Study finds substandard drugs cheaper than fakes

Research from the American Enterprise Institute shows that substandard drugs averaged nearly 20% cheaper than their high-quality generics counterparts. Counterfeit drugs, meanwhile, averaged less than 1% cheaper than the authentic drug.

The findings validate earlier work done by Legatum Fellow Roger Bate at the institute. The results, he says in the paper, may signal that fighting substandard drugs "may be easier than at first thought." Price information is "relatively easy" to get, according to the paper, and it could be a tip-off about substandard drugs in a market.

He finds also that, based on a theoretical cost analysis, the incentives for producers and distributors of substandard drugs are "quite different" from those of counterfeit drugmakers.

In September, Bate reported research findings suggesting that the low-price overlap of bona fide generics and substandard drugs can wrongly imply that all low-cost drugs will probably work. This earlier research identified substandard samples that were priced 14% to 19% lower than nonfailing drugs.

This time around, Bate separated the substandard drugs from the fakes. He reports in the paper that 15 of a total 899 samples "were almost certainly substandard since they either contained the right amount of ingredients but were poorly formulated, or contained an incorrect but non-trivial amount of ingredients." In all, 135 of the 899 samples failed quality control; 57 were determined to be either fake or substandard while 42 were confirmed counterfeits. He compared the latter to legitimate versions of the products available locally.

- see the paper (PDF)