Counterfeit drug trade draws congressional scrutiny

That was a key message presented at a November 1 hearing before the House Government Reform Subcommittee on Criminal Justice, Drug Policy and Human Resources, during which officials of the Food and Drug Administration (FDA), pharmaceutical industry, interest groups and victims discussed concerns and recommendations.

Tough regulations needed

"According to the World Health Organization, 10 percent of global pharmaceutical commerce this year will be counterfeit," says subcommittee chairman Mark Souder (R-IN). "That number is expected to double by the year 2010, as international criminal organizations become more sophisticated. Last year, within the United States, the FDA's counterfeit drug investigations rose 150 percent in only 12 months."

Randall W. Lutter, acting associate commissioner at the FDA, outlined investigations by the agency's Office of Criminal Investigations (OCI), which initiated 58 counterfeit drug cases in 2004 compared to just 30 in 2003.

Many drugs are subject to counterfeiting, Mr. Lutter says, noting that on September 12, 2005, the U.S. Attorney's Office for the Southern District of Texas announced the indictment and arrest of a suspect for his alleged involvement in the importation from China and subsequent distribution of counterfeit Viagra, Cialis and Lipitor.

As a result of the investigation, Chinese authorities arrested 11 suspects who will be prosecuted by the Chinese government for their involvement in manufacturing and distributing these counterfeit drugs. Chinese officials recovered 600,000 counterfeit Viagra labels and packaging, 440,000 counterfeit Viagra and Cialis tablets and 260 kilograms of raw materials used to manufacture counterfeit drugs.

In another case last August, the U.S. Attorney's Office for the Western District of Missouri obtained indictment of three businesses and 11 individuals for their involvement in a $42 million conspiracy to sell counterfeit drugs, smuggled drugs from Glaxo SmithKline and Roche, as well as others, including Procrit, Serostim and Neupogen.

In the summer of 2004 and again in the spring of 2005, OCI received "voluntary suspect counterfeit drug" notifications from Merck, Pfizer and Eli Lilly (the manufacturers of Zocor, Carisoprodol, Lipitor, Viagra, Cialis and Evista). Counterfeit versions of these drugs were being sold to U.S. consumers from Mexican pharmacies along the U.S. border. The analysis of all these drugs showed they either contained little or no active ingredients.

In March 2004, an Austin, Texas, man pled guilty to four counts of conspiracy to introduce misbranded and unapproved new drugs into interstate commerce, counterfeiting human growth hormone and possessing controlled drugs with intent to distribute. Two other people involved in these offenses were previously convicted and sentenced.

'Gray market'

Rep. Souder points out that a key problem is the "gray market," which results from drug diversion, the principal method by which counterfeits enter the legitimate drug market. This can occur when employees at pharmacies in nursing homes or hospitals, which acquire medication at prices much lower than wholesale, resell them at a higher price into the gray market, he says.

"This happens easily because the pharmaceutical supply chain is not regulated by any single entity, private or governmental," Rep. Souder says. "The pharmacies within a state are monitored by the state Boards of Pharmacy, which enforce the standards of care within each state. However, the state Boards of Pharmacy lack police power, and many are limited to only a handful of inspectors."

He says that manufacturers must comply with FDA requirements for safety, effectiveness and labeling, but have no control over their products once they are shipped from their facilities. The drugs are bought and sold by distributors, Rep. Souder adds, and frequently pass in and out of the secondary market. On the other hand, distributors are licensed by the states, where requirements vary widely.