GMU May 03, 2012

ROGER BATERBATE@AEI.ORGLEGATUM FELLOW IN GLOBAL PROSPERITYAMERICAN ENTERPRISE INSTITUTEWASHINGTON, D.C.

Orson Welles as Harry Lime

The Media

Are your drugs safe?

The Threat

• 100,000 annual deaths

• 1 out of every 10 medications in emerging markets are ineffective

The Problem

Drug samples from 19 cities worldwide

The Research

Online drug samples from 10 countries

The Research

Unregulated and often illegal $10 billion USD market

Especially large in high-value BRICS markets

The Market

• Key variables– income– illiteracy– political will

• Unlicensed, unmonitored, unofficial retailers

• Common medicines– Antimalarial– Antimycobacterials– Antibiotics

Emerging MarketsThe Market

Developed Countries• Less danger in OECD, but problems

still exist– Internet sales–Supply chain• Inferior API• Uncertain provenance of supply• Convoluted distribution networks• Criminal Networks

The Market

Internet Sales

Fake Chinese packaging

I. DefinitionsII. ResearchIII.CausesIV.Moving ForwardV. International Treaty

Definitions

Improperly stored or transported

Degraded

• Active Pharmaceutical Ingredients (API)–Wrong dose–Wrong ingredient

• Poorly formulated• Contains lethal impurities• Lacks Good Manufacturing Practices

(GMP)

Substandard

• Intentionally deceive patient• Include counterfeit pharmaceuticals

and intellectual property violations

Falsified

Falsified

Falsified

Drug Types

Are we discussing the same issues?

Research

ResearchOver 2,500 samples

– Malaria– Tuberculosis (TB)– Bacterial

infections

Testing: –MiniLab – Raman

Spectrometer

Analysis

NAFDAQ staff trained on Truscan

Analysis

Analysis

• 12% of total sample failed quality tests, – 5% were falsified products• many had zero API

– 7% substandard or degraded• Vast majority breach trademark • Substantial difference in price for

substandard products but not for fake ones

Results

15169

2429

24

1516

49

11

27

125

96 4

04 4

12%

Perc

enta

ge r

ate

of

failu

res

(%)

Failure Rate by City

• 12% of total samples failed quality tests• 5% of total samples were falsified

products–Many with zero-API (Active Pharmaceutical

Ingredient)– 7% other

• Vast majority breach trademark • Substantial difference in price for

substandard products but not for fake ones

Results

• 12% of total samples failed quality tests• 5% of total samples were falsified

products–Many with zero-API (Active Pharmaceutical

Ingredient)– 7% other

• Vast majority breach trademark • Substantial difference in price for

substandard products but not for fake ones

Results

Cheaper than qualitydrugs by up to 40%

-50

-40

-30

-20

-10

0

10

% P

rice

Devi

ation

Substandard

Fake Products

-50

-40

-30

-20

-10

0

10

% P

rice

Devi

ation

No significant discount

Price Analysis

0 5000 10000 15000 20000 25000 30000 35000 40000 45000 500000

10

20

30

40

50

60FakeLogarithmic (Fake)SubstandardLogarithmic (Substandard)Total

By city GDP

Origin and Causes

• Inferior API• Non-GMP• Poorly formulated• Contain lethal impurities • Degraded

Causes

Avastin Case, March-April 2012

• European Avastin has the company label ‘Roche,’ whereas US brands do not

• Fakes had ‘Roche’ label

• 19 US medical practices across at least 3 states purchased unapproved cancer medicines

• Minimal

.

• 149

• Maybe hundreds

.

• Thousands**

.

• Tens of thousands

.

• Maybe 100,000

USA

USA

Emerging Markets

Global

Africa

USA

Fake Internet Viagra

Fake Heparin

Inferior API causing shortages and dangerous

products

Substandard products due to inferior API and excipients

Lethal impurities in falsified products

Poorly formulated medicines and fake medicines

Deaths

Active Pharmaceutical Ingredients (API)

Intentional contamination– Chinese Heparin caused 149 deaths in

the US

Most problems are unintentional– non-certified plants making chemicals

Over 70% of API is made in India and China

They have many high quality suppliers…

* Phillipe Andre, European Auditor, School of Pharmaceutical Scienceand Technology at Tianjin University, China

but some subcontractor premises are “physically dirty”*

Auditor Phillipe Andre:

“Drug companies misinformed about source of 39% of drug substances purchased from China.”

“Only 6% of Chinese companies provide impurity profiles of chemicals exported.”

“Residues of solvents and potentially genotoxic catalysts are rarely controlled.”

“94% of audits of Chinese drug substances bought by overseas firms are conducted after purchase.”

FDA is increasing inspections:– Once every 30 months in the US – At best once every 13 years in China;

sometimes “staged”

Food and Drug Administration

Companies:

• The best line of defense• They should pool and deepen audits:

RX-360

Food and Drug AdministrationFood and Drug Administration

Good Manufacturing Practices (GMP)

• There are high quality as well as low quality companies: it’s hard to distinguish

Causes

Simplest Acetaminophen production

GMP Procedure

Simplest Acetaminophen production

GMP Procedure

Simplest Acetaminophen production

GMP Procedure

Simplest Acetaminophen production

GMP Procedure

Simplest Acetaminophen production

GMP Procedure

Final Producer

Role of Investigators

Processing

Role of Investigators

Storage

Role of Investigators

Roger and Suresh Sati in January, 2008

Role of Investigators

Moving Forward

Why and How to Make an International Crime of Medicine CounterfeitingBy Amir Attaran, Roger Bate and Megan Kendall

August 18, 2011Journal of International Criminal Justice

International Crime

Unregistered18% of total sample: 349 medicines

Registered82% of total

sample:1591 medicines

Drug Registration

Unregistered18% of total sample: 349 medicines

Drug Registration

What is the risk of having so many unregistered products

available in the market?

Unregistered drugs fail far

more often than registered ones.

5%

37%

RegisteredUnregistered

Failure Rate by Registration

Accra

Kampa

la

Luan

da

Nairob

i

Chenn

ai

Bang..

.

Istan

b...

São P

a...

Registered UnregisteredPe

rcen

tage

of f

ailu

res (

%)

Accra

Kampa

la

Luan

da

Nairob

i

Chenn

ai

Bang..

.

Istan

b...

São P

a...

020406080

100120

Registered Unregistered

Perc

enta

ge o

f fai

lure

s (%

)

37%

5%

Failure Rate by Registration

Medicine Regulation Authorities (MRAs): the FDA in the US

International Crime

Fake Coartem from Ghana

Nigeria’s NAFDAC

Dr. Paul Orhii

Dr. Dora Akunyili

International Crime

According to the World Health Organization (WHO), fewer than 50% of countries have adequate anti-counterfeit laws

– Some anti-counterfeit laws (like Kenya’s) may conflate fakes with generics

International Crime

50%30%

20%

Don’t have official anti-counterfeit medicine laws

Have laws and don’t fully

enforce them

Have laws and enforce them

Limits of National Law

BBC video here

• Most drugs (and fakes) are made in China and India

• Laws must – combat criminals and negligent

companies– not harm good producers

International Crime

Middle East Distribution Network

Middle East Distribution Network

International Crime

Amjad Markieh Raed Abu Markeih

In jail, awaiting trial in Syria

Prosecutions are rareInternational Crime

Abu Kasheh, Syria

Syrian customs warehouse: destined for Iraq and recovered in

Damascus

International Crime

International Crime

Does Price Reveal Poor-Quality Drugs? Evidence from 17 countries

By Roger Bate, Ginger Zhe Jin, Aparna Mathur

August 18, 2011Journal of Health Economics

Economics

Enforcing higher quality standards can cause: – Drug Shortages

• In the US: “number of prescription drug shortages nearly tripled between 2005 and 2010” • Children’s hospitals ran short of leukemia

drug after principal supplier, Ben Venue Laboratories,

failed FDA inspection and was shut down

– Variable Prices

Economics

Federal Drug Administration (FDA); the White House, Executive Order 13588; NPR

• India and China• Emphasize the harm to consumers• Save thousands of lives• Western companies enforcing IP is

the reason for Syrian ring shut down– E.g. Novartis and Glivec®

IP Success

• Overzealous EU enforcement led to seizures of legitimate Indian generic drugs en route to Africa and Brazil

• IP laws make no distinction

IP Shortcomings

Unlike most other fake products, there’s no demand for fake medicines

• Intellectual Property laws can be abused

• Due to IP accusations, non-regional nations are unlikely to adopt regional treaties

• Europe: CoE Medicrime

• There is little chance of extradition without inter-jurisdictional agreement

IP isn’t enough

Intellectual Property

IP will remain the key determinant without international public health

law

International Treaty

International Treaty

1. UN Member States: negotiate treaty

2. Specialized UN agency: secretariat for oversight

3. National governments: responsible for enforcement

International Treaty

Aircraft Hijacking

International Civilian Aviation

Organization

World Health

Organization

Framework Tobacco Control

International Atomic Energy Agency

Atomic EnergySafety

United Nations

Environment Program

Chemical Safety

United Nations

Office on Drugs and

Crimes

Narcotic Safety

1961 1968 1976 1980 2000

Role and benefits of UN treaty:

– Increase MRA funding to• Build labs• Enable authorities to spot fakes • Oversee GMP

– Share criminal evidence– Train customs staff to spot fakes– Improve cooperation between police and

prosecutors

International Treaty