Illegal prescription drug trade growing

Counterfeiters, profiteers endanger American lives

By GILBERT M. GAUL AND MARY PAT FLAHERTY Washington Post

Sunday, October 19, 2003

Washington -- For half a century Americans could boast of the world's safest, most tightly regulated system for distributing prescription drugs. But now that system is undercut by a growing illegal trade in pharmaceuticals, fed by criminal profiteers, unscrupulous wholesalers, rogue Internet sites and foreign pharmacies.

In the past few years, middlemen have siphoned off growing numbers of popular and lifesaving drugs and diverted them into a multibillion- dollar shadow market. Crooks have introduced counterfeit pharmaceuticals into the mainstream drug chain. Fast-moving operators have hawked millions of doses of narcotics over the Internet.

The result too often is pharmaceutical roulette for millions of unsuspecting Americans. Cancer patients receive watered-down drugs. Teenagers overdose on narcotics ordered online. AIDS clinics get fake HIV medicines.

Normally, drugs follow a simple route. Manufacturers sell them to one of the Big Three national wholesalers -- Cardinal Health Inc., McKesson Corp. and AmerisourceBergen -- which sell to drugstores, hospitals or doctors offices. Regulators and industry officials have long considered this straightforward chain to be the gold standard.

The shadow market exploits gaps in state and federal regulations to corrupt this system, creating a wide-open drug bazaar that endangers public health. A yearlong investigation by The Washington Post has found:

-- Networks of middlemen, felons and other opportunists operating out of storefronts and garages fraudulently obtain deeply discounted medicines intended for nursing homes and hospices. The diverters have stored drugs in U-Hauls and car trunks in blazing heat, stuffed them in plastic sandwich bags and traded them in a daisy chain of transactions with no purpose except to enrich the traders. Those drugs are ultimately sold to unwitting patients.

-- The diverters pave the way for counterfeiters who use pill- punching machines and special inks to produce near-perfect copies of the most popular and expensive drugs. They pass undetected through wholesalers to the shelves of retail pharmacies.

-- Pharmaceutical peddlers take advantage of lax regulations to move millions of prescription drugs into the United States from Canada, Mexico and elsewhere. Overwhelmed Customs workers inspect less than 1% of an estimated 2 million packages containing medicine shipped into the country each year. Virtually all those shipments are illegal, yet the Food and Drug Administration fails to enforce its own import regulations, saying it lacks the resources to intercept the illegal packages.

-- Rogue medical merchants set up Internet pharmacies that serve as pipelines for narcotics, selling to drug abusers and others who never see doctors in person or undergo tests. The sellers move tens of millions of doses of hydrocodone, Xanax, Valium, Ritalin, OxyContin and other controlled substances. Scores of customers have become addicted, overdosed or died.

The shadow market, which includes both legal and illegal operators, has grown rapidly yet received little public attention.

Isolated problems nationwide have attracted the interest of some state and federal prosecutors and resulted in lawsuits. But the increasing recalls of tainted medicines, overdoses on Internet- bought drugs and the cross-border pharmaceutical trade are part of a larger pattern. Taken together, the worst elements of the shadow market constitute a new form of organized crime that now threatens the public. Examples abound:

-- In St. Charles, Mo., Maxine Blount, a 61-year-old woman with advanced breast cancer, received a diluted drug distributed to her local drugstore. "It makes you angry," she said in an interview last year. "It shakes your faith. It saps strength you need to live." She died of her cancer a month after the interview.

-- In La Mesa, Calif., Ryan Haight, 18, died in his bedroom of an overdose after taking narcotics obtained on the Internet.

-- In Sacramento, Calif., James Lewis, 47, shopped the world for painkillers that flowed unimpeded from pharmacies in South Africa, Thailand and Spain. His wife discovered him dead of an overdose on the living room couch.

Public health dangers

These victims are emblematic of the dangers to public health that occur when profiteering and cowboy criminality invade the nation's drug distribution system.

The shadow market takes advantage of technology, global trade, vast disparities in pharmaceutical prices, the explosive growth of enticing new miracle drugs and the self-medicating habits of an aging baby-boom population. It extends from small, back-room operations to buck-raking Internet pharmacies to the warehouses of the nation's largest drug distributors.

Diverters reap millions illegally by buying drugs at a discount to sell to secondary wholesalers, which then sell them to other distributors, including the Big Three wholesalers that supply most major hospitals and chain stores. The Big Three risk buying from these secondary sources because they can get drugs more cheaply than if they bought them directly from manufacturers. In some cases, the drugs have turned out to be diverted, diluted or counterfeited.

William Hubbard, senior associate FDA commissioner, stressed that the U.S. drug distribution system is the safest in the world. "People can have a high degree of confidence," he said in an interview.

Yet he acknowledged that in recent months the FDA has been overwhelmed by illegal imports from Canada and offshore pharmacies. The agency also had to apologize to Congress in June for releasing a quarantined shipment of fake Viagra to consumers. And the FDA is now scrambling to keep up with a rise in drug counterfeiting.

Counterfeits abound

Phony medicines have surfaced in pharmacies from Florida to Hawaii, including tens of thousands of doses discovered in warehouses of the Big Three wholesalers.

Last summer, nearly 200,000 tablets of Lipitor, the world's bestselling cholesterol-lowering medication, were found to be counterfeit and recalled by a small Missouri wholesaler. Some of the pills had already reached Rite Aid and CVS pharmacies.

"This is hurting people," said Thomas Getz, a federal prosecutor in Cleveland who has pursued pharmaceutical fraud. "It's one thing to ask people to choose between name brand or generic," he said. It's another to "choose a bottle that came from a manufacturer or one that's been sitting in a hot semi for three weeks."

In the last year, a Texas wholesaler bought cancer drugs that had been spirited out in backpacks and, at least once, in a fast-food bag, from Methodist Hospital and the University of Texas M.D. Anderson Cancer Center in Houston. A drugstore in Scotch Plains, N.J., sold insulin and brand-name drugs stolen from Beth Israel Deaconess Medical Center in Boston. Pharmacies and wholesalers from Miami to Los Angeles sold medicines that Medicaid fraud rings bought on the streets.

Rising drug sales

The growth of the shadow market comes as Americans are spending more money than ever on prescription drugs. Between 1994 and 2001, the number of prescriptions swelled to 3.1 billion -- a nearly 50% increase. In nearly the same period, sales soared from $61 billion to $155 billion.

There were several reasons for this. Americans took advantage of new and better medicines, including a range of preventive drugs. Insurers promoted the use of prescription drugs to keep down the number of more expensive hospital stays. Employers picked up a large share of drug costs. And advertising by drug manufacturers drove demand, especially for lifestyle drugs such as Viagra and Celebrex.

"Americans want their Lipitor," said David Nash, a physician who directs the Office of Health Policy and Clinical Outcomes at Thomas Jefferson University in Philadelphia. "They want to be able to take it on their way to McDonald's."

COMING MONDAY

A look at the "diverters" -- armies of little-known brokers who illegally gain control of discounted medicines intended for nursing homes, hospices and AIDS clinics.

First of two articles

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