High prices flood the black market with counterfeit drugs

The high cost of prescription medicines is a problem not just for the individual patient – government health authorities, hospitals, health insurance providers and doctors are all struggling to cope. According to a study by the Kaiser Family Foundation, the rate of growth in spending on prescription drugs in the US is expected to exceed the growth rates for spending on hospital care and other professional services from 2010 through 2019. No wonder the pharmaceutical industry’s profit margins are being closely scrutinised. The Fortune 500 industry rankings put pharmaceutical manufacturing in the lead as the most profitable industry in the US, ahead of the oil industry from 1995 to 2002. From 2008 to 2011 pharma was still generating profits after tax of 17-19 percent. A major contribution to the industry’s profitability is the availability of patent protection in most countries, which provides a barrier to competition for an average of 11.5 years after a drug has been approved and brought to market. In Europe and other regions the industry is not able to achieve quite the same juicy margins, largely because of strict price controls. In a study of 170 of the most popular prescription drugs, market analyst firm Decision Resources found that on average they were 40 percent less expensive in Europe than in the US. Many of the lowest prices were found to be for drugs that face generic competition because government bodies such as the UK’s NICE (National Institute for Health and Clinical Excellence) negotiate drug prices on a pay-for-performance basis. Without regulation on the cost of prescription drugs, however, the market in the US is wide open to exploitation, often from surprising sources. For several years, Americans living in the north of the country have been driving into Canada to fill their prescriptions. A combination of government price restrictions, lower product liability costs and a relatively lower standard of living in Canada means the prices on branded prescription medicines can be as much as 30 to 60 percent lower than in the US and there is no legal restriction on Canadian pharmacies fulfilling medical prescriptions written by US doctors. But while these anomalies in cross-border pricing have created a legitimate market opportunity, there is a more dangerous development in the black market trade of medicines within the US. Across the country, stories are emerging of poverty stricken people or drug addicts under doctor’s care for long-term illnesses such as HIV or cancer, who are selling their prescription medicines on the black market to help pay the rent or fund their habit. These are the small players, who, according to one report may be able to get around $250 from the black market gangs for a bottle of pills that is worth more than $1,500. Or they become inadvertent suppliers by allowing the gangs to forge prescriptions for expensive drugs using their Medicaid cards, then fulfilling the prescriptions and handing the drugs over for a cash ‘wage.’