TCS Daily

Are Bad Drugs Coming to a Pharmacy Near You?

By Henry I. Miller - October 4, 2006 12:00 AM

In "The Third Man," the brilliant, shadowy, 1949 film, Orson Welles' character, Harry Lime, is a morally bankrupt, cynical racketeer and dealer of black-market, diluted penicillin.

Purveyors of fake or diluted drugs are no less detestable today than they were six decades ago, but the business has grown to frightening proportions. The highly professional and widespread counterfeiting of drugs increasingly casts doubt on what will actually be in your next vial of pills, especially if you buy them from abroad over the Internet.

A comprehensive analysis of the problem published recently by the American Council on Science and Health, called "Counterfeit Drugs: Coming to A Pharmacy Near You," describes the breadth and magnitude of the problem. Although quantitative estimates are difficult, it appears that something on the order of ten percent of the world's drug supply is counterfeit, encompassing not only products that are completely fake, but also those that have been tampered with, contaminated, diluted, repackaged or mislabeled in a way that misrepresents the contents, dosage, origin or expiration date. The World Health Organization estimated in 2003 that as much as five to seven percent of all drugs sold in the United States may be fraudulent in some way.

The perpetrators include big-time organized crime entities, such as the Russian mafia, Chinese triads and Columbian drug cartels, as well as terrorist groups such as Hezbollah, the Irish Republican Army and Spain's separatist organization ETA.

Just as counterfeiters have become adept at reproducing Gucci purses, Rolex watches and DVDs, they can duplicate the appearance of pills and capsules, and sometimes even the holograms and other security measures on the packaging. Without actually performing some sort of chemical analysis, the counterfeits may be virtually impossible to identify.

The risks to an individual patient are obvious if the drug is, say, a treatment for a cardiac arrhythmia or cancer, or an anticoagulant (blood thinner), but there are risks as well to society at large if the product is intended to treat an infectious disease such as tuberculosis, malaria or flu. The use of diluted or degraded antibiotics or anti-viral medicines can select for drug-resistant mutants, the proliferation of which makes infections harder to treat in all patients. In other words, the presence of counterfeits can actually compromise the overall usefulness of critical drugs.

How do fraudulent medicines enter the drug supply? Primarily by counterfeiters taking advantage of an alternative to the mainstream pathway of pharmaceutical manufacturing and distribution through which drugs normally move linearly from manufacturer to distributor to pharmacy to patient.

According to the ACSH report, "as much as 10 percent of the nation's wholesale drug supply travels through a complex and confusing network of distributors, intermediaries and secondary wholesalers, a vast array of businesses, most legitimate, many semi-legitimate and some outright criminal." Because manufacturers sell drugs at widely disparate prices, so-called "diverters" can realize profits by buying low and selling higher. But the competition is cutthroat, and the murkiness and absence of regulation in this "gray market" enables counterfeiters to introduce fraudulent products into the distribution system, often at astronomical mark-ups.

Increasingly, consumers are making the counterfeiters' job easier by buying drugs abroad. In a 2003 operation, spot-checks by the FDA and U.S. Customs Service found that 88 percent of drugs imported into the country by mail or courier violated federal safety standards in some way.

Orders from Internet websites are especially vulnerable to fraud. An FDA operation in 2005 found that nearly half of the imported drugs intercepted by federal officials from four selected countries - India, Israel, Costa Rica, and Vanuatu - had been shipped to fill orders that consumers believed they were placing with "Canadian" pharmacies. Of the drugs being promoted as Canadian, 85 percent actually came from 27 other countries around the globe. A significant number of these products were found to be counterfeit.

What can be done to protect the integrity of pharmaceuticals dispensed in the United States?

First, Congress must increase the penalties for drug counterfeiting, and the FDA must more aggressively enforce regulations that require documentation of the "pedigree," or history, of a drug as it moves through distribution channels.

Second, we need to apply new track-and-trace technologies to uniquely identify and track the distribution of drugs. (And similar to our confrontations with dealers of illicit drugs, in order to keep ahead of the bad guys we will have to innovate constantly.)

Third, new authentication technologies, such as holograms and ultra-violet and forensic tags, must be developed to make it more difficult for counterfeiters to imitate legitimate drugs. A promising new technology would attach mixtures of pH-sensitive fluorescent dyes to drug molecules and measure changes in fluorescence in the presence of solutions of different compositions.

Fourth, when making Internet purchases, consumers should patronize only pharmacies on the National Board of Pharmacy's recommended list (

Finally, consumers should be vigilant for anything amiss in any prescription drug obtained anywhere - unusual color, texture, markings or packaging and, when feasible, for any differences in effectiveness or side effects.

The miracles of modern medicines do us no good if we're getting the wrong drugs, the wrong dosages, or inactive sugar pills. Individually and collectively, we must assign a high priority to combating fraud in drug distribution and sale.

Henry I. Miller, a physician and fellow at the Hoover Institution, headed the FDA's Office of Biotechnology from 1989 to 1993. Barron's selected his most recent book, "The Frankenfood Myth..." one of the 25 Best Books of 2004.


guaranteed high prices
There are several things the government can do to help consumers of drugs. Inforcing quality control as Dr. Miller suggests, is one. Another would be working to lower drug prices. Instead, Republicans like Dr. Miller have been working to keep prices high by preventing Uncle Sam from negotiating over price.

I challenge Dr. Miller to make a proposal that would not benefit the pharma industry. What, cat got your toung?

It's not negotiation
It's theft.

The US government is the only entity I know that can force a hospital to provide services below actual cost.

I saw the effect on the inner city hospital I worked at for 30 years. There were a lot of causes for the decline in services when things really went bad, but much was due to Medicare and Medicade knowingly paying less than cost of treatment.

And now the liberals want the same government bludgeon applied to the pharma industry. Uncle Sam's method of negotiation is simple, "you get paid this or else!"

Poof! Drug Prices are Lower!
For high drug prices in the form of a very arduous approval process and the allowance of predatory litigation, even after the FDA approves a drug- exactly what methods should they employ to "lower drug prices."

Please note: Your answer should not be one of your normal economically ignorant answers and assuming the government can just reduce prices by fiat (what leftists normally mean by "negotiation" )would be such a response. Similarly, contacting the ghost of Elizabeth Montgomery to twitch or nose or reassembling the remaining cast of "I dream of Genie" to have Ms. Eden cross her arms and bow her head are infeasible answers as well.

like all liberals, LG believes that prices can be set by govt, without any harm to the economy.

Wal Mart to the rescue
"BENTONVILLE, Ark. – Sept. 21, 2006 – As part of its ongoing commitment to providing
more affordable healthcare for America’s working families, Wal-Mart Stores, Inc. (NYSE:
WMT) today announced that it will make nearly 300 generic drugs available for only $4 per
prescription for up to a 30-day supply at commonly prescribed dosages. The program, to be
launched on Friday, will be available to customers and associates of the 65 Wal-Mart,
Neighborhood Market and Sam’s Club pharmacies in Tampa Bay, Fla. area, and will be
expanded to the entire state in January 2007."

I would like to see Wal Mart open medical clinics.

No monopsonies please
When the US government ceases to effectively be a monoposony, I think that it should be able to negotiate just like everybody else so long as it acts like everybody else. If it wants something at a certain price or it's going to shut down the doctor, pharma, hospital, or nursing facility by force, it needs special restrictions on its actions no matter what its market share.

The government, in the current legal climate, should not be negotiating on price and using its unfair advantages to further distort the market.

Walmart's testing medical clinics
The problem with discount medical clinics is that doctors do a lot more than they bill for. Continuity of care means that your doctor knows you well enough to spot all sorts of problems that can be crippling, even life threatening before you ever figure out something is wrong with you. That sort of thing is not going to happen as much in the discount clinic world where doctors will be shuffling in and out of these clinics and worked too hard to provide good care for anything more than the most trivial of maladies.

I'm not against discount clinics but the medical profession really needs to do a much better job differentiating between the products so that consumers won't be misled by similar sounding facilities that provide different benefits.

Bogus arguement
What is the cost of providing the service? Hospitals charge, even the government, unbelieveable mark ups. Lets take one service for example, getting an MRI. The machine can now be purchased for under $100,000; therefore payments, on a 5 year plan, are around 2,000 a month. If you do 50 MRIs a month you need to price each MRI at $40 to break even. But you have to have an operations tech, a MRI Specialists and your consulting physician to make a diagnosis from the MRI. then you have to make a profit over and above what you pay each of these people. What hooey. Yes, you need a qualified operator and pay them at least $50,000 a year plus benies but your doctor should be able to work with the tech and make a diagnosis. If you did that the cost of an MRI would be, maybe, $150 to $200; have you gotten one lately? Try $500-$900 each. that is not a reasonable mark up, it is robbery. I would accept up to $300 each (but I would still complain).

But it gets worse; that really giving the hospital the beneift of more than the doubt. Here's why. Each MRI takes between 20 minutes and 1 hour (depending on the machine and what part of the body is getting imaged.) Most hospitals should be doing at least 40 MRIs a week. Even with a $500,000 deluxe machine that is just $50 to cover equipment cost and around $100 or so per MRI to make a basic 25% profit. Big hospitals that do that kind of business are charging 500%+ profit and claiming their costs aren't being covered. What a load of crap. There is a difference between covering costs and paying what the hospital wants to charge. The Government is covering cost X 4 at least in most cases.

Overpaid doctors, underpaid nurses and aides, poor services, and bad management are the problems hospitals face. (And we won't even get into bloated administration and pork barrel projects)

I've noticed the price charged for many high-tech, elective proceedures have gone down drastically and you never hear them whine about not getting paid enough. This crap only comes from those who are supposed to be in the business of saving lives.

And that pisses me off!!

You a ssholes charge me outrageous prices so you can go save lives in Africa for free and still afford your three trophy homes and four luxury cars. Sorry, I will die at home rather than pay you boneheads another dime; and if my wife calls an ambulance she better hope I die anyway, for her sake.

Patient owned medical records on some storage medium
Why can't I have a soft copy of my medical records on a DVD or memeory stick or... and hand that to any doctor I need to see?

Your records should belong to you, not a clinic or a doctor.

And why are there so few medical school in the US?
We import doctors and send students overseas.

you are ignoring many of the costs.
1) Maintenance of the MRI. Not cheap.
2) Rent on the room that the MRI is in. (Including support staff)
3) Insurance costs, to protect against charges that the Doc or the Tech misread the printouts.

Get real
5-10 year maintenence cost on a new machine; generally minimal (a few hundred a year plus bi-annual calibration; say $2,000 a year. On the low end numbers I used that is just $4 per MRI On the more likely numbers it is more like 25 to 50 cents.)

Rent on room? This is a hospital for crap sake. They have the room and just needed a little remodeling 15 years ago to accomodate. Just because, we will say $100,000 but you have to spread that over at least 20 years. So, call it $5,000 a year or a max of $10 per MRI.

Insurance costs are non-existant as they are covered as part of the facilities general liability and malpractice insurnace and generally add nothing. This is a non-invasive proceedure and is covered under general accident liability should someone be hurt by a malfunction. The Insurance costs for "misreading" are covered through the doctor's and facilities general malpractice insurance, generally with no additional premium.

But, just for fun, lets say it is equal to the total cost of the tech; say $80,000 a year. That comes out to $30 to $150 per MRI. On the low end we are still looking at a charge of $150 per to break even and $300 per to make a very nice profit ($24,000 per month in pure profit off one machine). At the high end it is maybe $350 to break even. $500 is still a very nice profit ($6,000 a month in pure profit). Also, that is if you replace your machine every five years with a high end one.

This is all smoke.

Same with CTs and ultra-sound.

Now labs and X-ray do carry some, though generally lower end, additional expenses.

Limit neo-natal and OB lawsuits and watch overall malpractice insurance premiums drop.

But the big problem isn't government payments, but government regulation and mis-management.

Because of the cost of education
And we have a solid number of medical schools here. We educate as many foreigners as we import.

There you go again.
You do have a habit of declaring that any cost you don't want to acknowledge doesn't exist.

I believe the maintenance and calibration is severl orders of magnitude higher than your guess.

Square footage always costs. If you are demanding that hospitals build and maintain areas inside them without getting any revenue from them, then no wonder you get surprised when hospitals loose money.

They may or may not be part of the general coverage. But that is part of the rent that you claim they don't have to pay.

You can't make costs disappear by just waving your hand and declaring that people are ripping you off.

This is part of your big business is evil paranoia that we keep getting back to.
You and roy are completely convinced that somebody out there is ripping you off, you just can't agree who's the head of the conspiracy.

An Alternative Approach to Quality Medications
Every retail dispenser of pharmaceuticals should have a
portable, easy to use detector to verify medication content. Using proper sampling techniques of incoming shipments would enable nearly 100% assurance of the products they sell.

Also, IF I were a frequent consumer of prescription medications, I would also like to have a medication detector (assuming it is affordable...say 199.99?). Then I can buy all the medications I want over the internet and be able to insure that at least I didn't poison myself. If I get a bad batch from Vendor-A, I dump the product, black list that vendor and spread the word.

Tools usable at the retail and consumer level would be far more cost effective in the quality control of medications than even MORE government regulation.

"And that pisses me off!!"

And you are not the only one. The ONLY solution that will work in the long run is a more competitive health care environment. The time for WALMARTIZING the health care industry is now. If not, we are likely to see a version of HILLARYCARE...which will only make matters worse.

gas chromatographs are several thousand dollars.

This one is easy, even for me mark
Let's use our little hospital as an example. They purchased a new MRI machine a couple of years ago. Like many hospitals, big and small, they had to do a little rearranging to have a room for the machine. The COST TO THE HOSPITAL was $0, they already had a space where their old, second (or was it third) back-up X-Ray machine was. But, even if they would have had to do a little expanding, (as they originally planned) it would have cost about $10,000. Now, if the hospital is leasing the space to an outside group, then I would agree that the cost of that lease would have to be included; but I don't know anyone doing that. So who is paying rent?

no, calibration and maintenence is not $10s of thousands of dollars for one machine. If it was, our little hospital would never have bought one; no way to make money off it when you do, maybe, 40 MRIs a month.

Yes, square footage does cost. It costs whatever the hospital has to pay for an addition if one is needed. MRI machines (or ultra sound or CTs) don't need more than 150 square feet in most cases (actually, modern MRIs can work in a 10X10 space. Most jail cells have more than enough room for an Ultra sound room; CTs need a bit more). But that cost, to be accurate, can only be figured as part of the debt required to build it or out to 20 years or so; then it most be split evenly over those years.

Part of the geeneral coverage means that this unit doesn't cost the hospital any additional money. It is very difficult, if not impossible, to figure what part of the insurance premium should be punt on this particular service, since it doesn't really cost you anything.

I'm not making costs disappear or declaring anything. You do the math yourself; I gave you some numbers to work with. You can't make it more expensive by waving your hand and declaring costs that aren't associated with that particular service.

I don't trust anyone; if my mom told me she loved me I would get a second opinion. I trust government and big business even less. But I do not consider any of them "evil". They are what they are and buyer beware.

There is no conspiracy; there is a lot of finacial stupidity; a lot of stock market driven idiotacy, a lot of corporate garbage all around and much of it to give large benefit to a relative few. I'm not involved, so what do I care. The only time it bothers me is when I have to pay the price so someones (including my own) dividend can be bigger this year.

Real Costs
I spent 30 years doing service of Linacs, X-ray, CT, etc.

A good rule of thumb for a maintenance contract is 1% of the purchase price per month.

If you do it in-house, (as my hospital did,) you can cut that in half, but you occasionally have to eat the cost of a very expensive part. (It's no fun explaining to the guy with the purse strings why a new klystron costs $70,000.)

If they weren't leasing the space, then they are forgoing rent that a competent hospital manager could have captured.

I like the way you assume that you know more about the costs of MRI's than do the guys who build and use them.

Since you believe you know everything, there is no sense trying to convince you otherwise.

GREAT idea, even IF gas cromo is $$$ swipe tests aren't
Dont know if swipe tests are developed for common pills, they certainly are for illegal drugs like heroin & pot, just like the ones used for explosives testing.

one hell of a market you just spotted tabonfils, too bad one of us isn't a wealth capitolist that could move with it.
Because it's VERY doable.

It'll happen, the technology to store massive data like MRI & CT is coming down
There is no way it WONT happen given the way tech is moving. There will be NO reason not to sync your records with theirs. There WILL be law suits & congressional hearings about the propriaty of this type of information but it will all get sorted out in the end & the consumer will get whatever we are willing fight for.

Where are the incentives for hospitals and staff to use modern technology like computers and digital records?

Whatever mark
Sorry I'm involved with our local hospital and do know what they pay. If that bothers you then I appologize. At the last Hospital Board meeting, they are very happy with the MRI purchase as it was a very good revenue generator. (Knowing the numbers, I also know what they are reporting in maintence costs.)

Go ahead, make up expenses to justify your argument. We are not discussing captured or non-captured profits here mark, but actual costs vs. what they are paid. Hospitals do recapture their costs+ from medicare and medicaide.

That's a bit high, but reasonable
For a maintenence contract. Our hospital does in-house and extended warranty (so they don't have to pay $70,000 for a klystron or even $10,000 for a magnatron). Their average maintence costs on the MRI (so far, they've only had it for a couple of years) has been about $3,000 to $4,000 a year; roughly 2% annually. The warranty is a 5-year deal (with, I believe, an extenion available for another 5 years, although at a higher cost per year).

But, given a hospital that does 15 MRIs a day average, your maintenence contract still only costs the hospital $11 per MRI on a high end, new machine. Considering my other figures, that is a cost to the hospital of roughly $161-$361 per MRI maximum covering all levels of reasonable use (more per when there is less use). The Hospital charges $500-$900 per because??! Pretty good profit margin.

The fact is, drug prices are lower outside the USA.
Where there is government intervention and most often state-run social medical insurance.

Justify that?

It's hard.

But it is the whole reason why people are getting their drugs on-line from overseas.

How is it that you missed the elephant in the middle of the living room?

I agree
And a better test could be developed and still sold for a couple of hundred dollars. A very good Idea.

Though not fool-proof
Many of these “swipe tests” are developed. They are often based on immune or immune response assays. If you can find the immune response, then you can use the very sensitive ELISA tests to see if the drug is present or not.

Gas chromatography is rather limited. A better way to analyze would be to use liquid chromatography with mass spectrometry as the detector (HPLC-MS). These instruments run about a quarter million dollar and probably require Ph.D. analysts to operate them.

But chemical composition alone is not enough to test for drug effectiveness.

The drug delivery technology is often as important as chemical composition. Much of the new discoveries has been in getting the drug to the target (through various biological barriers). This is often difficult to assess through physical methods.

But immune assays (swipe tests) may be applicable there too.

again, agreed
and anything is s step in the right direction.

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