India: Wal-Mart's Drug Connection

In 2003, a new kind of "drugstore" appeared across America, promoting cheaper prescription drugs from Canada. Instead of pills, these stores had fax machines and computers that could process orders from senior citizens in the U.S. desperately seeking lower cost drugs.

But federal and state regulators stepped in to interrupt the supply chain. "To some extent, we're caught in the middle of a problem that is not our responsibility, which is drug prices. Our responsibility is safety," a Food and Drug Administration (FDA) official, told USA Today. The FDA issued warning letters to these storefront pharmacies, saying importing Canadian drugs violated federal law. At the time, at least one million Americans were sourcing their medications from Canada. More than $1 billion in product was being imported from Canadian suppliers. The FDA ruled that anyone enabling U.S. citizens to buy drugs from other countries was violating federal law. Storefront owners countered that they were not violating the law, because they were not dispensing drugs -- just helping customers with paperwork.

The pharmaceutical industry was largely seen as driving the FDA to be more aggressive on cross-border imports, because of the potential loss of profits. But the FDA said its concerns about drugs entering the U.S. were all about safety. Seniors were warned that their drugs could be counterfeit, or from countries with weak regulatory standards. "They allege these are Canadian versions of drugs approved in the United States, but we don't know what they are, because there is no regulatory oversight of these drugs," the FDA told USA Today. The importers insisted that the drugs were coming from licensed Canadian pharmacies.

One Oklahoma-based importer, Rx Depot, was shut down by the FDA for violating drug importation laws. A federal judge ordered 85 Rx Depot stores closed in 2004, ruling that only drug manufacturers were allowed to import drugs for sale. The court also ruled that the safety of these imported drugs could not be verified. Rx Depot appealed the court's decision. "We're going to fight like a wild animal," one of Rx Depot's co-founders said---but the stores never reopened. To stop cross-border selling, some drug manufacturers, like GlaxoSmithKline, stopped shipping drugs to Canadian wholesalers who sold to U.S. customers. That led elderly rights groups to call for a boycott of Glaxo.

Beginning January 1, 2006, the entire drug importation issue changed dramatically with the implementation of Medicare Part D by Congress. Talk of Canadian imports all but disappeared from the media. Within 9 months of the creation of Medicare's new drug program, Wal-Mart announced that it would begin selling in the Tampa, Florida trade area, a month's supply from a list of 150 generic drugs for $4 each. One industry analyst told the NewsHour that Wal-Mart's drugs "come from all over the world. They're U.S. manufacturers, Israeli and Indian manufacturers. They have a choice of where to buy these drugs. They are the lower cost drugs in the system today, and that's part of the reason why they're able to price them at this low price point." Wal-Mart was buying drugs directly from manufacturers.

By the end of April of 2007, Planet Retail was reporting that Wal-Mart was "in advanced talks" with the largest Indian pharmaceutical exporting companies -- unknown to most Americans -- like Ranbaxy, Dr. Reddy's Labs, Cipla, Lupin and Sun Pharma. In March of 2003, the Los Angeles Business Journal reported that Cipla and Ranbaxy had 81 applications before the FDA to sell generic drugs in the United States. The companies were taking advantage of India's low labor costs and highly-skilled work force to expand outside their home base. Ranbaxy had challenged the patents on blockbuster drugs such as Pfizer's Lipitor and AstraZeneca's Nexium. A U.S. district court ruled in favor of Pfizer, but Ranbaxy appealed the decision. Even if it ends up losing the challenge, Ranbaxy will be the only generic manufacturer for six months after the patent expires, because under FDA law, the first company to file a challenge on a patent has six-month exclusivity rights, during which time the generic price can be as high as 80% of the original drug. This position could be worth billions to Ranbaxy.

About 14.3% of unapproved medicines entering the US market come from India, according to a group called GS1, a global organization "dedicated to the design and implementation of global standards" to improve the efficiency of supply chains globally. GS1 is described as a joint industry-Government initiative to bring international best practices into India. Wal-Mart began requiring its drug suppliers to use radio frequency identification tags (RFIDs) to help track drug supplies, and check counterfeits.

Historically, according to Bain & Company, Indian companies would copy drugs from other companies and make inexpensive versions, because the Indian government required the indigenous manufacturers to adhere to foreign patents on the manufacturing process, but not on the final drug product. They could alter the manufacturing process and produce generic versions of foreign branded drugs even while they were under patent. But India' laws have been amended to prevent big generic manufacturers like Ranbaxy from making inexpensive copies of foreign drugs patented after 1995.

A drug industry group called Pharmexcil, set up in December of 2004 by India's Ministry of Commerce & Industry, says that Indian drug makers have "tremendous opportunities...in the post 2005 era to manufacture and export many products getting off-patented. Its immense strength [is] in manufacturing quality medicines at affordable prices." According to Pharmexcil, "The generic drug prices in the US market have substantially gone down with Indian generic players quoting low prices...It is good to see that the quality of Indian generic products are accepted in the US."

In 2005, Ranbaxy won Wal-Mart's Supplier Award for outstanding performance. Ranbaxy expects that its U.S. division, largely buoyed by Wal-Mart, will bring in 50% of the corporation's revenues. The Indian drug company's sales in the U.S. increased ten-fold from 1999 to 2003, according to Bain.

From this complex global manufacturing and distribution network, a few basic facts emerge:

· * most Americans have no idea that the drugs they are buying at Wal-Mart are produced in India, made by companies that are copying another company's products.

· * although India has the highest the number of U.S. FDA-approved facilities (84) outside the U.S., no one knows how reliable the quality of Indian drugs really are. The World Health Organization (WHO) has warned that the global counterfeit and substandard drug trade is a $35-billion business, with little risk of prosecution.

· * when consumers buy their drugs at Wal-Mart, the retailer uses that money to buy more products from India, in the same way they buy more clothing or toys from China. Once again, the U.S. takes what other countries make. Wal-Mart's sourcing of drugs from foreign countries exacerbates our unprecedented foreign trade imbalance.

Ironically, the same federal government that hassled senior citizens over importing small quantities of drugs from Canada, now seems content to allow Wal-Mart to import billions of dollars annually worth of Indian drugs to enhance the retailer's bottom line. The Indian drug companies have found a generic drug niche to fill, and they are using their poorly-paid workforce and less than stringent regulatory requirements to satisfy America's growing need for pills. Unlike clothing or toys---there is no label on the pill that says "made in India."

Al Norman is the founder of Sprawl-Busters, and the author of "The Case Against Wal-Mart."

Comments

[sher2x4]

Let's see,
I buy a script from India for $.03
transport it to America for $.56
sell it in my store for $4.00
What's the Problem?

You can bet the farm that walmart is still making money.

Or maybe I'm just crazy or stupid and that walmart
really does have it's customers interest at heart.

[burque]

I"m no fan of Wal-Mart, but this article is way off. Are Big Pharma products safer, when they outsource to other countries anyway (look at the deaths from Heparin, made in China, sold by US Pharma)? Rather than spur needless fear of Indian drug manufacturers, you"d be better off looking at how Big Pharma delays and blocks generic production to keep prices of lifesaving medications so high.

[Michelle Pilecki - Huffpost Blogger]

One point you're missing is that US manufacturers of generic drugs are also put at a disadvantage, and are likely to be outsourcing what are currently good-paying jobs here.

[wolfgangmo]

And thus, once again, Walmart is bad for America.

[bdl0715]

Do we really know where any of our medication is coming from, especially if using generics?

[Mark701]

I reallly have mixed feelings about this. I despise Wal-Mart but also depise the fact that big pharma is raping the American public with overpriced drugs. The article attempts to make the point that drugs purchased from India are potentially unsafe. However most prescription drugs are inherently unsafe to begin with. Obviously, there is always the potential for an overdose. Second the list of side affects can be so severe that taking the drug can potentially cause harm than good. Now comes the spectre of poor quality control for drugs manufacturered in India and China. To be honest I find it difficult to buy any argument that drugs, because they are manufactered in China or India are any more dangerous than the ones manufactured here. To the best of my knowledge, no one has died or become ill due to poor manufacturing quality control. Fact is that the American pharmacuetical industries have everything to gain and nothing to lose by encouraging the meme that imported drugs are more dangerous than the one manufactured here.

[Marrigan]

If people like you are willing to abandon American-made products for those from India and China, how many Americans do you think are put out of work?

I refuse to buy my Rx's at Wal-Mart, even tho it's a few dollars less on my co-pay, because I don't want to see Wal-Mart run out drug store competition. As soon as Wal-Mart takes hold in a community and drives out local businesses, they raise their prices. The arguments for boycotting Chinese-made products are numerous and legitimate. They're killing us on trade, thanks to Congress; destroying the very manufacturing jobs that provided a decent living for the permanent underclass; providing crap merchandise that lasts a fraction as long as American-made products used to be; keeping their currency devalued and are they're guilty of serious industrial and corporate spying. These are people who use child labor, beat up monks, force women to have abortions and collude with greedy American and multi-national corporations to provide inferior and dangerous products.

Maybe if our govt. wasn't taxing us so heavilyand let us keep more of our salaries, we could afford to pay for decent products instead of the crap that Wal-Mart sells.

[anfractuous]

As China's and India's middle classes grow, both in buying power and girth, to American proportions, we'll soon be outsourcing our diseases to them as well.

[dzoner]

85 FDA approved facilities in India alone. Now why would there be 85 FDA approved facilities in India? ... could it be they were OK'ed by the FDA as manufacturing plants for the major US Pharma companies?

So ... Walmart is basically cutting out the middle man, the US pharmaceutical companies, and selling to the american consumer for $4. a month the exact same product Big Pharma was also buying from the same Indian manufacturers at the same wholesale price and charging the american consumer $100 - 400. a month for. The money is beng 'outsourced' to the same Indian manufacturers in the same amounts in either instance, but with the pharmaceutical companies the american consumer is given the priviledge of donating a several hundred percent surcharge for the betterment of the super rich.

What a deal.

Al Norman in his anti Walmart zeal has gone a bit off the rails on this one.

[arvay]

YAWN.

Indian companies have proven themselves capable of producing first-rate products and services, so far most of the (few) drug problems from overseas have come from China.

Why not have Americans get a benefit from globalization?

Especially since we can all see that the FDA is little more than a rubber stamp for the major drug companies, who fund its research! Who believes they are objective, or really protecting us?

Frankly, I have a lot more confidence in the Indian companies' desire to protect their reputation than the FDA, which habitually turns tricks for Big Pharma.

[darthdarcy]

The FDA has killed more Americans than al-Qaeda 3X's more from Vioxx alone, had bin-Laden known what he was doing all he had to do it start a pharmaceutical company and he could killed us off in bunches using the FDA as an accessory...

[demfriend]

Having worked with both small and big pharma I can tell you the unknown secret is the amount of generic drugs made in Shangai and china is a routine source for the ingredients. That is a whole lot worse to me than made in India but neither practice is something people even want to know about with getting a cheaper price on their medications. I do wonder how many people notice the difference in strength and action in their cheaper meds as I know of several generic meds I would choose to pay the higher price to have the medication work as it should. We americans should not have to go so cheap on the medications that life threatening problems from inactive or poor acting medications are the choice we have to make to afford the meds. The FDA is not our friend as they check what the maker gives them when the maker is sure the best quality is given to the FDA and not the medication we will get at the pharmacy. Testing a medication that does not represent the "real Deal" is not a good thing.

[KillTheMessenger]

Nothing prevents an independent organization from performing quality tests on imported drugs. I think we need to have a non-profit in parallel to the FDA which is willing to take this on. And once they embarrass the FDA often enough, things will change for the better.

Where do I send the money?

[drkazmd65]

Yet another example of the Bush Administration's version of the "American Dream",...

Outsource manufacturing to save the corporations' bottom line on costs,...

Remove good paying American Job opportunities for actual Americans,...

Ensure that those American's will have so little money that they can ONLY afford to shop at the discount store that outsoruces,....

Send the money off to China, or India, or somewhere not America.

Socialize the Costs,.... Privatize the Profits,... same old song and dance,...

[BusGreg]

Having been in a position to buy cheap mexican drugs that I couldn't in San Diego, I'm not really concerned about the quality of some, not all foreign imports. After all, when was the last time you heard of mass side effects from Canadian, Mexican or Indian pharmaceuticals? I personally am more worried about some of the FDA approved crap. One of the pills I was taking is now banned! Give Wally world a break! Some of us can't afford the high dollar places and at least they are doing something many are already benefitting from.

[disgustedcitizen]

Whatever their original mission, the new and current mission of the FDA is to serve BigPharma and screw the citizens of the US. Just another example of how bush/cheney and the Repugs are destroying the United States from the inside.

[lisakaz2]

Interesting that I cannot import drugs from another country but apparently Wal Mart seems able to do so. Hmm...

[drkazmd65]

Don't you know the mantra already lisakaz?

Socialize costs,... privatize profits,... - you just aren't a corporation,...

[James Love - Huffpost Blogger]

This story seems to be sourced from anti-generics PR from the major pharmaceutical companies, and lacks quite a bit of perspective. Nearly all "brand name" manufacturers already buy active pharmaceutical ingredients or finished products from India. The Indian companies he names are good manufacturers with a large presence in Europe and the United States. The reference to the WHO figures on "counterfeit and substandard drug trade" is mostly a product of big pharma PR lobbying campaigns, without of a lot of empirical support, and it is poorly understood. There is a significant health problem of "fake" drugs being sold in some developing country markets, particularly where regulatory structures are very weak or non-existence. Much of this involves products sold through informal markets from disreputable manufacturers, making all sorts of false claims about the properties of the medicines. It is quite unfaire to suggest that every Indian manufacture can be put in this same catagory.

[BeeOplentee]

I agree, James. It is also a cheap slam at WalMart who is at least doing SOMETHING for our medical cost woes.

[scottarino]

Yes. Wal-Mart really cares about the bottom line....er...I mean people.

[wolfgangmo]

The problem here is not that Walmart can import drugs but that small companies, like pharmacies or private citizen groups, cannot. They tried and once the FDA got wind of it they shut them down using the excuse that the drugs weren't safe.

We have an open and free market ... if you are a corporation with PAC money to give. Anyone else is barred from doing that.

Does anyone here honestly believe that Pharmaceuticals from Canada are of inferior quality than those from India. I beggars the imagination.