Guest Review: @pdxsag on Bottle of Lies: The Inside Story of the Generic Drug Boom by Katherine Eban

[This is a guest review of Bottle of Lies: The Inside Story of the Generic Drug Boom by CBS reader @PdxSag.]

I bought this book thinking it would fill-in the vague, almost memory-holed story of an Indian generic-drug company that the FDA had shutdown a few years ago. I recalled seeing occasional mention of the topic by Steve Sailer (1) (2), but nothing at any other media sources.

I quipped to my Dad, “I'm not sure what the take-away on this one is going to be. Sordid tale of our government selling us out to globalist crony-capitalists for legalized kickbacks of pennies on the dollar? Yeah, I've heard. Or a warning that consumers should avoid generics in favor of the Big Pharma brand-names? Um, 1995 called, they want their insurance back.”

As it turns out, it was both of those and much more. Indeed, I'd say the book has something for everyone:

• Regulatory capture – close followers of the Boeing and Tesla fiascoes are advised to keep a stiff drink on hand
• Jurisdictional in-fighting and glacial responses by regulatory agencies – again, stiff drinks for our friends short the Boeing and Tesla equities
• Bald-faced fraud on the part of foreign-born corporate executives
• US bureaucrats, contra their reputation, all bark and no bite – and chipping away at US credibility in eyes of regulators and frauds alike in the rest of the world
• Globalization fleecing American citizens
• Clinton Foundation (Really. Albeit mostly a cameo, but still... no coincidences?)

At times this was a hard book to read. The sense of deja vu I got from it was relentless. It has been 10 years since the fraud that is the primary subject of the book took place, and yet the characters and events are no different, save for the names, than I see happening at Tesla and Boeing. At times I wonder if the financial fraud of Enron presaged the financial fraud of the banks leading to the GFC, and perhaps now we're seeing a similar situation where the product fraud of Ranbaxy presaged the product fraud of companies like Theranos, Tesla, and Boeing.

Americans are getting fleeced by globalization and there's nary a thing citizens are able to do in response. It's not mere apathy by our government, from all appearances it's active antipathy. As Sailer often remarks: privatize profits (by a well-connected clique at the top) and socialize costs (across a segmented and antagonized base).

With regard to outsourcing, I was given pause to wonder how exactly pharmaceutical manufacturing is supposed to benefit from offshoring. Ostensibly globalization is leveraging – some say exploiting – cheap labor to lower the price on a finished good. It's easy to see the large relative labor component in a consumer non-durable: shoes, clothes, toys, etc. In contrast, pharmaceutical production should be a very expensive chemical engineering plant with very little human labor per unit-mass of finished product. If that is the case – and the book didn't exactly explore this point – then on the face of it, it should be obvious offshoring pharmaceutical production isn't about labor arbitrage. Rather, it has to be about regulatory arbitrage: specifically escaping over-sight to make it easier to cut-corners – some say cheating – without getting caught. Where is the fig leaf of plausible deniability that American patients stand to benefit from outsourcing prescription drugs? So far as I can tell, there isn't one. It's a shameless money grab that could not withstand a rational scrutinization if our media and government weren't in on the con themselves.

In the book we read about the rank-and-file front-line inspectors of the FDA doing commendable work under circumstances where the deck is stacked against them. They persevere against the odds and expose egregious fraud. Then, their work ends all for naught as the FDA's higher-ups stifle, water-down, and neuter any significant consequences bowing to political considerations. Again, anyone following along the NHTSA, the SEC, the DoJ, the EPA, CAL-OSHA, and a half-dozen other Federal, California, and New York regulatory agencies' impotent oversight of Tesla knows this story all too well. Or, for our aerospace friends, the FAA's lackadaisical over-sight of Boeing.

Despite my misgivings that the book was going to be yet another accounting of a sordid industry, it more than redeems itself by offering an informative look at an industry – pharmaceutical manufacturing – that I think most people take for granted.

My naïve assumption, and I think most people's as well, was that generic drugs are following “solved” chemical engineering processes – cookbook chemistry as it were – to create chemical compounds that are identical in every way to what the brand-name manufacturers are producing (bioequivalent is the technical term). With brand-names, as the conventional wisdom goes, you're paying for drug discovery research and development (and marketing and advertising), but manufacturing quality is not an independent variable between products. The truth of the matter is neither one of those assumptions is correct.

First, generic drug companies must create their own, unique, manufacturing process. Drug patents apply to the active chemical compounds, as well as to the process one follows to create the chemical compounds. The patent exemption for generic drugs is only for the final, active chemical compounds. The process, or recipe, to create the chemical compounds is still covered by patent held by the brand-name. In fact, the patent-holding brands routinely use this fact to dispute generic drug company's applications for patent exemption. Thus, by-definition generic producers are required to come up with a unique recipe to create a drug that will, nonetheless, produce an identical result.

A rough analogy is the brand-name company has patented selling bus rides from New York City to Chicago. The patent covers the route as well as the destination. The generics are granted an exemption to also sell bus rides from New York to Chicago, ie. the destination, but they must come up with their own unique route. Obviously where this analogy breaks down is that it's trivial to come-up with a non-infringing route between two distant cities. It's not trivial to come-up with a non-infringing process to cost-competitively manufacture a complex chemical compound that otherwise is identical in every way. To abuse the analogy, the generic's route may be such that the destination is not even Chicago. It's Gurnee, or perhaps more aptly, Gary.

Second, quality control is vitally important and anything but “cookbook chemistry.” Remarkably, quality control is so variable that generic manufacturers, as a matter of course, grade their finished products and decide post-hoc upon the market into which they will be sold. Literally, the same drug from the same plant will be destined to an end-market differently from one day to the next based on final manufacturing test results. The product a market receives is directly proportional to the strength of that market's regulators. Africa, India, and developing world nations are at the bottom. China, Latin America, and Eastern Europe are next up in quality. Western Europe is third. United States and Canada (owing to US proximity more than actual Canadian regulatory muscle) at the top. But, make no mistake, like the best house in a bad neighborhood, the FDA is failing miserably. US consumers are merely getting the best of the worst when it comes to Indian and Chinese produced generics.

In lieu of a synopsis the book, I'll share some of the more remarkable excerpts.

• The whistleblower that ultimately caused the complete shutdown of the Indian pharmaceutical firm Ranbaxy sent his first email to the FDA on August 15, 2005. It would be 8 years of gross fraud on the American public right under the nose of the FDA and DoJ before the final settlement was signed and a $500 million dollar fine paid. Soon after the company shutdown. However, no executives or management were held personally liable, either financially or criminally. All of them, save the CEO, found work in other generic Indian pharmaceutical companies. Supposedly they were highly sought-after given their considerable experience maneuvering against the FDA.
• FDA's head of Office of Compliance, Deb Autor, had 10 years prior to that time worked at the law firm that was now representing Ranbaxy, and was on first-name basis with the partner who served as Ranbaxy's outside counsel. Based on the text of emails Autor sent to the enforcement folks in the FDA, one would be forgiven for thinking she was still working on the side of her old firm, and not the FDA.
• “[In 1989 Mylan] had heard rumors [FDA Chief Chemist] Chang was getting his reviewers to slow down reviews or to fabricate excuses to block certain applications. Finally, the Mylan executives hired private detectives, who found a motive in his trash. [tickets for round-the-world airline trip and receipts for expensive furniture] Corrupt generic drug companies appeared to be bribing Chang with trips and furniture in exchange for approving their own applications and blocking those of competitors.”
• “John Dingell's (D-MI) committee uncovered corruption that seemed to have no bottom. Generic drug executives has roamed the FDA's halls, dropping envelopes stuffed with thousands in cash onto the desks of reviews... Representative Wyden (D-OR) [now Senator] called the generic drug industry 'a swamp that must be drained.' [heh]”
• “One of the companies involved in the scandal [in 1989] was Quad Pharmaceuticals, an Indianapolis-based company whose CEO, Dilap Shah, had given Chang $23,000.”
• “Although the scandal in the 1980s had implicated American companies, those companies had largely been run by South Asians, such Quad Pharmaceuticals."
• In an event reminiscent to the baby-formula scandal: “Nobody understood why the heparin – which is made from the mucosal lining of pig intestines, most of which come from China – was suddenly making patients sick. In February 2008, the FDA discovered the likely source of the contamination: a Chinese plant supplied the crude heparin to Baxter. In a clerical blunder the FDA had completely overlooked and failed to inspect the facility, Changzhou SPL, located 150 miles west of Shanghai. Instead it inspected and approved a plant with a similar sounding name. Predictably, once the FDA officials finally traveled to Changzhou in February 2008 to make an on-the-ground inspection, they found serious problems... nuclear magnetic resonance spectroscopy revealed a synthetic substance called oversulfated chondrotin sulfate (OSCS). The ingredient mimicked heparin, was almost impossible to detect, and produced life-threatening reactions. The FDA formally named OSCS as a likely contaminant and concluded that it had been added, somewhere along the supply chain, to increase the yield and profitability of the drug.”
• Concerning one of Ranbaxy's manufacturing plants in India: “There was only one entryway, secured by a well-staffed guard post. The guards there, former military policemen, seemed proud to confirm that they logged all employees and visitors in and out through the gate. No one got past them. This gave [the FDA inspector] the opportunity he needed. By examining checkpoint records at the gate, he learned that the supervisors who had signed off as present for the manufacturing of key tacrolimus batches had not actually been at the plant on those days. They had not signed in to the security gate logs. The dates, times, and signatures of the batch records were fake and had been filled in after the fact.”
• “Inside the FDA, despite murky and chaotic deliberations over Ranbaxy's fate, it seemed clear to some that the agency would never allow a company so saturated with fraud to keep exclusive rights to launch the nation's most important generic drug... But an argument had begun seeping into the government's internal deliberations. Because the generic drug company operated on razor-thin margins, it needed the profits from exclusive rights in order to pay the record-breaking fine it deserved.”
• “This time, because the inspection was so vital, the FDA's India office had given Ranbaxy only a few hours of advance notice – less time to conceal evidence. But Baker and Argawal wound up in the wrong town and had to backtrack, which took hours and bought Ranbaxy additional time. The investigators finally arrived, but a corporate executive from Ranbaxy's headquarters had beaten them there. The executive had taken the first flight from New Delhi that morning, which meant the company must have gotten word of the inspection the night before. Someone in the FDA's India office had almost certainly leaked it.”
• “[Generic drug manufactures] worked to make their formulations look perfect on paper, regardless of their actual quality. They jury-rigged the result by fiddling with the tests, retesting already proven batches, or even testing the brand-name products instead. Only then would they move the data to the computer system the FDA was going to examine. Until [FDA inspector] Baker showed up in India, only Ranbaxy had gotten caught – because of the whistleblower Dinseh Thakur... The finished doses manufactured at Wockhardt and other Indian plants were shipped straight from those factories to American wholesalers and drugstores. People had the right to know what they were taking and to choose what they didn't want to take. But American patients had no idea of the subterfuge that went into the manufacturing of their low-cost medicine, and the FDA had no plans to tell them.”

This wasn't in the book, but I feel it warrants mentioning. From my own experience and from news events many times I see reliable distinctions between foreign nationals that went to college in the US, got their first jobs in the US, and have deep social ties in the US, and foreign nationals that went to school and began their careers in their countries of origin, then transferred to western companies or began selling their foreign-sourced products into western markets. In the former case, as a group I have experienced nothing to indicated they are any less trustworthy than any other westerner. Indeed, the whistleblower at Ranbaxy was a South Asian who started his career at Bristol-Myers Squibb. As for the executives at Boeing responsible for the 737MAX, they are Americans through and through. Obviously no country or region has a corner on frauds and liars. What is obvious is that the vast majority of people are products of their culture. At present, the professional business culture in China and India and Russia, and what it selects for in executives able to get ahead in it, is not the same as the US, Canada, and Western Europe. As such, American consumers gain very little benefit when our markets and businesses are opened up to people who are products of those other cultures.

As for my grade of the book, I give it 5 stars for a comprehensive telling of an important story that has been deliberately ignored in the mainstream. The globalist system wants Americans to believe all prescription drugs are the same, and the FDA and the media are willing accomplices in that charade. The message in book needs to be known to the American public.

On the other hand, the story as-presented by the author was closer to 4 stars. It suffers slightly from choppiness, too many names and characters (though that is probably unavoidable given the events), and less than sensational recounting of what really are some sensational events. I was left wishing for a modern “The Jungle,” but this book wasn't up to that challenge. In the final acknowledgements Eban writes, “I am indebted to Mark Lee Hunter for his advice on how to turn years of reporting and mountains of information into an actual story at a moment when I felt stuck.” I can completely understand where that statement came from. This book was no easy task, and 4 stars for quality of writing and story-telling is no shame. In the end, I averaged the two to rate it a 4.5 out of 5.

Post-script: while in the process of writing this review the book's author, Katherine Eban @KatherineEban, shared a story from New Zealand where the state-sponsored pharmacy board was running a public relations campaign on the “nocebo effect,” in which supposedly patients imagine their generic prescription drugs are not as effective as their brand-name equivalents. At the same time, they pulled approval for a pair of brand-name epilepsy drugs in a cost-savings bid. Since August of this year, 4 patient deaths have occurred which are suspected of being linked to the change to generic medications. Again, we see globalization privatizing profits, socializing costs, and the best interests of citizens in developed countries being actively subverted by their government.

4.5/5