Health Canada warns that Lipitor drugs "are counterfeit if they contain packaging or labeling that states: ‘Repackaged by: Med-Pro, Inc., Lexington, Neb 68850'." The largest U.S. drug wholesaler, Amerisource Health Corp, is also under FDA and FBI investigation for allegedly being involved with counterfeit domestic drugs. Importing branded drugs is called "reimportation" because it usually involves Canada first importing drugs manufactured in the United States and then sending them back here. Drugs don't become more dangerous just by being shipped north, then south. Besides, most big drug companies have plants in many countries, and many materials going into U.S. drugs are imported.
Mark McClellan, head of the FDA, told the AARP Bulletin, "If you're certain you're buying approved Canadian drugs from an approved Canadian pharmacy, you can have a high level of confidence that that's a good product." It's not safe to buy from an unknown con artist, of course, but that is equally true if the crook has a U.S. address.
Another common rationale for the possibly impossible effort to ban drug imports is that the big drug companies (several of which are based in Europe) say they have to overcharge U.S. consumers because they need the money -- to conduct all the research the FDA demands. This is said to be our unique national burden, like fixing Iraq. One medical writer, Robert Goldberg, explained in The Washington Times that "Americans pay some of the highest prices for drugs in the world ... because of our free market and our willingness to shoulder most of the global costs of new drug development."
Personally, I do not recall being asked about my willingness to shoulder development costs so the rest of the world can get a free ride. That sounds like a bad deal. Besides, high prices for patented drugs can hardly be blamed on a "free market." The whole purpose of a patent is to thwart competition for a dozen years or so. And as soon as the patent runs out, the costly nuisance of a doctor's prescription often becomes miraculously unnecessary (e.g., Claritin and Rogaine).
Patents grant pharmaceutical companies a near-monopoly on branded drugs while the patents last. And any country in which the government is virtually the only customer for such drugs, like Canada, has a near-monopoly on the buying side -- a "monopsony." When a monopsony deals with a monopoly, there is apt to be a great deal of strategic gamesmanship involved, guessing how far the other side can be pushed. This has much in common with poker but little to do with free market competition.
The U.S. drug industry is the envy of the world, and one of the main reasons we are living much longer and better. But the industry is seriously overburdened with regulatory expenses, largely because a 1962 law forced the FDA to try doing one thing to many -- to require that drugs be proven effective prior to much experience, and not just safe. Effectiveness is best left to consumers, pharmacists and doctors, rather than bureaucrats with an incentive to drag their feet. We need to encourage private sources of certification for both drugs and pharmacies -- sources that would compete by building a reputation for being trustworthy (like United Labs or Consumer Reports).
Because coping with regulatory excess involves such high fixed costs, it is also a serious barrier to entry into pharmaceutical production and therefore to competition. Many best-selling drugs have only one or two close substitutes, and compete with marketing rather than price. In short, less drug regulation would give us more competition as a bonus. In the age of the worldwide web, however, retail competition is bound to become increasingly international regardless of regulatory efforts to thwart it. And that makes it strategically problematic for any company to even try charging vastly different prices for the same goods.
Drug companies are and should be free to offer big discounts only to foreigners if they wish. But U.S. consumers are and should be free to shop the world for a better deal.