Should Drug Counterfeiters Continue to Get Off Easy?
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New bipartisan legislation in Congress seeks to increase the penalties for counterfeiting drugs to match the penalties for diversion, i.e., the illegal reimporting of drugs intended for sale in another country. The bill argues the current disparity in consumer protections allows criminal enterprises to exploit loopholes in the law without fear of significant jail time.

Advocates of H.R. 2376 say amending the Federal Food, Drug, and Cosmetic Act (FDCA) to strengthen the drug supply chain would also help prevent future restrictions in the personal importation of drugs and forgo giving federal prosecutors more power to penalize legitimate parties in the industry.

The current penalties are not severe for manufacturing counterfeit drugs, which are usually ineffective because they contain either the incorrect amount — or none at all — of the purported active ingredients. Those fake drugs can also be harmful, if they contain improper ingredients.

Despite the possible negative health effects, those found guilty of violating the provision of the FDCA against producing and distributing counterfeit drugs can receive no more than a year in jail, with fines limited to $1,000. Meanwhile, someone found to have imported drugs manufactured domestically but exported for sale in other countries can get 10 years in prison and be fined $250,000.

There is a second type of diversion that also has lax penalties — someone who imports drugs manufactured overseas and intended for sale in foreign markets is subject to a simple misdemeanor.

Sheldon Bradshaw, partner in the FDA and Life Sciences Practice Groups at King & Spalding LLP in Washington, D.C., argues the disparate penalties for the two types of diversion — and counterfeiting — isn’t logical.

“Given that such drugs have the potential to be equally, if not more dangerous or ineffective than those manufactured in the U.S. for foreign markets, the disproportionately light penalty framework makes little sense,” he wrote for the Washington Legal Foundation.

H.R. 2376, sponsored by Rep. Leonard Lance (R-NJ), Rep. Debbie Dingell (D-Mich.), Rep. Michael C. Burgess (R-TX), and Rep. Gene Green (D-TX), makes that same argument. The lawmakers write in the legislation that penalties for illegally diverting drugs into the U.S shouldn’t “arbitrarily turn on the location where the drugs were initially manufactured.”

The legislators also advocate increasing penalties for counterfeiting to match those for diversion.

“There should not be unequal treatment of counterfeiting and diversion, enabling criminal enterprises to exploit statutory loopholes and jeopardize patient and consumer safety without fear of significant penalties,” reads the legislation.

The bill calls for offenders of drug counterfeiting to face imprisonment of up to 10 years.

H.R. 2437 has been referred to the Committee on Energy and Commerce.

The U.S. has pushed for nations like China and India, as well as the World Health Organization, to help clean up the counterfeit trade. Bradshaw said maintaining a leadership role will be tricky if the U.S. doesn’t increase the punishment for counterfeiting.

Amir Attaran, professor of law and medicine at the University of Ottawa, told Newsweek the U.S. must adopt stronger legislation and then encourage trade partners to do the same.

“If they don’t want to play by the rules, within five years their access to the U.S. market is gone,” Attaran said.

Bradshaw uses as a case study Doctor Medica, based in Vancouver, Canada. This internet seller offers a variety of dermatological products like Botox and Synvisc to health-care professionals worldwide. One of Doctor Medica’s customers was Bridget “Gigi” Goddard, owner of Pure Indulgence Skin Rejuvenation in Laguna Nigel, California. She pleaded guilty on Nov. 10, 2016, to receipt and delivery of a misbranded drug for distributing Botox that wasn’t approved for use domestically. The Botox she bought from Doctor Medica was manufactured in Great Britain for use in Europe.

While Goddard faces up to three years in prison, under current U.S. laws the owners of Doctor Medica could get no more than a slap on the wrist.

And there’s the case of Canada Drugs, another internet business making money off of questionable sales practices. The FDA’s Office of Criminal Investigations found that the company’s business revolved around selling counterfeit copies of brand-name drugs, including cancer drug Avastin. Investigators found that as U.S. doctors purchased discounted versions of the important medication, their patients were receiving essentially placebos, since these counterfeit versions didn’t contain bevacizumab, the drug’s active ingredient.

Paul Bottomley, who owned Montana Health Care Solutions in Belgrade, Montana, was hit with a felony and forced to forfeit $6 million in proceeds in 2013 for importing and distributing the fake Avastin through Canada Drugs. Had he been charged with drug counterfeiting his punishment would have been mild.

Regulators, seeing the enforcement gaps, are pushing for increasing penalties for a “catch-all” provision of the FDCA that allows the FDA to punish offenders for a wide range of actions. Bradshaw argues this is misguided.

“Giving more power to governmental prosecutors to hammer industry actors for a broad range of actions covered by the ‘catch-all’ penalty provision would overcriminalize the FDCA and is far too broad a solution,” he said. “The cure would be worse than the disease.”

Robert Graboyes, senior research fellow at Mercatus Center, said the regulatory framework for monitoring across-the-border movement of medications is becoming increasingly tested, threatening the free-market friendly supply chain.

“It’s becoming more and more easier to move things across borders because it’s less expensive, patients can cross borders to get drugs if they wish, especially as international flights become cheaper,” he said.

He notes, too, the FDA recently approved the first bioprinted pharmaceutical. With the innovation of 3D printers it’s possible now for people to bioprint chemical substance in their homes. Graboyes said that adds another wrinkle to the discussion of illicit medications.

“I think we need to give a lot of thought in the future to how we handle these things,” he said.

Bradshaw said that despite some successes in combating the trade of dangerous or ineffective drugs, plenty of those medications still reach consumers due to the potential profits and lax penalties. Reducing the number of counterfeit drugs will only help to strengthen free-market protections for U.S. drug manufacturers.

“Perhaps by closing gaps in the FDCA’s penalty structure, the criminal penalties from importing the dangerous produce will outweigh the perceived financial benefits for bad actors, thereby protecting American consumers and strengthening the supply chain.”

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