June 8th, 2008

Counterfeit Drugs and My Appearance on Assembly TV

When I went up to Albany on May 19-20 to lobby the legislature on civil justice issues, I also sat down with Assemblywoman Amy Paulin for 15 minutes on Assembly TV. The purpose was to discuss her legislation on counterfeit drugs.

The issue had come to her attention due to media coverage of New York teen Timothy Fagan, who I had represented. Tim had been injected back in 2002 with counterfeit Epogen after an emergency liver transplant at the age of 16. Tim’s drugs, it had ultimately been discovered, had been low dose 2,000 u/ml Epogen that was sold out the back door of a Florida pharmacy, “uplabeled” at a trailer park to 40,000 u/ml, a dose 20 times stronger, and sold back into the mainstream distribution system. His medication had been owned by at least 10 different companies around the country as they were traded through a vast secondary market of wholesalers before finding their way into his drugstore on Long Island and then his home. This was the source of a 60 Minutes story, among other national coverage, as well as a book. (See, Counterfeit Drugs Resource Page at my website, for background. And more on this blog at the counterfeit drugs label.)

The bill Assemblywoman Paulin now sponsors would force electronic pedigree labels on drugs from the point of manufacture through the distribution system. With the distribution system locked down, it would make it exceptionally difficult for counterfeiters to penetrate. I had first discussed this with her back in 2006 and was at her side for her first press conference on the subject.

While I hesitate to let readers see the too-serious side of me from an audio-visual perspective, the issue is, frankly, too important not to discuss. If counterfeits could make it into Tim’s house, they could make it into your house, my house or the White House. So here is the clip:


January 18th, 2007

Does Congress Understand the Counterfeit Drug Problem?

Last week bipartisan legislation was introduced, ostensibly aimed at drug safety, called the Pharmaceutical Market Access and Drug Safety Act of 2007. Does it really deal with drug safety? Nope. It is almost entirely about the importation of drugs from Canada and other countries.

The bill does nothing to plug the leaky supply chain that we have here that allows drugs to be swapped among the thousands of secondary wholesalers like pork belly futures. Indeed, the requirements of pedigrees for pharmaceuticals (a list of prior owners) has still not been fully implemented despite being authorized by Congress in 1987.

There is nothing in the bill about the most basic of safety issues, such as increased criminal penalties for counterfeiters, mandating pedigrees back to the manufacturer, and funding for the F.D.A. so that they can actually do random testing of drugs in the marketplace, recall them when needed, and do proper investigations.

Before Congress tries to deal with foreign drug supply systems, it should get a grip on our own, and enact Tim Fagan’s Law, which came about as a result of domestic counterfeiting.

More on the subject can be found at:


December 27th, 2006

Cardinal Health Settles Drug Inquiry with New York for $11M

Cardinal Health, one of the “Big Three” of the drug wholesaling business, has settled New York’s investigation against it for $11M and agreed to reforms of its business practices. Cardinal is ranked 19th on the Fortune 500 list of America’s largest corporations.

The underlying problem dealt with the company’s purchase and sale of drugs out of the “secondary market,” instead of buying them directly from manufacturers. This gray market in drugs involved some 6,000+ wholesalers as of 2005 when New York’s investigation began, and before changes started to sweep through the industry. Many of those changes I had previously documented on my Counterfeit Drug Resource Page.

The existence of so many secondary wholesalers — who are licensed by a hodgepodge of regulations that vary from state to state — led some to buy and sell pharmaceuticals without knowing exactly where they had been and who had owned them in the past. This opened a gaping hole for counterfeit medications to leak into the legitimate drug supply system. The purchase of such mystery medicines was widely condemned and led to changes by major wholesalers in 2005.

From the press release out of the office of New York Attorney General Eliot Spitzer:

Secondary market trading is not illegal on its face, but can create opportunities for the introduction of unreliable drugs, including counterfeits, into the marketplace. In recent years, there has been an increase in the number of cases of counterfeit drugs in the American supply chain. Secondary market trading also can create an opportunity for companies to divert drugs from their intended distribution channels. Diversion into the secondary market, often to take improper advantage of manufacturer discounts, can begin a series of trades from wholesaler to wholesaler that makes it difficult to trace the origin of a drug and impossible to ascertain its authenticity.

The investigation determined that Cardinal purchased drugs from certain alternate source vendors, despite risks associated with buying from those vendors, to take advantage of higher available profit margins. Cardinal also sold pharmaceuticals to certain customers even in the face of evidence that those customers may have been illegally diverting the drugs outside their intended channels of distribution.

A review of the AG’s findings, which does not seem to appear in newspaper accounts of this settlement, represents in my view a devastating indictment of the conduct of Cardinal Health, which appeared to act in a reckless disregard for the safety of consumers. This will be the subject of a follow-up post.

As per the AG’s office, Cardinal will pay $3 million to New York State, $7 million to a non-profit health research corporation called Health Research, and $1 million to the attorney general’s office to cover costs of the investigation. But wait… there’s much more…it appears it isn’t just about money but about forcing better business practices:

In addition to adopting the Wholesaler Safe Product Practices, Cardinal has agreed that in the regular course of its business it will:

— Buy pharmaceuticals directly from manufacturers and not on the secondary market from alternate source vendors;
— Sell pharmaceuticals only to wholesalers who have certified their compliance with the Wholesaler Safe Product Practices, and have agreed to allow audits of those certifications;
— Adopt “know your customer” provisions and monitor for customer diversion; and
— Hire an external auditor to conduct periodic reviews of its compliance with the settlement.

As I wrote on November 27th , I was one of the people the attorney general had dropped a subpoena on, for the records I had obtained and created in my own investigation regarding the counterfeit drugs taken by a Long Island teenager, Tim Fagan, after he had undergone an emergency liver transplant. It’s nice to see the investigation has paid dividends for New Yorkers, not just in financial recovery, but in a safer pharmaceutical supply chain.

Links to this post:

more secondary drug trading fallout
over a year ago drug wholesaler cardinal health announced it would stop trading drugs in the secondary market. such trading was a lucrative sideline for cardinal, offering the potential for much higher margins than the traditional
posted by David E. Williams of the Health business blog @ January 04, 2007 5:49 PM


December 12th, 2006

Fighting Fake Drugs: NYT Editorial

The New York Times today jumps into the fray regarding the dangers of counterfeit drugs in an editorial. They do so from the perspective of those buying drugs over the Internet:

Tempted to buy cheap medicines from a pharmacy Web site? Think twice. If the Web site shows no verifiable street address for the pharmacy, there is a 50 percent chance the drugs are counterfeit.

In rich countries, fake medicines mainly come from virtual stores. Elsewhere, they are on the pharmacy shelves. In much of the former Soviet Union, 20 percent of the drugs on sale are fakes. In parts of Africa, Asia and Latin America, 30 percent are counterfeit. The culprits range from mom-and-pop operations processing chalk in their garages to organized-crime networks that buy the complicity of regulators, customs officials and pharmacists.

The editorial goes on to the deaths from counterfeits and the ways developing countries have been fighting it, and otherwise serves to further sound the alarm of buying medication when you don’t know its origins.

As those in the pharmaceutical drug trade know, the issue of counterfeits has been a hot topic before the FDA in recent years. It is also, most certainly, not confined to foreign counterfeits as we have purely domestic counterfeiting going on.

After identifying the problem, the Times makes its pitch for action, writing:

An international convention is also needed to establish stiffer penalties for counterfeiting drugs, and marshal more funds and support to fight this deadly crime.

That’s a great idea. And we can start right here at home with legislation currently stuck in congressional committees. The pending legislation before both the House and the Senate comes in the form of Tim Fagan’s Law, named for one of my clients.

For more on the issues, you can visit my own Counterfeit Drug Resource Page, and read more about the problem by clicking on the Counterfeit Crugs label on your left and seeing other posts on the subject.


December 1st, 2006

More on Tim Fagan’s Law and Prescription Drugs

I speculated last week that the Democratic victory in the House and Senate bodes well for counterfeit drug legislation moving forward. The mover behind Tim Fagan’s Law is Tim’s congressman, Steve Israel. Tim, who I represent, was injected with counterfeit drugs after a liver transplant in 2002.

So I spoke this week to Rep. Israel’s new communications director and former health policy aide. She tells me that Rep. Israel will push for hearings in the Energy and Commerce Committee, where the bill is stalled. Significantly, the new chairman will be Rep. John Dingell, who was a champion of the Prescription Drug Marketing Act of 1987.

The PDMA, for those who follow the counterfeit drug issue, is the major piece of legislation that was designed to safeguard our pharmaceutical supply chain by forcing these companies to track the “pedigree” of the drugs — that is, who the prior owners of the drug were. It has never been fully implemented, and some companies continue to fight it today. From today’s WSJ Law Blog comes this story from Heather Won Tesorieo, who has been covering this subject for several years:

A federal magistrate recommended yesterday that a long-stalled provision of a drug law aimed at curtailing counterfeit drugs be stayed, giving a surprising upper hand to a group of small drug wholesalers that filed for an injunction to keep the law from going into effect. The plaintiffs and the government have until noon today to present further information to a federal judge, who is then expected to issue a ruling.

The drug law provision would require some drug wholesalers to supply a record, or pedigree, to track every middleman that handles a drug. It’s the latest regulatory measure aimed at improving transparency in the nation’s drug supply chain and stave off the growing number of incidents of counterfeit drugs.

With the continued obstinace of some wholesalers, who apparently refuse to make their industry safer so that they can continue to wheel and deal pharmaceuticals on the gray market, the passage of Tim Fagan’s Law becomes more important.

Change seems to be sweeping the industry — notwithstanding those who would like to keep it all secret — as light is shed on the loopholes in the system. So while some wholesalers continue to fight against the trend of greater safety, there is still good news out there for anyone who takes prescription drugs, which is to say, almost all of us at one time or another.