including blacklisting Canadian pharmacies that export medications into the United States and threatening to shut off brand-name drug supplies to Canadian wholesalers and distributors who sell to them.
An estimated 2 million Americans turn to outlets in the United States to buy much cheaper drugs imported from Canada.
In February, Pfizer halted supplies to two Canadian wholesalers until they stopped selling to blacklisted customers selling to the United States.
"They’re ruthless. They’re absolutely ruthless," said David MacKay, executive director of the Canadian International Pharmacy Association, which represents mailorder Internet pharmacies that sell primarily to the United States. Most of its members have been blacklisted by pharmaceutical companies. "They are big companies trying to totally cut off supply."
DISRUPTING THE SUPPLY
The tactics, to some degree, are working.
Canadian pharmacies selling to the United States — either retail stores or Internet businesses — have encountered inventory shortages. In some cases, the pharmacies are completely out of certain brand-name drugs and are unable to restock them. If pharmacies can get the drugs, short supply can drive up prices. Blue Marble Meds, for example, can no longer get Aracept, an Alzheimer’s medication, or Norvask, a beta-blocker for high blood pressure, any cheaper in Canada, said Robert Allen, Blue Marble’s president.
Other pharmacies no longer carry products made by Pfizer, which importation authorities said has been the most aggressive at choking off supply.
"I hope to goodness they don’t do away with (drugs from Canada) because for the people I have in this home, these medications have been life-savers," said Patti Jones, who assists George Allen and other residents of the Mesa care home, adding the Zoloft has calmed Allen considerably.
Suppliers are trying to find ways around the manufacturers’ squeeze tactics.
The restrictions have fueled an underground distribution system in Canada. Pharmacies that have escaped blacklisting secretly stock and distribute prescription drugs to pharmacies selling to the United States, according to many of those involved in the process.
The strategy has kept many lower-cost, brand-name drugs flowing to East Valley customers, many of whom use businesses called facilitators — such as Blue Marble Meds — which connect prescription drug orders with Canadian pharmacies.
For several East Valley facilitators, relying on the underground system leaves too much to chance. Some have started working with countries other than Canada, including England, Australia and New Zealand, to continue offering cheaper medications.
But even that strategy is laced with uncertainty. On August 17, Pfizer sent a letter to prescription drug wholesalers in the United Kingdom, telling them the company would begin supplying only enough medications to satisfy local demand. The same restrictions are being placed on New Zealand, said MacKay.
"The sad part of it all is it affects us, but the end consumer is the one hurting the most," said Joel Korsunsky, business manager of Prescription Drugs Canada, a Scottsdale-based facilitator. "The question is, where is it going to stop? "
PRESSURE FROM COMPANIES
Efforts to halt the flow of prescription drugs from Canada began in June 2002, when Abbott Laboratories Inc., maker of the HIV and AIDS drugs Kaletra and Norvir, sent a letter to certain Canadian pharmacies it suspected were selling medications to businesses in the United States, according to documents obtained by the Tribune.
The Canadian pharmacies had an "abnormal increase " in drugs purchased from Abbott, the letter stated, and would be cut off unless they could prove the drugs weren’t going to the United States.
Similar letters followed from Merck and Co. Inc., Wyeth Pharmaceuticals Inc., GlaxoSmithKline, AstraZeneca Pharmaceuticals, Eli Lilly and Co., Novartis, Boeringer Ingelheim and Pfizer.
The warnings did little to curtail drug purchases by U.S. customers and drug companies took more serious actions, according to court documents and officials from Canadian pharmacies and one wholesaler who spoke to the Tribune.
• Having Canadian wholesalers agree to prohibit sales to customers suspected of exporting brandname drugs.
• Monitoring orders from Canadian pharmacies and restricting supplies to historical levels before U.S. demand increased.
• Creating blacklists of pharmacies — some lists contain more than 100 names — that Canadian wholesalers cannot sell to without the risk of being cut off from a company’s brand-name drugs.
Wholesalers responded by removing blacklisted pharmacies from their customer base. But The Prairie Supply Cooperative, a wholesaler in Alberta, missed a few and Pfizer took notice. The wholesaler saw its sales plummet after the nation’s largest pharmaceutical company cut off supplies of its brand-name drugs, said Laurie Gauthier, general manager of The Prairie Supply Cooperative.
"As a wholesaler, you don’t have a lot of options. You stop supplying the people " who export to the United States, he said. "Nobody says business is clean and neat. Big corporations have serious issues, and they play a very serious game."
The tactics have sparked several class-action lawsuits nationwide claiming that pharmaceutical companies engaged in unfair trade practices by conspiring to choke off the supply of drugs flowing from Canada.
Officials from Pfizer and other pharmaceutical companies said the claims are without merit.
U.S. DRUG BURDEN
Pfizer is restricting the flow of prescription drugs from Canada because the company depends on the money it makes in the United States to pay for the research and development of new medications, said Jack Cox, a Pfizer spokesman.
Every other developed country Pfizer sells to has price controls on drugs. Only the United States provides patent protection to drug makers, allowing them to sell their brand-name drugs exclusively and charge whatever the free market will bear. And the U.S. market will support high drug prices, even though many uninsured and underinsured Americans cannot afford them, company officials say.
The disparity has made Canada a refuge for those who cannot or will not pay U.S. drug prices. The amount of money spent by Americans on drugs from Canada grew from $414 million in 2002 to $695 million last year, according IMS Health, a pharmaceutical research firm.
Still, losses to drug companies from U.S. importation is minimal, said Cox, whose company had $45 billion in sales this year.
Drug company representatives said the bigger threat would be if legislation allowed widespread drug importation in the United States.
Political leaders, including Sen. John McCain, R-Ariz., support importation.
McCain has co-sponsored Senate Bill 2328, the Pharmaceutical Market Access and Drug Safety Act of 2004, which would make purchasing drugs from Canada and other countries legal. It includes measures to discourage pharmaceutical companies from choking off drugs coming to the United States from foreign pharmacies.
"If importation were allowed on a large scale, that would be price controls, which would dry up resources for (research and development)," Cox said. "That’s our primary, long-term concern."
With pharmaceutical companies earning record profits, it’s doubtful that losses from drug importation or price controls in the United States would cause a dramatic decline in research and development dollars, said Brad Kirkman-Liff, professor of health policy and biotechnology at the W.P. Carey School of Business at Arizona State University.
Last year, the 50 largest drug companies invested $66 billion in research and development, said Kirkman-Liff. That year, the companies had a combined $348 billion in sales.
Even if U.S. drug prices were frozen at today’s levels, there would be plenty of money for research and development, especially as a growing and aging population increases demand for medications, he said.
The main issue, however, is the financial burden Americans carry by paying for the research and development of drugs used worldwide. What’s needed, he said, is either a global treaty in which all industrialized nations agree to share in the cost of research and development, or regulated drug prices in the United States.
"It’s a big issue that needs to be addressed in some manner, but until someone proposes (a treaty) and gets different countries to agree to it, (drug) companies in the meantime will try to maintain their prices in the U.S.," he said.
Although the crackdown by pharmaceutical companies initially depleted supplies, delayed orders and raised prices, those in the business of getting cheaper prescription drugs to Americans found ways to stay in the game.
Global Medicines, a facilitator in Cottonwood, has abandoned Canada, turning instead to pharmacies in New Zealand, Switzerland and India, said Shayne O’Shea, operations manager for Global Medicines.
"I used to deal with three Canadian pharmacies. Now I don’t deal with any Canadian pharmacies. It doesn’t make any sense to me," he said.
Prescription Drugs Canada in Scottsdale gives customers a choice between going on backorder if certain brand-name medications are not available from the Canadian pharmacies it works with, or obtaining those drugs through its partnerships with pharmacies in Australia, the United Kingdom and New Zealand.
Although it costs Prescription Drugs Canada more to go through other countries than through Canada, the facilitator has been able to maintain its prices, said Korsunsky, the company’s business manager.
Blue Marble Meds has been able to survive by working with Canadian pharmacies, but getting brand-name prescription drugs has become a trickier process, said Allen, the company’s president. Blue Marble Meds benefits from a network of pharmacies that each supply small amounts of brandname drugs for export. The approach helps the pharmacies avoid detection by pharmaceutical companies, which are looking for unusual increases in the amount of drugs pharmacies purchase.
"It’s the only way to survive," said MacKay of the Canadian International Pharmacy Association. "You have to stay under the radar and go to many pharmacies. It’s a real cat and mouse game."
Those secretive channels are what brought George Allen the Zoloft he needed to ease his crying and his pacing.
"I don’t know why they would want to choke it off," said Jones, Allen’s caregiver. "It’s sad to see this go on. It’s just not right."