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

U.S. pharmaceutical manufacturers and distributors work together in a robust system that delivers high-quality products. Nevertheless, complex supply chains and increased reliance on outsourced manufacturing create the potential for counterfeit or substandard medicines to enter the system and reach patients. The adulteration of the commonly used blood thinner heparin, outlined below, is a sentinel failure that demonstrates the weaknesses of today's pharmaceutical supply chains—particularly the risks of an increasing reliance on production outside the United States without sufficient levels of oversight. Heparin and the other case studies outlined in this paper have also become a catalyst for reform. The U.S. Congress, the U.S. Food and Drug Administration (FDA), the pharmaceutical industry and other organizations have renewed their commitments to remedy existing weaknesses. This white paper seeks to inform these efforts by presenting a holistic picture of the pharmaceutical supply chain and its problems (illustrated by case studies), and to propose a set of meaningful reforms that will better protect patients.

The exact prevalence of substandard^a and counterfeit drugs in the United States and elsewhere is not known. The FDA estimated in 2004 that less than 1 percent of drugs in the United States are counterfeit.¹⁸ For prescription drugs alone, even a fraction of 1 percent of the nearly four billion prescriptions filled in 2010¹⁹ would still equate to millions of dispensed medications. It should be noted that differing definitions of "counterfeit" complicate the use of the term as it applies to pharmaceuticals,^b with some stakeholders concerned that overly broad application of intellectual property regimes may impede global access to medicines.^20,21,c The World Health Organization's International Medical Products AntiCounterfeiting Taskforce (IMPACT) has estimated that fake drugs may account for approximately 30 percent of the market in parts of Africa, Asia and Latin America.²² Drug contamination, adulteration or the insertion of counterfeits can occur at any point during manufacturing or distribution, from the sourcing of raw ingredients through the delivery of a finished drug to the patient (see figure 1). Substandard and counterfeit products may reach patients through legitimate supply chains as happened with heparin (see case study 1) or through illicit routes.

Every step in the complex pathway of the pharmaceutical supply chain—from raw materials (see sidebar 1) to finished products to patient delivery—is an opportunity for adulteration. A typical pharmaceutical supply chain might proceed as follows: raw materials for a drug's active ingredient are purchased from suppliers and undergo initial processing. Processed raw materials then move to an active active-ingredient manufacturing site, sometimes through consolidators or brokers. This site prepares the finished active ingredient and sends it to another plant, where active and inactive ingredients, provided by yet other suppliers, are combined to create the finished drug. After the finished drug is packaged and enters distribution, it may change hands between brokers and wholesalers, be repackaged into different quantities and then stored for periods of time. Eventually, the product arrives at hospitals, pharmacies and doctors' offices, where it is dispensed to patients.

Figure 1: The pharmaceutical supply chain with examples of vulnerabilities

Several factors offer opportunities to adulterate a product or ignore quality controls (see sidebar 2). In regions where regulation, compliance and vigilance are weak, the quest for lower-cost materials can drive the trade of substandard or falsified drug ingredients. These may be introduced into manufacturing processes or sold as legitimate products by distributors and brokers. In countries with less developed regulatory systems than that of the United States, manufacturing standards may also be less rigorous—or less rigorously observed. Those same countries receive much less FDA oversight than U.S. manufacturing facilities, creating additional potential for poor quality medicines to reach U.S. consumers (see section 1.3).

The Federal Food, Drug, and Cosmetic Act (FDCA) penalizes adulteration, misbranding and counterfeiting at a maximum of $10,000 or three years in prison.²³ These penalties may be too low to present meaningful deterrents to violations and crime, particularly for pharmaceutical counterfeiting, which is additionally incentivized by high profitability. By one estimate, the return on counterfeit prescription drugs may be 10 times greater than that of the sale of illegal narcotics.²⁴ In the United States, the penalties for trafficking drugs such as heroin and cocaine can have jail sentences up to life and fines in the millions of dollars.²⁵ Although counterfeiting can be prosecuted under trademark law, with a maximum sentence of 10 years, the FDCA, with its lower penalties, is the most common statute used for prosecuting counterfeit drug cases.²⁶

The FDA regulates many thousands of drugs and medical devices intended for the U.S. market. The various entities involved in the manufacture of these products may be located within U.S. borders, or partly or completely overseas—and the overseas component is growing. The United States imported 393 million kilograms of pharmaceuticals and medicines in 2009 (see section 1.2.1).^d FDA-regulated imports represented 20 million shipments into the United States in 2010, a threefold increase over 10 years.²⁷ Human drugs, though a small percentage of the total, amounted to over 300,000 shipments of pharmaceuticals in 2007, more than double the volume in 2002.²⁸ The number of foreign establishments named in U.S. drug marketing applications more than doubled over a seven-year period (779 vs. 2,019 in years 2002 and 2008, respectively).²⁹ Imported drugs and their ingredients, each with intricate manufacturing, packaging and distribution supply chains, are made at thousands of sites around the world,³⁰ and arrive at any one of hundreds of U.S. points of entry every day.³¹

^{a Substandard medicines are legitimately marketed products that contain adulterants or improper amounts of active ingredients, or were compromised by improper manufacturing, handling and storage. Whether the result of deliberate or unintentional acts, substandard products have the potential to cause serious harm or to deny patients the therapy they need to preserve health or life.}

^{b For the purposes of this report, the term counterfeit is used to apply to finished drugs only, consistent with U.S. statute:
"…a drug which, or the container or labeling of which, without authorization, bears the trademark, trade name, or other identifying mark, imprint, or device, or any likeness thereof, of a drug manufacturer, processor, packer, or distributor other than the person or persons who in fact manufactured, processed, packed, or distributed such drug and which thereby falsely purports or is represented to be the product of, or to have been packed or distributed by, such other drug manufacturer, processor, packer, or distributor." [21 U.S.C. 321 (g)(2)]
Thus, the contamination of heparin (see case study 1), which involved a presumed act of economically motivated adulteration and deliberate misrepresentation of an ingredient, resulted in an adulterated drug, not a counterfeit one.}

^{c For example, regulatory authorities in Europe have seized drugs within their customs zones that they consider to be in violation of European intellectual property laws, even when those drugs are in transit to developing countries and are considered by some to be lawful generics in their country of destination.} 

^{d From a dataset provided by the U.S. Census Bureau, Foreign Trade Division.}

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