Watch CBSN Live

Drug Re-Importation Targeted

Eli Lilly and Co. has escalated its campaign to curb Canadian drug re-importation by requiring Canadian Internet pharmacies to tell Lilly how much of Lilly's drugs they order from wholesalers or possibly be cut off from supplies.

In a letter to Canadian Internet drug retailers and Lilly's authorized Canadian wholesalers, the Indianapolis-based company outlined a policy to help Lilly more closely track cross-border flow of its drugs, Lilly spokesman Ed Sagebiel said Tuesday.

"Effective immediately, information regarding the volume of each of your purchase orders to all distributors of Eli Lilly Canada Inc. products is to be faxed" to Lilly's Canadian customer response center, the March 22 letter said.

The letter said Lilly would then review the order within two business days and "respond in writing the result of its review of the order quantities to you and the distributor you had indicated."

With clearance, the retailer could then submit purchase orders to wholesalers.

Sagebiel said, "As a result of this program, Lilly will review the order quantities for all Lilly products that affected retailers are ordering from Lilly-authorized wholesalers before that sale is authorized. ... This is a further step to manage the allocation of these products at the retail level."

Lilly's letter noted the company is "not a party" in retail-wholesale transactions, and said Lilly's "only involvement will be to review the quantities you are ordering to help ensure that supply of our products is linked to Canadian patient demand" to guarantee adequate supply there.

The president of one of the Canadian Internet pharmacies that received the letters said Lilly had a different motive.

"They're pulling out all the stops to try to avoid letting drugs get south of the border," said Jeff Uhl of Winnipeg, Manitoba-based "They're coming up with an artificial shortage to scare the Canadian public to think the Internet trade is going to negatively affect Canada's supply of these drugs."

"I don't want to bash Lilly because they're trying to protect their bottom line. But it's ridiculous to say, 'It's a safety issue, and we want to try to ensure there's an adequate supply to Canadians.'''

Wayne Rivers, president and chief executive of Procurity Pharmacy Services Inc. -- a Canadian wholesaler that Uhl said Lilly cut his company off from -- said Lilly recently notified wholesalers across Canada of 77 wholesaler-retailer accounts Lilly had placed on a restricted list. Lilly indicated orders for Lilly products for those accounts would have to be vetted through Lilly, he said.

Lilly told wholesalers they would no longer be authorized to directly ship Lilly products to retailers on the list, Rivers said.

Lilly is among at least five drug makers that have recently imposed tougher restrictions on the Canadian drug supply chain to discourage re-importation. As many pharmaceutical companies choke the supply of drugs to Canadian Internet pharmacies, the online firms are turning to brick-and-mortar stores to replenish stocks.

"This whole debate is going to have to be resolved outside the wholesale community," Rivers said. "To this point there's been no political will on either side of the border to make a statement on this."

Prescription drugs are as much as 50 percent less expensive in Canada because of government price controls. As a result, U.S. drug makers stand to make less money when their drugs are re-imported.

"These companies are seeing some leakage, but it's small to date," said Robert Hazlett, an industry analyst with the firm SunTrust Robinson Humphrey. "But they want to make sure it doesn't become a larger issue."

It is illegal for Americans to import Canadian drugs. U.S. drug makers, backed by the Food and Drug Administration, say re-importation puts Americans at risk of receiving unsafe drugs.

By Mark Jewell

View CBS News In