Drugmakers played unintended role in counterfeits hitting U.S.

Call it the law of unintended consequences. Efforts by drug companies to quell the movement of less expensive drugs from Canada to U.S. consumers via online pharmacies set the stage for the counterfeit Avastin that was found this year at dozens of physician practices in nearly half the states in the U.S.

In 2003, when drug companies cut off supplies of price-controlled drugs to the online pharmacies from legitimate drug wholesalers in Canada, the pharmacies didn't close up shop. They just started looking for new supplies of cheap drugs in places like India and Turkey, countries with less oversight, according to an investigation by The Wall Street Journal. And while some of them made efforts to protect against buying fake drugs, their efforts were not foolproof.

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. 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. That changed in 2003, when Canadian suppliers were prohibited from supplying the online pharmacies, so they looked elsewhere. Thorkelson's brother-in-law, Thomas Haughton, set up a company in Bermuda to find new supplies. In March, he acknowledged that his overseas companies, which source drugs from around the world, were part of the supply chain that shipped the drugs. He claims that he had no idea they were counterfeit and alerted authorities when he discovered they were.

They came into the U.S. through a unit of Thorkelson's companies set up to sell to physician practices, the newspaper reports. That came as Medicare and insurers in 2005 cut reimbursements they paid doctors for many of the drugs they gave to cancer patients, 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. Thorkelson 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 in Miami, 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 was believed to have sold his company and headed to the Caribbean after U.S. authorities accused him of selling counterfeit medications. Before he left, he sold his company to Thorkelson.

- here's the WSJ story

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