Counterfeit Drugs and the Safety of America’s Rx Drug Supply Chain

November 2007

Chris Ward

Hospitals & Nursing Homes

37%

Dental & Other Health

Porfessionals7%

Physician & Clinical Services

21%

Rx Drugs10%

Other Healthcare Spending

18%

Admin & Net Cost of

Insurance7%

* 2007 projected

Components of U.S. Total Health Care Spending 2007 (Projected)

Prescription Drugs Account for Only 10 cents of every dollar spent on health care

Source: Center for Medicare and Medicaid Services : http://www.cms.hhs.gov/NationalHealthExpendData

44%

25%19%

12%

Hospitals &Nursing Homes

Physician &Clinical

Services

Other PersonalHealthcare

Rx Drugs

%

of

tota

l p

ers

on

al

he

alt

h s

pn

dg

gro

wth

'0

2 t

o'0

7

* 2007 projected

Increased Spending on Institutional Care and Physician Services is 5 times greater the growth in Spending on Rx drugs

Components of U.S. Personal Health Care Spending Growth 2002 to 2007*

Source: Center for Medicare and Medicaid Services : http://www.cms.hhs.gov/NationalHealthExpendData

Drug Safety Matters

US citizens buying product on the internet, in fact, cannot be certain where the product is coming from, if it is real, safe and effective or who and where the drug was manufactured.

Late last year, 57-year-old Marcia Bergeron ordered a package of what she thought was a generic form of a popular sleeping pill from an online pharmacy. A few days after Christmas, she died from a heart arrhythmia in her British Columbia home.Her liver was contaminated with fatal doses of metals such as aluminum and arsenic. Last month, the local coroner's office pronounced Bergeron a casualty of counterfeit drugs purchased from the Web.

Forbes.com August 20, 2007

U.S. Consumers Can Not be Certain of the Origins of Imported Drugs

As the value of the U.S. dollar has dropped relative to other countries The price differential between American and foreign drugs has dropped dramatically. Consequently fewer drugs entering the U.S. are likely to be sourced from Canada or other developed countries.

Purchasing drugs by mail order has become LESS safe since supplychains have become more stringently controlled.

There is also a growing recognition and acknowledgement that organized crime is actively engaged in drug importation.

Importation & Counterfeit Drugs

• Puts patients at risk because U.S. citizens buying drugs on the internet cannot be sure where the drug are coming from and by whom it was manufactured and if it is real, safe and effective

• Puts consumers at risk by evading supply chain safeguards

• Requires Americans to waive their rights to protection of U.S. law

2125

410

714

1157

200

88

217

65

13

All othercountries

India

China

Number of Establishments

Inspections (2007)Inspections (2002-2007)Total # of Establishments

Most foreign drug Ingredient manufacturers that export to the U.S. have never been inspected by the FDA

45.55%

87.68%

51.22%

0 20 40 60 80 100

All othercountries

India

China

Percentage of Un-inspected, Registered Foreign Establishments Manufacturing Drugs for the U.S. Market

GAO Subcommittee Testimony and Report: DRUG SAFETY - Preliminary Findings Suggest Weaknesses in FDA’s Program for Inspecting Foreign Drug Manufacturers (November 1, 2007)

As for FDA concerns that importation for personal us is unsafe, Gov. Pawlenty of Minnesota said:

"Show me the dead Canadians. Where are the dead Canadians?"

The reality is that, every day, all over the world, including Canada, people are harmed by counterfeit or sub standard medicines. Because of mail order importation Canada has become an attractive portal for foreign drugs to enter the U.S. market.

Importing Drugs : A Simplistic Approaches to Complex Issues of Safety

Although Most Internet Pharmacies in Canada sell Only to Americans, Counterfeit Drugs Can Enter The Regular Supply Chain in Canada

Canadian Pharmaceutical Imports from Selected Countries 2002 to 2006

$0.9

$0.4

$26.2

$18.3

$38.4

$9.7

$29.7

$37.2

$48.5

$80.1

Taiwan

Argentina

India

Singapore

China

$ millions

2002 2006

Industry Canada, Trade Data Online, www.strategis.ic.gc.ca, accessed Apr18, 2007

108% Increase

165% Increase

42% Increase

8082% Increase

1099% Increase

Importation Makes Attractive Portal to the U.S. Market for Foreign Drugs

Companies based in India were bit players in the American drug market 10 years ago, selling just eight generic drugs here. Today, almost 350 varieties and strengths of antidepressants, heart medicines, antibiotics and other drugs purchased by American consumers are made by Indian manufacturers.

Five years ago, Chinese drug-makers exported about $300 million worth of products to the United States. Eager to meet Americans' demand for lower-cost medicines, they, too, have expanded rapidly. Last year, they sold more than $675 million in pharmaceutical ingredients and products in the U.S. market.

THE WASHINGTON POSTJUNE 17, 2007

Promoters of Drug importation Have made America a Haven for Drugs from Developing Countries

Americans' Confidence in Drugs Manufactured in Developing Countries

Not Sure7%

Very/Somewhat

Confident30%

Not Very/Not at

All Confident

63%

Harris Online

Growing Awareness among American Consumers of the Dangers of Importation

Few people have participated in heavily promoted, politically drivenState sponsored or promoted importation schemes like I-Save-Rx

Minnesota’s importation plan was supposed to serve 700,000 consumers. In 2005, only 10,054 prescriptions had been filled.

Over 2 years only 3,689 consumers used the Illinois importation program.

In Wisconsin only 321 used the program, In Vermont there were 217.

Undermining the Regulatory Protection of Consumers

Importation schemes are politically driven efforts to circumvent laws designed to protect patients and consumers.

This includes:

• ignoring the regulation of the professional conduct of physicians and pharmacists in prescribing and dispensing medicines, and

• circumventing American and Canadian laws that guarantee the safety of the drug supply.

• mail order importation usually involves the use of foreign products that do not meet the requirements for FDA approval.

Safeguards that Ensure the Safety & Efficacy of the Drug Supply Chain

• Establishment licenses for legal importers

• Record retention and recall mechanisms

• Mutual recognition agreements for pharmaceutical GMP requirements

• Packaging and labeling requirements.

• The submission review process for individual products

Importation of Human Use Drugs for Personal Use Enforcement Directive

The personal use exemption unfortunately provides an opportunity for these suppliers to conduct commercial activities, and to evade the submission review process for individual products, and/or the Establishment Licence requirements for importers, by supplying their drug products primarily through the mail to individual Canadians. These activities at times may include violative marketing and advertising activities by means such as the Internet. This has ramifications related to safety because large quantities of products, which have not been reviewed for safety and/or efficacy, and which are of unknown quality, can enter the country and be distributed. The lack of an importer also means no person is responsible for meeting GMP requirements such as appropriate record retention or recall mechanisms.

Health Canada Warns Consumers of the Dangers of Evading Drug Supply Chain Regulation

Drugs Exported to U.S. May Not be Subject to Regulatory Oversight

37. (1) This Act does not apply to any packaged food, drug, cosmetic or device, not manufactured for consumption in Canada and not sold for consumption in Canada, if the package is marked in distinct overprinting with the word "Export" or "Exportation" and a certificate that the package and its contents do not contravene any known requirement of the law of the country to which it is or is about to be consigned has been issued in respect of the package and its contents in prescribed form and manner.

Canada’s Food &Drug Act

“In documents filed in Federal Court late last month, CanadaRX Corp. has asked a judge to prevent Health Canada inspectors from visiting its facility, calling the proposed inspection "invalid and unlawful" and a violation of the company's charter rights.”

Michelle MacAffee, Canadian Press, March 3, 2004

Importation & Liability

Mail order importers require patients to waive their rights of protection under US law before filling a prescription.

Before a prescription can be filled in Canada it must be signed by a Canadian doctor. Canadian doctors have been told by the agency that insures them that they have no liability coverage for prescriptions they write for US patients receiving imported drugs.

Additionally Canadian pharmacists have no requirement or obligation to carry liability insurance

Americans Waive Rights to Consumer Protection under U.S. Law

Americans are required by drug importers to sign a waiver relinquishing protection under U.S. law.

THE UNDERSIGNED, BEING OVER THE AGE OF 21, HEREBY:

Agrees that any dispute that arises between him/her and Discount Canada Drugs, and the Canadian Pharmacy its affiliates, related companies, subsidiaries, parent company, officers, directors, employees or agents shall be governed by the laws of the Province of Manitoba and the laws of Canada applicable to contracts formed in Manitoba and the undersigned agrees that the Courts of the Province of Manitoba shall have sole and exclusive jurisdiction over any such dispute.

U.S. $1 Conversion to Canadian Selected Yrs

2000 $1.49 Cdn.

2001 $1.57 Cdn.

2002 $1.59 Cdn.

2003 $1.35 Cdn.

2004 $1.35 Cdn.

2005 $1.17 Cdn.

2006 $1.12 Cdn.

2007 $0.95 Cdn.

Source: Bank of Canada, ww.bankofcanada.ca/en/rates/exchform.html

Lower Value of Increase the Prices of Legitimate Imports

Internet Drug Sales from Canada have Dropped 80% Over the last 3 Years

U.S. Internet Drug Sales from Canada

$595

$425

$112

2004 2005 2006

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