Inside Washington: Reimport Battle Complicates Anticounterfeiting Campaign

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BioPharm International, BioPharm International-09-01-2003, Volume 16, Issue 9

FDA and manufacturers seek to curb bogus drugs, while legislators consider liberalizing import policies to cut pharmaceutical costs.

Export officials estimate that 20 million packages containing pharmaceuticals come into the United States each year — and 14% have something wrong with them. The rise in Internet pharmacies is spurring the import trend, as are higher prices of drugs and biotech therapies in the United States.

This surge in imported prescription therapies is raising concern at FDA and among manufacturers that the door is opening to a flood of counterfeit and unapproved drugs and biologics. Ironically, members of Congress could make it easier for counterfeit drugs to enter the United States by pressing for legislation that would enable individuals and pharmacists to reimport lower-cost drugs from abroad. Advocates aim to increase consumer access to less expensive medicines, despite protests from FDA and industry that the policy is unwise and unworkable. Meanwhile, manufacturers are examining how new technologies can prevent product tampering and identify counterfeits, while backing policies to protect product names and patient safety.

Attack on Counterfeits

As counterfeit cases piled up in recent months, FDA launched a more aggressive program to halt the influx of bogus drugs from abroad (see

). The agency established an internal task force in July to explore the use of new technologies and identify enforcement actions that could stymie distribution of counterfeit medical products. The panel — led by John Taylor, associate commissioner for regulatory affairs, and Bill Hubbard, associate commissioner for policy and planning — is scheduled to report recommendations this month.

The initiative stems from evidence of rising counterfeit pharmaceutical distribution in the U.S. FDA opened 22 counterfeit drug cases in 2002 and 20 cases in 2001 — big jumps from about 5 to 6 cases each year previously. Since 1996, FDA counterfeiting investigation cases have led to 44 arrests and 27 convictions. Most cases involved high-cost injectables and high-volume drugs, such as statins, AIDS therapies, and antidepressants. One report speculates that unscrupulous distributors are diverting to the United States some low-cost and free drugs intended for foreign medical aid programs.

FDA has issued warnings that counterfeit versions of Procrit (epoetin) from Ortho Biotech and Amgen contain nonsterile tap water that could cause infections. Last year, counterfeiters substituted insulin for Eli Lilly’s injectable drug Zyprexa (olanzapine). A counterfeit version of Serono’s AIDS treatment Serostim (somatropin) had no active ingredient at all. Pfizer recently warned pharmacists of widespread distribution of unauthorized Lipitor (atorvastatin) that patients found to have a bitter taste. This rise in counterfeit biologicals is of particular concern because therapeutic proteins manufactured from living cells are more susceptible to contamination, said Carl Feldbaum, president of the Biotechnology Industry Organization (BIO), in a letter to FDA last February (see

Seeking Deterrents

The Prescription Drug Marketing Act (PDMA) of 1988 provides FDA with authority to track illegal drug distribution in the U.S. It requires wholesalers to keep paper records of a drug’s source and distribution history to provide a "pedigree" for prescription products. However, the tracking requirements are expensive, and FDA has failed to finalize regulations implementing PDMA due to objections from wholesalers. Now the surge in counterfeit products is putting pressure on FDA to implement the tracking program, although new authentication approaches could necessitate updating the 1988 policy.


The need for legislation to strengthen PDMA will be addressed by FDA's counterfeit drugs task force, which is examining new technologies capable of assuring product integrity. Most anticounterfeit efforts involve identifying look-alike packaging that can fool health professionals as well as consumers. Because phony medicines can be put in highly authentic-looking packages, manufacturers and regulators also are examining ways to incorporate authentication substances (such as chemical taggants) into finished products.

In addition, FDA is working with U.S. Customs offices to identify what counterfeits are arriving from foreign countries. The agency also is collaborating with states such as Florida (which has adopted stronger drug wholesaler licensing requirements) that may provide a model approach for other states. And while battling counterfeits at home, FDA officials are working with manufacturers and foreign governments to stem widespread, bogus drug marketing in both developing and developed countries. FDA notes that Chinese counterfeiting of some drugs may be as high as 50%, while estimates are around 40% for fake pharmaceuticals in Argentina, Colombia, and Mexico.

Industry Action

FDA's counterfeiting task force will gain assistance from a private-sector working group that has been examining anticounterfeiting issues. That group is finalizing a report on technologies to better secure the drug distribution chain to prevent tampering and detect bogus products. Manufacturers and wholesalers also are supporting FDA enforcement efforts by informing the agency more quickly (ideally in five days) of counterfeit product evidence. FDA may or may not release the information, depending on the potential risk to patients and the need for confidentiality while tracking the culprits.

An added reason for manufacturers to battle illegal knock-offs is to protect against liability claims. Last year, according to The Economist, Serono settled a lawsuit from U.S. patients claiming that the company should have taken more precautions to prevent counterfeit Serostim from entering the distribution chain (1).

Reimport Debacle

Industry critics, however, blame the high cost of legitimate medicines for spurring drug counterfeiting and have been fighting to loosen restrictions on reimportation of lower-cost drugs from other countries. Current law permits only licensed manufacturers to reimport FDA-approved products from abroad. Three years ago, Congress approved a limited expansion in reimportation — provided FDA certify that it could assure the safety and quality of such products. Twice since then, Health and Human Services officials have announced FDA's inability to certify the program, pointing to the huge volume of imports FDA would have to monitor and its lack of resources to do so.

In June the House and Senate adopted separate Medicare reform bills, each containing a provision to allow reimporting from Canada and the usual FDA certification caveat. However, a coalition of dissatisfied lawmakers sought to add a stronger proposal to the final Medicare pharmacy benefit program being negotiated by House and Senate leaders. Just before adjourning for the August recess, the House approved a bill (HR 2427) requiring FDA to allow individuals, pharmacies, and wholesalers to buy pharmaceuticals from a list of 25 developed nations, including Canada and the European Union. The measure sponsored by Gil Gutknecht (Rep–MN) drops the FDA certification requirement and instead calls for imports to be approved by FDA and made in facilities that meet FDA manufacturing standards. It also requires manufacturers to use new technologies, such as sealed packages and blister packs, to ensure the safety of imports.

The bill is highly impractical and unlikely to be implemented. FDA estimates that such protective technologies could cost manufacturers $2 billion to adopt. And the measure provides no funding for FDA to implement such a program, which would cost at least $100 million to establish. BIO’s Feldbaum points out that the requirement to adopt anticounterfeiting technologies could restrict access to much-needed drugs and biologics because manufacturers would have to retrofit operations and FDA would have to approve the new packaging, particularly changes to pre-filled syringes or vials that come in contact with drug substances. The new policy, therefore, would boost product prices and yield little savings for consumers, a claim supported by Congressional Budget Office analysis of the Medicare legislation. Moreover, there is strong bipartisan opposition in the Senate; 53 senators signed a letter citing the need for FDA to certify the safety of any reimported drugs.

Despite these problems, the bill passed the House by a healthy margin (243 to 186) when a number of Republicans joined most Democrats, overcoming strong opposition to the measure from the Bush administration and industry. The legislators approved the bill largely to send a loud message to pharmaceutical companies — which rely on high U.S. revenues to support worldwide R&D — to change their current pricing strategies.

Heavy-handed lobbying against the bill by manufacturers probably worked against them in the end, as the legislators took up the challenge to oppose the drug industry. Even House leaders who opposed the Gutknecht bill acknowledged that if Medicare is to pay billions for outpatient prescription drugs, industry has to offer U.S. patients fairer prices. The reimport legislation may be ill-conceived and never become law, but manufacturers would be wise to consider it a sign of significant change in the willingness of U.S. consumers and the health care system to support what appears to be unfair pricing.


(1) "Imitating Property is Theft,"

The Economist

, 17 May 2003, 52-54.

Strict Enforcer

FDA's anticounterfeiting initiative reflects agency efforts to heighten its profile as a strict enforcer of regulatory policies. In recent months, some members of Congress and patient advocates have complained that FDA was issuing fewer warning letters as part of a more lax oversight approach. The critics pointed specifically to delays in challenging misleading drug advertising and promotional activities due to FDA's "pro-industry" stance.

In response, FDA commissioner Mark McClellan issued a white paper in June highlighting agency efforts to boost enforcement actions (see Protecting the Public Health: FDA Pursues an Aggressive Enforcement Strategy cites evidence of "dramatically increased enforcement," particularly in pursuing criminal charges against parties involved in activities that could pose serious threats to public health. The white paper also notes that FDA is stepping up actions to prevent manufacturers from engaging in inappropriate promotional practices. BPI