The trade is huge and is estimated to have been worth more than $1 billion annually. According to the U.S. Food and Drug Administration, Americans are on the receiving end of more than two million packages of prescription drugs per year.

But, a new U.S. drug benefit plan, Medicare Part D, is threatening to cut the profits of online pharmacies. It gives those with Medicare coverage prescription drug benefits the way an insurance plan would, though patients must still pay deductibles and premiums to opt into the plan.

It isn't just ordinary citizens who are looking for a good buy. The states of Illinois, Iowa and Minnesota are looking into using Canadian pharmacies to supply drugs for their government employees.

MORE: WHY SO CHEAP?

Why so cheap?

There are several factors that make drug prices lower in Canada than in the U.S.

Perhaps the most obvious is the exchange rate. For the last few years the Canadian dollar has hovered between 60 and 70 cents, giving Americans more bang for their greenback.

Another reason is the fact that Canadian drug companies are not allowed to market their products directly to consumers. That's a substantial savings not realized south of the border, where so-called direct-to-consumer marketing has been allowed since 1997. According to the Pharmaceutical Research and Manufacturers of America, drug companies spent almost $3 billion on direct-to-consumer advertising – a price that gets passed on to the consumer.

But the biggest reason for the price disparity is the existence of drug price controls in Canada. The Patented Medicine Prices Review Board, a quasi-judicial body of the government created in 1987, reviews pharmaceutical prices and enacts caps for patented drugs and medicines prices.

How the cross-border trade works: There are three major means U.S. consumers use to access Canadian pharmacies: 1. By visiting a store-front businesses in the U.S. A U.S. customer brings her prescription to a store-front processing centre in the United States. The prescription is then sent along to a Canadian pharmacy. At that point, a Canadian physician re-writes the prescription (to make it valid in Canada) and the prescription is filled and shipped to the customer. 2. Internet A customer can access a pharmacy website to consult prices and download order and information forms. The customer then faxes a copy of his prescription (electronic orders are not allowed) along with his doctor's information, personal information and payment to a Canada-based online pharmacy. 3. Personal shopping Many Americans, particularly in border states, simply hop in their cars and cross the border to get their prescriptions filled in person. Dedicated drug-buying bus tours are also gaining in popularity.

Why Manitoba?

Some of the most popular pharmacies for Americans are in Manitoba, where pharmacists were quick to recognize the efficiency of using the internet to reach the U.S. market. A steady supply of cheap warehouse space combined with more relaxed rules for issuing prescriptions over the phone make Manitoba a popular destination for U.S. consumers. Today, it's estimated that anywhere between 10 and 20 per cent of Manitoba's 1,500 pharmacists work for an internet pharmacy.

While U.S. consumers are singing the praises of cross-border pharmacies, many government representatives and pharmaceutical companies are vehemently opposed.

Already three major companies – Eli Lilly and Co., Pfizer Inc. and GlaxoSmithKline PLC – have curtailed their supplies to Canadian pharmacies. And already those restrictions have driven up Canadian prices. While most drugs are cheaper in Canada than in the U.S., Pfizer's Viagra and Eli Lilly's Prozac are selling for more north of the border (see price comparison chart).

It's becoming a growing concern for Manitobans. They're worried the cross-border trade will effectively subsidize U.S. consumers at the expense of Canadians and that drug supplies will suffer because of the growing amount of prescription drugs being siphoned off by U.S. consumers.

A group called the Coalition for Manitoba Pharmacy says that if the trade is allowed to continue to grow, it would have "disastrous" effects on Manitoba's health care system. The group is especially concerned about the prospects of state governments using Canadian pharmacies to source their drugs.

Michele Fontaine is the CMP's vice-president. She says the increased appetite for Canadian pharmaceuticals has led to a shortage of drugs and pharmacists in Manitoba.

In an October 2003 letter, she implored Illinois governor Rod Blagojevich not to turn to Manitoba pharmacies for his state's drug supply. "It would be a disaster," wrote Fontaine. "A huge volume of drugs diverted to Illinois would make the shortages we're seeing even worse. I think the governor will listen to what we have to say. I don't think any American politician wants to try to solve a domestic problem by taking prescription drugs and pharmacy care away from Manitobans."

Who cares?

There are concerns on both sides of the border about online pharmacies. Some question the ethics of Canadian doctors who are willing to write prescriptions for U.S. patients they've never examined. Meanwhile, others are concerned Canadians could face supply shortages, lower quality service and risk losing federally regulated prices as pharmacists try to cater to the U.S. market.

Across the border safety is the greater issue. Worries about quality control and unregulated or counterfeit drugs being imported into Canada for sale in the U.S. are being voiced.

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