Tony Cenicola/The New York Times/Redux

Fixing Generic Drugs With Voluntary Privatized Regulation


larry fisher, a former New York Times reporter, writes about business, technology and design.

Published March 14, 2022


Last time you bought a new cordless drill you probably looked at reviews on Wirecutter or Consumer Reports to learn how well it does the job. When you order fish-and-chips to go, you probably check with Yelp or TripAdvisor to see whether other customers regretted their purchases. But for the generic drugs you take, you have no way of knowing where they were made and with what raw materials, if the per-tablet dosage is correct — or even if they contain the right drug.

Ignorance is most definitely not bliss. As journalist Katherine Eban documented in her 2019 book, Bottle of Lies, many generic drugs are not what they purport to be or are contaminated with impurities including known carcinogens. The Hatch-Waxman Act of 1984 was a well-intentioned piece of bipartisan legislation aimed at easing drug prices by streamlining the introduction of generic versions of drugs once their patents expired. But it set off a race to the bottom. On the one hand, government inspections are rare; on the other, the pressure for profits is unrelenting.

Eban’s work prompted a few headlines, but the issues persist and there is little that you, your physician or your local pharmacist can do about it. The generic drug supply chain is so extended and opaque that searching for the culpable parties for contamination or mislabeling is akin to a trip through a funhouse hall of mirrors. And while Washington does have the authority to toughen the rules, passing legislation to mandate anything — let alone increased surveillance and accountability — is a longshot in today’s political environment.

But there is a ray of hope. Clever people in both the commercial and not-for-profit worlds are pursuing non-government fixes — and with some early successes. Just as organically grown vegetables were once a niche category but are now sold everywhere, “certified safe” drugs could become a thing. Indeed, independent guarantees of drug purity and dosage could give a major pharmacy chain a way to stand out in a competitive, commodity-like market where price has become all. Alternatively, a new entrant — perhaps a company with a known internet platform brand — could turn the market on its head.

Safe and Effective?

When a biopharma company files a New Drug Application with the Food and Drug Administration, the candidate drug must complete three phases of human clinical trials. Phase One is a small study using healthy volunteers to find out whether a drug is safe. Phase Two is also small, but conducted in patients to establish efficacy as well as to confirm safety. Phase Three is a large trial in multiple clinical settings to confirm safety and efficacy, as well as to determine optimum dosage. Potential drugs can fail at any phase — and most never make it through.

Prior to Hatch-Waxman, a new generic had to run this same gauntlet. But the new law included a provision, the Abbreviated New Drug Application, that absolved generics from clinical trials altogether. Manufacturers only had to show that their molecules were chemically equivalent to the branded version. The FDA, for its part, does no independent verification. It relies on the companies’ own documentation, hoping that the foxes will voluntarily spare the henhouse from harm.

Hatch-Waxman did lower drug prices, and often dramatically. But the law of unintended consequences never sleeps. Generics have captured 90 percent of the U.S. drug market. Globalization and extended supply chains mean 40 percent of those drugs are manufactured in India, and 80 percent from raw materials made in China or India. The FDA does inspect the manufacturing sites of both branded and generic drugs, but it counts on the companies’ own documentation of drug purity. And while inspectors show up unannounced in the United States, Asian manufacturers won’t let inspectors in the door without ample warning — so the FDA cooperates.

The Case for Quality

The lack of oversight is actually even more lacking than it appears. “Due to staffing issues and Covid, by the end of last year over 40 percent of foreign facilities had not been inspected by FDA in five years,” lamented Kevin Schulman, a professor at Stanford University’s Clinical Excellence Research Center. “We have a supply chain doing all the global supply chain things, but not taking quality into account.” Generic drug manufacturers constantly switch suppliers in search of cheaper raw materials, and there is no way for the FDA to keep up.

Schulman only focused on the generic quality issue after one of his own children reacted badly when switched from a branded drug to a generic. He has since overseen an assay of blood pressure drugs sold by pharmacies in Nigeria, which was led by one of his graduate students, Elizabeth Thithi Ndichu.

Of the 102 samples they collected, 30 were falsely labeled and 76 were substandard. According to Schulman, these results do not reflect poor quality control linked to the need to keep drug prices rock-bottom low in poor countries. “In Nigeria and every place we’ve looked so far … the good drugs and the bad drugs are the same price,” he said. “Price is not a predictor of quality in this market.”

Could public shaming spur change? Maybe. “It doesn’t have to be legislation,” Schulman mused. “The last thing they [drug distributors] want is another class action lawsuit.” But this will only happen if major employers with health plans and drug retailers start asking tough questions and are willing to build quality assurance into their sourcing decisions, he added.

Outcomes differ between brand versus generic, but when you switch between generics that makes a difference, too — often a bigger difference.
Bad Drugs, Problematic Outcomes

Schulman has primarily looked at drug quality, and his work has contributed to a number of product recalls. His numbers do, however, beg the bigger question: if the drugs’ purity, dosage and labeling are all over the map, what about patient outcomes? 

One researcher, Jacinthe Leclerc, a registered nurse and professor at Université du Québec Trois-Rivières, has filled in some of the knowledge gap. In a 2017 article, Leclerc concluded that the substitution of generic blood pressure medicines led to more frequent hospitalizations and emergency room interventions. Subsequent studies of blood thinners and other cardiology drugs got similar results.

To be sure, these studies come with a caveat: they are all backward-looking. “We can never be quite sure that it was the switch from branded to generic that caused a 20 percent rise in hospitalization,” Leclerc acknowledged. “But we can say this is a picture of what happened. Above that, we are clinicians, and this is what we are seeing in the clinic.”

The gold standard for such research would be prospective double-blinded studies, where neither patients nor prescribing physicians knew who is getting a generic, and who is getting the branded drug. That’s how clinical trials for new drugs are conducted (with the drug being blindly compared to a placebo), but it has never been done with generics.

“It’s doable, but really, who would pay for that?” Leclerc asks. “One important point,” she adds, is that outcomes differ between “brand versus generic, but when you switch between generics that makes a difference, too” — often a bigger difference. And pharmacists routinely switch from one generic maker to another.

The Best Defense

Over the past three years, there have been recalls of:
• the blood pressure drug valsartan due to high levels of a carcinogenic contaminant called DMF
• the popular heartburn drug ranitidine due to the discovery of unacceptable levels of the carcinogen NDMA
• metformin, a vital, type-2 diabetes drug, also due to high levels of NDMA

All three recalls were prompted by the work of a novel startup born when Adam Clark-Joseph, a finance professor at the University of Illinois, suffered serious complications from variability in his anticonvulsant medication. He partnered with David Light, a veteran biotech entrepreneur, to create Valisure, a for-profit enterprise that does the kind of forensic research and independent analysis of drug quality the regulators don’t.

“We anticipated that we would find some issues, and that would underscore the importance” of drug purity and safety, recalled Light. “We never could have predicted just how many problems we would find, and how incredibly impactful that simple concept of independent testing would be.”

Valisure sends secret shoppers to retail pharmacies to fill prescriptions. The drugs are then analyzed for carcinogens, toxins like arsenic, lead and mercury, the makeup and quantity of fillers, accurate dosage, absorption rates, allergens and microbial pathogens. Valisure’s findings are confirmed by third-party analysis, and the results shared with the FDA and its counterparts around the world. Recalls follow.

You’re wondering how Valisure could make money? The company formed its own pharmacy, which only sold certified generics. That unit has since been sold to Medly, a feisty online pharmacy that has the resources and the retail expertise to grow the business. Medley currently only delivers to locations in New York, New Jersey, Florida, Philadelphia and Baltimore, though it plans to expand nationwide.

Valisure is paid by Medly, as well as by some large healthcare providers who consider drug quality a priority. “They’re starting to pay attention from the sourcing side, and some of these large health systems also have pharmacies,” Light said. They are “avoiding recalls, which cause them enormous headaches.” But there’s a big hitch. Many insurers will not cover the additional cost.

Imitation is the sincerest form of flattery. And Light takes heart from other groups picking up Valisure’s investigative approach. The University of Kentucky’s Drug Quality Study found impurities and lower than acceptable levels of the active ingredient in some samples of acetazolamide, which is commonly used to treat glaucoma, epilepsy, altitude sickness and fluid retention. The university filed a petition with the FDA, resulting in a recall.

In the end, Light is an optimist. “Being scared is appropriate,” he said. “But I do feel we’re on the cusp of taking that impact and turning it into change.”

There are ways to protect yourself. You can ask your physician to prescribe the branded drug, though most pharmacies won’t carry it and most insurers won’t cover it.
Sick Shots and Shortages

As the Kentucky research makes clear, contamination is not confined to pills, but extends to ostensibly sterile injected drugs as well. Kill Shot, a book by AP reporter Jason Dearen, recounts how fungi in injectable steroids from the New England Compounding Center caused over 100 deaths. Since the injectable scandal in 2012, Congress has tightened oversight of compounding pharmacies, which provide custom formulations of medicines not readily available from regular sources. But problems with compounding facilities persist, as the FDA’s postings of recalls and warnings attest.

There’s another big issue plaguing drug manufacturing and distribution related to the generics free-for-all: frequent shortages of common pharmaceuticals. The abbreviated regulation of generics reduces the cost of entering the market, prompting more companies to try their hand. The consequence seems to be supply instability, as companies leave as rapidly as they enter when prices dive. That allows the remaining players to raise prices, often steeply, until makers are coaxed back in. Rinse and repeat.

The vicious cycle has proven particularly difficult for hospitals. Thanks in part to Hatch-Waxman, “50 to 100 drugs are on the FDA [shortage] list at any time,” lamented Martin van Trieste, the CEO of Civica, a not-for-profit pharmaceutical “utility” that produces sterile injectable medicines for partnering healthcare systems. According to van Trieste, generic shortages lead hospitals to “use branded drugs, or other more costly alternatives.” All told, he estimates that shortages add $1 billion to our annual pharma bill.

Civica sells drugs at fixed prices on long-term contracts, with member health care systems contracting to buy half of their expected drug volume from Civica for a minimum of five years. This gives Civica the stability to sign long-term contracts with manufacturers, most of them based in the U.S. “There are good suppliers globally, and there are bad suppliers globally,” van Trieste explained. “That includes the U.S. — but it’s just easier to provide oversight here.”

Civica supplies 55 large health systems with about one-third of the licensed hospital beds in the country. While it currently just produces sterile injectables for hospitals, it plans to expand into pills for the retail market. CivicaScript will launch the latter service in 2023, van Trieste said, adding that he welcomes competition from for-profit players. “Healthtrust, Premier and Vizient are all copying our model. It’s better for everyone.”

What’s a Mother to Do?

“Generic drugs are just as safe and effective as their brand counterparts, and FDA stands behind the rigorous standards and regulatory inspections that go into ensuring the safety and quality of all generic drugs,” wrote Melinda K. Plaisier, associate commissioner for regulatory affairs, on the FDA’s website. Feel better now? Me, neither.

There are ways to protect yourself. You can ask your physician to prescribe the branded drug, though most pharmacies won’t carry it and most insurers won’t cover it. And if you live in a place served by Medly, you can get certified generics at close to the price of the non-certified variety. Moreover, the risks linked to generics are probably falling because institutional drug buyers have been responding to the market. There’s a good chance the health system you already use is a Civica member, as are the Mayo Clinic, Kaiser Permanente and Blue Cross Blue Shield. And as noted, for-profit drug purchasing organizations are adopting Civica’s methods.

Stanford’s Schulman says retailers should eventually catch on to the potential for profit in offering certified drugs. “You could see Amazon come into the market, or Walmart or Costco, to be the supplier of certified drugs,” he said. “If the drug distributors won’t do it, Valisure’s perfectly competent to keep doing secret shoppers.”

main topic: Public Health