Discount Drug Deal Derailed?

Miss Venezuela Stefania Fernandez, behind, hugs Miss Universe 2008 Dayana Mendoza, also of Venezuela, after being wining the Miss Universe beauty pageant in Nassau, Bahamas, Sunday, Aug. 23, 2009. (AP Photo/Andres Leighton)
Americans who get discount drugs through Canadian pharmacies via the Internet may be about to lose their good deal, reports CBS News Correspondent Cynthia Bowers.

Daren Jorgenson's Internet drugstore – – supplies hundreds of thousands of Americans with prescription drugs at a fraction of what they'd pay here at home. But he says once he runs out of his current supply of Glaxo Smith Kline products like Advair, Zantec, and Paxil that may be it.

"We're set for stock for the short-term future, not the long-term future," Jorgenson says.

"We've sourced out other suppliers who are still willing to supply us," he says, "but at a premium cost which will then have to be passed on to the American consumer."

For years, drug-makers have sold medicine in Canada for less – often much less – and savvy Americans have trekked across the border to take advantage of the discount. But thanks to the Internet, that cross-border business is now costing them billions in potential profits. Glaxo recently upped the ante when it sent a letter demanding wholesalers stop selling to pharmacies that ship to Americans, or be shut out of future shipments.

United Pharmacists Ltd., which distributes millions of dollars of Glaxo drugs, says it will stop sending shipments to pharmacies like Jorgenson's because it "can't risk being cut off entirely and unable to fill Canadian prescriptions."

Glaxo tells CBS News it is "pleased at this show of support" and that its terms of sale "specify the products sold to Canadian wholesalers are for distribution in Canada only."

The backlash has already begun. One American lawmaker promises within days to introduce legislation designed to force Glaxo to back off.

"They are the leader of the pack," says Rep. Bernie Sanders, I-Vt. "If they are successful I have no doubt that a lot of other drug companies will follow them."

The lines have been drawn. CBS News has learned that on Thursday Glaxo cut off a multimillion dollar wholesaler who refused to go along with its don't-sell-to-Americans mandate.