Canada: Internet Pharmacies - New U.S. Legislation Puts The Issue Back Into The Spotlight

Last Updated: October 27 2006
Article by David Rosenbaum and Louise Shap


Over the last four years the issue of "internet pharmacy" and the import of pharmaceutical drugs into the United States from Canada has become a very contentious political and legal subject. According to IMS Health Incorporated data, the annual total value of sales to the United States through the 278 confirmed or suspected Canadian based Internet pharmacies, identified as of June 2005, was estimated at (CDN) $507 million.1 Early in 2005, a Health Canada official testifying before a committee of the House of Commons stated that there were, at that time, about (CDN) $1.35 billion worth of cross-border retail sales into the United States. Of these sales, approximately $840 million were via Internet pharmacies, with the rest coming from so-called foot traffic. Trans-border drug sales represent eight percent of a $16 billion prescription market in Canada, but less than 0.5 per cent of the U.S. market of some $300 billion.2

The major factor driving this business is a large discrepancy in the prices of certain brand-name prescription drugs3 between the Canadian and U.S. markets. The main reason for the discrepancy is that the prices of brand name prescription drugs are regulated in Canada, whereas they are not in the United States.

Since 2002, various American politicians at the federal, state and local levels have been unsuccessful in their attempts to legalize bulk buying of drugs from Canadian internet pharmacies. It would appear that this trend may have changed. On October 4, 2006, U.S. Congress passed an amendment to a Homeland Security Appropriations Bill that bars United States customs agents from preventing persons from re-entering the U.S. from Canada with a 90 day supply of medicine. In tandem with the passage of this Bill, U.S. Customs and Border Protection has demonstrated a concomitant shift away from their current policy of seizing prescription medications mailed from Canada.

This bulletin will provide an overview of the current law in Canada (with particular emphasis on Ontario) and the United States and will discuss the potential implications for Canadians resulting from the recent changes in U.S. legislation and policy.

Current Law in Canada

Under Canadian federal law, subject to various exceptions, it is forbidden for anyone other than the holder of an "establishment license" to fabricate, package/label, distribute, import or wholesale a drug.4 "Wholesale" means to sell drugs, other than at retail sale, where the seller’s name does not appear on the label of the drugs.5 One of the purposes of issuing establishment licenses is to ensure that products entering the drug distribution chain are adequately stored, transported, and can be effectively recalled from the market.6

Under Ontario law, it is forbidden for anyone to sell by wholesale any drug for the purpose of sale by retail to any person who intends to use the drug for retail purposes but is not properly licensed for retail sales.7 A person who is entitled to sell the drug by retail would generally mean an operation such as a pharmacy.8 In addition, under Ontario law, it is forbidden to establish or operate a pharmacy without a certificate of accreditation, which is issued by the College of Pharmacists.9 These provisions are common among all Canadian provinces.

Canadian law requires that any sale of pharmaceutical drugs at retail be made pursuant to a prescription received by the seller.10 The prescription must be from a physician who is licensed to practise in Canada. Under Ontario law, an Ontario pharmacist is permitted to dispense a drug on a prescription signed by a physician licensed to practise in another province, but only if, in the professional judgment of the pharmacist, the patient requires the drug immediately, and the order may not be refilled.11

Therefore, before a Canadian pharmacy can dispense a pharmaceutical to an American patient, the Canadian pharmacy must receive a prescription signed by a Canadian licensed physician.

Medicine and pharmacy are self-regulating professions in Canada. Each province has a College of Physicians and Surgeons and a College of Pharmacists that regulate the members of their respective professions in the public interest. Various Colleges of Physicians and Surgeons, including in Ontario, have advised their members, through policy statements, directives and standards of practice, that they consider the practices associated with "Internet prescribing" to be improper.12

Current Law in the U.S.

Under United States law (Federal Food, Drug and Cosmetics Act, 21 U.S.C. section 301 and following) it is illegal to introduce or deliver unapproved drugs into interstate commerce. Foreign versions of U.S. approved drugs are considered unapproved, even if the drug was initially manufactured in the United States. Furthermore, there is a prohibition against anyone, other than the manufacturer of a drug, reintroducing a drug into the United States. Violations of the Act can lead to both civil and criminal liability.

The Federal Food and Drug Administration ("FDA") enforces the Federal Food, Drug and Cosmetics Act. While it is illegal to import drugs into the United States, the FDA has a "personal importation policy". Under this policy, the FDA permits its personnel to use their discretion to allow entry of drugs into the United States when the quantity and purpose are clearly for personal use. As a result, the FDA has not interfered with individual citizens crossing the border into Canada to purchase quantities of medication for personal use and then bringing them back into the United States. Importation of medication by mail or courier does not fall within the personal importation policy; nevertheless the FDA has taken no steps to stop the millions of Americans who are getting their drugs in that way from doing so.

However, in November 2005, U.S. Customs and Border Protection began to systematically confiscate packages mailed to U.S. consumers from Canadian pharmacies. Since the campaign started, it is alleged that more than 40,000 orders have been seized.14 Implementation of this policy also generated considerable congressional pressure against the seizures and resulted in Senator Bill Nelson, a Florida Democrat, and Senator David Vitter, a Louisiana Republican, proposing a bipartisan amendment to the Homeland Security Department funding bill. On October 4, 2006, the Appropriations for the Department of Homeland Security Act was passed. Under Section 535 of the Act, U.S. Customs agents are prohibited from preventing an individual, not in the business of importing a prescription drug from "transporting on their person" a personal use quantity of the prescription drug that does not exceed a 90 day supply. While the legislation does not apply to prescriptions provided over the internet or by mail order, in tandem with the passage of this bill, U.S. Customs and Border Protection confirmed that it would change its current policy and that its agents would discontinue the practice of seizing prescription drug shipments.15

Potential Implications for Canada

According to a report issued by the Fraser Institute,16 the number of attempts to pass legislation at the federal and state level had grown from three per year in 2002 to 84 per year by September 2005. Many of the proposals would have allowed the bulk buying of drugs from Canadian Internet pharmacies to supply employees for federal, state, and local governments in the United States as well as recipients of U.S. public-health programs like Medicaid and Medicare. It should be noted that, subsequent to the enactment of the Homeland Security Department Funding Bill, a spokesperson for Senator Nelson stated, "I think you could call this agreement in the House a very small advance and certainly we’ll take it, but it’s no place that we can stop and certainly isn’t enough to be satisfied with."17 Similarly, Senator David Vitter stated, "this really breaks the dam, and it shows that it’s only a matter of time before we pass a full-blown reimportation bill."18

The recent report issued by the Fraser Institute states that when the estimated potential individual and bulk demand from the United States for cross-border drugs is totalled, the number of American consumers who might compete for access to the Canadian drug supply (approximately 119 million) is nearly four times the size of Canada’s entire population. The report further indicates that ten of the largest brand-name drug companies have already begun to restrict the Canadian supply of their drug products to the level of normal domestic consumption in order to avoid facilitating the cross border drug trade.19

The industry association for Internet pharmacies in Canada, the Canadian International Pharmacy Association (CIPA), has also expressed concern that growing exports to the United States could lead to shortages and price increases in Canada. As a result, in September 2004, it adopted a new policy that while its members would continue to service customers from states that had established websites directing residents to approved pharmacies in Canada, they would not deal with states that had proposed turning over their entire system of supply to Canadian Internet pharmacies. CIPA’s executive director was quoted as saying that Americans "can’t get everything from Canada. We can’t be your complete drugstore."20

On October 11, 2006, in an open letter to Tony Clement, the Federal Minister of Health, the Ontario Pharmacists Association stated: "Ontario pharmacists are gravely concerned about the imminent threat to Canada's prescription drug supply, and the corresponding public health and safety threat to Canadians, arising from legislative changes and relaxed enforcement measures in the United States that re-open America's border to the importation of prescription drugs by U.S. patients."21 The association further maintains that "while the legislative changes enacted to date do not support bulk importation, we note that proponents of the changes in Congress have indicated their interest and intent to bring forward "full-blown" importation legislation in the future. We must warn unequivocally that bulk importation would quickly deplete the Canadian drug supply and cause a crisis in drug availability for Canadians - in one credible U.S. analysis, within 38 days."22

In response to this growing threat, the association has requested that the government take immediate action to protect Canada’s prescription drug supply.

To date, the federal government has not taken a position about what it would do if the United States were to permit the importation of prescription drugs into Canada. Time will tell what, if any, effect the introduction of U.S. legislation permitting persons to re-enter the U.S. from Canada with a 90-day supply of medicine and the related shift in policy, away from seizing prescription medications mailed from Canada, will have on Canadians.


1 Price Controls, Patents, and Cross-Border Internet Pharmacies, The Fraser Institute, Critical Issues Bulletin, 2006, . It is interesting to note that according to this study, the total amount of sales to the U.S. through internet pharmacies (i.e. $507 million) represents an 18% decrease from the total sales of CDN $618 million over the 12 months ending June 2004. According to the author, the 500 top-selling cross-border drug products between July 2003 and June 2005 show that generic products that are less expensive than brand-name products are displacing brand-name products in the volume of drugs being traded over the Internet which explains the drop in the overall value of sales.

2 Testimony of Ian Shugart, Assistant Deputy Minister, Health Policy Branch, Department of Health before the Standing Committee on Health, Number 020, 1st Session, 38th Parliament, February 14, 2005 ("Shugart Testimony").

3 Generic drugs are generally less expensive in the United States than they are in Canada.

4 Food and Drug Regulations, s. C.01A.004(1).

5 Ibid. s. C.01A.001(1)

6 Health Canada Health Products and Food Branch, "Obligations of Pharmacists under the Food and Drugs Act and Food and Drug Regulations", November 16, 2004.

7 Drug and Pharmacies Regulation Act, R.S.O. 1990, c. H.4, s. 160(1).

8 The equivalent statutes of the other Canadian provinces contain provisions that are of similar effect.

9 Drug and Pharmacies Regulation Act, R.S.O. 1990, c.H.4,s.160(1).

10 Food and Drug Regulations s. C.01.041.

11 Drug and Pharmacies Regulation Act, R.S.O 1990, c.H.4, s. 158(1).

12 It is also worth noting, that in November 2003, the Council of the Canadian Medical Protective Association ("CMPA"), which in effect acts as the insurer for Canadian physicians, passed a resolution that the Association would "no longer extend assistance to physicians involved in legal actions resulting from the inappropriate signing or co-signing of prescriptions for persons with whom they have no recognized doctor/patient relationship." This policy went into effect on February 2, 2004.

13 FDA Manual, Chapter 9, Personal Importations. (Note: This chapter is currently under review.)

14 The Economist, "Popping Pills" The Economist (5 October 2006), online: <>.

15 The Ledger, "U.S. Customs Sees the Light" The Online Ledger (8 October 2006), <>.

16 Price Controls, Patents, and Cross-Border Internet Pharmacies, The Fraser Institute, Critical Issues Bulletin, 2006,

17 ABC News, "Drug Imports from Canada Set to Be Erased", ABC News (October 9, 2006), online: ABC News,

18 Associated Press, "Cross-border drug shopping a step closer", (September 21, 2006), online:

19 Price Controls, Patents, and Cross-Border Internet Pharmacies, The Fraser Institute, Critical Issues Bulletin, 2006,

20 Bernard Simon, "Canada deals blow to cheap U.S. drug imports", Financial Times, October 17, 2004.

21 Marc Kealey, "Open Letter from the Ontario Pharmacists’ Association" CNW Group (11 October 2006).

22 Ibid.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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