Democracy Lab

The Great Pharmaceuticals Scam

India has a problem with substandard drugs -- and American regulators are allowing them to be imported into the United States.

Eight years ago, I was emailed by a whistle-blower at the big Indian pharmaceutical company Ranbaxy who claimed that the company had falsified data on drugs destined to be purchased with U.S. tax dollars. Most of the problems were with HIV medication sold to Western donors for use in Africa. But the more I probed, the more problems I found.

I was obviously not alone in my concerns. In 2010, after several years of investigations, the U.S. Food and Drug Administration (FDA) restricted the sale of some 30 Ranbaxy pharmaceuticals in U.S. markets. This was embarrassing for all concerned because Ranbaxy had been granted the exclusive six-month generic license to produce Lipitor, Pfizer's blockbusting anti-cholesterol drug, when it came off patent last November.

Ranbaxy says it has cleaned up its act, and perhaps it has. But the case raises a broader question -- one likely to become increasingly troubling as emerging-market pharmaceutical companies that manufacture generics expand their market shares in both developed and developing countries: How can we know for certain?

The question is particularly apropos for India, which is becoming a global powerhouse in generic drugs and depends on their regulatory watchdog, the Indian Central Drugs Standard Control Organization (CDSCO), that has been labeled corrupt by India's own Parliament. So while India is home to a number of reliable pharmaceutical manufacturers, a regulator known for unsavory collusion with less reliable ones continues to cast doubts on the quality of Indian-made drugs.

Even in the United States, and despite FDA regulation, there is evidence that quality control in imported generics is a significant problem. Consider the experience of Dr. Harry Lever of the Cleveland Clinic, who (like all cardiologists) uses diuretics, including furosemide, to help prevent heart failure. Some of my patients, recalls Dr. Lever, "were taking the brand medication [Lasix], then under cost pressure from insurers; I switched them to a generic and they reacted very badly. Only when I switched them back did they recover."

Dr. Lever, and virtually every other practicing physician in America, used to assume that generic drugs were as reliable and effective as the brand-name versions. After all, before generics can be sold in the United States, manufacturers must prove to the FDA that their medication works the same as the original drug.

However, my own field research suggests that in emerging markets (including India and China), companies capable of making high-quality drugs do not always do so. In a recent peer-reviewed paper on antimalarials sold in Africa, I concluded that companies were selling lower-quality medications to markets with weaker regulatory structures. Importing nations like Ethiopia or Angola ended up with a higher percentage of substandard doses than richer markets like Brazil or Thailand, where regulators do check for quality.

But why should the problem affect the United States? After all, the FDA built its reputation for policing new-drug quality by rejecting the anti-nausea medicine thalidomide in the late 1950s. Thalidomide was later shown to have caused horrific birth defects across Europe, where it had been approved. The agency has always concentrated efforts in ensuring the safety of new drugs, and has largely succeeded.

But the FDA does very little surveillance of products already on the market. It is assumed that once a manufacturer has attained the required standard, it will be maintained. The FDA does monitor production plants, inspecting U.S.-based producers every two years. But FDA monitoring in India or China, the biggest emerging-market producers, is extremely limited. At best, the agency shows the flag once a decade. This is partly because FDA staff must volunteer to undertake inspections abroad; it is not a mandated part of the job. Traveling to India and China is tiring and stressful -- and, unlike in the United States, inspectors are not given unfettered access to production facilities so their inspection reports have to be more qualified. Moreover, if a plant manager is given several days' notice of an FDA visit, many problems can probably be covered up.

Note, too, that the FDA took several years to restrict sales of Ranbaxy's products and probably devotes too few resources in responding to complaints after drugs have been approved. It's not surprising that Dr. Lever's complaints have so far not led to the removal of any drug from the market.

Indian companies make some of the best, and undoubtedly cheapest, generic drugs in the world. But with over 100 hundred medium-to-large manufacturers, competition can be cutthroat. Even a small cost advantage can mean winning a large tender for government hospitals at home, or a $100 million-plus order overseas.

Earlier this summer, the Indian Parliament published a report concluding that CDSCO officials illegally colluded with domestic and foreign pharmaceutical firms to speed up the medicine approval process. In one chilling finding, the report found that the CDSCO approved at least 31 drugs that had never undergone adequate clinical trials. The report also cited several examples of bogus product letters recommending CDSCO approval. These letters were purportedly written by independent experts thousands of miles apart, yet were "word to word identical."

Such exposure may do some good, but it would be naive to think that the airing of this scandal will reduce corruption by much (or for long) in a culture that has always tolerated corruption -- and in an agency in which the opportunities for corruption are everywhere and the payoffs can be enormous.

The CDSCO's first priority should be removal of dangerous drugs from both the domestic and export markets. But its own "Report on Countrywide Survey for Spurious Drugs," published two years ago, denies the problem exists. It found only 11 fakes from a sample exceeding 24,000.

My research team's work over the past five years, sampling from 90 pharmacies in four Indian cities, found that around 6 percent of the drugs on the Indian market were of substandard quality. Some were outright fakes with no active ingredients, but most were legal products that had been manufactured poorly. My results echo the Indian government's own yearly assessments through the 1990s and 2000s, which found failure rates of 5 to 10 percent.

Yet if the CDSCO is to be believed, India's drug quality problems suddenly vanished in 2010. Vijay Karan, former chief of police in Delhi who made combating dangerous drugs a priority, explains the discrepancy: Pharmacists had apparently been warned in advance, so they knew to offer only the best when the inspectors arrived.

But, as noted above, India is not alone in lacking effective oversight. Most governments, including Washington, focus on monitoring a drug at the approval stage rather than systematically assessing quality coming off the production line. Not surprisingly then, manufacturers put their resources into passing muster before production begins.

Occasionally, administering substandard drugs to very ill patients leads to fatalities. A larger problem, though, is that low-potency antibiotics and other anti-infective drugs don't heal infectious diseases -- but do drive the offending microbes to adapt. That's one reason India faces a large and growing problem with antibiotic resistance (notably to tuberculosis medicines), forcing health officials to accelerate use of more expensive alternates that should be husbanded. Sometimes doctors have to acknowledge that there are no treatments left. Patients often remain quarantined until they die.

Emerging markets -- in particular, India and China -- have the potential to produce most of the generic drugs in the world at the least cost, leaving rich countries to specialize in inventing new ones. It would thus be in the collective interests of the national industries (and their governments) to set high standards and to enforce them.

But corruption has a way of triggering races to the bottom, in which the failure to control quality undermines the reputation of all and reduces the incentives of high-standard producers to maintain quality. However quality-control issues play out among regulators and politicians in emerging markets, it is increasing obvious that, with 40 percent of generics used by Americans being produced elsewhere, the FDA can no longer afford to leave the job of quality control to the exporting countries.

Voluntary foreign-inspection trips by FDA staff will have to change. When staff join the Foreign Service at the State Department, they know that they will have to spend some time abroad, often on two-year rotations. The same should be expected of those who work for the FDA.

Photo by AFP/Stringer/Getty Images


The Somali Spring

Is the poster child of failed states finally getting its act together?

After the twin suicide attacks that killed 14 people in Mogadishu last week and an assassination attempt on the president a little more than a week before that, predictions of a Somali Spring would seem to be, at the very least, premature. But buried beneath the grisly headlines of the last few weeks was some unexpectedly good news: The newly appointed Somali parliament elected Hassan Sheikh Mohamud to serve as the first post-transition head of state. This is a seismic event in Somalia -- but not for the reasons many observers presume.

Mohamud's election does not signal an end to Somalia's 21 years of state collapse. Nor will it bring a quick end to the country's systemic political violence. The new president is taking the reins of a failed government that exercises only nominal control over the capital, Mogadishu, and faces a real, if diminished, threat from the al Qaeda affiliate al-Shabab. Even in a best-case outcome, it will take years for the government to extend and deepen its authority. And though it brings to a conclusion Somalia's deeply flawed, eight-year political transition, Mohamud's new administration must still take on a host of difficult, unfinished transitional tasks.

The real significance of Mohamud's election -- as well as the election two weeks earlier of Speaker of Parliament Mohamed Osman Jawari -- is that it demonstrates that Somalia's civil society is alive and well, after years of political violence that forced many of Somalia's best and brightest to flee the country or withdraw from public life. The election constituted a well-executed civic mobilization against the corrupt, illegitimate government of transitional President Sheikh Sharif Sheikh Ahmed and the mafia that surrounded him. According to U.N. investigations, 70 percent of foreign aid and other revenues flowing to Sheikh Sharif's transitional government in 2009 and 2010 went unaccounted for, earning Somalia the top spot on Transparency International's 2011 ranking of the world's most corrupt governments.

This may be the start of a Somali version of an Arab Spring, with all the uncertainties that entails. It has involved no street protests and no bullets, just ballots -- and a lot of commitment, savvy, and collective action by a coalition of professionals and civic leaders who jumped into what looked like a fixed game and beat the incumbent.

Practically no one saw this coming. The last year of the Transitional Federal Government was grim. Key transitional tasks -- like the drafting of a constitution -- were rammed through, circumvented, or only partially completed; the transitional government was paralyzed by infighting and corruption; and the country was emerging from a serious famine. Desperate to produce a sitting parliament, U.N. diplomats engineered what became known as an "appointocracy" -- appointees appointing appointees. Understandably, the process had little legitimacy in the eyes of Somalis.

Most observers were convinced that appointed members of parliament would be in the pockets of Somalia's "moneylords" -- a quarreling, dysfunctional coalition of political entrepreneurs who have used control over transitional-government finances to rent allegiances and enrich themselves since 2009. Instead, a combination of nationalists, moderate Islamists, business people, and cross-clan interests outmaneuvered Sheikh Sharif and his supporters. Mohamud, a civil society leader, educator, and peace-builder, emerged as a finalist in a runoff vote against Sheikh Sharif and won resoundingly.

Critics of the vote argue that money was passed around by both sides, and they are probably right. But what matters is this: In a power struggle between two rival coalitions, the "constructive elite" -- the group known and admired for having built universities, hospitals, charities, and businesses in the country during the long civil war -- defeated a parasitic elite coalition that had devoted all its energies to diverting public funds.

Mohamud's victory electrified Somalis and both surprised and relieved the international community. Only two groups emerged as losers: the moneylords and warlords who sought to maintain the status quo, and al-Shabab.

Al-Shabab has taken a big hit with this election. For years, the corruption and misbehavior of the transitional government was one of the jihadi group's biggest recruiting tools. Many angry and disaffected Somalis passively supported al-Shabab, in part because the alternative was so uninspiring. Now that support could evaporate as Somalis rally behind the new government. Mohamud's government thus poses an existential threat to al-Shabab, which, though weakened, is still capable of carrying out devastating terrorist attacks. As a result, we should expect al-Shabab to take desperate actions to attack and discredit the government, including widening its terrorist campaign into neighboring countries.

But Mohamud's government must also wage a rear-guard battle against the mafia of marginalized warlords and moneylords. They have demonstrated a willingness to resort to intimidation and political violence, and they could end up being as great a danger to the new government as al-Shabab.

Yet for all the challenges, this is a critical window of opportunity -- and the international community must approach it with the right policies. These cannot be the usual gift box of good-governance and rule-of-law foreign aid. More than anything else, Mohamud's administration will need political space. Somalis want to own their government and its policies. They want an end to warlordism and jihadism, but they also want an end to foreign domination. Mohamud will be under domestic pressure to reduce the influence of the United Nations and donor states, and gradually to exert more say in the operations of the African Union peacekeeping forces in Somalia. Outsiders need to respect Somalis' desire to reclaim their sovereignty and need to let the new government take the lead in proposing mechanisms to improve accountability and good governance.

The international community should also anticipate the possibility that Mohamud's government will reach out to "redeemable" wings of al-Shabab with an eye for reaching a negotiated settlement. Now that a post-transition government is in place and al-Shabab is sufficiently weakened, this may be a good moment to attempt that strategy. Mohamud may also have to cut deals with some of the moneylords and warlords to keep the peace.

These and other policies may create anxiety in neighboring states and Western donor countries, but foreigners need to understand and accommodate the complex negotiations among Somalis that will come next. Mohamud is a decent and experienced man who has the respect of Somalis at home and in the diaspora. If ever the stars were aligned for Somalia to emerge from its 20-year crisis of war and state collapse, this is it. Let's try not to get in the way.