Healthcare Commentary from Patrick M. Schmidt President and CEO of FFF Enterprises

The New Drug War: Battling Counterfeit Drugs

My company, FFF Enterprises, a biopharmaceuticals drug distributor, is best known for our long-term commitment to defining a safe and responsible channel for the distribution of drugs. Some of our colleagues, however, have suspected that our insistence on a defined responsible channel was more marketing ploy than concern for patient safety — until the recent rash of counterfeit drug cases affecting the nation.

“Repackager Recalls Counterfeit Lipitor,” “Fake drugs show up in U.S. pharmacies: As prescription prices rise, counterfeiters chase profits,” “Former convicts try a safer venture: pharmaceuticals.” These are just a few of the many headlines this year.

The good news is that the problem has captured everyone’s attention. The FDA has established an Anti-Counterfeit Drug Initiative, and we are beginning to hear about proposed technological, regulatory and legislative solutions that could provide important hurdles to counterfeiting.

The bad news is that such solutions are treating the symptoms of a larger, more fundamental problem:

ill-defined, irresponsible distribution. We must address this fundamental problem, because it is irresponsible distribution that opens the supply channel to illicit behaviors such as counterfeiting.

Irresponsible distribution is the result of two things: the "gray" marketplace and bad intentions. There is indeed a gray market for pharmaceuticals. You may be surprised, though, that the gray market is perpetuated by both bad guys and good guys, all of whom engage in purchasing practices that directly create opportunities for counterfeiting, tampering, drug diversion and theft of drugs.

Drugs are diverted to the gray market when: manufacturers move inventory quickly at the end of a quarter, and will sell to anyone who can pay; hospitals and physician offices sell over-stocked drugs back into the marketplace; wholesalers and distributors see a chance to make a quick buck by selling product to each other.

When drugs are diverted into the gray market, they are no longer safe because, in the shadowy landscape of the gray market —

where drug lot numbers aren’t tracked, prices are irrational, and safety is not a consideration — these drugs are now vulnerable to mishandling, tampering, counterfeiting, and unfair pricing. Worse, they put patients’ lives at risk. Yet, counterfeiters do not care about patient risk. They are just waiting with open arms for those drugs to cross the line into gray.

Unfortunately, there is no anti-counterfeiting measure, however high-tech, that will eliminate bad intentions: Criminals always find a way to overcome the hurdles put in their way. But, there is a way to eliminate the gray market.

If every entity along the distribution channel — manufacturers, wholesalers, distributors, hospitals, pharmacies and physicians —

if we all adhere to a safe and reasonable standard of distribution, there cannot be a gray market.

This standard is simple.

My company calls it the “Responsible Distribution Channel.” Drugs in the “Responsible Distribution Channel” move only from the manufacturer to a sole distributor to the healthcare provider — with no gray in between. This guarantees channel integrity.

Clearly, the battle against counterfeit drugs must be waged on multiple fronts, but we believe the ultimate weapon is distribution channel integrity. When channel integrity is guaranteed, patient safety is secured.

The Responsible Distribution Channel is achieved in three low-tech, but high-concept, steps:

Manufacturers, distributors and customers must embrace and honor the highest standard of channel integrity: Drugs move only from the manufacturer to a sole distributor to the healthcare provider.

This standard must be formally recognized.

And, the FDA must endorse this standard.

I will be delivering this message to the FDA at a public meeting on Wednesday the 15th, because I know that when we take these steps, we will restrict the flow of drugs into the gray market, and keep them out of the hands of counterfeiters — before they have a chance to undermine a tamperproof device, disable a drug authenticator or counterfeit a barcode.