As recently as a year ago, the reimportation of prescription drugs from Canada and other countries was being hailed as an effective way to circumvent the high cost of medications in the United States.

Not anymore.

The implementation of the Medicare Part D prescription drug benefit, along with several other factors, have lessened demand for medications from outside the United States, creating a more unfavorable environment for reimportation programs and leading some observers to predict their demise.

"I definitely think you're seeing that the popularity of cross-border prescriptions is waning," said Eric Michael, senior consultant for Mercer Health & Benefits L.L.C. in Minneapolis.

Several recent developments illustrate a shift in momentum away from reimportation programs.

Springfield, Mass., one of the first U.S. cities to implement a program to allow its employees and retirees to purchase prescription drugs from Canada, announced last week that it will terminate the program, most likely by Jan. 1, 2007.

In addition, a federal judge in Maryland recently denied a request by Montgomery County, Md., to force the U.S. Food and Drug Administration to issue a waiver allowing county employees to reimport prescription drugs from Canada. A 2003 federal law allows federal officials to issue such waivers, but thus far the FDA has consistently denied requests for waivers, saying the safety and origin of prescription drugs from other countries cannot be verified.

Furthermore, the FDA last week warned consumers not to purchase prescription drugs from Web sites that have orders filled by two Canadian pharmacies because of counterfeit drugs allegedly being sold by these companies.

Under the U.S. Food, Drug and Cosmetic Act, it is illegal for anyone other than the original manufacturer to reimport prescription drugs into the United States. But several U.S. state and local governments have openly defied the law by creating programs or Web sites to facilitate the reimportation of drugs from Canada and other countries.

While government officials have not taken steps to shut down these programs, they have begun enforcing the ban at U.S. borders by intercepting shipments of prescription drugs. Last year, the FDA conducted an operation at several major airports that found that 85% of the reimported drugs being promoted as Canadian actually came from 27 other countries, and several of them were counterfeit.

"They've been getting a little tougher on intercepting shipments," said Sean Brandle, a vp at benefit consulting firm The Segal Co. in New York.

In addition, Canadian health officials have tightened regulations on exporting prescription drugs, citing concerns about having a sufficient supply for its citizens following actions taken by pharmaceutical companies to curb reimportation.

The government seizures are troublesome for people considering reimporting drugs because of concerns that they would pay for medications that they would not receive and have to replace them, which would increase their costs, said Steve Wojcik, vp-public policy, for the Washington-based National Business Group on Health.

The strength of the Canadian dollar has also become a financial issue, making the purchase of prescription drugs from Canada more expensive, Mr. Brandle said.

There also is concern about adverse health impacts for people forced to go without their drugs for long periods should they be seized, Mr. Michael said. "I think that scares people," he said. "You don't want to take the chance of not having your blood-pressure medication or other chronic drugs."

While the reimportation of prescription drugs from Canada was a major political issue during the 2004 elections, it has not been an issue in this year's upcoming congressional elections due to the implementation of the Medicare drug benefit program under which the government heavily subsidizes the cost of prescription drug coverage, observers say.

Part D mitigates need

The Medicare Part D prescription drug benefit that began in January is the primary reason for declining interest in reimportation programs, they say, with millions of Medicare eligible beneficiaries now having low-cost prescription drug coverage.

"Medicare Part D took care of the largest contingent that needed lower-cost medications," Mr. Michael said.

The Medicare Part D benefit "probably mitigated some of the need for seniors to go to Canada to get their prescription drugs," Mr. Wojcik said.

Even with Part D coverage, the incentive to reimport prescription drugs from Canada may still exist when seniors reach the coverage gap in the Medicare program known as the "donut hole," Mr. Brandle said. Under a standard Part D policy, after drug costs reach $2,250, beneficiaries pay 100% of the next $2,850 of drug costs before Part D continues coverage.

Private employers, on the other hand, never really got involved with prescription drug reimportation programs, Mr. Wojcik noted. "They're usually able to negotiate better prices. Plus, the whole liability issue raised some concerns for employers."

Aside from seniors, the second biggest source of demand for reimported drugs was local municipalities struggling with escalating prescription drug costs for their employees and retirees.

Springfield, Mass., was the second municipality to launch its reimportation program in 2003 to combat rising prescription drug costs, which accounted for 30% of the city's health care spending.

Last week's decision to terminate the reimportation program in Springfield was not reflective of any program shortcomings, said Marilyn Montagna, personnel director for the city of Springfield. In fact, the city saved about $4 million per year on its prescription drug costs, she said. Springfield is simply changing the way it delivers benefits to its employees and retirees by joining a statewide benefits program that does not have a reimportation component.

"The decision has absolutely nothing to do with the program itself and in no way implies any dissatisfaction with it," she said.

Factors such as FDA disapproval and its actions to curb the practice have become a barrier for planned reimportation programs.

Montgomery County, Md., officials say they will not begin a reimportation program without a waiver from the FDA, although they are reviewing their options following the judge's decision to deny the county's request to force the FDA to issue a waiver.

At least one local government has reported lower-than-expected participation in its program.

Westchester County, N.Y., officials anticipated more people subscribing to its program than ultimately did, a county spokeswoman said. Westchester Rx allows all Westchester County residents to purchase discounted prescription drugs from a network of participating pharmacies, including a Canadian pharmacy.

"I don't know how successful the program has been," the county spokeswoman said. Despite the lower-than-expected enrollment, the county has no plans to terminate the program, she said.

With all these factors working against them, local government-sponsored reimportation programs will eventually be terminated, Mr. Michael said.

"You're not going to see new ones and you're going to see the majority of them going away," Mr. Michael said. "The pressing need is no longer there."

Reimportation was seen as a way to address legitimate concerns about the costs of prescription drugs, but it was never meant to be a long-term solution, Mr. Wojcik noted. "Once the risk outweighs the benefit, it really doesn't make sense to keep them around," he said.