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Americans cross border for prescription drug bargains

U.S. drug prices are the highest in the world. More people are turning to Canada or Mexico to save as much as 90 percent.

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By SUSAN TAYLOR MARTIN

© St. Petersburg Times, published December 17, 2000


WHITE ROCK, British Columbia -- With the zeal of bargain-hunters everywhere, Irene Gronberg and seven other U.S. citizens have traveled 2 1/2 hours and 120 miles to a shopping center in this tidy little Canadian city.

Thanks to the favorable exchange rate, there are attractive savings to be had on liquor, perfume and designer-label clothes. But Gronberg, 67, is here for something she deems far more desirable -- cheap prescription drugs.

Back home in Washington state, Gronberg spends "$400 a month or more" on Lipitor, Zantac and other medications.

"Here I'll save 50 percent, at least," she predicts.

Ed Ritzdorf, a retired truck driver, is making the trip to get blood-thinning medicine to keep him from having another stroke. He has good health insurance through the Teamsters union, but there is a $1,000-a-year limit on prescription drugs.

"I don't know what I'm going to save," Ritzdorf says, "but my prescriptions in the states cost me $1,800 for just six months."

As Ritzdorf and Gronberg know all too well, the United States has the world's highest prescription drug prices. That makes it a perpetual struggle for millions of Americans, especially older ones on fixed incomes, to afford the medications they need.

Almost a fifth of all U.S. residents say they haven't filled a prescription for financial reasons. Many others have to reduce dosages -- a potentially dangerous practice -- or skimp on food, clothing and other basics to pay for their medicines.

The high cost of prescription drugs was a major issue in the presidential campaign, and President-elect George W. Bush vowed in his acceptance speech Wednesday night "to offer prescription drug coverage for all our seniors."

In the meantime, most Americans have no recourse but to pay up or do without. For those who live close to the northern U.S. border, however, there is an increasingly popular alternative: Buy your medication in Canada and save up to 90 percent.

"When you look at the amount they're saving -- $300 to $1,000 -- you can see why it's so attractive," says Elaine Grenon of RxPassport, a new company hoping to capitalize on the trend.

Since last summer, the Seattle-based firm has been working with doctors in British Columbia to provide low-cost prescription drugs to Americans. U.S. residents can bring back a three-month supply of drugs from Canada for personal use, but the order must be filled with a prescription written by a Canadian-licensed physician.

For $39 a person, RxPassport will make arrangements for those who wish to travel to White Rock on their own. The fee includes an appointment with a Canadian doctor, who reviews the patient's medical condition and writes the prescriptions before sending him to the pharmacy next door.

For $99 a person, patients can leave the driving to RxPassport, which offers twice-a-month minibus service to Canada.

"Everybody have their papers?" an RxPassport employee sings out as two men and five women, all over 60, board the bus in Seattle on this clear, crisp December day.

Several pairs of hands ruffle through purses, pockets and sewing bags. Yes, everyone has two pieces of I.D., proof of citizenship and prescription and medical information forms from American doctors. Failure to show the proper documents could result in U.S. customs agents confiscating any prescription drugs on the return trip.

As the bus heads north on Interstate 5, the passengers chatter like pharmacologists about prescription drugs, their U.S. costs and the hoped-for Canadian bargains.

"The last time I went up there, I saved $600" on diabetes medications, Barbara Neal tells seatmate Candace Steele, who also has diabetes.

Steele nods appreciatively. In the United States, her blood-sugar test strips cost $1.80 apiece and she uses at least two a day. That comes to as much as $112 a month, on top of several prescription drugs she must pay for out of pocket.

"I'm just squeaking by," says Steele, 69, a retired family counselor. "These medication costs are killing me."

Although he worked as a hospital administrator, John Rugh is another of the 70-million Americans -- a fifth of them senior citizens -- who lack prescription drug coverage. He and his wife, Ruth, heard about RxPassport, got a brochure with price comparisons and signed up for the trip.

"The cost differential is tremendous," Rugh says.

As the minibus crosses the border, the anticipation builds. Will the cost savings be as great as everyone hopes? In a few minutes they'll know.

'Smoke and mirrors'

While the strength of the U.S. dollar makes everything cheaper for Americans in Canada, exchange rate differences can only partly explain the lower cost of prescription drugs.

An even bigger factor is something that strikes terror in the heart of the U.S. pharmaceutical industry -- price controls.

Since it was created in 1987, Canada's Patented Medicines Prices Review Board has regulated the prices drugmakers can charge for medicines still under patent protection. Prices for new drugs cannot exceed the highest cost of existing drugs used to treat the same disease. Nor can price increases exceed the changes in Canada's Consumer Price Index.

The regulations have had a dramatic effect. In 1987, patent drug prices in Canada were below those of the United States but higher than those in Britain, France and other European countries. By the mid 1990s, Canadian prices had fallen to the mid range of those in Europe.

The review board has authority only over patented medicines sold by manufacturers. However, there are other controls to protect consumers from excessive prices at the retail level. Canadian pharmacists, for example, are generally required to substitute lower-priced generic drugs for higher-cost brand name medications.

Moreover, Canada bans direct advertising to the public. In contrast to the United States, there are no full-page ads or prime-time TV spots trumpeting drugs like Claritin hay fever medication -- expensive ads that can drive up drugmakers' marketing costs and hence the price of the drugs themselves.

Although price controls have saved Canadians (and Americans) millions of dollars, some critics charge there have been less desirable effects.

"Arbitrarily low prices often discourage foreign companies from introducing new drugs into the Canadian market, and Canadians' access to drugs is restricted," the Calgary Herald said in an editorial. "With prices kept artificially low, pharmaceutical companies here also aren't able to spend enough on research and development into new drugs."

The Herald's editorial view echoes that of the Pharmaceutical Research and Manufacturers of America, a trade group for the U.S. drug industry that is fiercely opposed to price controls in the United States.

"Price controls hurt innovation," says Meredith Art, a spokeswoman. "Forty-five percent of all new drugs are developed in the United States; this is where the innovation occurs. Basically patients in this country have the earliest access to the newest and best life-saving treatments."

Defending the high prices it charges in America, the industry contends that it takes an average of 12 to 15 years at a cost of $500-million to bring a new drug to market. Controlling prices would limit a company's return on investment "without reducing the huge risk of drug development," the industry claims.

Nonsense, says Alan Sager, director of the Health Reform Program at Boston University's School of Public Health.

How can drugmaking be that risky, he asks, if the pharmaceutical industry consistently ranks among the most profitable in the United States?

Further, he notes, drugmakers spend almost three times as much on marketing and administration as they do on research. And much of what they do invest in research goes to copy other patented medicines instead of developing new "breakthrough" drugs to treat cancer and other dreaded diseases.

"The tragedy is that we already spend enough to buy all the medications we need," Sager says. "A few simple steps would give us affordable medications for everyone without hurting the research or profits of drugmakers."

Sager says the U.S. government could negotiate all prescription drug prices down to the level it already gets for veterans and active military personnel, a cut of about 42 percent from factory prices. As drugs became more affordable, more people would buy them and the high volume of sales would help the drugmakers recoup much of the revenue lost from price cuts, Sager predicts.

The government would guarantee to make up any remaining lost revenue by paying for medications needed by those who couldn't afford even the discounted prices.

Sager criticizes plans like that of President-elect Bush that would subsidize prescription drug coverage for certain groups of Americans without negotiating large, across-the-board price cuts.

"The Bush plan is all smoke and mirrors," he says. "It relies on solutions that have been failing for years. It also gives $160-billion in windfall profits to the drugmakers over the next 10 years. That's a problem."

In the absence of a nationwide plan, several states have taken steps to make prescription drugs more affordable. Vermont allows uninsured residents to buy drugs at the same discounted prices available to Medicaid recipients. Maine recently became the first state to enact a form of price controls. A new Florida law created a discount prescription drug-pricing program for people enrolled in Medicare.

And, in small but growing numbers, Americans are going to Mexico or Canada to find their own bargains.

'I'd definitely come back'

Shortly before noon, the RxPassport minibus pulls up near a walk-in clinic and the passengers file in for their appointments with Dr. Paul Assad.

After a 60 Minutes segment last year featured the enormous savings to be had in Canada, Assad's practice swelled with U.S. citizens seeking prescriptions to buy low-cost medications.

"No appointment was needed but we were seeing about 25 a day," says Assad, a general practitioner. "It was getting to be a little bit much and some of the Canadian patients were getting upset. We decided if we wanted to expand and give better service we needed to have a dedicated facility."

In September, Assad and his colleagues opened a clinic that sees only U.S. patients on weekdays. The current average is about 20 a day, some of whom arrive on their their own, others who come through the RxPassport program.

Among the first to be ushered into Assad's office are Rugh, the former hospital administrator, and his wife. RxPassport already has faxed the medical and prescription information forms completed by their U.S. doctors.

"I'm Dr. Assad and I want to check your medications for you," he says, quickly reviewing the forms. First they discuss Mrs. Rugh's thyroid condition and the medicine she needs.

"Now, John," the doctor continues, "you're on Vioxx 12.5 milligrams a day for arthritis, Glucophage for diabetes and Lisinopril for blood pressure."

After no more than two or three minutes, Assad hands the Rughs a few discount coupons to use at the pharmacy next door and tells them their medications will be waiting for them.

"You've got three months' prescription and and in three months, an automatic refill. That's it -- we'll see you again in six months' time."

The Rughs and the rest of the RxPassport group head to the nearby Medicine Shoppe, where pharmacist Pat Meehan pulls plastic bags full of white pill bottles out from under the counter. He discusses the medication with each person, answers questions and rings up the purchases by cash or credit card.

The Rughs' total: $398, a savings of almost $300.

Irene Gronberg spends $271 on six medications, almost three times less than what she would back home.

Candace Steele, who has diabetes, discovers that the blood-sugar strips she needs are also about $1.80 each in Canada. But because the Canadian dollar is worth far less than the U.S. dollar, "it cuts the cost considerably," she says.

Ed Ritzdorf is happy, too. "I probably saved $190 on two prescriptions," he calculates. "I'd definitely come back."

Thus far, the biggest benefit has been to individual consumers.

RxPassport had hoped to expand to the eastern United States this fall, but business has been somewhat undercut by Canadian doctors who have started to market their services directly to Americans. However, there has been some recent investor interest in the company, and several people have signed up for the next bus trip to White Rock this Tuesday.

Meanwhile, Assad and his colleagues spent more than $23,000 to open the new clinic and another $13,000 for extra malpractice insurance, to protect against any lawsuits by notoriously litigious Americans.

As a result, profits have been "zippo" to date, Assad says. But if U.S. prescription drug prices remain high and the exchange rate stays favorable, he expects as many as 40 Americans a day to visit the clinic.

"It's basically a cross-border phenomenon," he says of the medication-buying trips to Canada. "But if politicians continue not subsidizing drug prices in your country, I think it will continue for many years."

- Susan Taylor Martin can be contacted at susan@sptimes.com.

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