Reimportation doesn’t pose a safety threat only with traditional drugs. There’s profit potential – and danger – in counterfeit biologics.
Abstract
Prescription drug reimportation isn’t an issue that involves only traditional pharmaceuticals. The high cost of biotech drugs makes them an appealing prospect for reimportation – and a prime target for counterfeiters.
In 2000, seven months after he began treatment with human growth hormone, Rick Roberts started feeling a stinging sensation whenever he injected it. When he reported the problem to the chain drugstore that sold him the biologic, he was told it might be counterfeit. It turned out Roberts had received two batches of counterfeit growth hormone, well-done fakes looking just like the originals.
Today, after a three-year investigation involving the U.S. Food and Drug Administration and the FBI, Roberts says the counterfeits almost certainly were produced overseas. The first, a female fertility drug that is not supposed to be taken intravenously, caused the stinging. A second batch was growth hormone that had been diluted to one sixth its normal strength.
Both switched life-saving treatment at the time for something ineffective at best and life-threatening at worst. Since he contracted HIV in 1988, Roberts has required lots of medications, including biologics. In 2000, he was diagnosed with wasting syndrome and his health insurer provided a precious 12-month supply of human growth hormone costing $4,000 to $6,000 a month. “Pretty high-tech,” he says.
To Roberts, who teaches in the Department of Communication Studies at the University of San Francisco, his experience with counterfeit biotech drugs is a cautionary tale for anyone taking medication in the most regulated nation on the planet. What’s more alarming, he says, is that if counterfeits can slip through the U.S. drug system — a major drugstore chain, to boot — then allowing reimportation of biologics and other drugs would loosen drug-distribution safeguards and directly threaten countless patients’ lives along with biotech research and development.
“Now that I know how these people operate and how they take advantage of sick people, it’s clear that once we elongate the drug distribution chain, it will increase the likelihood of these points of vulnerability,” says Roberts. “By allowing it outside the country through reimportation, it will be much more difficult to track and find these people.”
PRICE VS. SAFETY
Reimportation is the importation of prescription drugs, both traditional and biologics, back to the country of origin — not necessarily where they’re manufactured but where the drug maker is based. Most Americans frame the issue in the media’s image of U.S. citizens crossing the border into Canada.
Canadian price controls have made it possible for U.S. citizens to buy drugs in Canada at prices that typically can save consumers a third to a half compared with U.S. prices. According to IMS Health, the value of reimported drugs from Canada doubled last year, reaching $1.1 billion.
Roberts’ voice has become a particularly poignant one in an increasingly politicized debate over reimportation that is being fueled by election-year polemics.
“Reimportation is an area that will — not could, but will — affect all of biotech, and not just late-stage, but also early stage firms,” says Michael Pellini, MD, president and CEO of Malvern Pharmaceuticals. The economic effect on drug manufacturers is that reimportation cuts into revenues and, ultimately, research and development. “Any drug that makes economic sense to a reimporter, they’re going to do it,” he asserts.
PHOTOGRAPH BY DON TRACY
Advocates view reimportation as a way to help those, such as the elderly, who are on fixed incomes and may be faced with having to choose between food and medication. Opponents such as PhRMA, the Pharmaceutical Research and Manufacturers of America, argue against allowing reimportation because it threatens patient safety. Opponents also cite studies showing that most U.S. consumers who cross over to Canada to buy medications are affluent bargain hunters. Critics counter that this is a smokescreen to veil drug makers’ greed.
Reimportation is illegal, but Congress is actively examining the issue. The Senate Health, Education, Labor, and Pensions Committee held hearings on the issue in May, and there are at least three bills under consideration that would allow various reimportation scenarios covering traditional and biotech drugs.
The first mention of reimportation was in the Prescription Drug Marketing Act of 1992, which limited the practice to U.S. companies that export drugs. The Medicine Equity Drug Safety Act of 2000 signed by President Clinton allowed pharmacies and wholesalers to reimport pharmaceuticals but the secretary of Health and Human Services had to certify their safety. Donna Shalala refused to do so because the process was so uncontrolled.
The Medicare Prescription Drug Act of 2003, signed by President Bush, allowed reimportation of drugs from Canada, again contingent on the HHS secretary certifying their safety and cost savings. Like Shalala previously, current Secretary Tommy Thompson refused to do so because he couldn’t guarantee their safety either. The law also designated the formation of a task force to examine the issue. The group has held a half dozen hearings so far. At the May Senate committee hearings, two large chain pharmacies testified that they could support reimportation as long as there were legitimate channels of distribution, which many observers interpreted as meaning themselves.
Patrick L. McKercher, PhD, director of the Center for Medication Use, Policy and Economics at the University of Michigan in Ann Arbor, estimates that about $12 billion in reimported drugs cross the borders of European countries annually, compared with only $1 billion that crosses between Canada and the United States. European countries, though, have the added safeguard of making distributors liable for the safety of the drugs.
UNDER THE RADAR
While reimportation of traditional pharmaceuticals has received wide media coverage, reimportation of biotech products has received little if any attention. That’s partly due to current economic drivers: until now, biologics have not had nearly the country-to-country price spread of traditional pharmaceuticals, eliminating much of the motivation to reimport biologics — and, therefore, to counterfeit them.
McKercher says reimportation is not as much of a threat to the biotech industry as it is to traditional pharmaceuticals. Most biotech products are approved differently, and major biotech products are excluded from bills that would allow reimportation.
“Bio is more expensive and is harder to differentiate,” he says.
Still, McKercher says that reimportation of biologics is likely to become more of an issue, because biotech products’ high prices will stimulate greater and greater interest from foreign counterfeiters.
The landscape may be changing quickly. Roberts’ experience shows how easy it can be to counterfeit a biologic — and how difficult it is to track down sources outside U.S. borders. The explosion of Internet pharmacies has expanded the problem exponentially, transforming what was once just cross-border traffic to a steady stream of cyberspam hawking cut-rate drugs.
“We’ve found a lot of these Web sites that are claiming to be in Canada, with a maple leaf or a Canadian flag, but consumers discover that the packages are often postmarked India or the labels say ‘manufactured in India,’” says Tom Mc-Ginnis, PharmD, the FDA’s director of pharmacy affairs. That means the FDA can’t vouch for the strength, quality, and purity of the products.
“It’s so easy to set up a Web site and fool a consumer,” he says. “It’s a situation of ‘buyer beware.’ The manufacturer may be somebody in a garage in Southeast Asia.”
Safety is key. “The number one issue with reimportation is the pedigree of the products,” says McGinnis. “Without FDA oversight, we don’t know where a drug comes from. FDA regulation stops at the border.” Biotech products are more sensitive than traditional drugs to such factors as temperature and age, and the agency cannot verify that these products are handled in a way that complies with those factors when they’re being reimported. Shipping through international mail facilities may mean, for example, that biologics are stored in hot places that impair the integrity of the product.
While it can take two or three days for a package to reach a patient’s door via domestic mail or shipping, it can take two weeks or more internationally. “Many of these products require a cold pack, which will be warm by the time it reaches the patient’s door,” he says.
“The fear is that reimportation will be the portal for counterfeit drugs on the U.S. market,” says Pat McKercher, PhD, director of the Center for Medication Use, Policy and Economics at the University of Michigan in Ann Arbor. “If they open up the border, they’ll never be able to trace a product.”
PHOTOGRAPH BY ROB CRANDALL
Once counterfeit drugs pass through the distribution system to the patient, the only defense may be astute patients like Roberts to notice the difference.
McGinnis says that before 2001, there was little counterfeiting of unit dosage. “After that time, we started to see them in the distribution channel.”
Changing labels is an easy first step in counterfeiting drugs. Counterfeiters often soak off a lower-strength label with a $200 price tag and replace it with a high-strength label putting the product into the $1,700 price range. “Some of these still have the active ingredient based on USP (United States Pharmacopoeia) standards,” but can’t be distinguished by testing at that point as lower strength, says McGinnis.
Fortunately, most U.S. wholesalers have been educated to the point where counterfeiting has become less of an issue inside U.S. borders. “Everybody’s become aware that if the deal sounds too good to be true, it probably is,” says McGinnis. “I’m not as worried about the domestic side as I am about wholesalers from outside sending to wholesalers who are inside the country. There needs to be oversight.”
For patients like Roberts, safety is one element of the larger argument against reimportation of biologics. His long-term prognosis depends on new treatments that biotech companies hopefully will generate from robust R&D programs. “I’m resistant to all the medicines, and I’m looking for another new drug. I’m fearful of things that will hurt the biotech industry’s ability to invest in R&D, and reimportation could do that. Companies have lost millions to counterfeiters.”
BIOTECHS NOT INVULNERABLE
Some believe it’s only a matter of time before the biotech industry has to face the issue.
“Reimportation is an area that will — not could, but will — affect all of biotech, and not just late-stage, but also early-stage companies,” says Michael Pellini, MD, president and CEO of Malvern Pharmaceuticals Inc., in Malvern, Pa., and a board member of Genomics Collaborative, a Cambridge, Mass.-based company selling a genomics-based platform for discovery of biotech products.
“We all need to be aware of the issue,” he says. It will affect late-stage biotech companies in the area of sales. For startups, the question is about its effects on opportunities for funding from venture capitalists.
“If you agree that the amount a biotech company spends on R&D is a percentage of sales or capitalization, then anything that causes a reduction in revenue will cause a reduction in R&D,” argues Pellini. “That ultimately affects productivity. It can become a vicious circle.”
If there’s a relatively fixed volume of biotech drug units sold and those products get sold in Canada at lower prices, there’s going to be a negative effect on the company’s revenue.
“The best thing the biotech industry can do is to continue its educational campaign about the effect reimportation can have on new products,” says Pellini. “At day’s end, legislators will hopefully reflect what U.S. citizens want. We need a full airing of the issue to come up with a reasonable middle ground.”
Louis M. Sherwood, MD, of Healthcare Executive Partners, a Philadelphia-based consultant to the pharmaceutical industry, says that despite the increased complexity of manufacturing, biologics are more easily counterfeited than traditional drugs because they typically involve vials of powders or liquids with concentrations that can easily be diluted. Erythropoietin, used to raise red blood cell levels of chronic dialysis and cancer patients, exemplifies a biologic that counterfeiters can easily dilute, he says.
While nobody has exact figures, the incidence of such counterfeiting is likely to be greater than the public realizes. Sam Hoffman, also with Healthcare Executive Partners, cited an FDA inspection of 500 packages coming into San Francisco International Airport that found a large number of counterfeit drugs from many countries. Many of the drugs included expired, superpotent, or subpotent products; animal products; or products not approved for use in the United States.
“Counterfeit biologics are a significant concern,” he says. “This is an emerging area, with growing use of monoclonal antibodies and vaccines that require special handling. How hot does it get in a FedEx package sitting on a ramp in India?”
INTERNET PHARMACIES
Hoffman may himself embody the ambiguities of the reimportation debate. While fearful of the threat that counterfeiters pose to both the domestic and international drug distribution chain, he also freely acknowledges that he uses a fax machine to order prescription cholesterol drugs from a Canadian pharmacy in Winnipeg because he can save 30 percent over U.S. prices. So far, he has not experienced any problems and receives the products delivered in tamper-proof packages.
The existence of legitimate Internet pharmacies furthers the ambiguities surrounding the issue of reimportation.
Canada imports drugs from 106 countries. It is difficult to tell where drugs coming into the U.S. from Canada originate
Bellevue, Wash.-based drug-store.com is an Internet-based pharmacy that sells more than 18,000 over-the-counter products as well as prescription drugs. The company has been designated a Verified Internet Pharmacy Practice Site by the National Association of Boards of Pharmacy. That means it does not engage in spam e-mail, is not affiliated with any physicians, and is licensed as a pharmacy in all 50 states.
Jeff Kimmell, RPh, drugstore.-com’s vice president for healthcare services and chief pharmacy officer, agrees that reimportation is not as big an issue in biotech as in traditional pharmaceuticals. “Biotech products aren’t as available. If someone is interested in counterfeiting [to make a quick buck], they’re more likely to go with easily available products that they can get outside the United States,” he says.
Kimmell estimates that more than a third of drug products that are reimported into this country are counterfeit and most of those are the low-hanging fruit of easily available prescription drugs. “If you steal a car for parts, you’ll want a car for which parts are in demand,” he says.
Nevertheless, he says, there is equally great potential for importation of counterfeit biotech drugs.
The increasing volume of reimported drugs will accelerate the problem of untraceable biologics, he argues. Canada has roughly a tenth of the population of the United States and can’t possibly fulfill U.S. consumer demand for traditional drugs, let alone biotech products. “We’re already seeing Canada unable to fulfill demand,” says Kimmell. “They’re already importing from 106 other countries. The problem proliferates and gets worse.
“The same thing will happen with biotech,” he continues. “The only place you can honestly know [where a product originated] is the United States, which has dock-to-dock control — and even that is susceptible.”
“As a pharmacist, my primary concern is and always has been patient safety. With reimportation, you’re really stretching it,” Kimmell says. “Would you pay $50 for a coast-to-coast airline flight if the government hadn’t approved the parts of the plane for flying? To save $20 to $30 [on the cost of the drug], it’s like taking a revolver and playing Russian Roulette.”
PATENT LAW IMPLICATIONS
Jamie Mills, an Ottawa, Canada-based lawyer who has worked in the area of drug reimportation, says patent infringement is an issue that’s received little coverage in the press, and it cuts across traditional pharmaceuticals as well as biotech. “It’s extremely complicated” in the area of reimportation, he says. When someone buys a product like a car, he gets an implied license to resell it. Canadian pharmacies typically have the right to resell prescription drugs in Canada.
The problem: When that license is explicitly for Canada and the pharmacy sells outside Canada, it’s a breach of patent law. The media largely ignore the issue, Mills says, because no biotech company is going to sue “an individual in Seattle who buys drugs from Vancouver.”
Mills is personally aware of some U.S. consumers getting drug products that were inappropriately packaged from a Canadian pharmacy. In this case, the patient’s attention was raised because the product was nearly out of date, and poor handling of the drug means the manufacturer could no longer guarantee the effectiveness of the drug.
Drug companies are worried about potential liability or recalls even if they do everything right, says Mills, because there’s no guarantee that liability claims will be raised in Canadian and not U.S. courts —which, compared with Canadian courts, tend to hand out much bigger awards. “Even if you don’t end up having to pay damages, you end up spending millions of dollars to defend yourself,” he says.
Counterfeiting carries little legal risk. The maximum sentence for counterfeiting drugs is 3 years. In contrast, the price for cocaine trafficking can be 10 years.
Labeling is another issue. Canadian products have different labeling provisions, which can be confusing to U.S. patients. “It’s not uncommon for a product to be approved for one or more indications in the United States and different ones in Canada. That could lead to problems, because the patient might be reading inappropriate labeling instructions or warnings. For instance, what if the product is contraindicated when taken with another drug that has been approved in the United States but not in Canada? It could be problematic,” says Mills.
He cautions that the loss of face-to-face communication between patient and pharmacist once the drug leaves Canada and ends up in the United States is a real problem. “The fundamental duty of care that doctors and pharmacists have is founded on face-to-face contact.”
In the end, there are a lot of reasons that go against reimportation that don’t make it into the U.S. media, Mills says, adding that the stakes are high because many adverse drug interactions are never discovered.
APPEALING CRIME
“Counterfeiting is a really attractive crime” that will become even more attractive with biotech products, Roberts thinks. Aside from the appeal of being able to sell very expensive products, the maximum sentence for counterfeiting drugs is only three years. In contrast, the price for cocaine trafficking can be 10 years.
As one with a life-threatening disease whose future depends on affordable access to high-tech drugs — and one who has suffered at the hands of biologic counterfeiters — Roberts has particular insight into the issue of reimportation. “I understand dependence on medicine and what it means to be desperate to get meds. In 1988, I maxed out my credit card. I still don’t think reimportation is worth the risk,” he says.
“Those who are for reimportation are people who are desperate for access to medicine,” Roberts adds. “The pressure is on politicians to come up with a solution. In this country, access to medications is a problem. I think we’re looking in the wrong direction. Reimportation from Canada is not the solution.
“The United States has a problem, and the United States needs to solve it. And the answer should not be exploiting the Canadian health system.”