Katherine Eban

The Real Drug Crisis

Air Date: May 19, 2018

Investigative reporter Katherine Eban on the dangers of generic pharmaceutical manufacturing and a looming shortage.


HEFFNER: I’m Alexander Heffner your host on The Open Mind. Katherine Eban is an investigative reporter whose articles on pharmaceutical counterfeiting, gun trafficking, and coercive interrogations by the CIA have won international attention and numerous awards. Author of “Dangerous Doses: A True Story of Cops, Counterfeiters, and the Contamination of America’s Drug Supply,” Eban uncovered for Fortune Magazine, the comprehensive picture of how under-policed generic companies operate. As she writes, “It’s not a tale of cutting corners or lax manufacturing practices, but one of outright fraud in which the company knowingly sells substandard drugs around the world including in the US, while working to deceive regulators.” Eban adds that the impact on patients will likely never be known, but it’s clear that millions of people worldwide got medicine of dubious quality. An Andrew Carnegie Fellow awarded to support research in the humanities and social sciences, Eban continues her investigation of non-compliance and illicit behavior by generic drug makers in her next book. She has separately probed Purdue, the maker of OxyContin, which has unleashed grave harm upon the American public in the ongoing opioid epidemic. Welcome Katherine.

EBAN: Thank you so much. Pleasure to be here.

HEFFNER: How do you see the intersectionality here, the criminal justice system and its seeming inability to catch up with those who would seek such harm.

EBAN: You know the problem has long been that the top executives do not get put in jail and they do not nearly enough get excluded from the pharma industry. And so the problem is that each one of these investigations, each one of these prosecutions winds up displacing crime. And basically each time you have one of these cases you have a kind of diaspora of the people who know how to fraudulently market drugs, who know how to alter data in manufacturing labs, and so long as those people walk away from these investigations, able to come back and participate in any kind of business or program that does business with the Medicare programs, Medicaid programs of this country, this is never gonna stop. So that’s the kind of justice prosecution problem here. But there’s really a bigger issue, which I see as one of basic economics. You know I’ve been investigating the pharmaceutical industry for well over a decade now. And almost every single fraud and con that I have looked at is originating from the fact that we have the most expensive drugs in the world. That is really at the root of everything that we see. Whether it’s trying to expand market-share and expand the patient base and sell as many drugs as you can… or whether it’s the fact that because we have the most expensive drugs and nobody can afford them anymore, we are forced into the arms of these absolutely low cost, bottom of the barrel generic drug makers, most of whom are located overseas, in India and China. They offer an incredible discount on the drugs that are made. But consequently they’ve forced, you know the FDA to scatter all its resources across the globe. It’s a policing problem, it’s a jurisdictional issue, you know as one person said to me: you know I don’t have an attorney general in New Delhi, who can give me a search warrant. So how do we get into these companies to make sure that they’re doing what they say they’re doing. So basically I see economics and the pricing structure of our medicine, really at the center of every con that I’ve investigated.

HEFFNER: And it sounds like, Katherine, it’s a combination of the incapacity of American law, but also where these drugs are being born overseas. The inability for there to be any kind of foreign intelligence that we can gather to tell us, you know, the drugs being produced here are not being produced with the right kind of screening or are more susceptible to contamination.

EBAN: Well you bring up a very important point, which is one of foreign intelligence. So, if a Swiss drug maker is making drugs and the FDA as is required is gonna go over to Switzerland and inspect a manufacturing plant, if they find something wrong, you know who’s gonna be keenly interested in it and want to enforce the infractions in that plant? Swiss regulators. Now, you go over to India, and the regulators in Mumbai are fairly disinterested in what’s happening in those manufacturing plants. This is an enormous problem, because US regulators don’t have active and engaged counterparts in a lot of these countries, where they can get cooperation, they can get help with enforcement. So we’re essentially functioning now in India as lone police officers, policing thousands of plants that in some cases, FDA agents and inspectors have not walked into in a decade.

HEFFNER: What percent of roughly, what percent of drugs that are prescribed in the US are generic, and what percent are being conceived, made overseas, or at least in conditions that are not subject to regulation?

EBAN: Right. Well in theory, all the conditions are subject to regulation. The question is, how effective is that regulation, how well does it work? But let’s go back to numbers for a second.


EBAN: 85 percent of all the drugs prescribed in this country now are generic. The majority of those are made overseas. Over 40 percent of those alone are made in India. Take a step back, 80 percent of all the active ingredient used in all our drugs, whether brand or generic, are coming from China. Now if somebody explained to me, I mean, China is definitely a concern and a risk as we’ve known. They’ve been the source of contaminated Heparin, tainted dog food, all kinds of troubling lapses have occurred in products from China. But there is a distinction to be made, which is China does not make the bulk of our finished doses. So they’re making active ingredients. The bulk of the finished doses in generics are coming from India. What that means is they’re making final pills, capsules, and vials that are literally leaving those manufacturing plants in India and coming directly to our drugstores. Now that is the last stop where drugs of poor quality can be detected.

HEFFNER: So the trail, right now, primarily is China, India, US.

EBAN: Correct. That’s right.

HEFFNER: The reality of what you’re describing is that we don’t really make most of our own medicine anymore.

EBAN: That is right. And it’s actually, in the view of many, a very sad story. For the my upcoming book, I did a lot of research on the history of antibiotic production, and it’s really a thrilling story how penicillin was discovered and how the British flew it in spy planes over to the US and got antibiotic production going with the help of the US government. But then over the decades, slowly all of that antibiotic production moved overseas, to the point where, really, the US makes almost no antibiotics at all. All of our antibiotics are made overseas. So if you’re going to go and fill a prescription for your kid, at a drug store, or an antibiotic, they’ve got an ear infection, it’s almost certain that that antibiotic is going to have been made in India.

HEFFNER: Why in that post-war period that you describe, did we kind of lose touch with the construction of the drugs and making this a proud, American industry, and instead we decided we’re gonna import and we’re gonna gouge people instead. How did that process happen?

EBAN: So it’s a story about cost. Because China, now a number of people have accused China of sending over essentially spies to Harvard University in stealing antibiotic strains. But nonetheless, the Chinese did have a long history of fermentation. They make soy sauce, they make beer, they make rice wine vinegar. And they knew how to ferment antibiotics. And they started making antibiotic salts, which are kind of like the base ingredient of antibiotics. They could do it so, so cheaply. So manufacturers here and in Europe said, well, why am I keeping open these factories when I can buy the active ingredients from China for a song, import them over here, and make the finished doses. And that’s really what happened, is that it was just economics and we stopped making the drugs. You know but it’s a whole ecosystem that has been harmful because antibiotic development stopped. One of the things that I’m examining in my upcoming book is the problem of when you have poor quality generics, what does that do. That actually feeds drug resistance. People are getting substandard doses, then drug resistance is growing as it is around the world. So this is a giant problem. I mean this is not just a problem of, you know, of a consumer in a drugstore maybe getting a substandard quality drug and they don’t actually know where it was manufactured. This is a problem of public health worldwide.

HEFFNER: And assuming the FDA is funded adequately, sufficiently to do the kind of due diligence they’ve done within the last decade, where does that leave us in terms of what you’re finding in your book now.

EBAN: Right

HEFFNER: To improve our own domestic fact-finding efforts so that folks are not being fed or medicated through, what you describe, substandard quality medicines that could have vast blowback.

EBAN: Right. Ha, well. Assuming that the FDA is funded adequately, but it isn’t. So it’s a domestic, it, you know,

HEFFNER: And this is a pre-Trump reality of the Obama years.

EBAN: Yes. Yes.

HEFFNER: And maybe going back all the way, how many years?

EBAN: Well, a long time. But I’ll talk about pre and post Trump in a well not post-Trump but, pre and current Trump.


EBAN: The FDA was set up as a domestic agency. It was not an international agency, and suddenly around 2002, 3, 4, it finds itself tasked with becoming a global policeman of foreign manufacturing plants. And there’s a huge backlog and they scramble to keep up, and they’ve got all kinds of problems. And one problem that they have is, who are they going to send to inspect these plants? Does anybody even want to go over there and do these trips to India? Can they station people there? What are the diplomatic impacts of this? What are the sort of state-craft impacts of this? China doesn’t even want to let our FDA inspectors in because they think they’re all spies. So how are they going to solve this problem? And they solved it in a way that has actually been disastrous for public health. One of the ways that they solved it is by giving all of these manufacturing plants overseas advance notice that they’re coming. Well they give them two months, three months advance notice to say, please expect an inspection, can you help our inspectors with transportation. Can you help them with hotel arrangements, can you help us with visas can you get them an invitation letter. This is not how you do inspections to really find out what’s going on in plants. And what I’m uncovering and, which will chronicle in full detail in this book, is that these plants have responded with these giant data falsification teams that arrive in advance or work in advance of the FDA inspections, and basically inspect all the data. Now if you’re one of these plants, why are you going to invest all this money up front to develop a generic drug, and submit an application to the FDA when you don’t know if they’re going to approve it? Wouldn’t it be better and smarter to fake the data to begin with, wait to get the approval and then scramble to try to make the drug.

HEFFNER: Sounds like the FDA has a relationship with the drug makers that is completely unhealthy to any accountability.

EBAN: Completely unhealthy to any accountability, but also, in many ways much worse. I mean doctors with a conscience can choose to bar pharmaceutical reps from their offices, and they can choose not to go to fancy dinners and become speakers on a pharm, big pharma roster. But if a manufacturing plant overseas ends up fooling the FDA and getting an approval.


EBAN: To make a chemotherapy drug that actually doesn’t work and millions of Americans are getting that.

HEFFNER: Now this is a technical question: Is there a different standard for the generics in terms of FDA certification or approval than there is for non-generics?

EBAN: That’s a good question. There’s a different process. The standard is the same, because they have to make a drug that is deemed bio-equivalent. But they’re held to a much lower level of proof, which is appropriate if the system worked. In other words they don’t have to prove safety and efficacy of the molecule, because that’s already been proven through huge clinical trials by the innovator. The big pharma company that made the drug in the first place. But what they do have to demonstrate to the FDA’s satisfaction, is that their drug actually reaches the appropriate level of concentration in the blood. As did the innovator. So that’s through small, small tests, small bunches of tests on individuals. Testing blood and presenting, presenting the FDA with reams of data, showing that in all the tests they did the dissolution is appropriate, the stability is appropriate, but, that’s all fine if the data that they’re submitting is authentic.

HEFFNER: Now that falsification can happen in a generic or it can happen from the innovator itself.

EBAN: Innovator when they are submitting a drug for approval, the amount of data and scrutiny is so enormous. The kinds of clinical trials they have to conduct, the review by an advisory panel of experts, I mean, there is a huge amount of scrutiny, and that’s not where you see a lot of the fraud. In big Pharma, where you really see the fraud is in marketing. It’s in sales. So we made this huge investment, we did all this research, and now we’re going to try to expand all the indicators for this drug. Hey! You know opioids? Let’s market ’em to children, let’s market ’em to old folks, let’s market ’em to everybody, let’s, you know, I mean, the big thing that Purdue Pharma did, and you know I’ve written about Purdue pharma, is they tried to basically expand who they marketed their drug to.

HEFFNER: Normalize it.

EBAN: To normalize it, exactly. They tried to normalize it, to say, you know what, because our drug they like to claim that it was non-addictive.


EBAN: And therefore could be safely marketed by ordinary doctors to sort of ordinary pain patients. That it was no longer going to be just reserved for a dying cancer patient, it was going to be marketed to you know, anybody with a backache.


EBAN: That’s what happened there.

HEFFNER: There’s a lot of mischief, and you attribute it to the economic model in this country, primarily in terms of our commerce, and what can we do about it? What do we need to do about it? Hopefully at the end of this book after you expose much wrongdoing, there will be some kind of call for corrective course.

EBAN: Well, what I think would be a significant correction would be to regulate prices, would be to regulate drug prices in this country. If you regulated drug prices, there you’d take a little bit of profit and heat out of our pharma marketplace. You wouldn’t force us into the arms of, you know, lowest cost drug makers in developing countries. Now I’m not exactly sure how we bring drug production back to this country, because that is pricey, but that’s another thing that needs to happen. You know, I mean it’s, you can look at this as a national security issue. India and China have incredible leverage over us. They could actually bring the country, our country to its knees in about 24 hours by saying, we’re just stopping exports of drug components. So we’re, we’ve put ourselves in an incredibly vulnerable position.

HEFFNER: When you talk about Trump’s FDA, that’s also a danger that you need to articulate and everybody else does too, with respect to these tariffs. And the negative blowback associated with them.

EBAN: That’s an excellent point.

HEFFNER: Not going to be able to fund our cabinet chest, let alone the necessary drugs.

EBAN: Let me just say that you know, as the Trump Administration got going, some of the names that they were floating to run the FDA were truly scary. I mean these were people who advocated for you know taking us back to the 1920s, to say you know, drug makers shouldn’t have to prove their drugs are effective in order to, in order to market them. Which is insane. I mean our entire, you know, drug apparatus, our FDA has all evolved under the premise that actually drugs should have to be proven to work before they’re sold. So, the good news was that the person who was ultimately appointed to the FDA is not insane.


EBAN: Scott Gottleib, so you know he is—he is sort of working within the parameters of normal. Non-crazy, as far as regulation. But that doesn’t address kind of all the underlying structural issues that my book is tackling. So, you know, that’s one. And then the other thing I would say is that this kind of, premise that Trump has thrown out there that you know if you make a new regulation you should have to take away two. That’s nuts too. You know, I mean, I’m not sure that the American consumer sufficiently appreciates the way in which regulation save their lives every single day. And really some of the incredible government workers who are out making sure that companies do comply with those regulations. I mean I have met a lot of those people and they really care about their jobs. And keeping people safe.

HEFFNER: To create the condition where there is price control, you need a new political climate, or a new consciousness around some of the issues you describe, to understand that we could very well go back to the 1920s in terms of fatality and mortality and not having the kind of equipment, i.e. antibiotics, or the next generation, probiotics, to resolve medical crises. When are we going to wake up to the need for some reclassification or modification in our economic system so that price control is possible, that regulation’s not viewed as detrimental.

EBAN: You know we really need a consumer revolution in this country. Consumer revolutions have really led to the creation of the FDA and the development of the FDA. I mean, the sort of outrage over, you know, the jungle and arsenic in food and all of those sorts of things really led to the creation of the modern FDA. I would say we’re, you know, a couple of scandals away from that level of awareness in terms of drug pricing. But let me also say that in our new, you know, ten-scandal a day news ecosystem, it’s really hard to hold on to issues and push them through.

HEFFNER: Katherine I’ve said for a while now that ultimately the Trump Administration’s incompetence will be, if the people like, if that incompetence is bleeding into agencies’ work, then there will be a scandal on a scale that it’s not the next 60 seconds of a scandal, but it will be millions of lives that are in jeopardy. So, as you point out, the person ultimately selected for the chairmanship of FDA, has the requisite qualifications and credentials, and hopefully that means…

EBAN: Of being not insane. Right.

HEFFNER: [LAUGHS] Right. And hopefully that means that the agency will be governed, not insanely,

EBAN: Right

HEFFNER: And, will preserve regulations that are integral to our livelihood. But it almost does make sense that there is this disconnect when we don’t produce any of the medicines ourselves and as a function we view it as, or the companies view it as acceptable that there would be kind of, almost a tariff like effect on the price. Where we’re not making them, and therefore you know, it is what it is. And I’m just wondering, how, is there a way that we could justify the price control if we did take more ownership of the industry, or retake ownership of the industry. Is that plausible?

EBAN: Well, yeah, you bring up a very interesting point. The pricing for generic drugs, one of the problems is that it’s actually too low.


EBAN: What happens is that once multiple generic drug makers come into a market to sell a drug, the price drops out of it. Now how do you sustain quality when you’re selling a vaccine for four cents a vial. You know, it becomes essentially impossible. So, maybe you do price regulation around protected manufacturing in the US. Maybe we say that as a function of national security, we need to make a percentage of antibiotics that we use in this country. I mean maybe just how they’re selling you know Shinola watches made in Detroit. And now they’re like, but selling them in Barney’s. I mean maybe, you know, we need a Shinola antibiotic plant in troubled cities. You know, set ’em up.

HEFFNER: I would think so, the scenario, nightmarish scenario that you present is if and all scientists say when, it’s not if, there is the next epidemic, it doesn’t sound like we’re going to have the bandwidth, the scientific or medical capital to deal with it. And, that we will suffer as a result.

EBAN: Yeah. We don’t have the capital and we don’t have the hardware and we’re not making the drugs. And the drugs that we need are not even in the pipeline or in development. I mean it’s a massive crisis and you have to add to that, I mean one thing we haven’t touched on is drug shortages. So the problem is because the prices have, the bottom has fallen out because of generic drug making, and there the profit is gone from whole sectors of drugs, companies have stopped making them. And so we have sort of crazy drug shortages, of very basic supplies and equipment.

HEFFNER: Katherine I admire your persistence and your dedication to the reporting you do and your advocacy. Thank you.

EBAN: Thank you very much.

HEFFNER: And thanks to you in the audience. I hope you join us again next time for a thoughtful excursion into the world of ideas. Until then, keep an Open Mind. Please visit The Open Mind website at Thirteen.org/OpenMind to view this program online, or to access over 1,500 other interviews. And do check us out on Twitter and Facebook @OpenmindTV for updates on future programming.