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Americans spend more on medical care than those in other wealthy countries, but we’re a lot sicker. The Price We Pay will explore the reasons for that and possible solutions to our health care crisis.

Generic drugs are cheaper in the U.S., but quality control can be a problem, professor says

Every week through October, we are examining the medical, business and cultural systems that contribute to the dichotomy that is the American health care system — a system that benefits some but costs all of us.

Today we're looking at generic drugs. You may have heard they're cheaper than name-brand drugs and are just as good, right? Well, changes are underway in the industry that test that long-held theory. Dr. Kevin Schulman is a professor of medicine at Stanford University who has extensively studied this issue.

Dr. Kevin Schulman
Stanford University
Dr. Kevin Schulman

Marshall Terry: Welcome.

Kevin Schulman: Thanks so much for having me.

Terry: Conventional wisdom has long been that generic drugs are the same as brand-name drugs. Is that assumption wrong?

Schulman: They're the same chemical entity. What we're learning is that over time, the question we have is the quality of the drugs. How are they manufactured? Are they manufactured to the same standards as the original brand-name drug?

Terry: And what is the answer to that?

Schulman: Unfortunately, we're finding that oftentimes they're failing. There are large classes of drugs — generic drugs — that have been recalled over the last couple of years because they contain carcinogens that were not appropriate for medications. And it just opens up the question: What is going on in the generic drug market? How do we understand both price and quality of the medications that we're receiving?

Terry: Well, what is going on with the generic drug market? What's leading to this?

Schulman: So, the idea of generic drugs goes back to 1984 with something called the Hatch-Waxman Act. At the time, the whole idea was to allow generic drugs into the U.S. market to lower the price of medications, and it was very much a price-focused set of issues. And it worked really well. In 1984, the generic drugs that we got in the United States were mostly made in the United States and Europe. Today, those drugs are made offshore — maybe in India, maybe in China.

Our ability to regulate those manufacturers is much different, and the market itself has really changed dramatically. We've had huge consolidation of intermediaries in the market — drug distributors. And that's put huge pricing pressure on manufacturers. So today, yes, generic medications are the lowest cost they've ever been. Sometimes, really important medicines are pennies. But it's purely a price market. There's no assessment of quality. It's like going on Amazon and saying, "Give me the lowest priced good for any category without the quality rating." And we all know what that leads to.

Terry: You said more of these generic drugs are now being made outside of the U.S. — overseas in places like China and India. How much more common is that?

Schulman: By about 2005, 2007, about 50% of all the generic drugs in the U.S. were made offshore. And I think now ... the majority of them are made offshore. There are different pieces to the drug. The chemicals that go into the drug, almost all of them are made offshore. And then whoever packages the drug and takes those what's called active pharmaceutical ingredients and make it into a pill or tablet or capsule — that also is generally offshore.

"Yes, generic medications are the lowest cost they've ever been. Sometimes, really important medicines are pennies. But it's purely a price market. There's no assessment of quality."
— Dr. Kevin Schulman, professor of medicine at Stanford University

Terry: Now you mentioned one of the concerns with this shift to more of these drugs being made offshore was a quality control issue. And the countries you mentioned — two of the biggest countries where these drugs are made, India and China. What reach does the FDA have in regulating these drugs that are made in those countries?

Schulman: Our FDA has authority to audit U.S. plants. What it has to do is ask governments for permission to audit plants in India and China. In the U.S., we have secret inspections. The FDA just shows up at your door and wants to inspect the plant. In India and China, it has to ask permission and notice the manufacturers that it's coming in.

But more broadly ... The FDA inspects only every couple of years. In between that time, the FDA has no idea what's going on at any individual manufacturing plant. I mean, it's not dissimilar to what we've seen in other industries that have outsourced. The idea of FDA policing all potential sources of molecules for the U.S. market is really, really hard to imagine.

Terry: Do those countries themselves have FDA-equivalent organizations? Do they have their own version of that? And if they do, are they up to the same standards as our FDA?

Schulman: They have nascent institutions that are not at the same standard as the U.S. I don't know how big the Chinese FDA was, but a couple of years ago, it consisted of 100 people. The issue here is the supply chain.

You would think you would test some of these drugs — the suppliers would test or the distributors would test medications to make sure that the ones they're dispensing are saying what's on the label and that they're good quality. Unfortunately, what we've seen is that's not true. And the recalls that happened with these carcinogens in metformin and ranitidine — metformin's a first-line therapy for diabetes, and FDA eventually recalled 40% of all the drugs on the market because of these carcinogens. But the only way we found out about that was actually a third-party testing organization that looked into the issue.

So, what happens today is each new manufacturer of a generic drug has to offer a lower price to get into the market. And so, prices have plummeted, which is a great thing. But again, there's no consideration of quality. And so, at a certain point, the market price is below the price that a high-quality producer can produce, and people leave the market. And so, we have this market now where it's basically the lowest-cost manufacturers that are the ones supplying the drugs to the U.S.

Terry: What can Americans do right now to verify the quality of their generic drugs? Is there anything they can do?

Schulman: Unfortunately, right now, there's really nothing they can do. But we can go back and say, "We don't want to tolerate this." If we're paying for a medicine at a pharmacy, we want that pharmacy to assure us that it's safely made medicine at the highest quality, not the cheapest medicine available that they could find.

Terry: You're in favor of a rating system for generic drugs, similar to the ratings that you see on Amazon.com. Even if we did have a rating system that assigns, you know, one star, two stars, et cetera, can you really rate a pill the same way that you would, say, a vacuum cleaner or a toaster?

Schulman: Absolutely. I mean, there are very specific parameters. Is the dose on the label — the actual dose? Is the quality of the pill, in terms of contaminants, is the quality of the pill there? And then are there other chemicals in the pill that you don't want in the pill, like these carcinogens that were found? So, I think we can rate it. We can rate it as yes/no. Does this meet the label? Is this within standards? Or we can rate it 1-5. I think it's possible to do either one.

It's really important not to scare the American public. It's really important to take your medicines. But if one month your blood pressure pill is not working or you feel really lousy when you take your medicine that you've been taking for a long time and you wonder whether or not that there's something wrong with the pill, the one thing I would say is it's entirely possible these days that there is something wrong with it. You can go back to the pharmacy, get a different manufacturer, and you can also ask the pharmacy, "Why is it that you're not giving me a quality rating on this medicine as well as a price?"

Terry: Thank you for taking the time.

Schulman: Thank you very much.

Terry: Dr. Kevin Schulman is a professor of medicine at Stanford University who has extensively studied changes affecting the generic pharmaceuticals industry.

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Marshall came to WFAE after graduating from Appalachian State University, where he worked at the campus radio station and earned a degree in communication. Outside of radio, he loves listening to music and going to see bands - preferably in small, dingy clubs.