American Journal of Law & Medicine

Fade to black: importation and counterfeit drugs.(Globalization of Pharmaceuticals: International Regulatory Issues)

I. INTRODUCTION

Americans rely extensively upon prescription medications to maintain health and quality of life. According to the National Center for Health Statistics, in 2002, at least 1.5 billion drugs were prescribed to patients in physician offices, 196 million in US emergency departments, and 140 million in outpatient settings. (1) Almost two-thirds of visits to physician offices and hospital outpatient departments had at least one drug associated with the visit, and 7% of visits had five or more drugs. (2) In 2004, US pharmacies dispensed over 3.5 billion prescriptions to patients. (3) Estimates indicate that annual expenditures for prescription drugs in the US top $230 billion dollars each year (4)--and there is every indication that these numbers will only increase. (5)

Prescription drug use is not simply associated with acute provider visits but is a standard part of US life. At least 44% of all citizens report using prescription drugs in the last month, and, indeed, 17% reported using at least three or more. (6) Seniors use a large fraction of these medicines. Greater than 80% of seniors use at least one drug, 50% report taking at least three prescription drugs, and at least 20% of seniors take at least five prescription medications. (7) Although seniors account for only 13% of the population, as patients they account for more than one third of all prescriptions, and as payers they account for more than 40% of each dollar spent on drugs each year. (8) It is estimated that seniors alone spent more than $70 billion on prescription medicines in 2005. (9)

Prescription medications have become a powerful tool in the medical arsenal against disease and promotion of health and quality of life. Yet the success of prescription drugs and their extensive use has attracted unsavory characters interested in exploiting vulnerable patients and the market for medicines. These opportunistic creatures introduce and peddle counterfeit drugs through vulnerabilities in the drug distribution system. In the United States, counterfeits are a growing problem, but our closed, domestic system has so far maintained a high level of safety. (10) However, the rest of the world has and does experience increasing problems with fake medicines, in great part due to extensive movement of drugs in and out of countries through licit and illicit importation. (11) Hence, without extensive new infrastructures involving safety systems, appropriate laws and regulations, investment in technology, and coordination of these components, allowing large scale importation of drugs into the United States could very well import other countries' counterfeit drug problems into our own.

This paper reviews some of the issues associated with counterfeit drugs and drug importation. In Part II, the characteristics of counterfeit drugs are reviewed, including their scope, known epidemiology, associated types of harm, and reasons for production and sale. In Part III, the interactions of counterfeits and importation are outlined, including the international experience and policy concerns that result. The Pharmaceutical Market Access and Drug Safety Act of 2005, often known as the Dorgan bill, is also assessed. In Part IV, issues associated with Internet pharmacies and accountability are discussed. In Part V, thoughts on reform are presented and proposed, and deeper issues of price and research and development, focusing upon international cooperation, are considered. Finally, in Part VI, the paper concludes.

II. COUNTERFEITS

A. SCOPE

Counterfeit drugs are a worldwide problem. The World Health Organization (WHO) has reported that a significant fraction of the world's drug supply is counterfeit. (12) While the scope of the problem is unknown, the WHO estimates that up to 60% of drugs in some developing countries are fake, and up to 20% in some developed countries are fake. (13) Overall, approximately 10-15% of all drugs sold in the world are counterfeit. (14) Through importation and reimportation, fake drugs enter into country supplies and end up in drug stores, (15) and, ultimately, in patients who ingest or are injected with them. (16)

Although the United States has not experienced the degree of counterfeit saturation that other countries have, it has not been immune. For example, in 2003, 200,000 bottles of Lipitor, a cholesterol drug and one of the world's best selling medicines, were recalled due to the discovery that they were counterfeit. (17) These drugs were a mixture of fake drugs manufactured in Central America, mixed with South American versions of the actual drug, and the illegal importation and sale of both into the US. (18) In the summer of that same year, blitz inspections by government officials of foreign drug imports at US international mail facilities found that 88% were unapproved, may have been stored inappropriately, and had safety issues. (19) In addition, a 2003 sales estimate of counterfeit or tainted prescription drugs sold in the United States alone was $200 million--a seven-fold increase from the previous year. (20) In 2004, FDA officials discovered that a large proportion of Mexican drugs imported by US citizens were fake; (21) and in May 2005, the FDA issued warnings on fake Lipitor, Viagra, and an unapproved osteoporosis drug being imported over the Mexican border by US citizens. (22) In addition, a 2005 story in Business Week highlighted the tremendous increase and market in counterfeit goods worldwide, including counterfeit medicines. (23) Further, the Pharmaceutical Security Institute, a nonprofit trade association group, reported in May 2005 that the United States experienced the greatest number of problems in counterfeiting, theft, and drug diversion--for a second year in a row. (24) Also, Sen. Charles Schumer (D-N.Y.) recently indicated that in New York alone, there were nearly 100,000 instances of fake drugs used to fill prescriptions. (25)

As evidence regarding the problem of counterfeit drugs in this country began mounting, the US Department of Health and Human Services launched an investigation into the issue under mandates of the Medicare Modernization Act. (26) In December 2004, it issued a report detailing significant security issues associated with drug importation and counterfeit drugs. (27) One of the most alarming issues involved detection of imported counterfeit drugs. Investigators noted that there are only 16.9 full time FDA employees responsible for covering all international mail facilities in the US to search for incoming counterfeit drugs--and that is not their only duty; (28) with 20 to 30 million packages entering the US each year through the US postal service, (29) resources devoted to detecting problematic drugs are not anywhere near adequate.

Additional information from the report is equally dismal. The high degree of Internet sales, the costs associated to ensure safety of drugs imported by individuals, the limited savings from a formalized importation policy of 1% or less, high technology costs to protect the drug supply, misperceptions about imported drug prices compared with the US, and the potential reduction in future development of new drugs all create issues of practicality and desirability that make the importation decision and policy in the context of counterfeits highly complex. (30)

The FDA estimates that ~1% or less of drugs in the United States are tainted or counterfeit. (31) Assuming only one tenth of one percent of drugs in the US are affected, in combination with the WHO estimates, (32) this still means that more than 3.5 million to 350 million US prescriptions may be potentially affected by counterfeit drugs each year.

B. TYPES

Early incidents of counterfeit drugs primarily targeted the category of "lifestyle" drugs: for example, Viagra. (33) In some quarters, there was very little sympathy for these victims because of the perceived "lifestyle" nature of these drugs (as opposed to therapeutic medications). Unfortunately, counterfeiters have since expanded their lucrative markets. Recent investigations have turned up counterfeit AIDS/HIV therapy, over-the-counter pain medications, antibiotics, insulin, cholesterol drugs, hormone replacement therapy, flu medications, cancer drugs, anti-arthritis drugs, cardiac drugs, anti-parasitic drugs, antihistamines, and many more. (34) The counterfeit market has burgeoned and matured: counterfeits now span the spectrum from lifestyle drugs to lifesaving drugs. It is likely that all citizens are potentially affected.

Harm occurs in at least three ways. First, if the fake drug contains the wrong drug, the patient is not treated for the disease he or she has. This can occur when, for example, vials (in some cases purchased on online auction sites like Ebay) (35) are relabeled with a fake label as another, more expensive antibiotic with different bacterial coverage than the one originally prescribed, or when the drug has become inactive due to expiration (36) or poor storage. Wrong or ineffective drugs not only fail to help the patient get better but also contribute to the increase in antibiotic resistance of bacterial pathogens, making infections harder to fight. In addition, fake drugs also contribute to the mistaken impression that antibiotic resistant strains are present due to lack of therapeutic effect of first-line therapies, resulting in use of stronger therapies, once again contributing to creating pathogen resistance to antibiotics.

Secondly, the patient may get the wrong concentration or dose with a counterfeit. This has occurred with Botox treatments, where a physician was supplied with a research version of Botox, (37) which is much more concentrated than that utilized for anti-wrinkle treatment and not intended for human use. It resulted in respiratory paralysis and near death for several patients, including the physician who was using it himself. (38) Another example was a cancer patient who needed red blood cell promoting Erythropoietin, which virtually all patients require after chemotherapy because of the latter's side effect of causing severe anemia. (39) Criminals sold a form of the IV drug diluted with bacterially-contaminated water, which was then injected directly into the patient. (40)

The third common method of harm results when the fake drug has no active ingredients and indeed may have harmful ingredients added to make the drug more realistic. In these circumstances, patients are not only harmed by not being treated, they are sometimes killed by materials used to make the fake drug. Counterfeiters have introduced bacteria-laced water as noted above, colored dye, powdered cement, (41) toxic yellow road paint, floor wax, boric acid (42) (the latter used commonly to kill cockroaches), and, horrifyingly, antifreeze. Over 500 children died from ingesting what their parents thought was cough syrup, but was instead counterfeit medicine tainted with ethylene glycol (43) before the deadly drug was discovered and destroyed. (44) Other similarly shocking and horrendous fake drug cases include counterfeit inhalers for pediatric cystic fibrosis patients that were contaminated with bacteria being directly introduced into the children's lungs, (45) and injected cancer drugs that were only vials filled with tap water. (46)

One of the most insidious means of selling counterfeits is salting. Salting occurs when legitimate drugs or fakes with some active ingredient--which are often imported from other countries or have expired--are mixed or "salted" with fake versions of the drug. In this way, even if patients, pharmacists, or government authorities are attempting to detect counterfeits, these fake drugs may elude detection due to a legitimate sample or fake with the active molecule being pulled for testing. (47)

C. REASONS

1. Cash, Costs, and Penalties

The primary reason for the explosion of the counterfeit market is simple: money. It is estimated by WHO and the FDA that worldwide sales of counterfeit drugs represent between $32 billion and $35 billion annually; (48) that is $88 to $96 million in sales each day. Related to this incredible cash flow, the FDA and international government authorities warn that counterfeit drug sales are linked to funding of well organized international criminal operations and terrorist activities, including those of Hezbollah and Al Qaeda, (49) as well as countries who may sponsor these activities, such as North Korea. (50) The drug supply has also been identified by the FDA as a target for terrorists. (51)

It is also easy to produce these drugs. Making illicit drugs such as heroin and cocaine is a very difficult, expensive, and highly risky activity. (52) Counterfeit licit drugs, on the other hand, are cheap, financially lucrative, and low risk. (53) Nefarious producers can use unskilled workers, and need only make drugs that appear authentic; they do not have to work. A fake pill may cost less than $0.01 to make, but can be sold for $0.30, (54) and that is still cheaper than the actual drug. In addition, the risk and cost of selling licit drugs is much lower than that for illicit drugs. (55)

Part of the lure of counterfeit production is also related to pressure from the United States and domestic country governments on illicit drug production. In Latin American countries, where a significant amount of cocaine and heroin production occurs, governments have passed increasingly stringent laws. (56) Hence, such production may result in 10-15 years in prison. (57) Yet, laws regulating the production of fake, licit drugs have not been strengthened to reflect the gravity of the harm. Penalties are light--often only 6 months in jail, and individuals caught can be out on bail in just a few days. (58) Therefore, an unintended consequence of creating appropriate penalties for drug lords caught making illegal drugs is a business reevaluation that has shifted production to a much cheaper, less risky, and more lucrative product: counterfeit legal drugs. Hence, Latin America has become a source and is itself awash in counterfeit drugs. (59)

Penalties for counterfeit drugs in the United States are also weak: for example, counterfeiting a trademark may get the perpetrator 10 years in jail, (60) but counterfeiting a drug subjects him or her to only up to 3 years in prison. (61) In some cases, no jail time is given. (62) Such perverse incentives are akin to the effects in Latin America (63) that only lightly punish counterfeit drug production. Hence, former convicted cocaine traffickers have entered into the US market to sell counterfeits. For example, two who were caught, Domingo Gonzalez and Julio Cruz, led a multimillion dollar counterfeit ring that included sale of at least 4 million cholesterol medicine tablets and generated greater than $10 million in sales. (64) Other cases show how easy it is to get involved in the counterfeit trade. (65)

2. Gray Market

A tremendous part of the United States' problem with counterfeit drugs results from the "gray market." Traditionally, 90% of prescription drugs move from the manufacturer to large wholesalers then directly to the pharmacies in the community or other facilities such as hospitals and nursing homes. This market is dominated by three large bulk wholesalers: Amerisource Bergen, Cardinal Health, and McKesson Corporation. (66) However, up to 10% of drugs pass through the gray market, represented by thousands of interactions between larger and smaller wholesalers and providers. (67) This secondary "gray" market is the vulnerability where counterfeits can enter. (68)

Theoretically, bulk wholesalers sell directly to customers like consumer and hospital pharmacies, who then dispense these drugs to patients. However, in reality, the "Big Three" wholesalers sometimes buy back drugs from the smaller secondary wholesalers to cover short term shortages. Pharmacies and others sell stock amongst themselves and to and through secondary wholesalers when they need cash flow; excess supplies with impending expirations are sold between and among large and small wholesalers, pharmacies, hospitals, and other providers; bulk drugs are sold to repackagers with other parties in-between to create consumer-level sales products; and arbitrage activities result in prescription medicines passing through numerous wholesaler, retailer, and/or repackager hands before reaching the final seller and the patient. (69)

Gray market sales regulation is fractionated. Distribution, repackaging, dispensing, and returns of pharmaceuticals by purchasers are governed by state law, (70) often with few requirements and inadequate support for staffing for inspection and enforcement. Drug approval and manufacturing is governed by federal law, often with limited coordination with state activities. (71) Consequently, many holes exist within the safety net of pharmaceutical distribution. This highly convoluted gray market allows parties peddling fake drugs to slip their products into the distribution chain, and ultimately, into the patient who buys and takes the tainted medication. (72)

3. Detection

Another problem that allows for such ease in action is the difficulty of counterfeit detection. Passing off counterfeit drugs is indeed the perfect crime. (73) Physicians and nurses have little index of suspicion that a fake drug may be the cause of therapeutic failure, (74) generally attributing poor clinical outcomes to human variation. (75) Similarly, patients, their physicians, and their families may not know that they have been harmed by a fake drug, akin to patients dying without knowing they had a treatable illness. (76) Patients may also be frail, elderly, and/or very ill, further limiting suspicion. Providers rarely ask where drugs were purchased, and even in the unlikely event that they do, patients may be reluctant to disclose that medicines were bought over the Internet or from a foreign country. (77) Further, medication packaging is often thrown away. The material is also metabolized by the patient's body once taken and there are few lab tests normally available to detect the thousands of drugs that patients could be taking, hence drug levels are not easily obtained. (78) Consequently, no one suspects, no one tells, and any evidence is discarded or digested. (79) This situation makes it tremendously difficult to investigate forensically where, how, and what occurred in a circumstance that may implicate fake medicines; such frustrations are stymieing investigations into recent counterfeit drug deaths in Canada. (80)

Detection is also problematic for another reason: the quality of the packaging and counterfeit product. Often, the fake product looks identical to the actual medicine in form and in substance. In testimony for the Senate Health, Education, Labor, and Pensions committee, Graham Satchwell, a former detective superintendent and former Association of Chief Police Officers' spokesperson on counterfeiting, noted that:

 
   [C]ounterfeit medicines often appear so like the genuine product 
   that no one, not the best specialist can tell the genuine 
   packaging from the counterfeit. And no one, not the best 
   specialist can tell the genuine product from the counterfeit unless 
   the product is subjected to chemical analysis. The result is that 
   everyone, poor, ignorant, rich and smart, all are at risk from 
   counterfeit or sub-standard products--and they probably won't 
   recogni[z]e them when they and if they see them. 
 
   In the course of my work I have myself negotiated to buy counterfeit 
   medicines from China, Germany, Poland, India, Pakistan and other 
   countries. It is extremely easy for anyone to find a foreign party 
   willing to counterfeit medicines (without active ingredients) and 
   present those medicines in packaging that will easily pass as 
   genuine. (81) 

Hence, to detect counterfeit medicines in a clinical culture of limited suspicion and diagnostic uncertainty and a world of high quality fakes is a challenge that is virtually insurmountable. This situation truly makes counterfeit drug production and sale the perfect crime.

III. IMPORTATION: FROM GRAY TO BLACK

A. INTERNATIONAL EXPERIENCE

Although counterfeit/gray market problems are not well known in the United States, (82) they are throughout the rest of the world. (83) International drug counterfeiting difficulties are due in part to problems with parallel trade, i.e., international drug importation in Europe and other countries around the world. (84) Through parallel trade, drugs may pass through many different countries and scrupulous and unscrupulous sellers' hands before ending up in a pharmacy. The incentive to engage in this practice is attributable in part to differences in medicine pricing amongst European countries, (85) and is permitted in the EU under Article 28 of the European Commission Treaty for the Free Movement of Goods and Services within the Internal Market of the EU countries. (86) This principal of free movement mandates that no country within the EU may place legal, legislative, or other barriers preventing trade between members, nor may an owner of a trademark use its rights to prevent repackaging of the medicinal product if the repackaging will not adversely affect the original condition of the product. (87)

There have been significant issues of counterfeits in Europe both domestically and across international lines relating to parallel trade. (88) Unfortunately, examples abound. The UK recently uncovered one of the largest counterfeiting operations ever discovered, which was churning out 500,000 tablets of counterfeit drugs daily, and which disseminated those products through parallel trade means across Europe. (89) It is interesting to note that in the UK, like the US and Latin America, penalties are light. (90) Allen Valentine, the mastermind of the UK counterfeit ring, who had been convicted on 14 previous occasions on charges of medication fraud, only received 5.5 years imprisonment--and the sentence was due to his copyright infringement, not his threat to public health. (91) He is eligible for release in two years. (92) This case follows several recalls and previous UK counterfeit discoveries (93) with attendant light penalties for its perpetrators. (94) More recent counterfeits have also been discovered, resulting in calls for scrutiny of the current regulatory safety structure. (95)

Investigative efforts have outlined the significant issues facing Europe:

 
   [D]rug importation in Europe has led to a situation where drugs 
   often change hands more than 20 times before reaching their 
   destination, frequently manufactured in one country, shipped to 
   the country in which they were intended to be marketed, bought 
   and sold there by wholesalers and then moved yet again to more 
   expensive markets.... 
 
   ... Americans would be wise to consider the example of [the] United 
   Kingdom as it imports more prescription drugs than any other nation 
   in the European community. This opened the door for counterfeit and 
   other sub-standard medicines to enter the UK distribution chain. One 
   survey in 2004 revealed that of 300 imported medicines examined, 
   25% should have failed on "safety reasons," 50% because of poor 
   quality of product. In addition 80% failed on legal grounds such as 
   intellectual property rights infringement. (96) 

Other European countries have also faced the problem of counterfeits. Wholesalers in Europe have been duped into introducing counterfeits into the legitimate supply chain, such as the case in The Netherlands in 2004. (97) In Italy, a licensed medicines dealer was found to be distributing counterfeit gastrointestinal drugs. (98) In France, custom's agents seized 542,000 fake drugs in 2003. (99) In Spain, authorities raided six laboratories producing counterfeit steroids, hormones, and cancer drugs. (100) The operation was capable of producing 20,000 fake doses per hour; 30 million doses and 10 tons of high quality tablets were found, with vials, capsules, tablets, and injectables all represented. (101) These fake products were confirmed to have been sold through parallel trade in Italy, France, and Portugal, and more broadly through the Internet. (102)

Hence, it is no surprise that patients' groups such as the UK Patients' Association have voiced their concerns about the dangers of counterfeits and parallel trade in Europe: "We are increasingly concerned not just about counterfeit medicines, but also the growth of unregulated Internet pharmacies, and the patient safety implications of repackaging medicines through parallel trade." (103) "We've been saying for some time that parallel trade is the supply chain's soft underbelly, that it is a potential weak spot. Well, given what we've uncovered, you can now remove the word 'potential'; it's a real risk, and it's here now." (104) Reflecting these concerns, the European pharmaceutical supply situation has been described as follows:

 
   The complex nature of the supply chain across Europe results in some 
   medicines exchanging hands many times before reaching the patient. 
   This creates more opportunities for counterfeit products to enter 
   the supply chain than if the products were sourced nationally. 
   Combined with the accession of ten member states that are 
   significantly poorer than the rest of the EU and that have both 
   current and historic trading ties with the former Soviet Union 
   (where the WHO already estimate the medicine supply chain to contain 
   up to 10% counterfeit product), it is almost inevitable that 
   counterfeit medicines will enter the EU supply chain. (105) 

Indeed, the problem in a nutshell is very much like issues associated with safe sex: You may trust the person you are with right now, but do you trust every person that person has had sex with to have used appropriate protections? Do you trust those others to have ensured that all the individuals they have had sex with to have ensured their partners had appropriate protection? You may trust the representative who is selling you drugs across the counter, but do you trust all the other persons who have handled the medicine? Do you trust all those others to have stored the drugs in appropriate conditions, to have ensured security of the drugs, and to have verified their authenticity? Because importation may extend the gray market outside our closed system to worldwide suppliers, the counterfeit drug problem the world experiences may become our own. So through importation, we may move from the gray market to the black: from getting drugs from legitimate secondary wholesalers with its accompanying weaknesses to the international black market and its tremendous risks, including maiming, worsening illness, and death.

B. POLITY ISSUES

The question also arises as to just who the polity is comfortable with in terms of importation trading partners. Surveys have shown that US consumers favor importation from Canada--although certainly not uniformly: one large survey showed that 69% favored some form of importation of prescription drugs from Canada. (106) But most consumers were opposed to importation from other countries, such as those within the European Union and Asia. (107) Further, senior citizens and women, the "health care gatekeepers," were most opposed to importation. (108)

Yet surveys like this one beg the question, regardless of their results: do consumers know that importation from "Western" countries like Canada, Ireland, and the UK, include medications that originated from eastern bloc European countries or Asia? (109) It is unlikely that the vagaries of the drug distribution and importation markets domestically and internationally are everyday discussion points for US consumers. Indeed, Canada itself currently imports drugs from 80 countries, including countries with high levels of suspect drugs. …

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