If you like used Soviet nuclear warheads, you’re going to love this …

According to Mikhail Zurabov, the Russian Health and Social Protection Minister, the number of counterfeit drugs has “significantly” decreased, and now amounts to 3-4% of the Russian drug market.

Most international organizations put the rate of counterfeits in the Russian health care system at 12%. Reducing this exposure to 3-4% is an exaggeration of truly Soviet agitprop proportions.

How did the Comrade Minister accomplish such a feat? Why he changed the law! (And we all know how much the Russian Mafia believes in the rule of law.)

Mr. Zurbov commented, “The penalties for such drugs has been defined and the decision was made to revoke the license of a company producing counterfeit drugs.”

That’s right, they reduced counterfeit medicines almost entirely by threatening to “revoke” the license of counterfeiters.

Surprisingly, the Minister neglected to mention the number of “licenses revoked,” people arrested, or counterfeit medicines seized (and to reduce the Russion national volume from 12% to 3% there must have been quite a lot.) Maybe he’s just really modest.

In any event, now that Russian drugs are so safe, maybe we should introduce legislation to allow importation into the US market.

The Center for Medicine in the Public Interest (www.cmpi.org), estimates that counterfeit drug commerce will grow 13& annually through 2010.  The CMPI study is cited by the WHO on its updated counterfeit pharmaceuticals fact sheet.

Counterfeit sales are increasing at nearly twice the rate of legitimate pharmaceutical sales and they are a money machine.  In 2010 CMPI estimates that fake drugs will geneate $75 billion in revenues — a 92% increase from 2005.  And the risks of detection and prosecution are low.

Members of the Senate HELP Committee yesterday called for more resources for the FDA to protect Americans from unsafe products.

The hearing was a response to the Baxter/heparin debacle.

The BNA (subscription required) reports that Senator Kennedy, the committee chair, said that

drug companies should be required to know more about the suppliers from which they obtain their ingredients and use better tests to detect impurities and contaminants, he said. “FDA obviously needs greater authority and significant additional resources to enforce these requirements, especially with respect to ingredients manufactured overseas.”

Senator Sherrod Brown (D-OH) called for more oversight of imported medical devices too.

But ranking member Senator Michael Enzi (R-WY) said “we cannot inspect our way to safety.” He called for closer cooperation between industry, stakeholders and the FDA.

It was the Elixir Sulfanilamide disaster of 1937 that led to the passage of the Food, Drug and Cosmetic Act, which first required Agency oversight of safety tests. Nothing since suggests that the industry is likely to solve this problem without a strong push from government.

I’m not talking about drug re-importation by little old ladies or Internet drug sites. I am talking about the active ingredients found in prescription drugs.

The Wall Street Journal reported (here; subscription may be required) that “About 80% of active ingredients used in drugs sold in the U.S. come from overseas, a figure that has significantly increased in recent years.” But FDA commissioner Dr. Andrew von Eschenbach had to be repeatedly drubbed by Rep. John Dingell of the House Energy and Commerce Oversight and Investigations Subcommittee before he came up with an estimate for how much money the FDA would need to inspect foreign suppliers to the drug industry.

“You presided over this because you do not have the resources to do the job that you need to do,” said Dingell. “How much money do you need to do the job that you are supposed to do?”

Instead of giving Dingell a straight answer, von Eschenbach replied “Mr. Chairman, I would like to have the resources that would enable us to do a systemic overhaul of the entire process, not a figure that’s related to a cost per inspection times the number of facilities.”

That’s von Eschenbach for you. Systematically ineffectual!

“In November, the Government Accountability Office found that the FDA could inspect about 7% of foreign companies annually and on average inspected such facilities at a rate of once every 13 years. The agency is required to inspect domestic companies every two years and to inspect foreign facilities before the agency approves a new drug or medical device made in that facility. However, there’s no requirement for foreign reinspections.” (WSJ, op. cit.)

The “foreign active ingredient” problem already has been more deadly than any counterfeit drug ordered over the Internet. The recent heparin crisis caused an estimated 81 deaths.

Americans cannot wait for von Eschenbach’s long-promised but never delivered “systemic overhaul.” We need an FDA commissioner that is straight-talking and who asks for and receives the funds needed to do the job!

That’s my opinion. What’s yours?

In the good old days big pharma earned attractive returns by bringing differentiated, patent protected products to market, supporting them with robust sales and marketing programs, and making intelligent use of a variety of communications channels to physicians, and –for the last decade– consumers.

As pipelines dried up and the generic industry became more sophisticated and aggressive, big pharma adjusted its tactics. In product development it’s turned to in-licensing, creating new formulations (especially extended release products), and combination products. Big pharma has combated generics in the courtroom, introduced “authorized generics” that cut into the profits of the initial generic supplier, and attempted to bundle multiple products into its contracts with payers.

It’s been a losing battle, though and new tools are needed. The current wave of cost cuts and acquisitions of smaller firms won’t be decisive.

It’s unlikely that big pharma will succeed in reviving its pipelines anytime soon, but there are things the industry could try.  For example, if branded pharmaceutical companies can demonstrate better clinical results through medication adherence programs, they may be able to make the argument that they are selling a “solution” rather than a product. Instead of losing roughly 90 percent of their sales when generic competition begins, maybe they can cut it to 50 or 60 percent. That will make a huge difference –if pharma can pull it off. I haven’t seen much indication yet that this strategy will be pursued in a serious way or that big pharma can execute.

The recent Heparin scandal makes me think that there is another opportunity. That is, rather than shifting production to low-cost locations such as China, as big pharma seems to be doing, why not deploy a manufacturing network strategy that is deliberately more expensive but more assured? Only make products in Europe, North America, Japan, Singapore and their ilk, and don’t accept any inputs from questionable sources.

Then make the pedigree of the finished products and their components a significant part of the marketing/educational campaign to payers, pharmacists, and patients. Since the cost of goods sold for branded products is so low (typically 5-15 %), it won’t matter so much if those costs rise. On the other hand, generic companies are really pressed to offer the lowest possible price and they need to shave costs wherever they can.

Of course it would be unseemly to cast aspersions on competing products based on their manufacturing quality, but because of the publicity surrounding the Heparin recall and problems with Chinese products in general awareness is already high and the customer will make the connection.

A Pharmaceutical Executive article about the Heparin recall sums up the current view on China:

“Greed is universal. But in China, it is especially dangerous because of the lack of regulations and enforcement,” says Wang Fei-ling, an expert in Chinese policy at Georgia Institute of Technology. “That combination creates rampant corruption, which is the most serious problem China faces.”

Pharma companies that can afford not to manufacture in China might be wise to keep that observation in mind. I believe there is a profitable niche available for products going off patent that want to compete on manufacturing quality and pedigree.

The movement to make the pharmacy supply chain safer just took a huge step forward with Friday’s introduction of H.R. 5839 Safeguarding America’s Pharmaceuticals Act of 2008. The bill is co-sponsored by Representatives Steve Buyer (R-IN), Gene Green (D-TX), Jim Matheson (D-UT), and Mike Rogers (R-MI).

I enthusiastically support this bill, which finally offers Federal preemption of the multiple disorganized, uncoordinated, and underfunded state-level mandates. Ultimately, patients will be the biggest beneficiaries of a more secure supply chain.

KEY POINTS

Federal Preemption with Uniform National Standards – “no State or political subdivision of a State may establish or continue in effect any requirement with respect to statements of distribution history, manufacturer packing lists, unique standardized numerical identifiers, or drug identification and tracking systems for prescription drugs that is different from, or in addition to, any requirement under this subsection.’’ Got that, States? The bill also establishes new Federal minimum standards for wholesale licensing.

Phased Implementation – The Bill sensibly requires earlier compliance for “High-Risk Drugs.” The precise timing will depend on when the bill becomes law, but it looks like High-Risk Drugs would not have to serialized until mid-2011. (I touted a risk-based approach last July.) There are many places in the bill where the speed of implementation will be based on sensible factors such as “operational and technical feasibility.”

Support for “Independents” – A truly closed-loop, interoperable track-and-trace system based on serialization will require a massive infrastructure upgrade at the 150,000+ points of pharmacy dispensing in the U.S. The bill permits grants for technology upgrades to a “small pharmacy,” which is defined as “a pharmacy which is not owned (or operated) by a publicly traded company.” Of course, some privately-held pharmacies can be quite large (um, Duane Reade?), so this language will need to be cleaned up.

And the pedigree starts with… The bill also clears up a major area of disagreement between various state and federal definitions of pedigree: Where does pedigree begin? According to H.R. 5839, it begins with the Authorized Distributor of Record (ADR) that purchased directly from the manufacturer, a.k.a. “Direct Purchase Pedigree.”

OBSERVATIONS

H.R. 5839 Safeguarding America’s Pharmaceuticals Act of 2008 is only a bill, just sitting there on Capitol Hill. Nonetheless, here are a few implications if this bill becomes a law.

Amateur hour will be officially over. Today’s crazy patchwork of pedigree regulations creates uncertainty for everyone involved in the pharmacy supply chain. These decisions need to be made in a structured, logical, and public manner. Supply chain security regulations are too important to be left to the personal whims of a few volunteers at an underfunded state agency. Yes, I’m thinking about you, California State Board of Pharmacy!

Serialization will not be optional. The momentum for serialization is now inescapable, which is one reason that I joined the Advisory Board of Secure Symbology. Track-and-trace at the unit level only becomes possible with serialization, which is complex and must begin with the manufacturer/packager. At a minimum, serialization with pedigree requires: affixing a unique number during the packaging process; capturing and managing petabytes of data; adding pedigree information as the product moves down the supply chain; and then making these data easily (but securely) accessible. It also requires substantial lead time since serialization must happen during the drug packaging process, which can be months (or longer) from the time that the product is dispensed to a patient.

The pharmacy lobby will oppose national standards. I warned in December that pharmacists do not want pedigree. State Boards of Pharmacy – composed mainly of independent pharmacists – don’t want to lose local control (read: influence, power) and want to avoid any additional burdens on pharmacy operations. In fact, before the text of H.R. 5839 was even posted online, Steve Anderson of NACDS leapt into action with this statement asking Congress to “refrain from mandating serialization, e-pedigrees or track and trace requirements, since they are still experimental and will prove extraordinarily costly for pharmacies and other supply chain operators.” Unfortunately, pharmacies must close the loop if we are all to benefit from complete track-and-trace and ensure that pharmacy purchasing is not the weak link in the supply chain. Plus, wouldn’t a single national standard lower compliance costs for NACDS members such as CVS Caremark or Walgreens (WAG)?

–

All in all, a very promising start for reducing counterfeits in the legitimate supply chain. Now, we just need to convince consumers to stop buying from shady online pharmacies.

Note: Cross-posted from the Drug Channels blog.

Dora Nkem Akunyili, a true hero in the fight against global counterfeits, spoke in Washington, DC. last Tuesday. Dr. Akunyili’s experience shows that the fight against counterfeits can be won, although the efforts must be multi-pronged and consistent. Her Nigerian strategy also suggests some new ideas for our attempts to secure the U.S. pharmacy supply chain.

Dr. Akunyili is the director general of Nigeria’s National Agency for Food and Drug Administration and Control (NAFDAC). When she took over NAFDAC in 2001, she estimated that 41% (!) of drugs in her country were fake or sub-standard. Today, the Nigerian national average has reportedly dropped to a still-troubling 15%.

In an interview to accompany her speech, Dr. Akunyili describes the many steps that NAFDAC has taken to stop counterfeits, starting with education:

“We realized that the first step in solving a problem is to sit down and accept that there is a problem; to tell people that there is a problem so that people will stop being deceived; to sensitize people to be vigilant about what they buy, what they use, and what they eat.”

NAFDAC has also focused on “mopping up what is already in circulation, especially counterfeits from (where else) India and China, which required a zero tolerance policy for pharmacies: “[W]e found that some people when we find fake drugs in their shops, they give us fake receipts, and that’s made it impossible for us to trace who imported it, who produced it. So we put up a guideline that if such receipts were ever given by any shop, everything in that shop would be evacuated and destroyed. That is how we were able to find the thirty Indian and Chinese companies and one Pakistani company that we banned from importing drugs into Nigeria.”

Naturally, any potential problems with counterfeit drugs in the U.S. pale in comparison with the Nigerian situation. Yet the Nigerian experience raises some intriguing questions for the U.S. supply chain:

• How can we better educate consumers to the dangers of purchasing from unsafe sources such as importation and online pharmacies?
• What can we do to ensure that pharmacies are not a weak link in guarding the U.S. supply chain against counterfeits and diversion?
• How can pharmacies signal to consumers that all drugs were purchased from a legitimate supplier who provided a valid pedigree?
• How could drug makers partner with dispensing pharmacies in the U.S. to help consumers identify and validate legitimate pharmacies that practice “safe sourcing?”

No easy answers, but at least the questions are getting clearer.

Two cheers for Congresswoman Rosa L. DeLauro for holding an FDA oversight hearing.

Throughout her career, Representative DeLauro has expressed a brazen disregard for drug safety, continually calling on policymakers to open our borders to an uncontrollable influx of untested, impure, expired, and counterfeit drugs from around the world.

Surprisingly, drug importation was noticeably absent from her agenda. Perhaps importation was omitted because of the recent report that contaminated heparin, manufactured in China, is responsible for at least four deaths. Or perhaps she ignored importation because her hearing comes just one year after dozens of cats and dogs died of kidney failure after ingesting contaminated pet food — and only one year after counterfeit Colgate toothpaste containing diethylene glycol infiltrated the market.

Regardless of her reasoning, it seems grossly irresponsible to grandstand for drug safety on one day and call for the importation of foreign drugs on another.

Let’s look at the facts. The World Health Organization estimates that eight to 10 percent of today’s global medicine supply chain is counterfeit. According to the Food and Drug Administration, that figure jumps to 50 percent or higher in some countries.

Without legalized prescription drug importation, the number of counterfeit drug investigations has increased four-fold since the late 1990s. Just imagine what will happen if such a thoughtless policy were codified.

Perhaps Representative DeLauro will take this opportunity to publicly denounce drug importation and take action to keep counterfeit drugs out of the medicine supply.

From the Moscow Times …

“The State Duma will examine plans to stiffen penalties for manufacturers and distributors of counterfeit pharmaceuticals.

‘It will be the first reading of a bill to create a new statute in the legal code covering the manufacture, intent to supply, supply, storage, transportation and importation of counterfeit pharmaceuticals,’ said Pyotr Shelishch, a member of the Duma’s Legislation Committee.

Counterfeit medicine is a serious problem on the Russian market, Shelishch said.

‘It’s difficult to say what the amount of counterfeit drugs is, but estimates range from fractions of a percentage up to 10 percent,’ he said. The country’s pharmaceutical market is worth around $10.7 billion, according to estimates by industry consultant Pharmexpert

According to the new proposals, the minimum penalty would rise to 500,000 rubles ($20,000) and the maximum penalty would be a 15-year prison term, Shelishch said.

‘The maximum sentence would be applicable if it led to the deaths of two or more people,’ he said.

The new measures come as a result of glaring shortcomings in existing legislation, lawmakers and analysts said.

‘I welcome this new move, as we still do not have any law to punish those people that produce counterfeit drugs in Russia,’ said Nikolai Demidov, general director of Pharmexpert.

In November, pharmaceuticals firm Bryntsalov-A was handed a 40,000 ruble fine after being found guilty of offenses including the improper storage of drugs.

Manufacturers welcomed the proposed legislation but said new laws needed to be backed up by tougher action. “Any changes in legislation should be followed by relevant enforcement measures. Legislative amendments are meaningless without strong support of control activities from executive authorities,” a GlaxoSmithKline Russia spokesman said.

‘We would like to see examples being made where those found to knowingly trade in counterfeit medicines are prosecuted and receive meaningful penalties,’ the spokesman said. ‘We would also like to see an increase in checks on pharmacies and warehouses.’

With international standards such as the good manufacturing practices code as yet not obligatory in Russia, Demidov said overall production control needed to be sharpened.

The prevalence of counterfeit medicine in the country has consistently been one of the major factors hampering Russia’s entry into the World Trade Organization.

“Of course we are thinking first of all about our citizens, but if these measures help facilitate Russia’s entry into the WTO, then that is also positive,’ Shelishch said.

The urgency of these requirements makes it likely that the legislative changes will be passed by the end of the year, Demidov said.

‘I hope that this law will be adopted not later than September. I am linking this with the WTO membership bid,’ he said.”

It’s a good start, but the Russian government can still Duma. (Get it.)

China, which reportedly now has more Internet users than the U.S. is admitting a home-grown problem with illegal online drug sales.

China’s State Food and Drug Administration (SFDA) just announced a new effort to shut down on-line drug sellers. (Source: China tightens scrutiny over illegal online drug sale)

As they say…good luck with that.

I’m sure that not all drugs at online sellers are counterfeit. However, many online pharmacies are typically just diverting drugs from one country/channel/whatever to another. And drug diversion creates openings for counterfeits to get into the hands of consumers. In fact, diversion is the entry point for every case investigated by the FDA involving counterfeit drugs going into legitimate pharmacies.

Domestic education efforts have hardly dampened U.S. consumer’s enthusiasm for buying from potentially shady sellers. In addition to the occasional FDA warning, there are reliable, industry-sponsored websites designed to educate consumers about the dangers of buying products from potentially disreputable sellers. (See the Links on the right.) Yet a Wall Street Journal-Harris Interactive survey in 2006 found that 1 out of 9 U.S. adults has ordered drugs from another country to save money, showing that some consumers just do not care very much about safety. I’m sure that a fair number of consumers also buy online so they can get a drug they shouldn’t be getting.

Maybe China will figure out how to stop their citizens from taking ludicrous risks, but the U.S. experience should not make them hopeful.