Who’s Selling Bad Drugs?
Nick is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
A previous post delved into attempts by research managers to distance themselves from uncomfortable findings on underdosed malaria drugs. It appears some products approved by the World Health Organization may not be of universally good quality, and since approximately 80% of medicines in the United States are manufactured (or have their component elements made) overseas, this issue is one that could impact Bristol-Myers Squibb (NYSE: BMY), Novartis (NYSE: NVS), Pfizer (NYSE: PFE), and other pharmaceutical majors. However, before drawing too many conclusions, it is worth looking into more details of the research itself.
Recently published papers indicate WHO-approved Chinese products, and to a lesser extent Indian products, are allegedly underdosed. In order to find out how WHO views this research, I contacted Dr. Lembit Rago, who oversees drug quality for WHO. He explained that based on the research, he had launched an investigation of the products.
However, overall he seemed skeptical of the results, “…based on my more than 20-year experience in regulatory affairs it is very unlikely that several different manufacturers have exactly the same quality failure in the same time window.”
Dr. Rago was obviously working on more information than was contained in the papers, and this was made explicit by Dr. Bate, who said he had provided a confidential memo to Dr. Rago of the batches and manufacturers that failed quality control. The memo implicates several companies for having allegedly produced some of the suspect products – including Chinese company Guilin (SZSE:002275); Indian companies Ajanta (NSE:AJN), Ipca (BSE:524494)(NSE:IPCALAB), and Cipla (BSE:500087)(NSE:CIPLA); and Moroccan company Maphar – owned by French giant Sanofi (NYSE: SNY).
Dr. Rago suggests that these companies may not have produced the problematic drugs and proceeds to list other possible causes for the defective products:
1) Were the products truly prequalified ones or they seemed to be the prequalified ones? We know cases of relabeling, which have been done with the purpose of mimicking prequalified products.
2) All the products were according to labeling not beyond expiry dates. Again, we know that sometimes expired products have been relabeled locally in order to allow them to be marketed.
3) The low content of active ingredient may occur easily with these drugs very soon after the expiry date as these compounds are relatively labile structures. What we do not know is whether originally they had right content of active or not. In case the actives disintegrated then there should be suspected degradation products around but unfortunately they were not measured.
I put Dr. Rago’s responses to Dr. Bate. He agreed that when he first saw the results he doubted them and was “surprised that multiple manufacturers would intentionally underdose products.” However, as his investigations broadened he believed there was at least one possible explanation:
The most likely is inferior [active pharmaceutical ingredient]. The critical API underdosed was artemesinin. As we stressed in the paper, there have been shortages of this and perhaps a single major maker of API underdosed some of its supply, which wasn’t checked properly by manufacturers. I obviously don’t know for sure, but it would mean that multiple manufacturers exhibit the same production flaw.
Bate dismisses as extremely unlikely that the products identified as substandard products were fakes or expired products:
We went through this in detail in the small sample paper – the products had perfect packaging, there was over 50% of the API that was underdosed, and roughly 100% of the companion API (which makes degradation of the entire product unlikely), and there was no announcements of any fakes of these subsidized products. The chances are incredibly low these were fakes. But the reason I cannot be 100% sure is because the companies never confirm they’ve made a substandard product.
WHO is launching an investigation and one hopes it gets active support from manufacturers, which would probably rather ignore the findings. Oddly this also seems to be the preferred option of the public health community, too. Though largely apolitical, the community tends to be left of center and normally expects bad behavior from private sector companies. Yet, for whatever reason, the community seems to want to ignore this latest research.
It will be interesting to see how the investigation and the story unfolds. GlaxoSmithKline may not be the only pharmaceutical facing problems with the public and investors this summer.
Read the reports here:
http://www.fightingmalaria.org/pdfs/subsidizingACTs_Bate_etal.pdf
http://www.fightingmalaria.org/pdfs/anti-infectives_Bate_etal.pdf
Nick Slepko has no position in any company mentioned here at the time of publication. The Motley Fool owns shares of GlaxoSmithKline. Motley Fool newsletter services recommend GlaxoSmithKline, Novartis, and Pfizer. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.
