DDP Newsletter May 2019 Vol. XXXV, No. 3
Drug addiction is devastating. Drug dependence may be unavoidable—as with insulin-dependent diabetics. Modern medicine depends on the availability of life-saving drugs. And the U.S. now depends on China for most drugs. The U.S. even lacks the capacity to produce penicillin, as Rosemary Gibson reveals in her book China Rx: Exposing the Risks of America’s Dependence on China for Drugs.
In 1988, Oak Ridge National Laboratory published Expedient Antibiotic Production: A Final Report. This includes a how-to guide to build/rebuild antibiotic production facilities if they were damaged or destroyed. It has a map of the location of such production facilities in relation to a possible nuclear attack on industrial or military facilities.
Today, most of this capacity is gone, as manufacturing has been outsourced to the cheapest supplier. In 2004, the last U.S. penicillin production facility, in Syracuse, N.Y., closed. It was also making the starting material for cephalosporins. Launched in 1943, the facility had made 70% of the world’s penicillin until the mid-2000s.
In the 1980s, the Chinese government began to invest in the production of penicillin ingredients, and by 2001 had built vast industrial capacity. China had the great advantage of rules that tolerate massive air and water pollution, and antibiotic production is dirty industrial work. From 2004-2006, Chinese companies dumped penicillin ingredients on the global market at very low prices. After competitors were driven out of business, prices increased spectacularly in 2007.
Something similar happened to U.S. steel production, but the steel industry advocated for protection. No one advocated for protecting the antibiotic production base. “Antibiotic stewardship” is now urged to reduce usage in order to minimize development of resistance; why not stewardship of production capacity, Gibson asks.
After the 2001 anthrax attacks, the U.S. government bought 20 million doses of doxycycline. The European company that supplied the U.S. military obtained the starting material from a plant in China. The other antibiotic useful in anthrax, ciprofloxacin, requires a chemical for which China is the largest exporter. The active ingredient for vancomycin, needed for C. difficile and resistant staphylococcal infections, is also made in China.
The U.S.-China Trade Relations Act of 2000 removed tariffs on goods from China. Within 4 years, the last penicillin fermentation plant closed; the vitamin C cartel formed in China and drove U.S. prices up 600%; the last U.S. aspirin manufacturer closed when cheap Chinese product flooded the market; lethal heparin imports began.
After 80 patient deaths were tied to tainted heparin in 2008, Chinese authorities promised to crack down on suppliers, but illegal ingredients are still an open secret.
It is far more expensive to inspect a facility located abroad. The average cost is $52,000 compared with $23,000 in the U.S. China may refuse access to inspectors, and producers in China may submit false documents and refuse audits.
Instead of using soybean oil to make the initial building block for cephalosporins, some producers used “gutter oil” from restaurant frying pans, grease traps, and sewage drains. A criminal racket sold 100 tons of it to unnamed pharmaceutical companies.
Censorship of unfavorable news is routine in China. In 2015, a massive explosion at a Tianjin chemical warehouse created fireballs so huge they were detected by satellite, raining down a toxic chemical brew. The FDA warned companies purchasing drug products from the area to check for contamination, but declined to reveal the contaminants to check for or the names of potentially contaminated drugs. An online search revealed that Tianjin Tianyao Pharmaceuticals makes prednisone and other anti-inflammatory products used to treat asthma, allergies, arthritis, and multiple sclerosis. Four months after the explosion, shipments of drugs contaminated with hydrogen cyanide were stopped.
Dangers of contamination and counterfeits notwithstanding, drugmakers cannot at present do without active pharmaceutical ingredients (APIs) from China.
“If China stopped exporting [APIs] to the U.S., within three months all the pharmacies would be empty,” stated Guy Villax, CEO of Hovione.
In some cases, known defective medications have been left on the market because of a lack of alternatives to life-saving drugs.
Even if the drugs are safe, a highly centralized global supply chain may result in shortages. A diversified manufacturing base and a shortened supply chain are imperative as a matter of national security, Gibson writes.
Gibson recommends the online pharmacy Valisure, which tests all the products it sells for certain impurities and for correct dosage.
HIGH PRICES, ESSENTIAL DRUG SHORTAGES
The prices of essential medications, such as insulin and even of generics that have been on the market for decades, have been sky-high. Patients can pay more than $400/month for insulin that costs $18 to manufacture, three times as much as in 2002! Hospitals have also been experiencing shortages of critical drugs and supplies such as anesthetics and intravenous solutions.
“Doctors and hospitals are rationing drugs, and patients are being forced to use substitutes that are less effective or more expensive, or both,” write Robert A. Campbell, M.D., and Philip L. Zweig, M.B.A., of Physicians Against Drug Shortages. “Lately, this crisis has reached a new level of absurdity: the U.S. is now importing sterile saline solution (a.k.a salt water) from Germany, Norway, Spain, Brazil and Mexico, and sodium bicarbonate solution from Australia! Drug shortages and astronomical prices are nothing less than a public health emergency” (https://tinyurl.com/y32tqasj).
Reasons for this include coverage of pharmaceuticals by third parties, especially Medicaid and Medicare Part D, bringing in middlemen such as Pharmacy Benefits Managers (PBMs). In return for getting a drug placed on the formulary, PBMs receive a “rebate” (kickback) that is shielded from anti-kickback laws by “safe-harbor” rules. PBMs could add $100 billion per year to spending for prescription drugs. The higher the list price, the bigger the “rebate.” Single-source contracts negotiated by PBMs also help to drive potential competitors out of the marketplace (https://tinyurl.com/y6a962vl).
Three PBMs account for more than 80% of the market, according to the Council of Economic Advisors (https://tinyurl.com/ya62ukd6). More than 20% of spending on prescription drugs was taken in as profit by the pharmaceutical distribution system. The size of manufacturer rebates and the percentage of the rebate passed on to health plans and patients are kept secret. Insulins and drugs to treat hepatitis C have “rebates” of 66% and 62%, respectively (JAMA 4/23-30/19).
Another factor in high prices, CEA recognizes, is government regulations that prevent, rather than foster, healthy price competition. Additionally, the fixed cost of bringing a new, patented drug to market has increased rapidly, to about $2.6 billion.