NEW YORK (CNN/Money) - Purchasing prescription medications from abroad is illegal, but many local and state governments say that importing drugs from Canada could be a cost-effective way for them to slash health-care costs by hundreds of millions of dollars.

In July, Springfield, Mass., became the first local government to institute a formal program to import prescription drugs from Canada.

Democratic Mayor Michael Albano estimates the program has saved Springfield $600,000 since it was initiated and could save the city as much as $9 million a year, depending on the number of people who join the program and what medicines they purchase.

Illinois commissioned a six-week study in mid-September that found the state and its health plan enrollees could save about $91 million a year by importing drugs from Canada.

"Illinois faced a $5 billion deficit this year," said Abby Ottenhoff, press secretary for Governor Rod Blagojevich, a Democrat. "The cost of prescription drugs is a major cost and it is going up 15 percent every year, and that is expected to continue until 2010."

New York City Mayor Michael Bloomberg, a Republican, held a joint news conference last Wednesday with the Illinois governor to announce that his city could save up to $108 million a year with a similar program.

And Wisconsin's Governor Jim Doyle met with Canadian pharmacies Tuesday to explore the possibility of purchasing prescription drugs from Canada.

"Wisconsin's seniors are forced to pay staggering prices for prescription drugs, but our neighbors in Canada can often walk into a drug store and purchase the same medications for a fraction of the price," the Democrat said in a statement.

Wisconsin expects to spend $115 million in 2003 and $128 million next year on prescription drugs for state employees. Its Department of Health and Family Services says it will spend $600 million on prescriptions for Medicaid and other government-funded social programs.

Drug companies argue that foreign price controls cause U.S. consumers to pay premium prescription prices and that the extra money Americans pay for their medicine goes to fund research and development programs.

The pharmaceuticals industry spent an estimated $32 billion on research and development in 2002, according to the Pharmaceutical Research and Manufacturers of America. The industry group also says that the average cost of developing a new drug can easily hit $800 million and that four out of five new drugs in development fail.

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These figures have made drug companies particularly sensitive to the "fair pricing" issue.

"[The Canadian system] does not recognize the free market. It does not recognize innovation," Eli Lilly spokesman Edward Sagebiel said. "We have worked hard to get other countries to look at the value of innovation and to support it."

Eli Lilly in October began limiting its prescription drugs sales to Canada, and GlaxoSmithKline of Canada recently took steps to tighten the supply of drugs available within the country.

The Food and Drug Administration prohibits importing drugs from countries where the agency has no jurisdiction and opposes a move to legalize drug imports from Canada because of potential safety issues.

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According to the FDA, over 90 percent of the imported medications it seized during a summer "blitz" at John F. Kennedy International Airport in New York City failed to meet its regulations.

"There is no safe way to buy drugs illegally," said Peter Pitts, the associate commissioner for external communications at the FDA. "And consumers have no recourse if anything goes wrong."

Several experts, including Sarah Sellers, the executive director of the Center for Pharmaceutical Safety, say the federal government is ultimately responsible for finding a solution to the drug pricing issue.

"Addressing the pricing issue directly is the best option instead of pursing a route that may open us up to unintended consequences such as substandard drugs," she said.

"People are very angry and upset about high healthcare costs and they should be," Pitts conceded. He added that price inequities are a global trade issue that buying prescription drugs north of the U.S. border cannot remedy.