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[IP] Glaxo backs off threat to Internet pharmacies

Jan. 21, 2003. 02:14 PM


Glaxo backs off threat to Internet pharmacies
Drugmaker battling Canadian sites that sell cheaper drugs to U.S.


WINNIPEG - Canadian pharmacies have received a stay of execution but not a
pardon from a leading drug manufacturer that wants to shut off the flow of
cheap prescriptions to the United States.

"At the end of the day, nothing has changed," said Laurie Gauthier of
Calgary-based Prairie Supply Co-operative, a drug wholesaler contacted
personally by GlaxoSmithKline Inc. operations director Steven Popp.

"Glaxo still does not want Canadian product winding up in American hands."

Drug wholesalers, who had been told they would be cut off themselves after
today if they continued to supply pharmacies they knew were retailing to
Americans, have now been told the policy is on hold.

"They tried the sledgehammer approach," Gauthier said today.

"Now they're going to try the more politically correct approach."

He said the company appears to be shifting its arguments from safety for
American consumers to a guaranteed supply for Canadian consumers, even
though it could easily address that issue by making more of its products.

He said he was sure the announcement that the federal Competition Bureau was
looking at Glaxo's earlier move, to see if it ran afoul of Canadian
legislation, had some impact.

"How could it not? Glaxo doesn't want negative press and they've been
getting a fair bit of it."

Glaxo officials refused to comment directly on the about-face, other than to
issue a brief written statement today.

"GlaxoSmithKline continues to speak with a number of key stakeholders
regarding Internet pharmacies and their export of our medications that are
approved for use only in Canada," said the statement, provided by Canadian
company spokeswoman Alison Steeves.

"We are currently working on implementing a process that will allow us to
maintain a continuity of supply of medicines for Canadian patients."

Gauthier and others have been skeptical all along about Glaxo's claims it is
worried about the safety of products exported to the United States.

"It has nothing to do with safety, it has nothing to do with the reasons
they've stated. They don't want it there because it costs money."

John Graham, who has written on drug pricing for the Vancouver-based Fraser
Institute, agrees it's all about money and the failure of the United States
to control soaring drug costs for seniors and the poor.

"The real goal here is to preserve the American profit margins."

Canada is a $7-billion annual market for drugs while the United States is a
$145-billion market, thanks in part to much higher drug prices. Canada
regulates prices; the United States does not.

Glaxo products include Zyban for people trying to quit smoking and the
anti-depressant Paxil. Glaxo products represent perhaps 10 per cent of the
dollar value of the cross-border trade, but the fear is if Glaxo succeeds,
other manufacturers will take similar action.

Over the last decade, thanks largely to the growth of Internet sales, the
cross-border trade has turned into a $1-billion pipeline.

Much of that flow is through Manitoba, which boasts about 45 of Canada's
approximately 150 pharmacies selling to the United States. They take in
about $400 million a year and employ about 1,000 people.

Glaxo's latest move also means a legal challenge being planned by Manitoba's
Internet pharmacies is on hold, said Kris Thorkelson, a spokesman for the

"You can't take someone to court if they haven't done anything," he said.

He said they must now wait until Glaxo makes its next move before deciding
how they will respond.

Thorkelson didn't know whether the company would attempt to impose some sort
of rationing system, which was a trial balloon floated by one of the largest
Canadian wholesalers in response to Glaxo's earlier threat.

As for the consultation process the company proposes, Gauthier was also

"Who all the stakeholders are in their opinion, I'm not sure," he said.

"Perhaps the wholesalers, perhaps the pharmacies concerned, but I doubt
they're in contact with the American customers, who of course would be the
biggest stakeholders."
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