Overpriced and underregulated: the dark side of generic drugs

The attorneys general of 44 states have filed a lawsuit alleging that 20 major pharmaceutical companies conspired to manipulate and inflate the prices of at least 100 generic drugs in this country.

The lawsuit states an investigative report found that between July 2013 and July 2014, more than 1,200 generic medications had increased in price, on average, almost 450%. The drugs include tablets, capsules, creams and ointments used to treat a wide range of maladies and conditions including diabetes, high cholesterol, high blood pressure, cancer and epilepsy.

Some drugs increased over 1,000% in cost, and the price of doxycycline (a drug used to treat a skin condition) jumped from $20 to $1,829 in one year — an increase of over 8,000%. The cost of generic drugs is a significant component of overall health expenditures as these pharmaceuticals account for approximately 90% of the American drug supply.

Stacie Dusetzina, who studies drug pricing at Vanderbilt University, states that even if patient co-pays rise modestly because of these increases, insurance companies are spending much more for prescription drug coverage and this cost will be passed on to consumers as higher health plan premiums.

Attorney General William Tong of Connecticut alleges that pharmaceutical company representatives met regularly at industry dinners and golf outings where they discussed “competitively sensitive” company pricing information. The lawsuit alleges that “Reciprocal sharing of information greatly facilitates agreements among competitors … to avoid price competition.”

Tong said his office has emails, text messages, telephone records and statements from former company insiders “we believe will prove a multi-year conspiracy to fix prices and divide market share” for a significant number of generic drugs.

With the high and increasing cost of generic drugs, one would assume the quality of their ingredients and the accuracy of the stated potency of these medicines were beyond reproach. In her book “Bottle of Lies: The Inside Story of the Generic Drug Boom,” investigative reporter Katherine Eban challenges the Federal Drug Administration’s claim that it holds foreign plants (mostly located in India and China that manufacture 80% of this country’s drug supply) to the same standards it does to drug making facilities in this country.

Over the course of her research, Eban interviewed more than 240 people, including FDA inspectors. Eban relates the drug manufacturing inspection work of FDA employee Peter Baker, who spent six years examining factories in India and China. She notes that Baker uncovered “the dangerous compromises behind the production of generic drugs and the FDA’s limits as a drug regulatory agency.”

On his second day at the manufacturing site of the Indian company Wockhardt, Baker and a colleague caught an employee attempting to smuggle out a garbage bag full of documents. This led Baker to discover the plant had knowingly released into the Indian, as well as other, foreign markets vials of insulin containing metallic fragments likely caused by a defective sterilizing machine. He learned that Wockhardt had been using the same defective equipment to make a sterile injectable cardiac drug sold in the U.S. Two months after the Wockhardt inspection, the FDA banned the import of drugs from that plant.

How many drug manufacturing violations were successfully hidden from Baker and other FDA inspectors working overseas?

Eban states that over the next five years Baker discovered fraud and deceptive practices in almost 80% of the Indian and Chinese facilities he inspected. “Some of the plants used hidden laboratories, secretly repeated tests and altered results to produce fake data that fundamentally misrepresented drug quality, then submitted that data to regulators.” Inspectors were given contaminated water that sickened them during the course of plant tours and their hotel rooms were wiretapped in an effort to determine how they were planning to conduct an upcoming inspection. Investigators spoke of inappropriate perks such as hotel upgrades (for which they were never charged), golf outings, massages and trips to the Taj Mahal. FDA employees referred to these attempts to secure favorable reports as “regulatory tourism.”

It’s surprising so many gross violations were discovered as the “vast majority” of foreign inspections are announced to drug manufacturers weeks and sometimes months in advance. Eban states the FDA permits (and defends) scheduled regulatory inspections to minimize diplomatic tensions. In the U.S. investigators typically show up at a drug manufacturing plant unannounced.

Knowing the equivalent of an FDA does not exist in most African countries, some manufacturers ship their lowest-quality drugs to these impoverished nations. Some drugs are completely counterfeit, with no active compounds, while others don’t have sufficient quantities of the stated ingredients. Eban cites a report that found African physicians often had to prescribe between two and 10 times the typical dose to achieve the stated effect of the drug.

So how do you protect yourself from the problems associated with some drugs manufactured in India and China? It’s not easy. Purchase anything from a pair of socks to luxury automobiles, and the product is almost always marked with its country of origin. Not so with pharmaceutical drugs. Because the supply chain is complex and a drug’s ingredients can come from multiple plants in numerous countries, the FDA generally defines a drug’s country of origin as the last stop in the manufacturing process. That is, where the ingredients were combined and/or the drug prepared for distribution. Although labeled “U.S.” some or all of the ingredients in a drug may have originated in India, China and/or other countries.

Katherine Eban states that when Peter Baker left the FDA in March of this year, he told a colleague that if people knew how some of the drugs from overseas were manufactured, “no one would take them.”

David Gortler, a pharmacist and former FDA medical officer, states that because consumers are looking for the least expensive prescription drugs, the major chain pharmacies are “motivated to purchase the cheapest low-quality generic drugs they can get a hold of, from whatever sweatshop country is having a ‘fire sale’ on the generic drug they need.”

Rohit Deshpande, a marketing professor at Harvard University, notes the pharmaceutical industry does not want consumers to know where drugs originate. “The moment people find out these products largely come from China and India, they want to know why they’re not cheaper. … The industry’s motivation is hiding this to maintain very high prices.” A second motivating factor, I would argue, is that big pharma does not want consumers questioning the quality control procedures of drugs manufactured in developing-world sweatshops.

Why doesn’t the government mandate that drug manufacturers list every country involved in the process of making drugs as Americans consume prescription tablets and capsules by the tens of millions every day? Perhaps it has something to do with the $4 billion big pharma has spent on lobbying over the past 20 years, according to the Center for Responsive Politics.

As Sheila Krumholz, executive director of the CRP, notes, the question isn’t whether the billions spent on lobbying and campaign donations influenced the drug policy decisions of our elected officials, but “how much?”

George J. Bryjak lives in Bloomingdale and is retired after 24 years of teaching sociology at the University of San Diego.


Bartz, D. (May 11, 2019) “U.S. states accuse Teva, other drugmakers, of price-fixing: lawsuit,” Reuters, www.reuters.com

Eban, K. (May 11, 2019) “Americans Need Generic Drugs, But Can They Trust Them?” New York Times, www.nytimes.com

Gortler, D. (June 15, 2018) “Generic Drug Quality vs. Generic Drug Prices: How the FDA Fails Us,” Op-Med, https://opmed.doximity.com

Lambert, J. (May 12, 2019) “‘Bottler of Lies’ Exposes The Dark Side of the Generic Drug Boom,” National Public Radio, www.npr.org

Lazarus, D. (May 15, 2019) “Where to prescription drugs come from? Good luck answering that question,” Los Angeles Times, www.latimes.com

Rajagopal, R. (April 19, 2019) “Indian exec ‘named’ in U.S. pharma case,” The Economic Times, https://economictimes.indiantimes.com

Scutti, S. (May 13, 2019) “Generic drug companies, executives slapped with price-fixing” CNN, www.cnn.com

Simmons-Duffin, S. (May 13, 2019) “States Sue Drugmakers Over Alleged Generic-Price-Fixing Scheme” National Public Radio, www.npr.org

“The Generic Drug You’re Taking May Not be as Safe as You Think” (May 16, 2019) National Public Radio, www.npr.org


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