Citizens Health, Taxpayer Dollars at Stake in FDA’s Fake-Drug Investigations

After nearly five decades on the Washington scene, National Taxpayers Union (NTU) has seen its share of “who’s watching the watchdog?” stories. Oversight is, after all, vital to the effective stewardship of taxpayers’ money. When this element fails, the impact is not only measured in dollars and cents – it’s gauged by loss of citizens’ confidence in government. 

That’s why NTU’s members took great interest recently in an announcement that the House Committee on Energy and Commerce was probing “management concerns with the Food and Drug Administration’s (FDA) Office of Criminal Investigations (OCI).” Although OCI’s issues have previously been mentioned in Government Accountability Office (GAO) and FDA Inspector General reports, the Committee’s actions are also motivated by a Reuters article citing complaints from OCI agents about spending decisions, as well as case priorities. 

As supporters of “whistleblower” protections and of federal policies that reduce the cost of health care, we believe the Committee’s investigation needs to be conducted thoroughly, but also diligently. Here’s why:

Securing the supply chain can’t be selective. One reason that legal importation of drugs from foreign sources hasn’t happened here is the monumental task of weeding out fake or adulterated medicines. A previous estimate put the cost of establishing effective screening at nearly $3 billion – and that was 10 years ago, when the number of online websites selling pharmaceuticals was not as great. 

The problem has become much bigger in recent years, and easy answers are elusive. For example, the Reuters article highlighted several OCI employees who say they have become the “Botox Police,” owing to the workload of following up on cases involving that particular injectable medication. Unfortunately, counterfeit or improperly stored Botox can result in serious conditions such as paralysis. Moreover, the manufacturer of Botox reported that its second quarter U.S. revenues for therapeutic uses of the drug (e.g., migraines and PTSD) were nearly $300 million, dwarfing receipts from cosmetic uses by more than $100 million. It would also be a mistake to think that “policing Botox” is a dead end for “leads” on other activity. Ultimately, bad actors tend to prey upon a range of products that represent the biggest financial windfall: they might begin plying their illicit trade in Botox, but could then just as readily set their sights on specialized cancer treatments. 

Focusing on a particular country of origin instead of just one drug is of no help either: as a FDA sting operation determined, 85 percent of the drugs promoted by the targeted scammers were advertised as Canadian-based, but came instead from more than two dozen places around the world. 

Taxpayers have a huge stake in safe medications. Because of secondary distributors and other intermediaries, there are many opportunities for patients to be endangered by fake drugs. New technologies such as an integrated tracking system are promising, but some of them are nearly a decade away. In the meantime, taxpayers, not just patients, suffer. Medicare, Medicaid, and the Children’s Health Insurance Program were alone responsible for $115 billion in prescriptions in 2014, while taxpayers also subsidize nearly three-fourths of the premium costs for the Federal Employees Health Benefits Program (FEHBP). These programs heavily rely on reimbursing third-party providers, making them more vulnerable to illegally imported drugs. 

For this reason, OCI’s budget and human resources allocations must be weighed against the potential savings to government health programs from fraud prevention, improvement in patient outcomes, and reductions in costly follow-up care that might be required for those who had adverse reactions to illegally imported medications. 

Fixing a flawed management culture requires targeted solutions. Allegations in the Reuters article that OCI was extravagant with motorcades for its officials, or that supervisors were allowed too much latitude in relocating offices, call for disciplinary actions that are unrelated to other matters, such as where to put investigative resources or how to measure OCI’s prosecutorial outcomes. GAO’s 2010 report explored several reasons why prosecutors might be declining to take OCI’s recommendations, beyond lack of merit. This includes “the extent to which the case falls under the [U.S. Attorney] office’s current investigative and prosecutorial priorities.” Additional information is needed to shed light on any next steps that might be taken.

The Committee on Energy and Commerce was smart to ask 11 detailed questions of FDA Commissioner Robert Califf about OCI’s activities. Taxpayers deserve a thoughtful, measured response based on the answers they receive – one that recognizes OCI’s critical mission of protecting the prescription drugs taxpayers and consumers depend on every day.