Drug Costs: The Canadian Cure

By Nathan Thornburgh

At home he faced rising costs for his diabetic son's insulin. At work he was forced to lay off teachers, policemen and fire fighters in part because of skyrocketing drug prices. So Michael Albano, the colorful mayor of Springfield, Mass., looked north for a solution. Starting in July, Springfield became the first city in the nation to officially encourage its employees to buy prescription drugs from Canada. City workers fax or mail their prescriptions to a company in Canada; the prescriptions are filled there, and the drugs are mailed to the patients' homes. The workers get a reduced copay, and the city saves 20% to 80% on each pill. In just four months, Springfield Meds, as the program is known, has saved the town about $640,000.

But with cities across the country watching Springfield's experiment, the Food and Drug Administration (FDA) may be moving to crack down. While federal law prohibits the reimport of U.S. drugs by anyone other than the manufacturer, the FDA has long tolerated individuals who bring prescription drugs from Canada for personal use. But last week the FDA persuaded a federal judge to shut down Rx Depot and Rx of Canada, which sell Canadian drugs in the U.S. Along with its Canadian counterpart, it has stepped up its investigation of CanaRx, the Canadian company that administers Springfield's program, for potential violations of Canadian law. Other measures are being weighed, from an import alert on the company's shipments to criminal charges against U.S.-based representatives of the company.

Albano could even be prosecuted, although the defiant mayor says the FDA couldn't stand the political fallout. "It would be a serious mistake to prosecute an elected official," he says. "If they're going to prosecute me, they better prosecute all those senior citizens on the bus to Canada too." --By Nathan Thornburgh