“Don’t Touch My Bags If You Please, Mr. Customs Man”

10/5/09

Imagine the following scenario for a minute: A middle-aged man books a round trip ticket from San Francisco to Shanghai. His reservation indicates this will be a short trip; he is going to be in China less than one full day. Upon arrival at the airport in Shanghai, the immigration control officer asks him “What has brought you to China?” The man looks sickly, is sweating profusely, and appears much older than the 54 years indicated on his passport. Knowing this question was going to be asked, he has been carefully thinking over his answer during the 14-hour flight. “I’m here to buy drugs,” he confesses.

At this point, you’re probably thinking he’ll be marched off to some dank prison cell, never to be heard from again. You would be wrong. Instead, he’s told, “Welcome to China!” and after clearing customs, he heads to a large medical institute located on the Bund by the Huangpu River. Here, he will get his first injection of the generic biologic drug that has led him to this ancient land, along with a yearlong supply to take (actually, smuggle) back home.

Why would someone travel 6,200 miles to buy drugs when they are available here in the U.S.? For the same reason people now are traveling to India, Thailand, or South Africa for heart surgery, hip replacement, or some cosmetic procedure – affordability. They have no (or limited) insurance coverage, and the costs of their treatment are significantly less in other countries. An estimated 750,000 Americans went overseas to have medical procedures done in 2007, according to Wikipedia, saving the recipients a great deal of money and costing the U.S. health industry billions in lost revenue. The cost of the surgery overseas can be one-tenth the cost of having the surgery done in the U.S., even factoring in the travel expense. Similarly, biologics can be every bit as expensive as heart surgery or hip replacement. Treatments for rheumatoid arthritis, cancer, hemophilia, or rare enzyme deficiencies can cost tens of thousands, even hundreds of thousands of dollars a year.

As I’ve discussed in a previous Xconomy piece, generic versions of biologic drugs are not currently for sale in the U.S. Even worse for patients who would benefit from these, regulatory authorities are still in the process of formulating a pathway that would allow the approval of generic biologics. So what’s the likelihood of my scenario above coming to pass? Will shopping overseas for biologics come to resemble the trend of traveling for cut-priced surgery? Here are the key factors involved:

Insurance—For the sake of our discussion, this is a non-issue. If your insurance covered your biologics, then you wouldn’t be leaving the country in the first place to purchase these drugs overseas.

Availability—Just because a biologic is available in the U.S. doesn’t mean that you are going to be able to buy a version of it overseas. Foreign manufacturers, like American ones, will likely choose to make drugs based on their potential profitability as well as whether or not they have patent protection (only relevant in countries that honor this). They will weigh a number of factors, including whether similar treatments are already for sale in their country as well as the number of people in their own region that would likely benefit from the drug. The incidence of particular diseases varies greatly in different parts of the world, and if the disease you have is not prevalent in China or India, for example, then there would be little incentive to manufacture a drug to treat it in that country.

Location—My scenario above has my imaginary patient flying to China to buy Chinese made drugs. Some less worldly travelers might find this lengthy trip intimidating enough to stay home. But suppose these drugs were made in China or India and then exported to a country closer to the U.S., like Mexico, where buying them would be much more convenient? Would that increase the likelihood of this scenario happening? Since drugs are much easier to export than hospitals equipped with trained doctors, this is a significant difference from the flying-to-have-surgery setting described above.

Cost—This is likely to be the most important factor. Finding out how much drugs cost here in the U.S. is surprisingly difficult (go to Google right now and try it). Let’s do a quick case study with etanercept (Enbrel), ranked by EP Vantage as the best-selling biologic in the world with 2008 sales of $6.46 billion. Etanercept, a soluble TNF inhibitor developed by Seattle’s Immunex (since acquired by Amgen) is used primarily for treating rheumatoid arthritis and psoriasis. In the U.S., this drug is usually dosed at 50 milligrams a week. My local drug store put the cost at about $26,500 a year; at drugstore.com the cost was about $21,400 a year. In China, a version of this drug, known as Yisaipu, lists for $64 for 12.5 mg. This works out to $256 for the same weekly recommended dosage in the U.S., or a yearly cost of $13,312. Assuming your travel expenses are under $2,000, then one could still save between $6,000 to $11,000 a year by buying this drug in China. Buying this drug in Mexico, where it is apparently exported, would save significantly on the travel expenses. This looks like a pretty significant savings, although still a very large expense. Manufacturing biologics, even in China, is an expensive enterprise.

Quality—If you’re going to pay thousands of dollars to purchase drugs overseas, you’ll want to feel confident that what you’re buying is up to snuff. First off, are you getting the real deal? A vial full of reconstituted proteins looks no different than a vial of water. Does the vial contain the drug it is supposed to contain? What’s the reputation of the seller, and how easy would that be to determine in a country where you don’t speak or read the language? Let’s assume for the sake of argument that the vial really contains the drug it’s supposed to contain. Is the packaging truly sterile, so you won’t get an infection? Is the potency equivalent to the drug available in the U.S.? It’s unlikely that a copycat drug you are buying in India or China will have gone through clinical trials that are as rigorously monitored as in the U.S., and maybe there were no trials done at all. So how confident will you be that the drug will work? How will the dosage be calculated? Finally, what assurances do you have that the drug isn’t counterfeit? Caveat emptor—there will be no guarantees that the material you are buying will be biologically equivalent to the drug you couldn’t afford back home.

Intellectual Property—This is an issue that I imagine most patients are unaware of and, even if informed, would probably ignore. As pointed out by Ellen Ruppel Shell in her well-researched book Cheap: The High Cost of Discount Culture, there is often a significant price to be paid by buying a cheaper product that is not readily apparent to the consumer. Drugs made in countries that have not honored intellectual property laws (or where IP enforcement is difficult) can be significantly cheaper for many reasons, including the fact that the companies that make them don’t pay royalties or license fees on discoveries made and patented in other nations. Some patients will attempt to justify their purchases by claiming that U.S. drug makers are making excess profits and they are simply “sticking it to the man” by buying overseas. Others will argue that they’re just being smart consumers and buying drugs at a good price. Failure to honor intellectual property laws is not an issue generally faced by those traveling to foreign countries for surgery.

Legality—Having your drugs administered in a foreign country shouldn’t be too problematic, but can you legally bring those prescription drugs back into the U.S? The FDA regulates this importation issue. The Food, Drug and Cosmetic Act prohibits importation of unapproved new drugs, according to the FDA website. “Unapproved new drugs are any drugs, including foreign-made versions of U.S. approved drugs, that have not received FDA approval to demonstrate they meet the federal requirements for safety and effectiveness.” Furthermore, the FDA has developed guidelines for “Coverage of personal importations.” The guidelines state that the “FDA should consider not taking enforcement actions,” in certain cases “when the intended use of the drug is unapproved and for a serious condition for which effective treatment may not be available domestically either through commercial or clinical means.” However, Indian or Chinese made copies of U.S. biologics would not be allowed since the drugs are commercially available here, albeit at much high prices. While the FDA has discretion over whether or not they will allow your drugs into the U.S. “foreign-made chemical versions of drugs available in the U.S. are not intended to be covered by the policy.”

In summary, buying biologics in other countries and bringing them back to the U,S. wedged in between your T-shirts and dirty socks is not so much “importation” as it is “smuggling.” Will Americans be willing to take this risk? Is it happening already? I have no current numbers to share, but would not be surprised to find that this type of travel, even with the risks involved, is already happening at some level. Whether a trickle becomes a flood may depend on the outcome of the current healthcare reform efforts.

[Editor's Note: Thanks to Arlo Guthrie for inspiring the title to this piece, borrowed from the lyrics of his 1969 ode to smuggling, "Comin’ Into Los Angeles."]

Stewart Lyman is Owner and Manager of Lyman BioPharma Consulting LLC in Seattle. He provides strategic advice to clients on their research programs, collaboration management issues, as well as preclinical data reviews. Follow @

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  • steve s

    I would like to hear Dr Lyman’s opinion on the future of outsourced development and manufacturing of biologics to China, Singapore, Korea and India. Big pharma is already building manufacturing and R&D in China and several Biotech companies are planning the same. Nektar has a major R&D site in India. Medicinal chemistry work at CMO, CRO and company owned facilities are largely accomplished overseas. Today, most if not all small molecule generic drugs are manufactured in China and legally imported to the US for testing, formulation, and distribution. That’s why Walmart can offer generic small molecule drugs for $4 per month. What happens 10 years from now to US based R&D and manufacturing of biologics when China and India have mature regulatory systems, huge biologic CMO capacity, and Big Biotech owned manufacturing sites? Can Amgen afford to not manufacture in China?

  • http://www.lymanbiopharma.com Stewart Lyman

    Steve, I delayed answering your question to give others a chance to chime in. The trends are clear that the production of biologics overseas is growing rapidly. There are a number of companies in countries such as India and China that are already manufacturing generic biologic versions (biosimilars) of epo, G-CSF, GM-CSF, insulin, growth hormone, and others for their own markets. At present there are strong barriers that keep these molecules from being exported to some countries, such as the US, although they are being exported to other countries around the world. There are a number of political, organizational, intellectual property, and manufacturing issues that will need to be resolved before we see large scale production of biologics made overseas with the intent of selling them in the US. One of the primary factors will be that the US FDA will need to establish inspectors in these countries to sign off on the quality of the drugs made there. There will need to be a significant effort to scale up manufacturing expertise and approved supply chains in these countries, and to get local government approval as well. We will see Big Pharma respond to the financial threat of biosimilars by making their own generics to compete against their branded biologics. This is already happening with small molecules. In addition, there will be an increased emphasis on second generation biologics to extend patent protection i.e. drug franchises, as Amgen has done with Neupogen/Neulasta and Epogen/Aranesp. I will also predict that this outsourcing trend will not be without serious challenges, as Boeing has seen with their outsourcing program of the 787 Dreamliner. Producing products locally with a skilled, highly trained and experienced workforce will always have certain advantages over outsourcing to a foreign country, especially when problems arise and when you are trying to make a product for the first time.