Who’s Responsible for Bad Drugs?
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Responding to a finding that two-fifths of the medicine sold in Ghana were of uncertain origin, immunologist and lawyer Dr. Amir Attaran posed the question:
How would you feel if 40% of all airplanes landing at Dulles actually weren’t meant to land at Dulles… But they were somehow swooping in hoping to land on the tarmac before somebody else plowed into them. That would be an obvious problem… Richard [Tren] mentioned [from two studies] that 7% of the subsidized malaria medicines being sold in West Africa were substandard. How would you feel if 7% of the aircraft on which you boarded had substandard engines?
While referencing a US-Canadian mail-order medicine scandal, Dr. Attaran underscored the crux of the regulatory problem for pharmaceuticals: “We have international trade law, but not international criminal law.” (Sounds similar to having a transnational monetary union without having an integrated tax and spending policy.) Dr. Attaran also pointed out that, “In the United States, about 80% of medicines come from abroad…so you are 80% vulnerable to global supply chains.”
Earlier this week, the American Enterprise Institute in Washington, D.C. hosted Dr. Attaran and speakers from the National Institutes of Health, US government, World Bank, and others to discuss the topic of substandard medicines – those legally produced but ineffective medicines that plague developing countries and which are increasingly finding their way into American and European supplies.
As already discussed, a number of scholars are publishing papers suggesting that the World Health Organization is failing to properly oversee the medicines it approves for malaria, and possibly tuberculosis and bacterial infections too. What many fail to understand is that the WHO doesn’t have the budget to act as a proper regulator, and can only tell that a producer can make a good product, not that it consistently will.
At the AEI conference and in recent coverage, it has become obvious what line the vested interests in the aid establishment were taking in response to research led by AEI. Several have suggested that it was not plausible that the companies involved in underdosing had done anything wrong, and implied that the researchers did not know what they were doing.
Dr. Andreas Seiter, the World Bank’s top pharmaceutical guy, suggested that it was inconceivable that several companies had the same production problems. This echoes points made by the WHO, which also speculated that this was unlikely. The inevitable conclusion therefore is that the researchers bungled. Or have they?
Dr. Patrick Lukulay is a senior scientist at the US Pharmacopeia, which establishes standards for US medicines. He indirectly suggested a possible reason for the researcher error – that some of the fixed dosed combination therapies are hard to test. Dr. Bate of AEI and lead author of the papers responded that the vast majority of drugs tested did not fall into this category and hence the point was interesting and worth looking at in future data, but not relevant to topic at hand.
In terms of solutions, Dr. Seiter said that the legitimate private sector is often more effective in pointing out where things are wrong than the public sector. By developing a system that allows drug manufacturers to gain approval in many countries at once, not only will legitimate drugs enter smaller markets, but a portion of the resources saved could go toward enforcement activities – not all of which are that complicated:
Even in the absence of rule of law ... just by naming and shaming in public and withdrawing from the market products that have failed is a sufficient blow to the commercial interests of those selling, particularly the intermediaries. The shopkeepers and pharmacists have no interest in selling bad products. It is very bad and embarrassing for their businesses when police show up in their neighborhood and remove boxes with everyone watching. [Some solutions are] not rocket science.
Recent incidents with Barclays (NYSE: BCS) manipulating interest rates as well as GlaxoSmithKline (NYSE: GSK) bribing doctors to prescribe its medications were first uncovered in the way Dr. Seiter outlined for combating substandard and counterfeit pharmaceuticals. The resulting fall out for both companies (and now others) also seems to vindicate his vision for how the naming-and-shaming strategy plays out.
The most important and startling revelation at the AEI event came as an off-handed aside from Dr. Bernard Nahlen, the Deputy Coordinator of the (US) President’s Malaria Initiative, when he mentioned:
We have had experience with PMI that even very reputable, internationally recognized companies sometimes have production problems. So, for example, we also test post-shipment, as the drugs arrive in country and we’ve had a couple of examples of cases where, frankly, it was a bad shipment. And we’ve contacted the company, you know, and obviously we quarantined and they replaced that shipment.
PMI buys drugs from Ipca (BSE:524494)(NSE:IPCALAB), Novartis (NYSE: NVS), Sanofi (NYSE: SNY), and others. Later when queried about which corporations had bad shipments and how the companies had improved on the situation, a representative for USAID responded, “We are not able to discuss details regarding our relationships with any supplier.” Though they did elaborate on the multiple checks their program has in place, including using products approved through the WHO Prequalification Program.
PMI routinely tests the drugs it buys, most donors do not. Dr. Nahlen’s comment would seem to support the research of AEI’s Bate and his colleagues. Based on research from his recent book and current investigations, Dr. Bate has not detected any problems with companies in the European Union, and so it is natural to conclude that the issue is with Asian companies. (Though, Dr. Lukulay observed that it is disturbing and a bit unfair that pharmaceutical manufacturers in troubled countries like Romania may be getting less scrutiny simply because they have recently joined the EU.)
Meanwhile, the London School of Hygiene and Tropical Medicine, whose scientists tested the drugs, but then withdrew from the paper perhaps under administrative and donor pressure, is silent. When asked about such a scenario, LSHTM’s polite response was, “I am sorry but we do not have any further comment on this.”
Whether a grand conspiracy or simple buck passing, investors and the public should wonder about the state of affairs when independent findings appear to be muzzled, while at the same time US government spokespeople say that the problems being muzzled are quite routine.
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 and Novartis. 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.