NEW YORK (AP) – Americans purchasing their drugs from Canadian online pharmacies didn’t save as much money last year as they did in 2003, with the average discount dropping to 29 percent from 38 percent, a new study found.

The average drug price on Canadian Internet pharmacies rose 23 percent from the first quarter of 2003 until the end of last year. Meanwhile, drug prices at American online pharmacies rose 8 percent, according to PharmacyChecker.com, which tracks Internet pharmacy prices and released the study.

A combination of the weak American dollar and higher acquisition costs are responsible for rising prices and dwindling savings.

Several major drug companies have cut off supply to the Internet pharmacies to stop the cross border trade.

To circumvent the restrictions and keep supplying their American customers, Internet pharmacies have been buying drugs from Canadian brick and mortar drug stores, which charge them a markup of between 7 percent and 15 percent above wholesale prices.

The higher acquisition costs combined with being paid with weak American dollars is hurting Internet pharmacies’ profits.

“This has become a really low margin business for us,” said David MacKay, executive director of the Canadian Internet Pharmacy Association. “We are just trying to hang on.”

The margin pressure comes as political forces opposed to Canadian Internet pharmacies are intensifying. The Canadian Health Minister may prevent Canadian doctors from signing prescriptions written by American physicians, which would essential kill the industry. He also may create a list of drugs that cannot being exported.

Prescription drug prices have become a huge political issue and the Medicare bill passed in 2003 called upon the Bush administration to study the feasibility of importing drugs from abroad.

In a report released last month, the administration found that costs associated with allowing commercial reimportation would largely wipe away most savings. Additionally, it found that creating a system to vouch for the safety of drugs imported by individuals would be too expensive.

It is illegal for Americans to import drugs from abroad. However, millions of Americans shop online to buy drugs from Canada and elsewhere, while several cities have established Web sites to help people purchase the less expensive drugs. Government controls cap the price of medicines in Canada and some European countries, making them significantly cheaper than in the United States.

But the savings from Canadian drugs purchased over the Internet are eroding. For example, savings on 100 pills of 20 milligrams of Lipitor, fell to 31 percent at the end of last year from 44 percent in the first quarter of 2003. The average Canadian price rose 26 percent to $201.01, while the American price was essentially flat at $290.34.

Meanwhile, the discount on Cozaar, a blood pressure drug made by Merck & Co., fell to 19 percent from 33 percent in the same period. The average price at a Canadian Internet pharmacy for 30 pills of 50 milligrams rose 18 percent to $40.41, while the American price fell $1.50 to $49.83

PharmacyChecker.com conducted the report by investigating prices on 13 Canadian sites and four American sites.