The Canadian Online Pharmacy Sector: New Economic Forces at Work

According to a recent article in The New York Times, like so many other industry sectors that are dependent on the Internet, online pharmacies that sprung up in Canada over the past several years to serve international markets are now being pressed to adapt to fast-changing conditions. As noted in an earlier issue of E-TIPS® (Vol 3, No 6, September 1, 2004), the burgeoning online pharmacy industry in Canada was responding, in part, to demand from US residents for less expensive pharmaceuticals. Recently, however, it appears that several factors have converged to present formidable challenges for the once booming sector. The rising strength of the Canadian dollar relative to US currency, advertising by US competitors raising doubts about drug safety and, perhaps more importantly, the advent of more generous US Medicare benefits have combined to bring downward pressure on demand. As observed by the former Executive Director of the Canadian International Pharmacy Association, David MacKay, "this is not a cash-cow industry anymore". According to McKay, monthly drug sales from Canada to the US have declined by 20 to 30 per cent since last June, with individual suppliers suffering sales drops of over 50%. Just prior to the federal election in November 2005, the former Liberal Government introduced an amendment to the Food and Drugs Act which would have given expanded information–gathering powers to the federal government in order to provide advance warning of any impending drug shortages (see E-TIPS®, Vol 4, No 12, December 7, 2005). This was prompted by the runaway success of Canadian Internet pharmacies and the fear that this might lead to shortages for Canadian consumers. However, the general election having intervened, the amending legislation died. This may be another example of legislators' intentions being overtaken by market forces. For now, it seems unlikely that the new Conservative Government will be required to respond to any calls for re-introduction of the amendment. For the article in the New York Times, visit: http://makeashorterlink.com/?T231153FC Summary by: The Editor