After Heparin
Protecting Consumers from the Risks of Substandard and Counterfeit Drugs

In late 2007, U.S. health officials began receiving reports of unexpected allergic-type reactions in patients undergoing dialysis.¹ The reactions were linked to a widely used blood thinner—heparin²—and specifically to an adulterant that had been introduced during manufacture of the drug in China.^3–5 The U.S. Food and Drug Administration (FDA) believes the adulteration of heparin was an economically motivated act—a clear breach of the U.S. pharmaceutical supply chain.⁶

Pharmaceutical manufacturers and distributors work together in a robust system to deliver high-quality products, but drug manufacturing and distribution have become increasingly complex in recent years. Prescription and over-the-counter (OTC) medications originate in factories all over the world, moving into the American marketplace through supply chains that can involve numerous processing plants, manufacturers, suppliers, brokers, packagers and distributors.

The number of drug products made outside of the United States doubled from 2001 to 2008, according to FDA estimates.⁷ The FDA estimates that up to 40 percent of finished drugs used by U.S. patients is manufactured abroad,^8,9 and 80 percent of active ingredients and bulk chemicals used in U.S. drugs comes from foreign countries.¹⁰ Increasingly, the United States relies on drug manufacturing in developing countries—mainly China and India. Globalization, increased outsourcing of manufacturing, the complexity of pharmaceutical distribution and the existence of criminal actors willing to capitalize on supply chain weaknesses has created the potential for counterfeit or substandard medicines to enter the system and reach patients. As evidenced by the adulteration of heparin and other case studies outlined in this report, these rare but potentially serious events can have grave consequences.

For economic reasons, the movement of manufacturing from the United States to foreign countries is likely to continue. However, industry and regulatory bodies have failed to adapt adequately to these changing circumstances.

Drawing on public documents, peer-reviewed publications and dozens of interviews with industry stakeholders, regulators and supply chain experts, this Pew Health Group white paper provides an overview of the complex, modern pharmaceutical supply chain and its risks from manufacturing through distribution of the finished drug. A discussion draft of this document was developed to inform a Pew Health Group stakeholder conference on ensuring the safety of the U.S. drug supply that was held on March 14 and 15, 2011, in Washington, D.C. Conference participants included leadership from the FDA, the United States Pharmacopeial Convention (USP), major pharmaceutical manufacturing and distribution trade associations, pharmacy organizations and medical professional groups, individual supply chain experts and consumer organizations. This paper has now been revised to incorporate outcomes and stakeholder discussion from that meeting.

This report concludes that more can—and must—be done to ensure the safety of "upstream" pharmaceutical manufacturing (chapter 1), to provide the FDA with essential authorities and resources to exercise effective oversight (chapter 2) and to improve the security of "downstream" pharmaceutical distribution (chapter 3).

In a world where drug manufacturing is increasingly outsourced and offshored, robust supply chain management is critical. Pharmaceutical companies have the ultimate responsibility for drug quality and safety, but some companies may not be adequately verifying the quality of their suppliers.^11,12 Ensuring drug-ingredient manufacturers meet quality standards is critical to ensuring the quality of the product itself. However, chapter 1 reviews numerous situations in which foreign producers and traders have misrepresented the source drug ingredients from the United States and other purchasers, in some cases concealing substandard products that harmed consumers. It is essential that manufacturers look beyond current manufacturing quality standards (known as good manufacturing practices, or GMPs) in their own facilities to ensure appropriate supplier qualification, through risk-based assessments, quality agreements and physical audits, where appropriate.

The FDA and its counterpart agencies worldwide monitor the quality and safety of drug manufacturing by inspecting plants and validating compliance with GMPs. However, the FDA lacks the resources, capacity and authority to effectively inspect foreign facilities and assess risk. In contrast with U.S. manufacturing facilities, which are inspected every two to three years, the FDA currently inspects foreign facilities once every nine years on average.¹³ Improved oversight of foreign manufacturing is essential and will require increased resources for the FDA, some of which could be obtained through industry fees. In addition, the agency will have to make additional use of third-party inspections, including those by other regulators and, potentially, private entities. The FDA also requires certain new authorities to enable effective oversight and must more effectively use its existing authorities and resources. The agency should have the power to mandate recalls, subpoena witnesses and documents and destroy at the border any products that present public safety risks. In the long term, ameliorating risks to the U.S. and global drug supply requires international cooperation, harmonization of standards and steps to improve the capacity of regulatory bodies in the developing countries where manufacturing increasingly takes place.

The movement of finished drugs from manufacturer to the consumer is also a complex process involving many intermediate players. The past decade has seen several instances of adulterated and counterfeit drugs infiltrating U.S. distribution. In 2002, counterfeit vials of the anemia drug Epogen® entered the distribution supply chain through licensed wholesalers and were sold by U.S. pharmacies.^14–16 A shipment of 129,000 vials of insulin, stolen in June 2009, was stored under unknown conditions before eventually being sold to legitimate pharmacies and, ultimately, to patients.¹⁷ Pharmaceutical cargo theft is substantial, and much of the stolen product is never recovered. Manufacturers, wholesalers and pharmacies have taken steps to secure the distribution pipeline, but risks persist. No national system exists for tracing the provenance of finished drugs as they are bought and sold. Requirements for drug pedigrees and wholesaler licensure vary widely among states. Drug distribution tracking and regulation must be improved; methods of documenting the movement of drugs at the individual package level have been attracting support, and a universal system should be implemented. Legislators, the FDA, consumer organizations and industry recognize the need to strengthen control of the pharmaceutical supply to safeguard public health. Based on the outcomes of Pew's stakeholder conference, as well as extensive review of the public literature and background interviews, this paper concludes that Congress must institute reforms to ensure that the FDA's oversight of overseas manufacturing is increased, and that industry is held accountable for the security and safety of increasingly globalized and outsourced supply chains. This report makes the following key policy recommendations:

Ensure meaningful oversight and quality management of globalized pharmaceutical manufacturing

• Require 21st-century quality systems to protect drug safety through statute and regulation
• Strengthen industry oversight of contract manufacturers and suppliers
• Enhance documentation and transparency of upstream manufacturing supply chains through legal requirements
• Improve testing standards
  

Eliminate barriers to FDA oversight

• Increase FDA oversight of overseas manufacturing
• Ensure adequate FDA resources
• Improve the FDA's infrastructure and tracking systems
• Strengthen oversight of drugs and bulk drug substances at import
• Empower the FDA with regulatory authorities it needs to fulfill its mission
• Strengthen the FDA's enforcement ability through stronger penalties and clearer accountability for industry
• Improve FDA access to information from other regulatory bodies and industry
  

Secure pharmaceutical distribution

• Improve drug distribution security through a federal serialization and verification system
• Strengthen wholesaler regulation and oversight