Search for cheap prices sets stage for more counterfeit drugs

As Canadian online pharmacies morphed to protect their business model, they also became more vulnerable to counterfeits from places such as India and Turkey, where they turned for cheap supplies. That and changes in U.S. drug reimbursements set the stage for the importation of fake Avastin, which this year made its way to dozens of physician practices in nearly half the states in the U.S. and put patients at risk.

U.S. authorities in February alerted the public that fake versions of Roche's ($RHHBY) cancer drug Avastin, which contained no active ingredients and so were of no medical benefit, had been discovered in the U.S. An investigation by The Wall Street Journal finds that companies tied to Kris Thorkelson, the owner of the popular website Canadadrugs.com, were the sources of the counterfeit Avastin, which was acquired by 76 clinics in 22 states. The investigation into where the Avastin originated and how it made it into the U.S. is ongoing and neither Thorkelson nor his companies have been charged in the case.

According to The Wall Street Journal, when Thorkelson first started his companies in 2001, they sourced their drugs from suppliers in Canada, where prices were lower than in the U.S. because of price controls in that country. But in 2003, when drugmakers cut online pharmacies off from Canadian supplies, his companies began seeking supplies in other countries with less regulation, such as India and Turkey. And although the company took steps to protect against counterfeits, those efforts were not foolproof. Thorkelson's brother-in-law, Thomas Haughton, in March acknowledged that his overseas companies, which source drugs from around the world, were part of the supply chain that shipped the drugs but says he had no idea they were counterfeit and alerted authorities when he discovered they were.

While Thorkelson's companies initially targeted individual consumers, it later began a unit to sell to physician practices, the newspaper reports. That came as Medicare and insurers in 2005 cut reimbursements they paid doctors administering many cancer treatments, giving physicians a motivation to look for cheaper suppliers. One doctor tells the newspaper that it became impossible to make money administering drugs bought at U.S. prices. All of these factors culminated with the counterfeit Avastin being shipped into the U.S. He reportedly has now closed that unit.

Authorities globally have been trying to figure out how to attack the growing problem of counterfeit drugs making their way to consumers through this unregulated end-run around the legitimate supply chain. Thorkelson is not the only drug supplier that authorities have had their sights on. In June, the feds arrested Andrew Strempler on charges that he and his former Canadian online pharmacy, RxNorth.com, had sold and shipped to U.S. consumers fake and misbranded drugs between early 2005 and the summer of 2006. Strempler sold his company to Thorkelson in 2006, and was believed to have hightailed it to the Caribbean after U.S. authorities accused him of selling counterfeit medications. He was arrested in Florida.

The dangers of counterfeits are likely to escalate as the pharmaceutical industry continues to grow globally. As FDA spokeswoman Sarah Clark-Lynn tells The Wall Street Journal: "The recent counterfeit incidents highlight vulnerabilities in the drug-supply chain and the possible health risk to patients if medical practices are choosing to buy unapproved drugs from a foreign supplier."

- here's the WSJ story

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