Let’s not worry about fake online drugs

By Felix Salmon
April 23, 2012

Roger Bate has a curious op-ed in the NYT today. He’s the lead author on a study which bought 370 drug samples from 41 online pharmacies around the world, and then tested their authenticity. The results? With the exception of Viagra bought from non-verified websites, every single drug was 100% authentic. But you’d never guess that from his op-ed:

In 2007-8, when counterfeit versions of heparin, a blood-thinning drug, were shipped from China to the United States market, 149 people died. In the last few months, bogus versions of the cancer drug Avastin, apparently shipped from the Middle East, have surfaced in clinics in California, Illinois and Texas. Thankfully, so far as we know, they haven’t killed anyone, but more and more cases of dangerous fake drugs are being reported by the Food and Drug Administration. Numerous incidents surely go unreported, the evidence swallowed, the deaths incorrectly attributed to natural causes.

Fighting the fake drug menace is like playing whack-a-mole. It is technically illegal for individuals to order drugs online from other countries. And yet no sooner does the F.D.A. shut down one dubious online pharmacy than another pops up. According to the National Association of Boards of Pharmacy, only 3 percent of the 9,600 online pharmacies it has reviewed complied with industry standards. Many were based overseas, so their sales to Americans were illegal; others did not require doctors’ prescriptions. And some were very likely peddling dangerous counterfeit drugs.

This is all highly alarming — but also highly misleading. The “more and more cases” of fake drugs being found by the FDA? The FDA’s counterfeit medicine page lists exactly six cases in the past 24 months, of which just two — Tamflu in June 2010, and Vicodin ES in March 2012 — were linked to online pharmacies. The bogus Avastin, by contrast, was being distributed through legitimate channels by two distributors: Quality Specialty Products (QSP), a/k/a Montana Health Care Solutions, and Volunteer Distribution in Gainesboro, Tennessee. It had nothing to do with online pharmacies at all.

Realistically, the US simply doesn’t have a “fake drug menace”. Yes, fake drugs exist, and they’re not all that hard to find if you’re based in, say, Ethiopia. An earlier study by Roger Bate found that 7 of 36 drugs bought by secret shoppers in Ethiopia failed a stringent authenticity test. (On the other hand, 100% of the drugs bought in Turkey were legitimate, and Brazil, Russia, and China all performed very well in the test.)

What’s more, even if the US did have a fake drug menace, which it doesn’t, the menace would not be coming from internet pharmacies. As Bate himself has found, internet pharmacies sell authentic drugs at low prices; the only exception to this rule is unlicensed sites hawking Viagra.

But Bate doesn’t seem to believe the evidence of his own eyes. Instead, he relies on urban myths: his July 2011 paper, for instance, said in its second sentence that “according to the World Health Organization, substandard and counterfeit drugs have been found in both developed and developing countries, accounting for more than 10% of the global medicines market and over US$32 billion in annual earnings.” This is a classic bogus counterfeiting statistic: if you go to the WHO page he links to, the WHO in fact makes no such assertion at all. Instead, it attributes the factoid to the FDA, with no footnote.

I’ve been trying to track down these statistics to their source for years, and I’ve never yet found one with a solid empirical grounding. Certainly Bate’s own studies would seem to disprove this assertion, but that doesn’t stop him, in his op-ed, talking authoritatively about “criminal networks” which “launder billions in profit”. As far as I can tell, no such network has ever been identified, and while there might be billions of dollars of profit in illegal drugs, that money is much more likely to come from marijuana and cocaine than it is from fake pharmaceuticals.

And in any case, concentrating on fake drugs is itself dangerous, because it diverts resources from the real problems with US drugs — legitimate drugs where there has been either a flaw in the manufacturing process or which have degraded because they’ve been stored badly or for too much time. Fake drugs are dangerous; real drugs can actually be more dangerous, just because people aren’t nearly as worried about them.

Still, Bate does at least appreciate that if you’re buying drugs from a licensed online pharmacy, those drugs are going to be authentic. As such, he says, that behavior should not be criminal. But he’s still a very long way from the logical conclusion, which is that there should be a free market in authentic drugs:

Buying drugs online from overseas isn’t for everyone. It should remain a limited option for desperate cash buyers — sick people with limited resources and insurance coverage — not a way for well-insured patients to reduce their co-pay. American health insurance companies should not be required to reimburse consumers for these drugs, because that would effectively import foreign governments’ price controls into the United States and undermine American companies’ research and development budgets.

This really doesn’t make sense. If authentic drugs are perfectly good for “desperate cash buyers”, why can’t they be used by the rest of us with health-insurance plans? There’s no reason why I would want to reduce my co-pay when buying drugs online; I’m perfectly happy to make exactly the same co-payment when buying at a Canadian online pharmacy as I would when buying at the drugstore down the street. But my insurer would save money, and maybe, ultimately, that would reduce the total cost of healthcare and health insurance in this country.

Yes, if the cost of healthcare and health insurance comes down, that might mean — that should mean — lower profits for Big Pharma. But would lower profits mean lower R&D budgets? And would lower R&D budgets mean fewer great new drugs coming to market? No one knows; all we know for sure is that Big Pharma’s R&D expenditure is enormous, and is increasingly bad at creating great new drugs. In general, if you want to look for billions in profits, you should be looking to the big pharmaceutical companies, not mythical organized-crime syndicates. And it’s definitely worth asking why and whether we have a societal interest in protecting those profits instead of opening up the market in US pharmaceuticals to a modicum of competition.

What we’re faced with here is a tradeoff. On the one hand, there are clear financial benefits to letting Americans and American insurers buy their authentic drugs wherever those drugs are cheapest. On the other hand, there are extremely vague worries that were that to happen, some hypothetical new future drug might fail to make its way to market. Given the massive economic and fiscal costs of healthcare price inflation, it’s surely a no-brainer to go for the option which unambiguously saves money. Especially since, as Bate himself has demonstrated, the drug-safety risks of going down that road are essentially nonexistent.

14 comments

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Follow the money Felix, follow the money.

Bate has some interesting connections to various of the astroturfing groups around.

Thus his conclusion is always going to be:

“because that would effectively import foreign governments’ price controls into the United States and undermine American companies’ research and development budgets.”

Now, as it happens, I agree with him. High us drug prices do in general pay for global drug research.

But, without being too, too cynical about this I’m open to being convinced otherwise, Bate is not.

Posted by TimWorstall | Report as abusive

Can you please provide the reference for: “He’s the lead author on a study which bought 370 drug samples from 41 online pharmacies around the world, and then tested their authenticity. The results? With the exception of Viagra bought from non-verified websites, every single drug was 100% authentic.”? Where’s this study published?

Posted by ManuelL | Report as abusive

Yes, let’s go back to worrying about really important stuff, like the high-end art auction business.

Posted by Moopheus | Report as abusive

@ManuelL, click on the word “study” and you’ll find it. It’s at NBER.

Posted by FelixSalmon | Report as abusive

Funny how this blogger basically accuses Bate of being misleading and picking and choosing facts, but then turns around and does the same to promote his own opinion. Take this sentence: “On the other hand, 100% of the drugs bought in Turkey were legitimate, and Brazil, Russia, and China all performed very well in the test.” If you consider failure rates of 3.12%, 7.5%, and 5.41% to be “performing very well” then I question your judgment. Also, note that Bate is not claiming “Verified” on-line pharmacies are unsafe, rather he (like others) warns consumers to avoid UNVERIFIED websites (often foreign) as a source of discounted medication. This blogger has his head in the sand… No criminal networks involved in illegally counterfeited or diverted pharmaceuticals? Laughable man, laughable.

Posted by Hatroq | Report as abusive

Felix -

Thank you for covering this topic, as Americans who can’t afford their medications are relying on the media to bring more attention to the emergency of Americans going without needed medication due to drug prices. On the other hand, you’re being a little hard on Roger Bate. His main point in this article is extremely pro-consumer: The FDA and the pharmaceutical industry should stop scaring Americans away from safe international online pharmacies because it leads to poor health outcomes, and the technical illegality is immoral.

For an AEI scholar, one rarely encounters such a position at odds with the pharmaceutical industry, which would like to see safe international online pharmacies shut down.

Also, there is a counterfeit drug problem that, yes, threatens the United States. True, the problem is miniscule in the U.S. compared to poor countries with weak regulations. But the Internet is also a place where rogue online pharmacies can and do harm consumers, including Americans searching for medication online. We know well because evaluating online pharmacies is our business. That’s why Bate writes it’s important to show Americans how to safely find affordable medication online.

Your point about not limiting the benefits of savings online to some Americans and not others is well taken. It seems here you and Bate just don’t fully agree. Room for debate…

Responding to ManuelL: The source of the study mentioned is published here: http://www.nber.org/papers/w17955. The main finding is that properly verified non-US online pharmacies sell safe medication at much lower prices.

Felix – feel free to contact me anytime.

Gabriel Levitt
Vice President
PharmacyChecker.com

Posted by PharmacyChecker | Report as abusive

The online pharma business is very small: ~100M$ a year gross revenue.

https://www.usenix.org/conference/usenix -security-11/show-me-money-characterizin g-spam-advertised-revenue

Posted by NicholasWeaver | Report as abusive

Err, the online spam pharma business, not the legit businesses represented by Mr Levitt

And apologies for spaces inserted in the URL

Posted by NicholasWeaver | Report as abusive

“No one knows; all we know for sure is that Big Pharma’s R&D expenditure is enormous, and is increasingly bad at creating great new drugs.”

It is enormous taken on its own, but it’s less than half the amount Big Pharma spends on administration and marketing. And Pharma really has no desire to create new drugs, just endlessly refining what we already have, hence the amount spent on marketing. Plenty more information here.

http://mdcarroll.com/2009/10/25/explaini ng-research-drug-company-expenditures-pa rt-1/

Posted by Secretwhistle | Report as abusive

“And in any case, concentrating on fake drugs is itself dangerous, because it diverts resources from the real problems with US drugs — legitimate drugs where there has been either a flaw in the manufacturing process or which have degraded because they’ve been stored badly or for too much time”

I’ll agree that either of these problems is serious if the problem is widespread. That said, after excoriating Roger Bate for using insufficient or misleading statistics, it’s awfully hypocritical to throw out this statement without citing statistics (or at least linking to a study) indicating that either of these issues is a much bigger problem than counterfeit drugs.

Posted by realist50 | Report as abusive

One doesn’t have to look hard for evidence of fake online pharmacies, try checking out the National Association of Boards of Pharmacy’s quarterly report, which surveys many online pharmacies and find only a small percentage that actually have the licensure necessary to dispense drugs to Americans.

We license pharmacists for a good reason, right?

The latest report from Jan 2012 shows that 80% of these outlets surveyed by the NABP don’t even require valid prescriptions. If they can’t get that detail right, why should we assume they’re being careful about sourcing medication from reputable dealers?

http://www.nabp.net/programs/consumer-pr otection/buying-medicine-online/

You can find a number of ways to safely shop for medication online and save money on our website at http://www.safemedicines.org/

Let us know if you’d like more information about our materials.

Shabbir Safdar
Digital outreach, Partnership for Safe Medicines
http://www.safemedicines.org

Posted by ShabbirS | Report as abusive

America’s Big Pharma pocketed $300 billion last year selling prescription drugs in the U.S. It’s no surprise then that enterprising chemists and pharmacists in some 27 foreign countries now market name-brand and generic drugs at a fraction of U.S. retail pharmacy prices to cash-strapped Americans.

These drugs pass through multiple middlemen to get to U.S. soil, but along the way who checks the chemical ingredients for quality? For example, what protections are in place to insure that the generic drug Quetiapine– sold online by canadadrugs.com, who acquires it in name only from Anam Pharmacy in Singapore, who buys blister packs by the box from Intas Pharmaceutical in Selaqui, Dehradun-248 197 India– is safe to consume?

I would like to believe that these business people are honorable, but let’s be realistic– where is the incentive to protect the consumer? Does Canadian law require canadadrugs.com to guarantee every product that gets shipped from Singapore through Frankfurt to Anytown, USA without ever crossing into Canada? That would be amazing, but because they are technically illegal, the FDA won’t spot test the medications once they arrive in America.

A sane response from the U.S. government is unlikely anytime soon. Too much money is paid to the campaigns of members of Congress by Big Pharma. Spurred on by CEOs who make mega-salaries, investors demand higher dividends even when it’s against their own self-interest for U.S. drug company prices and profits to rise.

We can’t trust the internet, full of fraudulent claims and self-serving editorials. It is nearly impossible to run interference against abusive online companies. When most of the middlemen in online pharmacy world are for-profit companies, who’s protecting the buyer?

Until we have some sort of international treaty, buyer beware.

Posted by RikkiLee | Report as abusive

I’ve been in academic science, and it’s a business like everything else. The local equivalent of “making a sale” is “getting a grant”, the local equivalent of “repeat business” is “getting a grant renewed”.

The pharma industry likes to vary prices by region, according to what the market will bear (not unlike DVD publishers). Online pharmacies arbitrage away those profits. Although Dr. Bate is a scientist, and ideally is all about the impartial generation of knowledge, apparently he’s enough of a realist to give his funders what they want, which is rhetorical ammunition against online pharmacies.

He, thankfully, seems to avoid faking the data. It’s a compromise; people who read his study carefully can see the results (online pharmacies are pretty reliable), but harried politicians get his sponsor’s message (online pharmacies are dangerous).

I used to work at a military lab, and the stuff that went on there would have made a good season of The Wire,

Posted by JayCM | Report as abusive

“No one knows; all we know for sure is that Big Pharma’s R&D expenditure is enormous, and is increasingly bad at creating great new drugs.”

It is enormous taken on its own, but it’s less than half the amount Big Pharma spends on administration and marketing. And Pharma really has no desire to create new drugs, just endlessly refining what we already have, hence the amount spent on marketing. Plenty more information here.

http://mdcarroll.com/2009/10/25/explaini ng-research-drug-company-expenditures-pa rt-1/ and http://www.rxgs.com

Posted by Frank99 | Report as abusive