Are Fake Pharmaceuticals A Big Problem in the U.S.?


American Enterprise Institute fellow Roger Bate has an op/ed, The Wrong Way to Stop Fake Drugs, in today's New York Times worrying about Americans taking counterfeit drugs. The op/ed notes:

It is technically illegal for individuals to order drugs online from other countries. And yet no sooner does the F.D.A. shut down one dubious online pharmacy than another pops up. According to the National Association of Boards of Pharmacy, only 3 percent of the 9,600 online pharmacies it has reviewed complied with industry standards. Many were based overseas, so their sales to Americans were illegal; others did not require doctors' prescriptions. And some were very likely peddling dangerous counterfeit drugs.

As examples, Bate points to two recent cases including a faked version of the blood thinner from China and the cancer treatment drug Avastin from Turkey. However, neither drug came from online pharmacies but were sold through distributors directly to physicians and hospitals. In fact, Bate cites his own research that suggests that properly certified internet pharmacies can be trusted:

In a recent National Bureau of Economic Research paper, I assessed the quality and price of drugs procured through Internet pharmacies. As expected, I found several foreign sites that sold fake drugs. But of the international Web pharmacies certified by the Canadian International Pharmacy Association or — 23 in all, with 211 drugs sampled — all passed quality-control tests. After all, they were the same drugs made by the same companies, just in different locations.

It turns out that the only real way to meet the National Association of Boards of Pharmacy (an umbrella group for state pharmacy regulators) certification requirements is to be located in the United States. But as Bate points out the certification procedures of private groups like and Canadian agencies have so far effectively protected online purchasers of cheap pharmaceuticals from fraud. 

Bate argues that private citizens should be permitted to buy price controlled drugs online from abroad, but would not require that health insurance companies reimburse them. Why not? 

…because that would effectively import foreign governments' price controls into the United States and undermine American companies' research and development budgets.

That is likely true, but if the importation of price controlled drugs dramatically increased perhaps pharmaceutical companies would have an incentive to fight back by simply refusing to sell their drugs to countries that impose price controls. That could have the salutary effect of changing the current situation in which, by paying full price, U.S. consumers bear a disproportionate share of the burden of financing R&D for new drugs for the entire world. In any case, Bate comes to the right conclusion that the law against Americans purchasing pharmaceuticals from abroad should be changed.