Counterfeit meds could be as close as your corner drugstore

June 07, 2006

The pitch within the e-mail message is an eye-catcher:


"You can now get any of your medications online today from the most reliable pharmacy on the net."

Clicking a subsequent hyperlink in the e-mail opens the home page for MyCanadianPharmacy, including reassurances of a safe online shopping experience: Top rated by PharmacyChecker. Listed at Better Business Bureau. Verified by VISA. VeriSign Secure Site. Verified by the Canadian International Pharmacy Association. And, of course, the myriad of brand-name pharmaceuticals are available at greatly discounted prices -- prices much more reasonable than one would pay under the typical prescription plan and substantially below retail at your neighborhood pharmacy.


The site is slick with proclamations of business longevity: proprietor biographies, timelines of company milestones, evidence of licensure, published addresses and contact numbers -- reassuring the wary consumer. All that's required is to place your order, provide proof of doctor's prescription, and punch in a credit card number.


But, if you're one of the 4 percent of American participants in a 2004 Pew Internet & American Life Project survey who journeyed beyond mere window-shopping to the actual online purchase of pharmaceuticals, in short order you've discovered that everything about MyCanadianPharmacy is completely and utterly bogus. Even more disconcerting: the URLS used by MyCanadianPharmacy can be mistaken for a legitimate URL,, which in turn redirects browsers to licensed online pharmacy


Welcome to the unsavory universe of counterfeit pharmaceuticals.


'Sophisticated threats' to market


Randall W. Lutter, acting associate commissioner for policy and planning at the Food and Drug Administration, testified in November 2005 before the House of Representatives that the global pharmaceutical market is "under unprecedented attack from a variety of sophisticated threats."


Lutter, in his statement, defined counterfeit pharmaceuticals as those sold to the public and deliberately misrepresented as the brand name or generic version of an approved product.


For the consumer, 'counterfeit' implies replication of an authentic product by someone other than the actual approved manufacturer, but that concept merely scratches the surface in the pharmaceutical sector. A counterfeit pill may have been manufactured with an inaccurate quantity of the active ingredient -- too little or too much of that ingredient, rendering the prescribed dosage either ineffective or dangerous. More dangerous is the presence of an entirely different active ingredient.


Still worse, an active ingredient may be completely absent, making the prescription useless for treatment of conditions such as high blood pressure, anemia, and diabetes.


"Many are visually indistinguishable from authentic drugs, and they pose a potentially serious health threat," Lutter said in his prepared statement.



We do it all for you


Asim Roy, a professor of information systems at the W. P. Carey School of Business, got a glimpse inside the international pharmaceutical supply chain during a conversation with a business person in India.


"He used to be the managing director of one of the pharmaceutical companies [in India]," Roy said. "I was asking him, 'so how's it work … are you the guys doing it?' I was trying to get a feel for how pharmaceutical companies over there see this as a problem. He said they often are not aware of who's buying their product from them."


As it turns out, Indian companies had no qualms about filling 'specialty orders,' no questions asked. The manager described how shadowy clients approach companies about supplying brand-name drugs such as Lipitor. "The chemists would analyze it, they would produce 100,000 or so bottles of it, made to order -- but they didn't know who was buying it," Roy said. "They're out to make money, and they hand it off to this guy who somehow gets it into the supply chain here."


"There's huge money changing hands," Roy said.


Huge money, indeed. The FDA estimated pharmaceutical industry earnings at the end of fiscal year 2004 to be around $235 billion. Figure in losses from counterfeiting, estimated at between 1 to 10 percent of earnings in the United States alone, and that translates into $2.35 billion to $23.5 billion recouped if the problem is squelched. (By comparison, counterfeit infiltration runs as high as 50 percent in Africa, according to a February 2004 article in World Press Review.)

The drug counterfeiting problem is not a new concern with the FDA. It is an issue that has been festering for over two decades, and the introduction of counterfeit drugs into the nation's pharmaceutical supply has been exacerbated by the very nature of the pharmaceutical industry's distribution practices.  



Roundabout route of distribution


In the pharmaceutical industry, there are three distinct models of distribution from the point of production -- the manufacturer -- to the retailer (which can be a pharmacy, clinic or hospital) who in turn dispenses the drug to the end user.


With each successive model, layers of ambiguity are introduced into the distribution process. Two models are the least susceptible to impropriety:

  • When the manufacturer distributes a product directly to the retailer, and
  • When the manufacturer distributes product directly to the wholesaler, who in turn ships the product directly to the retailer.

Barring outright fraudulent activity at the manufacturer or wholesaler level, these point-to-point supply chain models ensure delivery of a safe, guaranteed product.


But the secondary market model proves troublesome. In this model, pharmaceuticals are bandied about between manufacturers, primary and secondary wholesalers, repackagers who break down bulk shipments into individual packages, and the end retailers themselves who sell off excess stock. This is the market model where counterfeit pharmaceuticals infiltrate the supply chain -- and this market is the most prevalent today.


Secondary wholesale market: a Turkish bazaar


Katherine Eban, a New York-based investigative medical reporter, wrote an article published in Self magazine titled "Pharmacy Fakes" in March 2003. The article led to a two-year-long investigation into the distribution practices -- legal and otherwise -- of Florida drug wholesalers that culminated in 2005 with the publication of Eban's book, "Dangerous Doses."


"One of the big surprises in my investigation was that the nation's three largest pharmaceutical wholesalers -- McKesson, Cardinal [Health], and AmeriSource [now AmerisourceBergen] -- all operated these trading divisions whose sole purpose was to scout for discounts in the secondary market," Eban said. "And so, in almost every single case in which counterfeits wound up in a retail pharmacy, it was because the big three had purchased cut-rate medicine of no known origin from the secondary market."


The book followed a ragtag group of dogged Florida investigators who dubbed themselves "The Five Horsemen of the Apocalypse." Eban's protagonists exposed a convoluted trail of questionable business dealings within the secondary drug wholesale market. Working in concert with the major wholesalers, the secondary operators worked feverishly to acquire pharmaceuticals at rock-bottom prices for eventual sale to end users at the highest possible price. Scores of secondary traders fulfilled the demand using a practice called "diversion," and this is where they ran afoul of the accepted practices of the major wholesalers.


Secondary wholesalers who engaged in diversion, Eban explained, often resorted to illegal practices in order to sell discounted pharmaceuticals. Adulterated products -- pharmaceuticals past their expiration dates, drugs handled improperly as to render them ineffective (such as those requiring delicate shipment in temperature-regulated packaging), weaker medicines relabeled to resemble stronger, more expensive versions, and outright stolen or counterfeit pharmaceuticals -- were commonly represented by secondary wholesalers as legitimate product to the retailers who  subsequently provided them to unknowing end users.


American consumers pay top dollar for drugs that they assume are pure, Eban said. "The fact of the matter is that nobody can tell them where that medicine had come from, and nobody can give them a guarantee of its purity. And that's wrong. That's just inexcusable," Eban said.


Eugene S. Schneller, a professor in the School of Health Management and Policy at the W. P. Carey School of Business, underscores Eban's concern about public confidence in the system.


"They believe in efficacy and in a set of trust relationships in the system, and when that breaks down, it becomes a general distrust," he said.



The drug pedigree


One area where the FDA could have shored up public trust has proven to be the Achilles' heel in the counterfeit prevention battle: tightening the industry's tracking of drug 'pedigrees' from manufacturer to retailer. As the name implies, a pedigree is the paperwork tracing the route of a drug through the supply chain. With each sale, the seller is listed on the pedigree: When a buyer passes on the product, in turn becoming the seller, that name goes onto the paperwork. Tracking a drug's pedigree is no different than tracking an automobile title from the time the vehicle rolls off an assembly line until it becomes a rusting hulk in a salvage yard.


A single Google search revealed MyCanadianPharmacy's scam. The Better Business Bureau's disavowal of affiliation came up instantly. One anti-spam activist traced the operation's spam e-mail IP address to Korea. He discovered that the domain names, which change on a weekly basis, are registered by Slovakian agents; the sites themselves employ a revolving door of host servers in China, Korea, or Hong Kong. Even the most cursory review of the site "credentials" reveal what is, in reality, a sloppy attempt at legitimacy. All this was discovered in a matter of minutes, and without even making a single online drug purchase.


In the Florida investigations, uncovering malfeasance was not so simple. Tracing transaction pedigrees required extensive research. Notorious at the time for its lax licensing requirements, Florida had become a haven for unscrupulous secondary wholesalers who built up elaborate façades of legitimacy through the creation of shell corporations which existed only on paper -- the pedigree paper. Florida relied on an "honor system" between the big three wholesalers and the thousands upon thousands of secondary wholesalers throughout the nation.


Exacerbating the issue was the reluctance of the pharmaceutical industry's primary and secondary wholesalers to comply with the more stringent pedigree tracking requirements of the Prescription Drug Marketing Act of 1987. Since then, lobbyists have successfully petitioned the FDA to extend repeated stays of the pedigree provisions until December 2006.



Creating an e-pedigree


In November 2004, the FDA proposed a voluntary program, scheduled to run through December 2007, whereby the pharmaceutical industry would develop technologies designed to supplant the aggrieved paper pedigree. Paperwork, which was viewed as cumbersome and costly to process, would be replaced by Electronic Product Codes (EPC) and Radio Frequency Identification (RFID) technology to automate large portions of the pharmaceutical shipment tracking and tracing process. Companies would develop technologies for the electronic tagging of pharmaceuticals that could be passive (the tag's communications power is drawn from radio waves transmitted by an RFID reader), semi-active (the tag chip's operating -- but not RFID communicating -- power is derived from a battery power source), or active (the tag uses battery power for transmitting and receiving RFID information).


The tracking, in essence, replaces the paper pedigree with an e-pedigree.


The FDA provided minimal specifications, including frequency operating parameters and recommendations on when to actually affix the tracking tags (the preferred method: Place the tag on the packaging first, then imprint the information in order to avoid mislabeling product). The pharmaceutical companies have reported modest progress, using RFID to track and trace their most sensitive or expensive products, such as the painkiller OxyContin.


This spring, Roy supervised four W. P. Carey MBA students who were assigned to evaluate RFID technology solutions for their semester project. A Scottsdale, Arizona-based business-to-business software development firm partnered with the team on the project. Also on the table was the challenge to come up with an alternative, marketable solution. In the early weeks of the project, one of the project overseers with the B2B company provided copies of "Dangerous Doses" to the group for casual reading. The expose was an eye-opener for 31-year-old student Adam Grimsley.


"I was actually shocked at how big of a problem it is," Grimsley said about the diversion and counterfeiting practices revealed in the book. "I think my initial response was that I had no idea that it was such a widespread practice, that there was so much of it going on."


Grimsley, who recently received the dual W. P. Carey MBA/master of information management degree, said that the team kept in mind the complexities of the secondary wholesale market. "Between the manufacturer and the customer there's everybody and anybody in between," he said. Addressing that issue, Grimsley said, will go far to provide a public so dependent on pristine pharmaceuticals with peace of mind.


Fellow W. P. Carey MBA student Jay Rasband, 27, strove to balance the commercially-driven aspects of the project with the end benefit -- a safe drug supply at the end of the supply chain.


"Human nature will lead you to really give some importance to the societal aspect and that they're protecting those people," Rasband said. "So, I tried to look at both of those aspects, to give them both equal weight."


Schneller believes a technology-based solution will be a partial fix. "Technology can do an awful lot for tracking the authenticity of larger quantities of pharmaceuticals," he said. But it is at the point of distribution to the patient, in essence the last 10 yards of the channel between manufacturer and patient, that there can be substantial breakdowns in the system. What gets put into the patient's hands is almost never questioned.


But self-discipline on the part of the manufacturers and suppliers is also needed. In addition, international suppliers should be integrated into the process as a regulated supply chain source. "We're going to have to get into some issues of international certification that just don't exist at this point," Schneller said.



What you can do about counterfeit drugs:

  1. Watch what you take:
    •  Be familiar with your medicine. Examine its shape, color, and size.
    •  If your medicine is in pill, capsule, or tablet form, put it in the palm of your hand and examine it under a light before taking it.
    •  Look for altered or unsealed packaging, or changes in design.
    •  Make sure the packaging is pristine and has no sticky residue, which can indicate the drug has been previously dispensed.
  2. Observe your symptoms
    •  Be aware of new or unusual side effects.
    •  Be concerned if your medicine stops being effective.
    •  Be suspicious if an injectable drug stings or causes a rash.
  3. For additional information, consult the source of these safety tips, at