WASHINGTON — Mabel Stoltz, at 93, lives independently in her own home in a quiet harbor town on the Minnesota shore of Lake Superior. But she has to watch her budget carefully and has been buying prescription drugs from Canada.
So Stoltz was surprised to learn recently that she could buy her generic-label medications for much less from a U.S. pharmacy -- a potential savings of $560 a year for two prescriptions. "I do have enough money to pay, but I don't know how long it will last at this rate," said Stoltz, who once worked as a medical secretary.
Like Stoltz, many U.S. consumers have been buying generic drugs from Canada, not realizing that generics -- unlike brand-name medications -- are usually quite a bit cheaper at home.
U.S. consumers may be wasting more than $100 million a year on Canadian generics, according to one Canadian analyst, although no firm figures exist on how much Americans are overpaying.
Generic drugs are the therapeutic equivalent of brand-name medications, at about a quarter of the cost. Generic versions can be marketed after the patent protection on a brand-name drug expires.
Americans know that brand-name drugs are cheaper in Canada because the government controls prices there. But many don't realize that Canadian policies have the opposite effect on prices for generic drugs.
"We have a system of government favoritism toward generic companies," said Brett J. Skinner, director of pharmaceutical and health policy research for the Fraser Institute in Toronto. The public policy organization advocates free-market policies, including the repeal of price controls on brand-name drugs.
Earlier this year, the institute released a study by Skinner of the 100 top-selling generic drugs. It found that Canadian prices were, on average, 78% higher than in the U.S. The study estimated that Canadians could save $2 billion to $5 billion annually if their generic market was as competitive as it is here. (The study accounted for exchange rate differences, and the potential savings are in Canadian dollars.)
A smaller study last year for the U.S. Department of Health and Human Services looked at five popular generics and found that U.S. prices were 32% lower.
Canadian drug-approval regulations make it difficult for foreign generic competitors to enter the market, Skinner said, and the reimbursement policies of Canada's provincial governments act to keep prices artificially high.
"We have very few companies competing for sales -- two companies take up nearly 70% of the market for the top 100 drugs," he said. "Canadian taxpayers are helping to support a monopoly situation on the drugstore shelf."
American consumers have a hard enough time following the quirks of healthcare at home, let alone in Canada. Most apparently assume that if brand-name drugs are a bargain up north, generics are as well.
"We have a feeling that there is a lot of misconception that everything outside the United States is cheaper," said Tom McGinnis, director of pharmacy services for the U.S. Food and Drug Administration.
Generic drugs are less expensive here because more manufacturers are competing in the market, he said. Shipping charges from Canada also can widen the cost difference.
A couple of months ago, McGinnis spent some time at John F. Kennedy International Airport in New York, spot-checking packages of drugs imported from Canada. Although such shipments are illegal, the U.S. government allows most through.
About 30% to 40% of the packages that were opened by inspectors contained generic drugs, McGinnis said. Last year, a check of 400 packages at the Miami airport found that about half contained generic drugs or drugs for which a generic equivalent was available in the U.S.
"Consumers aren't getting the message that generic drugs are cheaper at the local pharmacy," McGinnis said.
With the total value of the cross-border pharmaceutical trade estimated at $700 million a year, such misconceptions can be costly.
Consumers intent on getting their brand-name drugs for less often don't bother to compare prices of generics, said Sean Kacsir, president of MedSave Discount Pharmacy in New Hope, Minn.
"The problem is that people, in general, focus on the brands," he said. "They don't pay attention to the generics. Sometimes they don't focus on the entire picture."
But market-savvy group purchasers have figured it out.
The Minnesota Senior Federation, which runs a prescription-buying program, deals with two Canadian pharmacies for brand-name drugs and with Kacsir's company for generics.
"If our Canadian allies want to begin importing generic drugs from the United States, we'd be glad to do it," said Peter Wyckoff, the federation's executive director.
In Boston, where the city government has set up a Canadian prescription program for several thousand retirees and employees, generics were kept off the list of drugs approved for importation.