Why Canada Won't Be Our Pharmacy

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Nonetheless, reimportation has already set drug companies on the offensive. Pfizer, the giant behind blockbusters such as Lipitor, Celebrex and Viagra, sent letters early this year threatening to cut off supply to more than 100 Canadian pharmacies that had been exporting its drugs in violation of their contracts. GlaxoSmith Kline took similar action. "When you import price controls, you undercut the system that pays for R. and D.," says Nancy Pekarek, a Glaxo spokeswoman.

So far the drug companies' efforts haven't had much effect. Sales by Canadian online pharmacies have grown about 20% this year, and Illinois, Wisconsin and Minnesota are continuing their reimportation programs. "Clearly this is not going to solve the health-care crisis," says Melanie Fonder, spokeswoman for Wisconsin Governor Jim Doyle.

What's the alternative? Kaiser's Altman favors allowing Medicare to negotiate directly with drug companies for discounts, while academic Reinhardt suggests a "green card" that would give the uninsured prescription drugs at the same price as that of an average health plan. A similar card offered by the state of Michigan gives a drug discount of 5% to 20%. In the first year, 200,000 of that state's 1 million uninsured are expected to use it; 10,000 signed up in the first 30 days. Michigan might have 721 miles of border with Canada, but in the end, crossing it wasn't the answer. --With reporting by Melissa August/ Washington, Steven Frank and Cindy Waxer/ Toronto, Barbara Kiviat/ New York and Leslie Whitaker/ Chicago