Roger Bate has a curious op-ed in the NYT today. He’s the lead author on a study which bought 370 drug samples from 41 online pharmacies around the world, and then tested their authenticity. The results? With the exception of Viagra bought from non-verified websites, every single drug was 100% authentic. But you’d never guess that from his op-ed:
In 2007-8, when counterfeit versions of heparin, a blood-thinning drug, were shipped from China to the United States market, 149 people died. In the last few months, bogus versions of the cancer drug Avastin, apparently shipped from the Middle East, have surfaced in clinics in California, Illinois and Texas. Thankfully, so far as we know, they haven’t killed anyone, but more and more cases of dangerous fake drugs are being reported by the Food and Drug Administration. Numerous incidents surely go unreported, the evidence swallowed, the deaths incorrectly attributed to natural causes.
Fighting the fake drug menace is like playing whack-a-mole. It is technically illegal for individuals to order drugs online from other countries. And yet no sooner does the F.D.A. shut down one dubious online pharmacy than another pops up. According to the National Association of Boards of Pharmacy, only 3 percent of the 9,600 online pharmacies it has reviewed complied with industry standards. Many were based overseas, so their sales to Americans were illegal; others did not require doctors’ prescriptions. And some were very likely peddling dangerous counterfeit drugs.
This is all highly alarming — but also highly misleading. The “more and more cases” of fake drugs being found by the FDA? The FDA’s counterfeit medicine page lists exactly six cases in the past 24 months, of which just two — Tamflu in June 2010, and Vicodin ES in March 2012 — were linked to online pharmacies. The bogus Avastin, by contrast, was being distributed through legitimate channels by two distributors: Quality Specialty Products (QSP), a/k/a Montana Health Care Solutions, and Volunteer Distribution in Gainesboro, Tennessee. It had nothing to do with online pharmacies at all.
Realistically, the US simply doesn’t have a “fake drug menace”. Yes, fake drugs exist, and they’re not all that hard to find if you’re based in, say, Ethiopia. An earlier study by Roger Bate found that 7 of 36 drugs bought by secret shoppers in Ethiopia failed a stringent authenticity test. (On the other hand, 100% of the drugs bought in Turkey were legitimate, and Brazil, Russia, and China all performed very well in the test.)
What’s more, even if the US did have a fake drug menace, which it doesn’t, the menace would not be coming from internet pharmacies. As Bate himself has found, internet pharmacies sell authentic drugs at low prices; the only exception to this rule is unlicensed sites hawking Viagra.
But Bate doesn’t seem to believe the evidence of his own eyes. Instead, he relies on urban myths: his July 2011 paper, for instance, said in its second sentence that “according to the World Health Organization, substandard and counterfeit drugs have been found in both developed and developing countries, accounting for more than 10% of the global medicines market and over US$32 billion in annual earnings.” This is a classic bogus counterfeiting statistic: if you go to the WHO page he links to, the WHO in fact makes no such assertion at all. Instead, it attributes the factoid to the FDA, with no footnote.
I’ve been trying to track down these statistics to their source for years, and I’ve never yet found one with a solid empirical grounding. Certainly Bate’s own studies would seem to disprove this assertion, but that doesn’t stop him, in his op-ed, talking authoritatively about “criminal networks” which “launder billions in profit”. As far as I can tell, no such network has ever been identified, and while there might be billions of dollars of profit in illegal drugs, that money is much more likely to come from marijuana and cocaine than it is from fake pharmaceuticals.
And in any case, concentrating on fake drugs is itself dangerous, because it diverts resources from the real problems with US drugs — legitimate drugs where there has been either a flaw in the manufacturing process or which have degraded because they’ve been stored badly or for too much time. Fake drugs are dangerous; real drugs can actually be more dangerous, just because people aren’t nearly as worried about them.
Still, Bate does at least appreciate that if you’re buying drugs from a licensed online pharmacy, those drugs are going to be authentic. As such, he says, that behavior should not be criminal. But he’s still a very long way from the logical conclusion, which is that there should be a free market in authentic drugs:
Buying drugs online from overseas isn’t for everyone. It should remain a limited option for desperate cash buyers — sick people with limited resources and insurance coverage — not a way for well-insured patients to reduce their co-pay. American health insurance companies should not be required to reimburse consumers for these drugs, because that would effectively import foreign governments’ price controls into the United States and undermine American companies’ research and development budgets.
This really doesn’t make sense. If authentic drugs are perfectly good for “desperate cash buyers”, why can’t they be used by the rest of us with health-insurance plans? There’s no reason why I would want to reduce my co-pay when buying drugs online; I’m perfectly happy to make exactly the same co-payment when buying at a Canadian online pharmacy as I would when buying at the drugstore down the street. But my insurer would save money, and maybe, ultimately, that would reduce the total cost of healthcare and health insurance in this country.
Yes, if the cost of healthcare and health insurance comes down, that might mean — that should mean — lower profits for Big Pharma. But would lower profits mean lower RD budgets? And would lower RD budgets mean fewer great new drugs coming to market? No one knows; all we know for sure is that Big Pharma’s RD expenditure is enormous, and is increasingly bad at creating great new drugs. In general, if you want to look for billions in profits, you should be looking to the big pharmaceutical companies, not mythical organized-crime syndicates. And it’s definitely worth asking why and whether we have a societal interest in protecting those profits instead of opening up the market in US pharmaceuticals to a modicum of competition.
What we’re faced with here is a tradeoff. On the one hand, there are clear financial benefits to letting Americans and American insurers buy their authentic drugs wherever those drugs are cheapest. On the other hand, there are extremely vague worries that were that to happen, some hypothetical new future drug might fail to make its way to market. Given the massive economic and fiscal costs of healthcare price inflation, it’s surely a no-brainer to go for the option which unambiguously saves money. Especially since, as Bate himself has demonstrated, the drug-safety risks of going down that road are essentially nonexistent.