Corruption and Pharmaceuticals: Strengthening Good Governance

1. Corruption and Pharmaceuticals: Strengthening Good Governance Health, Nutrition & Population, Human Development Network, Operations   Policy and Country Services and                                       PREM Public Sector Group                           Brown Bag Lunch Seminar April 4, 2006 Washington, DC Jillian Clare Cohen, Monique Mrazek and Lorraine Hawkins

2. Organization of Seminar • Introduction to the topic • Provide examples of how corruption can occur globally • Highlight a pharmaceutical diagnostic tool applied in Costa Rica • Discuss anti-corruption strategies • Feedback

3. Introduction • Access to medicines is often a life and death issue • Despite international aid and a plethora of programs devoted to improving global pharmaceutical access, there is a morally concerning drug gap • About 2 billion people or one-third of the global population lack regular access to medicines • WHO estimates that by improving access to essential medicines (and vaccines) about 10 million lives per year could be saved • Corruption contributes to the drug gap

4. The Impact of Corruption in the Pharmaceutical System • Corruption in any one of the critical decision points in the pharmaceutical system can be detrimental to a country’s ability to improve the health of its population • Typically the poor in developing countries are most susceptible to its detrimental effects • Good governance is a sine qua non for ensuring good access to essential medicines for the population

5. Why the Pharmaceutical System is Susceptible to Corruption • The sale of pharmaceutical products is lucrative • Final customers more vulnerable to opportunism than other products • Pharmaceutical suppliers (drug manufacturers, importers, wholesalers, pharmacists) are profit maximizers • But sometimes profit maximization breaches legal norms and professional ethical norms

6. Good Governance • We focus on two core areas for good governance • First, government regulation (e.g. market entry, manufacture, sale) • Second, when coverage is provided, selecting, purchasing and managing distribution of medicines

7. Why the Pharmaceutical System is Susceptible to Corruption • The pharmaceutical system has a significant degree of government involvement in its regulation • Government officials have a monopoly on several core decision points • Governments determine how drugs are selected for a national formulary • Need robust institutional checks and oversight mechanisms to limit individual discretion

8. Why the Pharmaceutical System is Susceptible to Corruption • Third, it can be difficult to distinguish authentic pharmaceutical products from counterfeit or sub-standard ones • In many countries with weak institutions, the sale of counterfeit, unregistered or expired drugs are common • The WHO estimates that about 25 percent of drugs consumed in poor countries are counterfeit or substandard • Counterfeiters are often skilled at copying legitimate products

9. Corruption and pharmaceuticals is becoming a “mainstream” topic Reluctance in the past by policy makers to disregard the issue “Too complicated” “I’ll know it when I see it” “How can you distinguish the difference between corruption and inefficiency?” Corruption is now talked about

10. Collective Action to Fight Corruption • Declaration of Rome (February 2006) “…counterfeiting medicines, including the entire range of activities from manufacturing to providing them to patients, is a vile and serious criminal offence that puts human lives at risk and undermines the credibility of health care systems”

11. Counterfeit Medicines: the Bad and Ugly • If institutions weak more likely find counterfeit medicines in the market • Regulators may receive kickbacks to ignore makers of counterfeits • Regulators may be intimidated by counterfeit producers

12. Counterfeit Medicines (2) • Thailand, substandard medicines account for 8.5 percent of the market • China had 500 illegal manufacturers • India plans to introduce the death penalty

13. Counterfeit Medicines (3) “Profiting from spurious drugs that might harm or kill innocent people is equivalent to mass murder” • Tragedies are not uncommon (e.g. Haiti and cough syrup for children)

14. Global Examples • A pharmaceutical manufacturer in Brazil was found to be manufacturing sub-standard contraceptive drugs • In June 2004, the New York State Attorney General’s Office accused GlaxoSmithKline of fraud by concealing information to physicians about the adverse impact of the anti-depressant Paxil® (paroxetine) when prescribed for depression in children and adolescents

15. Drug Dumping • This happens when pharmaceutical companies donate low quality, ineffective or even dangerous drugs to developing countries • Tax concessions are given for donations in the USA • Need to ensure intention is good and uniform standards apply • WHO Guidelines for Drug Donations (1996)

16. Purpose of Corruption Framework • The pharmaceutical system is technically complex • It is comprised of a number of core decision points: manufacturing, registration, selection, procurement, distribution, and prescribing and dispensing • Need to know what are the best practices in the core decision points so ignorance and ioster corruption • Decision makers need to be familiar with the potential areas where corruption can occur in the pharmaceutical system

17. Pharmaceutical System Corruption Assessment Tool • First methodology done by Cohen, Cercone and Macaya (2002) in Costa Rica and which has been revised and applied in South East Asia by the WHO in 2005 • Includes use of questionnaires that are designed to assess the vulnerability of each decision point in the pharmaceutical system • For example, does the pharmaceutical system run centrally or locally? What institutions are involved in the procurement of pharmaceuticals? What committees are responsible for the drug selection process?

18. Pharmaceutical Assessment Tool • Built on Klitgaard’s formula: • Monopoly(M) + Discretion (D) – A (Accountability) – T (Transparency) = Corruption

19. Service Delivery Manufacturing Selection Registration Procurement Distribution

20. Methodology Gaining Support We obtained support from the central government and the hospital management prior to launching our pilot study in order to guarantee access to information Evaluation Evaluation indicators indicators Develop Develop Seek “buy Seek “buy - - in” in” General General questions / questions / and mandate and mandate methodology methodology Focus groups Focus groups distribute to distribute to from top from top design design decision points decision points leadership leadership User survey User survey Map questions Map questions to key to key personnel personnel Request Request support from support from Contact and Contact and hospital hospital meet with key meet with key management management personnel personnel Focus groups Focus groups User survey User survey Collect industry Collect industry Collect Collect (must have good (must have good (train survey (train survey perspective perspective information information moderator) moderator) collectors) collectors)

21. Assessment Tool (Continued) • After interviews complete, indicators are rated according to the specified criteria • An average rating is calculated for each of the questions addressing a given decision point • Average rating has a possible range from zero to one • Sum of all the ratings of one is divided by the number of questions in a given decision point to obtain the percentage indicators • Resulting percentage is converted to a zero-to-ten scale by multiplying the resulting percentage by ten

22. Methodology Scale A ten-point rating system represents the following degrees of vulnerability to corruption: 0.0 – 2.0 2.1 – 4.0 4.1 – 6.0 6.1 – 8.0 8.1 – 10.0 Extremely vulnerable Very vulnerable Moderately vulnerable Minimally vulnerable Marginally vulnerable

23. Some Findings: Costa Rica • Procurement was moderately vulnerable to corruption, with a relatively low rating of 5.7. • Absence of an information system to track suppliers and project future need, as well as the lack of documentation • Distribution was 6.9, due to the absence of a monitoring system for inventory stock

24. Some Findings: Costa Rica • Registration and selection processes both received 9.4, indicating that they are minimally vulnerable to corruption • System received an overall rating of 7.7 suggesting the system is only marginally vulnerable to corruption

25. Nigeria’s War on Counterfeiters (1) • Nigeria notorious source of counterfeit medicines • Studies found more than 50% (up to 80%) of retail drugs sampled were not compliant with pharmacopeia standards • Some had no or a small amount of active ingredient (50 mg ampicillin instead of 250mg), others were mislabeled (for example paracetamol labeled as the antimalarial drug Fansidar) • New head of National Agency for Food and Drug Control (NAFDAC) declared war in 2001 • Staff retrained • Procedures more transparent • Registration guidelines updated and enforcement strengthened with more inspectors

26. Nigeria’s War on Counterfeiters (2) • Drugs seized in markets, manufacturers, warehouses • Drug stores and sub-standard manufacturers closed • Media campaign to out fake drugs and smugglers • Impact: • estimates of up to 80% fewer fake drugs on market • 30 convictions secured and 40 pending • Some West African countries lifted ban on Nigerian drugs • Local manufacturers experiencing turnaround with 16 new manufacturing sites • Multinationals coming back to Nigeria • Lessons: Make example of smugglers; inspections and enforcement incentive to retailers; education and training including of general public key

27. Unregistered Drugs Azerbaijan • Central Drug Control Laboratory modernized and staff retrained • Regular batch testing of drugs • Drugs passing inspection had hologram stickers on package • Hotline for patients to check if a batch number had passed quality control • Number of arrests and seizures of unregistered drugs

28. Drug Procurement Albania • In Eastern Europe rapid deregulation and privatization of pharmaceutical sector, combined with unstable economic and political environment created vulnerabilities to corruption • Procurement system was vulnerable to influence during drug selection, kickbacks or bribes that enabled bidders access to confidential information and use of direct procurement instead of competitive bidding • Albania has made significant strides introducing a more transparent international tendering system • This has significantly lowered the price of the average purchase contract for a given drug

29. What Can We Do? • Klitgaard (2000) identifies three main phases in combating corruption • First raise consciousness: Educate decision makers and the public about corruption and its deleterious impact • Second add systems analysis to identify points of vulnerability to corruption • Third determine what prevention strategies are necessary to prevent corruption

30. What to Do: Manufacturing • Ensure legal basis for GMP requirement • Ensure compliance with GMP by having both regular and random inspections • Hire a sufficient number of capable and well paid inspectors • Develop a rotating schedule for inspectors of manufacturing sites

31. What to Do: Drug Registration and Quality Control • Develop transparent, effective and uniform law and regulations for drug registration • Ensure adequate quality control capacity or capacity to adequately review registration documents • Educate professionals and public to identify registered drugs • Disseminate information on internet • Market surveillance and random batch testing

32. What to Do: Drug Selection • Clear criteria for selection and pricing • Drug selection criteria should be based on international standards as set out by WHO • List based on WHO EDL • Committee membership available publicly • Professional and public scrutiny including the regular reporting to the media of drug selection meetings • Public posting of methodologies used and results obtained/decisions made

33. What to Do: Procurement • Procurement procedures must be transparent, follow formal written procedures throughout the process and use explicit criteria to award contracts to reduce the risk of corruption • Announced closing date should be strictly adhered to • Information on tender process and results should be made available to all participants and published • Supplier selection justified and monitored • Written records should be kept of all bids received • Procurement office should be required to report regularly on key procurement performance indicators

34. What to Do: Distribution • Where possible develop information systems to ensure drugs are allocated, transported and stored appropriately at all points • Tight and regular communication and reporting between every level of the system • Appropriate storage facilities and conditions • Good security such as electronic monitoring of transport vehicles and careful checking of delivery orders against inventories of products delivered

35. What to Do: Prescribing and Dispensing • Where possible use information systems to monitor physician prescription patterns • Impose serious penalties for breaches of legal and ethical standards • Regulate industry interaction with prescribers through explicit criteria that limit industry gifts and payments • License and inspect pharmacies

36. Closing Thoughts • The methods and recommendations we make are not comprehensive or perfect • They are however a needed first step to confront corruption head-on • Education and transparency are key • Once we know where corruption is likely, deterrent measures can be put in place • This should include putting together baseline data • Disregarding the problem is not an option