The unintended consequences of healthcare reform: Drug counterfeiting and the illegal trafficking of prescription drugs

Will healthcare reform increase the number of counterfeit and fake drugs on the market?

SAN JOSE, June 26, 2012 - One of the advantages of a free-market health system is that private industry and private dollars have a business-motivated alignment with quality, which benefits the patient.  In the arena of medical care, happy patients make for happy investors. Conversely, some may question whether an increasingly bureaucratic medical establishment is capable of thinking outside the box and adapting quickly to insure patient safety.

The United States Government and Big Pharma have been secretly ramping up strategies to protect American patients from tainted and counterfeit drugs. For the better part of a decade, Congress has grappled with various unfunded legislative mandates to place radio frequency ID chips in drug vials to track them from factory to bedside. There has also been research in the area of nanotechnology to place microscopic ‘tags’ inside every vial of medicine that leaves the factory floor. Since the 1970s, undercover private and federal agents have operated in China, India and Mexico, the world’s three biggest producers of fake drugs, to thwart such illegal operations.


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According to sources from the article “Europe Awash in Counterfeit Drugs,” Europe’s struggle with counterfeit drugs is equally, if not more challenging, than encountered here in the States.  According the report Counterfeit Drugs and National Security, “Drug regulatory systems in most countries, including in North America, expend far more time and effort on pre-marketing approvals than on post-market monitoring. No matter how thoroughly premarketing assessment is conducted, it is only one of the functions necessary for ensuring the efficacy and safety of drugs.”

Sleuthing against counterfeiters ‘in the field’ is quietly funded by Big Pharma itself; the end result has been to reduce the tide of dangerous, illegal medicines into the U.S. Since the early 2000s, when communications were intercepted indicating that Hezbollah and Al Qaeda were plotting to use counterfeit medicines to raise revenue and poison Western medicine supplies, the FBI, the Department of Homeland Security, and private industry have been actively beefing up security to detect and prevent potentially lethal agents from winding up on the shelves of retail pharmacy outlets.

It is in the best interest of drug manufacturers to support measures to prevent counterfeit drugs, but also to keep their activities under the radar. Nothing would scare customers away more than the knowledge that upwards of 85% of all drugs purchased over the Internet, even when shipped from places within the United States, and 20-35% of all drugs bought at the corner drug store could be, in fact, ‘fake’.

Some counterfeit drugs are molecularly close to the advertised drug itself; but many are simple starch pills or other types of drugs mixed with saw dust and other fillers. The risk is that it is impossible to know what a patient may be getting.  The absence of the intended medicine can, in and of itself, be very dangerous or even life threatening if used to treat diseases like diabetes or high blood pressure.

Some states, like California, are taking a proactive stance on this issue.  California law requires pharmaceutical manufacturers to ‘serialize’ drug packages by equipping them with “e-pedigrees” beginning in the year 2015; such law also requires that the pedigree be implemented by all state pharmacies by 2017.

On a national level, the FDA and Pharma have different ideas on how best to achieve purity in the nation’s drugs supply chain.  The FDA favors a system that would promote ‘unit-level’ tracking and tracing of who has handled any given drug product.  This, they claim, would be a means of preventing “cargo theft and adulteration.”  The Pharmaceutical Distribution Security Alliance (PDSA) is pushing a system that would ‘serialize’ drug packages, allowing confirmation of “manufacturer origin,” but would not require an electronic pedigree.

When it comes to complex drug compounds, called ‘biologics’, which make up many of the hormonal drugs on the market, the need to prevent counterfeiting is even more pressing. Just one proper ‘biologic’ drug lab can cost from 1 to 5 billion dollars to create, and even minor variances from the original lab construction, such as a difference in temperature or humidity, can seriously alter the final drug product leading to patient injury. In the case of the growth hormone industry, such medicines as Serostim (somatropin rDNA origin) and Egrifta (tesamorelin) have been tracked by a consortium of hundreds of pharmacy stores through the addition of barcodes to packages of the growth hormone agent (beginning in 2002) to prevent diversion and claims of fraud.

Counterfeit drug trafficking within our borders is also big business in the United States.  It involves Medicaid and Medicare patients, local community pharmacies and supermarket pharmacy chains, drug runners, small-time ‘mob bosses’, drug wholesalers, and check-cashing stores, all in one illegal scheme.

Without the knowledge of the prescribing doctor, stolen or purchased medicines (obtained at pennies on the dollar by Medicaid/Medicare patients or imposters), are picked up at real pharmacies and then diverted back to pharmaceutical outlets when they are sold on the secondary market.

Here’s how the scheme works: criminals first obtain possession of the real prescription medications through various means (paying patients, raiding pharmacies, or staging large-scale operations to clean out entire drug storage facilities); then, they repackage the drugs to remove any trace that the medicine has been issued to a particular patient or warehouse facility.  The drugs are then re-labeled through a very sophisticated process that is difficult to distinguish from the ‘real thing’. In some instances, drugs are diluted, tampered with, or even replaced with placebo-type substitutes that are not detected unless a patient complains about not responding properly to the medication.

Some of the most trafficked drugs are also the most expensive. They include drugs used in organ transplants and for treating diseases like cancer and AIDS. In certain cases, drug traffickers will re-label the medicine package to indicate a different dosage, putting patients who are on insulin and antiviral drugs at severe risk.

Law enforcement officials consider South Florida to be the epicenter of the illegal pharmaceutical drug trade, and in many cases have uncovered multi-state operations that relied on Medicare recipients to supply the drugs.

A 2003 grand jury report shed light on the issue in Florida, and it led to stricter licensing laws for prescription drug wholesalers. As a result, the number of licensed wholesalers in the state dropped from 432 to 308 in the first year, according to Florida prosecutor Oscar Gelpi.

Overall Health Care Reform Perspective

In an era of drug cost containment, health system reform and national/socialized medicine, an underlying nagging question remains:  will cutbacks and rationing measures lead to laxity in the area of system wide drug safety? Will a shift in emphasis toward generic drugs (away from established brand drug factories) make it easier for international criminals to infiltrate the American market with counterfeits? It may be erroneous to assume that greater government involvement alone (as exists in socialized countries) is itself enough to translate into improved safety and security.

These are other questions should be on the table for discussion as our nation grapples with the fluctuating healthcare reform debate. Regardless of the pending ruling by the Supreme Court on the ‘Affordable Care Act’, America must decide how to curtail spiraling health system costs while preserving safety and our uniquely superior American brand of medical care.






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Adam Frederic Dorin, M.D., MBA

Doctor Dorin is a Hopkins-trained, board-certified anesthesiologist, practicing in a large group in San Diego. He is a small business owner, a Commander in the US Navy Reserves, and the Founder/President of America's Medical Society, Inc., (AMS) a non-profit corporation created to serve and educate physicians and the general public in matters of national health-care reform and medical politics

Contact Adam Frederic Dorin, M.D., MBA


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