PHARMACEUTICAL ROULETTE | A Vast, Unregulated Shadow Market

U.S. Prescription Drug System Under Attack

By Gilbert M. Gaul and Mary Pat Flaherty
Washington Post Staff Writers
Sunday, October 19, 2003; 12:03 AM

First of five articles

For half a century Americans could boast of the world's safest, most tightly regulated system for distributing prescription drugs. But now that system is undercut by a growing illegal trade in pharmaceuticals, fed by criminal profiteers, unscrupulous wholesalers, rogue Internet sites and foreign pharmacies.

In the past few years, middlemen have siphoned off growing numbers of popular and lifesaving drugs and diverted them into a multibillion-dollar shadow market. Crooks have introduced counterfeit pharmaceuticals into the mainstream drug chain. Fast-moving operators have hawked millions of doses of narcotics over the Internet.

The result too often is pharmaceutical roulette for millions of unsuspecting Americans. Cancer patients receive watered-down drugs. Teenagers overdose on narcotics ordered online. AIDS clinics get fake HIV medicines.

Normally, drugs follow a simple route. Manufacturers sell them to one of the Big Three national wholesalers -- Cardinal Health Inc., McKesson Corp. and AmerisourceBergen -- which sell to drugstores, hospitals or doctors offices. Regulators and industry officials have long considered this straightforward chain to be the gold standard.

The shadow market exploits gaps in state and federal regulations to corrupt this system, creating a wide-open drug bazaar that endangers public health. A yearlong investigation by The Washington Post has found:

* Networks of middlemen, felons and other opportunists operating out of storefronts and garages fraudulently obtain deeply discounted medicines intended for nursing homes and hospices. The diverters have stored drugs in U-Hauls and car trunks in blazing heat, stuffed them in plastic sandwich bags and traded them in a daisy chain of transactions with no purpose except to enrich the traders. Those drugs are ultimately sold to unwitting patients.

* The diverters pave the way for counterfeiters who use pill-punching machines and special inks to produce near-perfect copies of the most popular and expensive drugs. Some fakes have passed undetected through wholesalers to the shelves of retail pharmacies.

* Pharmaceutical peddlers take advantage of lax regulations to move millions of prescription drugs into the United States from Canada, Mexico and elsewhere. Overwhelmed customs workers inspect less than 1 percent of an estimated 2 million packages containing medicine shipped into the country each year. Virtually all of those shipments are illegal, yet the Food and Drug Administration fails to enforce its own import regulations, saying it lacks the resources to intercept the illegal packages.

* Rogue medical merchants set up Internet pharmacies that serve as pipelines for narcotics, selling to drug abusers and others who never see doctors in person or undergo tests. The sellers move tens of millions of doses of hydrocodone, Xanax, Valium, Ritalin, OxyContin and other controlled substances. Scores of customers have become addicted, overdosed or died.

The shadow market, which includes both legal and illegal operators, has grown rapidly yet received little public attention.

Isolated problems nationwide have attracted the interest of some state and federal prosecutors and resulted in lawsuits. But the increasing recalls of tainted medicines, overdoses on Internet-bought drugs and cross-border pharmaceutical trade are part of a larger pattern. Taken together, the worst elements of the shadow market constitute a new form of organized crime that now threatens public health.

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