Desperate to protect favorite social programs from the chopping block, California legislators are looking into whether the state can save hundreds of millions of dollars by buying cheap drugs from mail-order Canadian pharmacies.

Because Canada regulates drug prices, pharmacies across the border offer prescriptions that cost 30 percent to 80 percent less than in the United States. Squeezed by tight budgets at a time when health care costs are soaring, states across the country are eager to take advantage of that difference.

But Canadian pharmacy executives said Canada is not going to be a quick fix for California's or any state's budget woes. It cannot support mass purchasing because that would shut down Canada's mail-order system, said David MacKay, executive director of the Canadian International Pharmacy Association.

"It's not an option," said MacKay, who will testify at a hearing by the Assembly Health Committee today, along with representatives from Illinois and Minnesota and the U.S. Food and Drug Administration. "We have no intention of informing California that we can subsidize their state budget."

To curb growing demand from the United States, pharmaceutical companies are restricting supplies, MacKay said. Wyeth, AstraZeneca and Eli Lilly and Co. have begun rationing based on pre-2000 Canadian sales. GlaxoSmithKline and Pfizer Inc. are blacklisting pharmacies doing cross-border business and won't allow wholesalers to sell to them.

The pharmacies can still handle the demand of U.S. individuals, but purchases by states like California would soak up supplies, leaving nothing for Canadians, MacKay said.

California legislators are looking north because Gov. Arnold Schwarzenegger has threatened to curtail popular social programs like Medi-Cal, Healthy Families and CALWorks to control the state's finances.

Pharmaceutical costs are one reason the state's budget needs have grown. For example, drug costs of Medi-Cal, the health insurance program for the poor, have risen steadily over the past few years. According to a preliminary budget released by Schwarzenegger, for the 2003-04 fiscal year, drug costs will total about $4.6 billion and are projected to increase to about $5.4 billion the following year.

In addition, California purchases drugs for state employees and retirees. So decreasing drug prices could potentially save the state a lot of money.

Though states like Illinois and Minnesota have endorsed purchasing Canadian drugs, none are likely to do so this year. The U.S. Food and Drug Administration turned down a waiver requested by Illinois that would have allowed it to legally import from Canada. The FDA says it's dangerous for Americans to obtain drugs from outside the country.

Instead of wholesale importing, Minnesota will unveil a Web site next month that guides residents who want to order cheaper drugs to credible Canadian pharmacies. The state will not place its own orders.

The latter approach is one that California could try, MacKay said. It probably won't save the state money. But it will make it easier for Californians without insurance to get cheaper prescriptions. It will also place more pressure on pharmaceutical companies and politicians to either control U.S. prices or allow importation from Canada.

To that end, the Canadian International Pharmacy Association is encouraging California and other states to legally challenge pharmaceutical companies' tactics, MacKay said.

New York Attorney General Elliot Spitzer and Minnesota Attorney General Michael Hatch are considering the matter. Formal discussions have not taken place with California Attorney General Bill Lockyer, but his office is aware of the idea, MacKay said.

If the lawsuits were successful, the drug companies could no longer restrict Canada's access to drugs. Then, states like California could order in bulk and save substantially.

"If they're interested in ordering from Canada, then one of the things they can do is put pressure on pharmaceutical companies to open up their supply chain to us," MacKay said.

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