The Peter Attia Drive - #71 - Katherine Eban： Widespread fraud in the generic drug industry

00:00:00.000 Hey everyone, welcome to the Peter Atiyah drive. I'm your host, Peter Atiyah. The drive

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00:04:12.040 My guest this week is Catherine Eban. Catherine is an investigative journalist, a fortune magazine

00:04:17.580 contributor, and an Andrew Carnegie fellow. She has written quite a lot about pharmaceutical,

00:04:22.280 counterfeiting, gun trafficking, coercive interrogations by the CIA, et cetera. But what we focus

00:04:28.520 on today very specifically is her most recent book called Bottle of Lies. This book is a really

00:04:35.900 interesting and truthfully at times infuriating look at the culture of incredible deceit and fraudulence

00:04:45.560 that exists in the generic drug manufacturing industry. I think Catherine does a great job in the

00:04:51.740 book, and I think we do so in the podcast as well, walking you through basically how the stage is set.

00:04:59.240 In other words, what are the regulatory, environmental, cultural factors that allowed this type of practice

00:05:07.820 to flourish? And then we dive really deep into one specific and infuriating example. I think I'll leave it at

00:05:16.040 that. I'm half tempted to say more, but I realize everything that we have to say on this topic is

00:05:21.540 covered nicely. This is not a technical podcast, meaning you will, you don't have to know anything about how drugs

00:05:27.040 work, and I think you'll get through this pretty clear. And the only thing I'll say before closing is if you find

00:05:32.300 yourself throughout this podcast getting sort of frustrated, don't worry. At the end, we offer some semblance of

00:05:38.880 things that you can do to at least protect yourself. It's not a magic bullet, but it's better than flying

00:05:45.400 completely blind. So without further delay, please enjoy my discussion with Catherine Eban.

00:05:54.020 Well, Catherine, thank you so much for coming up here today.

00:05:56.420 It's great to be here.

00:05:57.700 For the listener, within about 30 seconds of meeting, I was already peddling Topo Chico to you.

00:06:02.540 When you let it be known that you love bubbly water, I couldn't resist.

00:06:05.900 It's good stuff. I like it.

00:06:07.200 That's great feedback for the listener because I'm sort of an unabashed enthusiast and totally not

00:06:11.900 sponsored by them, have no financial affiliation, but I never waste an opportunity to talk about it.

00:06:16.440 So feel free to say you don't like it because I want people to know this is a legitimate Topo

00:06:20.700 experience.

00:06:21.380 I'm a bubbly water junkie. I'm adding it to my list.

00:06:24.960 Awesome. Well, Catherine, I don't even know if I mentioned this in the initial communication we

00:06:29.540 had over email. If I did, it'll still be helpful for the listener for context. A couple of months ago,

00:06:34.000 I was talking with a friend of mine named Sam Harris. Do you know Sam?

00:06:37.760 Yeah.

00:06:38.420 Yeah. Yeah. And we were talking, talking about something and the discussion shifted to something

00:06:44.960 had really upset me the day before and I had just gotten super pissed off about something. And in

00:06:49.820 some ways, Sam is kind of like my spiritual guidance leader guy. He's the one I turn to when I need

00:06:56.140 sort of help. And I said, Sam, do you even know what it's like to get pissed off anymore? I mean,

00:07:01.860 are you so far past this? Is your practice of mindfulness so evolved that you are able to

00:07:08.920 constantly distance yourself from your thoughts and not find yourself in a state of outrage,

00:07:13.700 even if it's not prolonged, but just momentary. And he said, no, not at all. Like I still get

00:07:18.240 really upset. And he goes, in fact, I just read this book yesterday and I can't tell you how angry

00:07:25.740 I am. And I was like, well, say more. And he said, it's this book about generic drugs and the total

00:07:33.520 chicanery that goes on along with it. And then he said, you know, in fact, you really need to

00:07:38.760 interview the author of this book. She is the perfect person for your audience. And I think

00:07:44.560 you could have the right discussion with her, a very detailed, nuanced discussion. And so, I mean,

00:07:49.720 I was literally sitting here in my office and I looked it up and I did a quick read and I was like,

00:07:55.180 I wonder how this has sort of escaped my radar. And I think just on that moment's notice, I must've

00:08:00.060 just sent you a direct message on Twitter and it all went from there. So in advance, I'll thank Sam

00:08:04.980 for putting this on my radar. I'm sure it would have got there eventually, but he put it there in a

00:08:09.840 moment. And I guess for the listener who doesn't know Sam, that something could make Sam that upset

00:08:15.980 probably speaks to what you are in store for in the next, I don't know how long.

00:08:22.000 I want to start with the story, but I'd love a little bit of the motivation.

00:08:26.460 You've written about healthcare before. How did you dip your toe into this very muddy, disgusting

00:08:34.120 cesspool? So before I started with this project, I thought about generics the way I think most people

00:08:40.240 do, which is we need them. They're affordable. Nobody can afford their brand name drugs. And

00:08:45.740 they're sort of an engine that makes government health programs run. I mean, how would we prescribe

00:08:52.040 to the VA, Medicare, Affordable Care Act without these affordable life-saving drugs? So that was,

00:08:58.960 you know, they're a public good. But in 2008, I got a phone call from a radio show host named Joe

00:09:05.740 Graydon, who runs an NPR program called the People's Pharmacy. And he said, I'm deluged with these phone

00:09:13.100 calls and emails from listeners who are complaining about side effects from their generic drugs. They

00:09:20.120 were stabilized, then they were switched to a drug. It doesn't work. The complaints are similar in

00:09:24.580 nature. And so he took these complaints to the FDA. And FDA senior officials, their reaction was

00:09:32.000 basically, well, it's psychosomatic, because if they patients get switched, the pills look different,

00:09:38.080 it's different color, but the drugs are fine. So Joe Graydon really didn't believe that. And he said

00:09:44.520 to me, we need somebody with investigative firepower to look into this. He knew of my work. I'd been on

00:09:50.440 his program before. And that's really where it started. I mean, it was an unusual phone call.

00:09:56.340 And I just started digging.

00:09:58.980 Now, you must have had a pretty high quotient of belief for Joe, because I'm sure someone like you

00:10:05.660 would be brought ideas like this pretty often for you to say, I'm going to stop what I'm doing and

00:10:12.040 do some digging. I mean, by definition, you can't really do a little surface scratching. Digging is

00:10:16.460 digging. Was it just Joe's reputation? Or was there something that also personally resonated where you

00:10:22.400 thought, well, this is more than just plausible?

00:10:24.300 I've been an investigative journalist now for about 20 years, and you really begin to get a sense.

00:10:31.260 Something sort of tingles inside you. I get tips all the time. I get tips from whistleblowers,

00:10:37.720 all kinds of people. But, you know, when there's somebody with a certain amount of credibility,

00:10:44.060 he's very legitimate. He was asking a big question. It was intriguing to me. I mean,

00:10:51.580 what were all the complaints about? Why were these patients having problems? It just seemed to me

00:10:57.220 that it was something where there was some depth there. I just felt that it was going to be a pretty

00:11:03.840 deep well to go down. I just had that sense. And so I began.

00:11:10.840 Well, I'm going to resist every sort of temptation in my body right now, which is to let you

00:11:16.440 naturally go into the story, which you've so eloquently written about. But I think given the

00:11:22.540 format we have, and assuming that the listeners don't necessarily have some of the background,

00:11:28.280 let's take a step back and put a few things in place. So you've already alluded to this idea of

00:11:33.460 generics versus branded. Can you say a little bit more about what that distinction means?

00:11:37.200 Yeah. So generics, a lot of people will, you go to the supermarket and you can buy a

00:11:44.180 Costco brand cling wrap, which is a version of saran wrap.

00:11:50.280 Or Kleenex versus tissue paper.

00:11:53.240 And the idea that most people have about generics, and they have it because the FDA has told them this,

00:11:58.960 is that they are identical to the brand name, but just at a lower price point. So a great bargain.

00:12:06.420 If everything is working well, the truth is a little different. So a generic is a version

00:12:13.840 of a brand name drug that is made either after a brand name drug has gone off patent,

00:12:20.660 it's no longer legally protected, or if the generic company has successfully challenged the brand patent

00:12:29.340 in court, and then the FDA gives them permission to make a generic. So the FDA,

00:12:36.220 the FDA recognizes, just to take a step back, if you make two batches of drugs in the same

00:12:42.480 manufacturing plant using the same ingredients, those two batches will be a little bit different.

00:12:49.200 There will be a little variation. So now if you take a generic where a company has reverse

00:12:56.060 engineered the brand, sort of broken it down in a lab, tried to figure out how to put it together,

00:13:01.640 maybe with a different set of manufacturing steps, but then concocted it, maybe they've used

00:13:07.780 different excipients, which is additional ingredients, but you have this sort of central

00:13:12.360 molecule, which has already been tested for safety and efficacy. Then they have to present data to the

00:13:18.160 FDA. The FDA recognizes there's going to be differences. So they've provided a range, which is a range of the

00:13:25.440 absorption of the drug into the blood. And basically the generic has to present data to the FDA showing through

00:13:32.340 their testing that they've hit within that range. And that the drug is essentially clinically equivalent in the

00:13:41.600 body, which is called bioequivalent.

00:13:43.440 Now, I think for some people, it might come as a surprise that the company that makes the branded

00:13:52.920 version of the drug would be anything but cooperative with the generic, because the only thing that patent

00:13:59.900 really discloses is the actual molecular composition. And the little bit that I know about pharmacology,

00:14:07.500 which is to say truly just a little bit, is that the methods by which one creates the compound are often

00:14:15.580 where some of the secret sauce lies. In other words, there's lots of value within the manufacturing

00:14:22.860 process that is usually deliberately not put into the patent application. Is that generally correct? Or do the

00:14:30.860 methods typically try to capture that? I mean, I guess maybe I'll explain for the listener what we're talking

00:14:35.440 about here. When you want a patent on something, you have to fully disclose it. So in exchange for

00:14:40.880 fully disclosing something, you have protection. The downside is when that patent is expired, you no

00:14:47.080 longer have any protection. So for example, Coca-Cola chooses to not patent its formula. Instead, it is a

00:14:53.500 trade secret because they never want to have the expiration. So technically, if you could wave a magic

00:14:59.780 wand and figure out how to make Coca-Cola, you could do so legally. You would not be infringing on

00:15:05.360 their patent. But of course, the people at Coca-Cola would, that secret is guarded apparently very

00:15:11.020 heavily. And so my understanding is that in pharma, yes, they'll disclose the molecule because they

00:15:16.360 sort of have to, to get that protection. But a lot of the know-how is in how you went about making it.

00:15:22.360 So when the generic manufacturer comes along and says, well, this drug is now off patent, we're going

00:15:27.060 to go ahead and make it. Just because we know what it looks like in its final, final state, we might not

00:15:31.560 realize the 47 steps required to make it. And that's sort of this reverse engineering you're talking about,

00:15:37.020 right?

00:15:37.520 So generic reaches the market through a process of really warfare, which is that the brand name

00:15:44.480 company surrounds its drugs with patents. All different aspects of the drug are patented. So the time

00:15:51.160 release formula might have a different patent. And the process of manufacturing, each manufacturing

00:15:57.540 step may be under a patent. So they surround the drug with these protections. And then what a generic

00:16:05.140 company does is gets a sample of the drug. They try to break it down in the laboratory and figure out

00:16:12.600 reversing the steps, how do you get to formulate this drug? One way to get around a patent is instead of

00:16:21.320 A, B, C, D, E manufacturing steps, it's A, E, D, C, B, you reverse the steps, which is by the way,

00:16:31.180 legal to do in India, which is where I know we'll get there in this interview, but that's where some

00:16:36.400 of the best reverse engineers in the world come from in India. But then they have to figure out, well,

00:16:42.840 how do they make the time release formula? And what sort of excipients or additional ingredients do

00:16:48.500 they add? And how do they get the drug to dissolve properly? And is it stable under various temperature

00:16:56.180 conditions? And those are all kinds of manufacturing secrets, which the brand name companies put in

00:17:04.200 something that's called a drug master file. And that's like their cookbook. And that is proprietary,

00:17:09.520 that is not disclosed. So any generic company that wants to propose to make a drug, they're sort of

00:17:17.380 going their own way in the laboratory. Yeah, they're using the same molecule. They have to prove that it

00:17:23.700 absorbs similarly in the body. It has to be same route of administration. So is it a pill? Is it an

00:17:30.140 injection? But otherwise, it can vary in significant ways. So when I make my favorite sort of lamb shank,

00:17:38.480 which is a 12 hour cooking process with seven steps and call it 13 ingredients, the analogy here would

00:17:48.800 be once my lamb goes off patent, anybody can taste the final product, do anything they want with it,

00:17:57.080 stick it into an analyzer, look at every element of that final lamb shank. But shy of knowing I started

00:18:05.700 with a lamb somewhere back there, they don't necessarily know the other ingredients. That's

00:18:10.420 right. They don't know the temperature of the oven. They don't know what else I added, how I changed the

00:18:14.900 temperature. Because of course, in my cool lamb recipe, it's actually multi-temperature that I use.

00:18:19.780 So it's very complicated. They don't know any of that stuff. And they're expected to produce something

00:18:25.220 that is plus or minus a little bit almost identical to the finished product in flavor, firmness,

00:18:31.480 texture, everything, without knowing how I actually made it.

00:18:35.840 Yes. And I'll add one more thing to your analogy, which is they have to follow a set of rules that

00:18:42.920 are imposed, to use your analogy, in every kitchen. So this is the same set of rules.

00:18:48.140 We'll call these good cooking procedures. For the astute listener, you'll get the reference there.

00:18:53.160 Right. Exactly. So it's, in theory, the same very stringent set of rules, the same central active

00:19:02.080 ingredient, and the same route of administration within a range.

00:19:07.620 Yeah. Now, another kind of topic, a little off the beaten path, but just to set the stage for people,

00:19:13.380 anybody knows that they can go in and buy drugs off the shelf that are not prescription-based,

00:19:18.740 such as Tylenol, Aspirin, Advil, that also come in generic. So you can also buy acetaminophen. So

00:19:25.920 every drugstore has their own branded acetaminophen, but there's only one Tylenol. Everyone has their

00:19:31.160 own ibuprofen, but there's only one Advil. Only Bayer makes true aspirin, but you can buy generic

00:19:37.440 anywhere. These compounds, these drugs are in a different regulatory schema because they do not

00:19:44.840 require a prescription. But is everything else that we're going to talk about today and that you've

00:19:49.960 talked about already still applicable to the difference between a generic acetaminophen and

00:19:55.600 the Tylenol acetaminophen? Well, I'd even say, I mean, over-the-counter drugs are less regulated,

00:20:02.860 but some of the issues we're going to talk about today really do apply to this drugstore brands

00:20:08.620 that you're talking about. The drugstore generic brands. Got it. So if you're listening to this and

00:20:15.320 you buy anything that is a drug, that is over-the-counter or with a prescription, what you're about to

00:20:23.520 talk about probably applies on some level. And one of the things I've been trying to understand

00:20:30.160 going through your book is the average magnitude of the problem. As we'll talk about today, you make

00:20:37.200 a case for what the extreme examples of this look like. I still don't. And hopefully by,

00:20:44.840 through our discussion today, we'll be able to sort of tease out some of these things. But with that

00:20:49.700 said, I think that's a pretty good background for most people to now understand what we're about to

00:20:54.400 talk about. So let's go back and talk about the FDA. So you've already made reference to this

00:20:59.720 organization a number of times. Where did they come from? How were they created and why were they created?

00:21:04.440 So the FDA really has its origin in a series of public health disasters that have taken place

00:21:13.760 over the years. It was first formed in the 1930s. And this was after numerous children died from taking

00:21:22.040 cough syrup that had been tainted with, I think it was arsenic. But all of this had galvanized

00:21:29.220 public sentiment around the need for food and drug safety. And so the FDA was born in 1930 out of

00:21:38.580 history of tragedies around this. But the sort of modern day FDA as we know it really has stemmed from

00:21:47.040 a crucial moment in US history. There was a reviewer at the fledgling FDA who refused to approve a drug

00:21:57.520 called thalidomide. So this is now 30 years after. Yeah. Yeah. This is early 60s. Yeah. Which was being

00:22:03.840 widely dispensed in Europe to help pregnant women who were having trouble sleeping. Morning sickness.

00:22:09.840 Morning sickness. And she basically held firm, basically saying that she didn't have enough

00:22:16.820 information on the drug. And of course, it turned out she was correct. America dodged a bullet because

00:22:22.680 that drug was associated with children who were born with flipper-like arms. So it was associated

00:22:29.420 with horrible birth defects. And it was really sort of on the basis of that and other...

00:22:35.000 Do you remember her name, by the way? I don't remember her name.

00:22:37.640 Yeah.

00:22:38.120 But I love the story.

00:22:39.380 Yeah. Frances Kelsey. Frances Kelsey, who really became a hero.

00:22:44.460 She's sort of the one that, as you said, took the FDA from being sort of... I guess FDR had sort of...

00:22:50.000 It was created under FDR, but kind of limped along until the hero moment, which was the thalidomide

00:22:57.940 story, right?

00:22:58.880 Right. Well, what's interesting is that in the beginning of the FDA, there was not this idea

00:23:04.920 to focus on the manufacturing process. The idea was, well, you can't market something with absolutely

00:23:14.340 no basis in fact. But then the question is, well, how are investigators empowered to figure out what

00:23:22.240 is true and what is not? And really, the evolution of the FDA was around a focus on the process of

00:23:30.660 manufacturing. Because the idea was, it's impossible to test every single pill in every batch. But what

00:23:38.060 became sort of vital and sort of underpins the modern FDA is this idea that the process is the

00:23:45.380 product. That was, right, the key change in how public health enforcement evolved. That basically,

00:23:54.300 you have to be able to document and prove that your process is under control, that there's a control

00:24:02.020 in there in the process.

00:24:02.840 And that's sort of... I mean, again, I don't know. It's not even like I'm hungry, by the way,

00:24:05.720 but I'm just keep coming up with these dumb food analogies. But McDonald's can't test every Big Mac

00:24:10.980 or French fry. But it's much easier at the centralized level to create procedures and then

00:24:17.140 decentralized locally to be able to enforce the procedures around where we buy our feedstock,

00:24:24.040 how we manufacture in the store, what the temperature is of the oven, how long a piece of

00:24:29.360 food can sit here, etc. And if you put all those things in place, you have much greater faith that

00:24:34.280 every French fry, every Big Mac is going to meet the safety requirement.

00:24:39.540 Right. So one of my sources early on gave me this analogy, and we were sitting at a lunch table at a

00:24:44.960 restaurant. He said, a good FDA investigator is not just going to come in here and say,

00:24:51.800 is there a glass on the table? Is there a fork? Is there a knife? That's a kind of checklist

00:24:56.920 inspection. But a good FDA investigator is going to say, what is the temperature of the dishwasher?

00:25:02.880 And what is the procedure in the kitchen for bringing out these dishes? It's a very different

00:25:09.880 sort of a mode of inspection than most people think of.

00:25:13.420 Now, using your analogy, which seems to largely stop at the border of the restaurant,

00:25:20.180 inclusive of the kitchen, right? So what's the temperature of the dishwasher? What are the

00:25:25.240 temperature of the heaters on the food behind the thing? In that analogy, does the inspector also

00:25:32.260 have the liberty to say, where is the meat coming from? How far do the potatoes travel? And how were

00:25:38.420 they planted?

00:25:39.580 Absolutely. So anything-

00:25:42.560 Anything that enters that restaurant is under the purview of the FDA.

00:25:46.020 That's correct.

00:25:46.960 And so for people like me, most of the time, and I suspect this is probably, I don't know,

00:25:53.420 we'll see. Maybe this is not how everybody thinks about it. When I think about the FDA,

00:25:56.560 I normally think about it through the lens of approving new drugs. So going from this standpoint

00:26:02.160 of what's called an investigational new drug, an IND application, through to a phase one,

00:26:08.760 phase two, and a phase three approval. And embedded within those processes are two things that are

00:26:13.620 absolutely necessary. You can't approve a drug unless you can confirm that it is safe. And that's

00:26:18.880 done primarily in phase one, but the safety monitoring continues into phase two and phase

00:26:24.860 three, and even beyond into post-marketing. And then the second thing that becomes more important

00:26:29.780 by phase two, and then again in phase three, is efficacy. Does it work? And it's those two things

00:26:35.460 that go hand in hand. And the FDA seems to have a very heavy role in saying, does this thing do what

00:26:42.160 it's supposed to do? And does it not hurt people? Were those mandates equally important at the time?

00:26:47.240 I mean, clearly the thalidomide case brings the safety piece to light. Was efficacy also front and

00:26:54.120 center on their radar throughout this evolution? Well, no, actually it wasn't always. In fact,

00:26:59.940 proving the efficacy of a drug was a somewhat new idea. I mean, I think that that was one of the

00:27:07.880 things that Francis Kelsey was asking of these thalidomide manufacturers is, what are the studies

00:27:14.660 around the efficacy of this drug? Now, I mean, it's interesting, fast forward, when Trump was elected

00:27:20.620 president and there were sort of names being floated, well, who would his FDA commissioner be?

00:27:27.500 And some of the names that were floated as possible commissioners were people who had made crazy public

00:27:33.840 statements basically saying, well, manufacturers shouldn't have to prove that their drugs are effective

00:27:39.980 in order to market. And let the market take care of and sift out all those questions, which basically

00:27:46.920 was impossible for the industry to even comprehend, because our whole system is based on the idea that

00:27:52.980 the drugs that you're taking have been proven to work, right? I mean, how would an insurance company

00:27:58.960 even decide what to cover you for if we're all potentially taking drugs that are not effective?

00:28:04.780 effective. So effectiveness is like key to the modern concept of drug approvals.

00:28:11.920 Yeah. And luckily, Scott Gottlieb became the commissioner, although he is at the time of this

00:28:15.820 recording, no longer the commissioner, which I didn't know Scott, I don't know Scott, but I know

00:28:20.360 many people who do. And fortunately, everything I've ever heard about him is that he was the right

00:28:24.200 person for the job. So it's in the 60s, the FDA kind of gets a second wind on the basis of this,

00:28:31.040 as you put it eloquently, they dodge a bullet. I mean, the United States, I can remember for this

00:28:34.760 was in Canada as well, if Canada dodged the thalidomide bullet, but certainly in the United

00:28:38.220 States, the bullet was dodged. So you've already alluded to this idea of there being branded drugs.

00:28:44.920 So pharmaceutical companies are pretty smart when they create a drug. The branded name is really

00:28:50.640 easy to remember. The generic name is really hard to remember. That's a design choice. I remember

00:28:56.180 learning this in medical school class in pharmacology, which was you show up and you only learn the

00:29:01.160 generic names. That's the way you're taught every drug. And I remember thinking, God,

00:29:04.540 these are so complicated names. Like just come up with something normal. And the professor sort of

00:29:09.760 said, look, idiot. They don't want the public to know these names. They want you to think

00:29:15.680 Lipitor, not atorvastatin. They want you to think Viagra, not sildenafil, right? These are very

00:29:23.240 deliberate choices. So up until about the early to mid eighties, you could make the case. It was almost

00:29:30.180 impossible for a generic company to compete with a branded pharma company based on the regulatory

00:29:35.400 environment. Is that a safe statement? Well, that is because basically anybody applying to

00:29:41.740 market a drug had to prove safety and efficacy. So the branded companies were required to do these

00:29:48.660 huge clinical trials, create these enormous new drug applications. And so really what was the point

00:29:56.140 of a generic, which was supposed to be a lower cost version, doing all these studies all over

00:30:01.620 again? Yeah. The only advantage they have going for them is the risk of failure goes down. So I don't

00:30:07.700 know what the numbers would have been in the mid eighties. And truthfully, I don't know what the

00:30:10.800 numbers are today, but about a decade ago, when I was paying more attention to this particular issue,

00:30:16.440 it was about $1 billion to do what you described to go from an IND to a phase three approval cost a

00:30:25.620 billion dollars. And so there aren't that many companies that have deep enough pockets to spend

00:30:32.360 roughly a decade navigating that to then have about a decade to sell their drug without competition.

00:30:40.680 So if you want to open up your own generic drug company and you know that Viagra is about to come

00:30:48.680 off patent, what advantage do you have that Pfizer didn't, that's a bad example because of how Viagra

00:30:54.300 was discovered, but drug X, whatever, you at least know it should work. You know, you're not in store

00:30:59.880 for a phase one, phase two, or phase three disaster, all things equal, but there's no denying the cost of

00:31:06.240 doing all of that. And to your point, how can you do it? So of course, this brings us into the

00:31:12.760 question of how the generic industry really got its start in the United States. And so wasn't Orrin

00:31:19.380 Hatch half of this law or am I making, mistaking that with another one? No, no, no. So what happened

00:31:23.420 was actually the generic industry owes a lot to a crusading investigative journalist named William

00:31:31.260 Haddad. And he did an investigative series on cartel-like pricing practices in the antibiotic

00:31:40.680 market of branded companies. And sort of in the wake of that, he became very interested in generic

00:31:47.620 drugs and also interested in the fact that there was no good pathway for generic drug makers to market

00:31:54.440 their drugs.

00:31:55.160 So to be clear, up until this point, generics existed. They were created and largely consumed

00:32:01.200 outside of the U.S. though.

00:32:02.620 Right. And they existed within the U.S., but sort of they were few and far between. There were many,

00:32:07.760 many drugs that had come off patent years earlier, and there was no generic substitute for them. So

00:32:13.320 he ended up walking the halls of Congress with a couple of like-minded colleagues. And his efforts

00:32:20.340 led to what was called the Hatch-Waxman Act of 1984, which Reagan signed into law. And basically what

00:32:27.660 that said is it created a pathway at the FDA for generic drug makers to apply for approval and said

00:32:37.100 the safety and efficacy of these molecules has already been established, so you don't have to

00:32:43.080 reprove that. You don't have to do clinical trials on thousands of people. What you do need to do

00:32:49.460 is prove that your drug is bioequivalent to the branded product. So you have to submit data from

00:32:58.780 your tests, which shows that your drug falls into that range we talked about of absorption into the

00:33:05.220 blood and that it remains stable at certain temperatures, that it dissolves properly in the

00:33:10.220 body. And then we're going to review your data and see if we're going to give you approval. But the

00:33:16.640 generic drug makers still faced a significant risk, which is they would almost certainly have to

00:33:22.800 litigate against the brand name companies, and they might not end up getting approved by the FDA.

00:33:28.600 So there was a really crucial little deal sweetener in Hatch-Waxman. What it said was,

00:33:35.280 if you are first to file your application and you get approved, you will get six months of exclusivity on

00:33:43.760 the market without any generic competitors. And what that meant for generic makers is they could

00:33:50.360 price their drug at about 80% of the brand name drug price. So they would get this six-month window

00:33:57.520 where they could make big money. And that was a big incentive.

00:34:01.920 At the time, was there an understanding of what the price would collapse to after six months with

00:34:08.920 multiple entrants was the idea that the steady state ultimate price is going to be, was there

00:34:13.700 an expectation at least baked into Hatch-Waxman that said, look, by the time it's an all-hands-on-deck

00:34:19.880 open field running generic market for drug X with 10 generics out there, they're making 30 cents on the

00:34:26.440 dollar. I would just wonder how the six months came about as the period of time. Because truthfully,

00:34:30.740 that doesn't strike me as very long when you consider how much protected time the branded person got

00:34:36.880 for the risk they took. Six months seems a little short. It shouldn't have been 20 years,

00:34:41.780 but it struck me as that that was always a bit short. That created a bit of a perverse incentive

00:34:45.920 in my mind. I mean, as we saw, it created a perverse incentive.

00:34:48.840 Yeah. I mean, there's no question about that. But it actually, I mean, it really was the difference

00:34:54.560 between, as I have said, making a fortune and making a living. I mean, you look at generic Lipitor,

00:35:00.780 the first generic Lipitor that came on the market, six months, was worth about $600 million.

00:35:07.920 Yeah. Which is staggering when you realize how much is saved in not having to run a billion

00:35:14.220 dollars worth of clinical trials.

00:35:15.900 Right. Right.

00:35:17.300 Wasn't it our friend that actually came up with the first generic? Wasn't it atorvastatin?

00:35:21.280 It was rambaxi.

00:35:22.600 There you go. Well, we're going to hear a lot more about these bozos.

00:35:25.760 That's charitable.

00:35:26.540 When you're not on NPR, you can just come out and say bozos. So I want to plant a question with

00:35:34.360 you now that I'm going to ask you at the very end. But it's a question that I've been mulling

00:35:40.140 over for a long time without a great answer. And therefore, I don't think it's fair to ask you in

00:35:45.560 a moment. And the question is this, knowing what you know now, everything that happened,

00:35:50.880 the best of intentions, the best laid plans falling. If you could go back in time to Hatch

00:35:56.320 Waxman, how would you rewrite that reg? Because truthfully, I think at least one aspect of Hatch

00:36:02.720 Waxman made sense. I think it was reasonable to get rid of the efficacy, safety, huge clinical trial.

00:36:09.540 I think that was fair. I think everything that came after it in the reg fell short. But I haven't

00:36:16.620 got a great answer for what I would do different. I have a whole bunch of little answers. And so I

00:36:21.800 want to plant that seed with you because not that there's huge value in looking through the

00:36:26.800 retrospective scope, but it is an interesting philosophical question, if nothing else. And

00:36:31.720 it might actually offer an insight into part of the way out of this problem going forward. So

00:36:36.800 we'll come back to that in a little while. So I guess there are a couple of other interesting

00:36:41.040 historical things. I guess the last piece I want to bring into it before we jump into this story

00:36:45.580 is this use of taxpayer dollars. And the internal culture, meaning internal to this country,

00:36:52.740 the internal culture toward generics took another big shift during the presidency of George W. Bush

00:36:58.980 based on the program in Africa, PEPFAR, correct?

00:37:02.460 PEPFAR, yeah.

00:37:03.600 So talk a little bit about that program, which I think does factor into this story in the broad arc.

00:37:11.240 So PEPFAR was really born of the best of intentions and was sort of maybe one of the most sort of

00:37:21.400 brilliant, innovative globalization ideas, which is that the developed nations of the world and us,

00:37:32.480 the U.S., could use taxpayer dollars to buy low-cost generics from India and send it to Africa

00:37:40.620 to address the AIDS crisis. So in that sense, it was really remarkably innovative.

00:37:48.180 So George W. Bush announced the intention of PEPFAR during 0203, and this creates a little bit of

00:37:56.520 attention within the administration, right? Because how are you going to fund it? Well,

00:38:00.200 the question isn't how are you going to fund it, it's what are you going to buy?

00:38:02.320 Right. So it was the low cost of Indian generics that made PEPFAR possible. It was based on that

00:38:10.980 concept that the price of the AIDS drugs had fallen down to about a dollar a day, which allowed a

00:38:19.320 taxpayer-funded program to send these AIDS drugs to Africa, which was reeling from the AIDS crisis.

00:38:26.380 You had basically an entire continent under a death sentence. But then the question inside

00:38:31.540 the administration was, how do you guarantee the quality? And Scott Gottlieb at that point was in

00:38:38.080 the Bush White House. There's a great line in your book about how he referred to generics. He refused

00:38:43.460 to call them generics. He referred to them as counterfeits. Right. And there were people on the

00:38:48.460 other side of the aisle who were saying the World Health Organization, they can come in and inspect these

00:38:54.820 plants and certify them. And those are going to be fine. And the view of Gottlieb and other people

00:39:01.500 was what's who going to do. That's just like some guy in a back room in Yugoslavia with a couple of

00:39:07.200 people helping him who are going to go into these plants and verify the quality. So the idea was created

00:39:14.220 that the FDA would do expedited review of these drugs and approve these companies. And then they'd be

00:39:23.920 cleared to sell drugs under the PEPFAR program. But with the FDA suddenly in the business of approving

00:39:31.900 these Indian companies, it created this idea. Well, if these Indian drugs are good enough for

00:39:38.620 our regulators to approve, shouldn't Americans be taking them too? And this, of course, is in the

00:39:43.840 backdrop of even though at the time, I think the thing that was on most people's mind was foreign

00:39:50.420 affairs. The Iraq war had reached sort of its peak, or I shouldn't say it reached its peak,

00:39:55.440 but probably reached its peak attention maybe. But clearly in the backdrop was the rising cost of

00:40:00.680 healthcare. And a big component of healthcare is drug cost. So this became, well, if PEPFAR is making

00:40:08.540 a very strong, compelling case that we can be using Indian manufactured drugs to pay for a program in

00:40:16.620 Africa, shouldn't we be looking at the same drugs here in the United States?

00:40:20.620 Absolutely. And you had Indian companies who had long been regarded as just fakers and counterfeiters

00:40:27.800 who were suddenly cleared by the US FDA, which was a huge point of pride for those companies.

00:40:34.540 So they wanted to get into our market. Because if you make drugs, we're the market you want to sell to.

00:40:40.420 We're the biggest, most profitable market. So it was really a convergence of these two things.

00:40:46.180 And so everything that I think we've just talked about sort of sets the stage for the listener to

00:40:50.280 now really understand the story about one company that you use as, I don't think anybody would believe

00:40:56.980 that they're the only company that's out there at the depths. They just happen to be the one for

00:41:00.760 which a set of circumstances, which you'll explain, allowed us to be able to do the post-mortem

00:41:07.320 at the level that it's been done. So tell us about this company.

00:41:11.260 So Rambaxi was India's largest drug company. And in India, that meant it was a generic drug

00:41:17.920 company. I mean, India, by and large, was not innovating, creating molecules. What they were

00:41:23.960 doing is they had become master reverse engineers. And Rambaxi was one of the sort of handful of

00:41:32.720 companies that was a true multinational. It was out there in world markets. And it was one of the

00:41:39.300 first companies, Indian drug companies to get approved under the PEPFAR program.

00:41:44.040 So Rambaxi was closing in on a billion dollars in global sales and had its eye on becoming one of

00:41:51.620 the world's top drug companies in short order. It was very ambitious. It had a lot of what are called

00:41:57.880 the first files. So it had been approved by the FDA to be first to launch various high-profile drugs

00:42:06.300 in this market, including generic Lipitor. And in 2003, the company ended up recruiting a young

00:42:12.820 engineer named Dinesh Thacker. He had been working at Bristol-Myers Squibb, which was a highly

00:42:18.100 regimented corporate culture. He moves his whole family to Gurgaon in India, which is outside of

00:42:24.080 New Delhi.

00:42:24.540 Was he working at BMS in Europe or?

00:42:26.600 No, in New Jersey.

00:42:27.660 Okay.

00:42:28.080 So he was working at BMS in New Jersey. And the environment, just so your listeners understand,

00:42:33.640 the environment of a Western drug company, which is so heavily regulated, it's hard to move an inch

00:42:40.800 without a stack of paperwork. Everything is documented. The controls are really rigorous.

00:42:46.620 That said, obviously, we know there are scandals all the time, but the atmosphere is one of real

00:42:53.300 control. So let's use the food analogy, right? You're walking into the cleanest, most pristine

00:43:01.440 kitchen that looks like you could eat off the floor. If one crumb is left on the counter,

00:43:09.840 it is swept up three times, it is cleaned, it is disinfected. On any given day, the kitchen looks

00:43:18.000 as it looked any day before and will look any day in the future. You picture it being white. You

00:43:25.200 picture it having sort of a stainless steel sort of clean conveyor atmosphere. And let's contrast

00:43:34.460 that with where Dinesh went.

00:43:36.140 Yeah. I mean, and just to say, Dinesh was a senior Indian colleague of his at Bristol Myers Squibb who

00:43:42.500 was leaving for Rambaxi and made a job offer to him. They were walking around the lake on the Bristol

00:43:48.800 Myers campus in New Jersey. So I went to that campus so I could recreate it in the book because

00:43:54.180 it's in the opening chapter. I mean, that campus, there's not a blade of grass out of place. There's

00:44:00.600 safety poles, emergency phones every hundred feet. Even the turtles in the pond have a special

00:44:07.540 crossing lane that they're supposed to use. I don't know how they know. You know, and every

00:44:12.660 blade of grass is, I mean, it's just perfect. It's an environment of total control without variation.

00:44:18.860 And that is like the goal for any drug company. So Dinesh moves his family to Gergawan.

00:44:25.840 And Dinesh grew up in India?

00:44:27.280 He grew up in India.

00:44:28.560 And at this point in time, do you get the sense, I know it's, the story will get so much more

00:44:33.360 complicated that the answer might change. But do you think he thinks of himself here as more

00:44:39.360 American or more Indian as he's about to leave New Jersey for a return to India?

00:44:44.220 Well, that's an interesting question because so many of the Indians who work in the U.S. who I

00:44:50.280 interviewed for this book, you know, a number of whom went to go back to India, they really saw it as

00:44:57.360 such an important homecoming. I mean, it's a moment in time where India is emerging onto the

00:45:03.360 world stage. And they saw it as such a sort of patriotic act to help bring their-

00:45:12.040 It's a reverse brain drain.

00:45:13.500 Yeah, yeah. So the return to India, there was a lot of pride for them in it. They imagined

00:45:20.060 themselves as creating a kind of Pfizer of the 21st century for India. So I think that was really

00:45:26.920 significant for them. Anyway, so he gets to India and he finds complete chaos at this company. I mean,

00:45:35.140 there is just active ingredients that are in the employee refrigerator next to the half and half.

00:45:40.600 There's fistfights in the boardroom. There's orders to just delete documents that are required

00:45:47.440 for regulation. They don't even have the same sort of format or font for any of these presentations.

00:45:54.600 I mean, one of the first, so his job was to help standardize and track all the information in this

00:46:02.000 company. I mean, his job was to sort of collate information about the global pipeline of this

00:46:08.020 company. I mean, they didn't even have any standardized financial reporting in their presentations and in

00:46:15.240 their bookkeeping. Are they keeping track in rupees or in dollars? Nothing was standardized.

00:46:21.440 So he senses from the chaos that he is needed and he's built a team to sort of be information

00:46:30.620 architects to keep track of the company's records. Is he hiring people under him from India or is he

00:46:37.940 inheriting people? He hired his team. So he hires some people from India. He hires some people from

00:46:44.060 Bristol Myers Squibb who had the same vision of the job as he did to help bring this company

00:46:50.840 into the 21st century. And remind me what year this is. So this was in 2003. He ends up going over

00:46:56.860 there. Wow. So true, true and unrelated, but remarkable timing with the PEPFAR discussion that

00:47:01.920 we had in terms of being there right at the genu of this thing about to explode. Absolutely. He and

00:47:08.300 his colleagues were basically saying everything is becoming generic. That's where all the growth is.

00:47:14.160 That's where all the energy is. Foreign manufacturers are flooding into our market. By 2005, the FDA has

00:47:22.940 more companies to inspect overseas, more plants to inspect overseas than it does within U.S. borders.

00:47:29.520 And I know we'll talk about that a little bit later. Well, I was actually just about to go there for a

00:47:33.220 second, but we'll come back to it. Give us a sense of how the FDA could exercise its authority. Again,

00:47:39.580 thinking about this through the sort of kludgy analogy of a chain restaurant or something or

00:47:44.220 something. So basically the reason I use that example is because it's like making your commodity

00:47:47.320 product. Like a Big Mac is a Big Mac is a Big Mac. Do they just get to show up at McDonald's and

00:47:52.160 inspect the McDonald's in India? I mean, how do they have to give advance warning or notice before

00:47:57.360 they come? Is it done remotely? Is it done in person? How does this process work?

00:48:00.960 So the FDA basically has two sets of tools to figure out whether a generic drug should be on

00:48:08.680 the market. One is the review of all this data, which the companies submit in what's called an

00:48:14.220 ANDA, an abbreviated new drug application. The other thing they do is a pre-approval inspection.

00:48:22.200 So you submit your application to market a generic drug in wherever it is, whether it's in Mumbai

00:48:29.120 or in Memphis, the FDA wants to come and inspect your plant to make sure you're not going to be

00:48:34.960 manufacturing these drugs in your garage or in an outhouse. And at a minimum, to be clear,

00:48:40.360 this happens at least once because after I submit all of the data that back up my claims that I

00:48:47.780 basically have a bioidentical drug. So it has the same chemical composition. It has the same

00:48:52.220 distribution within the body. It reaches the same concentrations in the same periods of time,

00:48:56.400 et cetera, et cetera, et cetera. Assuming those data are righteous in your mind, you still have

00:49:01.620 to at least once come and lay eyes on my facility. Right. And ideally you come to do a pre-approval

00:49:07.800 inspection. Can you make the drug in question? And then under regulation, the FDA would come back

00:49:14.800 in two years. And how is it going in that plan? Are you still making decent drugs or are you just

00:49:21.020 running a pharmaceutical slaughterhouse and following no rules? So they will come back and

00:49:26.280 check that. But some of their techniques changed because of a massive scandal that hit the generic

00:49:33.640 drug industry in the late 1980s. So once Hatch Waxman passed, and then you had this first-to-file

00:49:40.080 incentive, and every generic drug company wanted to be first.

00:49:45.200 You write something very funny in the book about how when that first mover advantage clause was

00:49:50.620 still in existence, you literally had generic companies camping out in parking lots waiting to

00:49:56.680 petition the FDA on the nanosecond the patent expired. Right. Which is what led to these street

00:50:03.400 fights. Like it was true mayhem. It was true mayhem. So it wasn't just about who was first on what day,

00:50:10.160 it was what second. So you would have generic companies sending in representatives in stretch

00:50:16.940 limos into the FDA parking lot, sleeping in the back of the limos, queuing online. I mean, I even

00:50:23.820 describe one company executive pushing another one out of the way just before the doors of the FDA open

00:50:31.280 so they can be first. So there were actually fistfights in the parking lot. And so the FDA ended up

00:50:37.660 changing that requirement a little, but suffice it to say that first-to-file was like rocket fuel

00:50:42.820 for the generic drug industry. And what you saw very quickly was a massive scandal. It started with

00:50:50.580 a company called Mylan, which was a West Virginia generic company. And they noticed that they were

00:50:56.400 not getting drug approvals anymore. And that there were other companies that didn't seem to really

00:51:01.860 merit it, but they were getting approved before they were. And they hired some private detectives

00:51:07.780 who started going through the trash of FDA reviewers and found that they were being bribed by these

00:51:14.540 companies to get online first. And that led to a huge scandal, congressional hearings. And the result of

00:51:23.580 that was more stringent inspections by the FDA, that was where the pre-approval inspection came in.

00:51:31.560 And that was also where something called an application integrity policy came in. It was a

00:51:36.760 new tool for the FDA to say, you know what, if you're faking your data in applications, which some

00:51:43.080 of these companies were, we have the right to basically remove your applications from the queue,

00:51:49.900 to shut down your pipeline, to not review your applications because we don't trust you anymore.

00:51:55.660 And was that a durable response or was that for just that compound? In other words, if a company

00:52:00.560 was caught falsifying data, was that just disqualifying them from that drug or were they

00:52:06.020 then disqualified as a producer of generics in general? They could be disqualified as a producer

00:52:11.000 of generics generally. And did the FDA exercise that much muscle on any company? Very infrequently.

00:52:17.240 It became a very, very rare enforcement tool. And what was the, was the sort of net effect of the

00:52:23.720 bribery within the FDA? Were those individuals prosecuted to the fullest extent of the law?

00:52:29.800 There were huge prosecutions. I mean, it was, there were details like literally company executives who

00:52:35.740 were roaming the halls of FDA and dropping envelopes of cash on people's desks. So in the congressional

00:52:42.560 hearings that followed, the question was who's clean? How do we trust any of these companies? And

00:52:48.960 so these enforcement mechanisms were added to the FDA's arsenal. So supposedly everything was fine

00:52:56.620 after that. I mean, the whole thing just, you got to, like, I'm only laughing because the alternative

00:53:01.820 is just to scream. And sometimes laughing just feels better than screaming and raging. But it really

00:53:08.600 speaks to, on some level, the worst of human nature, which if you're a cynic is like, look,

00:53:14.520 in the end, entropy always wins. Gravity always wins. Chicanery always wins. Create a rule. The scum of

00:53:24.360 the earth will always, even if they start out with well intentions, the scummiest of the scum will always

00:53:30.260 figure out a way to cheat the system. And if you haven't read it, I can't resist. I cannot resist

00:53:36.420 a chance to always plug her amazing work. Mistakes were made, but not by me, by Carol Tavris. Have you

00:53:43.100 read this book? I haven't. So it's a must read. And in fact, I've already interviewed Carol on the

00:53:47.660 podcast along with Avram Blooming, who's a partner of hers on a totally different topic, which is around

00:53:52.100 hormone replacement therapy. I will be interviewing Carol subsequently on this book, which she has written

00:53:57.580 so many years ago and told me she will never again do a podcast on because she's so sick of talking

00:54:02.320 about it. But as a favor to me, she is going to do a podcast and we'll talk about it, but it talks

00:54:06.440 about this sort of very slippery moral slope. And I realize that's not really front and center to what

00:54:10.800 we're talking about, but we do have the luxury of time and we can pause for a moment because it is a

00:54:14.580 question that comes up a lot when a person would read a book like yours, right? Which is how can there

00:54:19.520 be so much moral corruption? And we, myself included, and perhaps myself first and foremost,

00:54:25.460 we're so quick to put ourselves on the pedestal, the moral high ground. You know, I could never

00:54:31.400 have been that FDA officer that would have been corrupted by the bribe. I could never have been

00:54:37.360 that executive that would have pushed the other guy out of the way to get in line or that would

00:54:41.400 have dropped the cash in the situation or blah, blah, blah, blah, blah, blah. But the way Carol

00:54:45.380 writes about this, you realize that the first infractions are never these big ones. They're very

00:54:51.080 minor infractions and they often come with a reasonable rationalization. She uses a great example

00:54:58.020 among many, which is the cop who plants evidence on the suspect. In the end, you see what it looks

00:55:03.840 like when it's Mark Furman and everybody knows how that story ends. But was that the first time he would

00:55:09.520 have done that? No. The first time he did it is probably more like this. There's a suspect who is

00:55:15.200 absolutely the drug dealer of the town. You barricade the house. Just as you break in, he manages to lock

00:55:23.620 himself in the bathroom and is flushing down barrels of cocaine and heroin. And as you finally break the

00:55:31.440 door open, you see the last of the cocaine and heroin go down the toilet. And in theory, he walks

00:55:37.280 away free, but you're not going to have it. Not this day, not on your watch. You're going to take a

00:55:42.140 little bit of cocaine. You're going to throw it down. You've planted it. You arrest him. And you can live

00:55:47.480 with that because in fact, you actually saw it with your own eyes. You knew he flushed it down the

00:55:52.520 toilet. And this is simply justice. But now you're on the wrong side of morality for a moment,

00:55:59.560 albeit very briefly. And now you have a choice, which is you continue to rationalize your behavior

00:56:05.320 or you walk back from it. And most of us can't. And we take one step further and further and further.

00:56:10.200 And so I couldn't help but wonder, as I read your book, what were those first infractions like for all

00:56:17.360 of these actors that you've talked about and will continue to talk about? Because you're showing

00:56:23.320 us the most extreme state of these behaviors, which at the individual level, I think probably

00:56:29.600 follow an arc like that described by Carol. And I think frankly, at the population level, just follow

00:56:35.980 the laws of nature, which is you create a weakness, it will be exploited. I think we'll get into this a

00:56:42.520 little more. But what's interesting is you take that example that you gave of the cop and the suspect,

00:56:47.580 but now put 7,000 miles between them. So there is this whole question about integrity in a globalized

00:56:58.240 world, and different actors in different cultures who are supposed to be following one set of rules.

00:57:07.600 And it becomes like way more complicated.

00:57:11.900 Yeah, I want to come back to this point about the cultural differences between them. I've already

00:57:17.800 sort of derailed you enough. Let's go back to the point of basically, there's a congressional hearing

00:57:23.540 in the late 80s, early 90s that finds out the FDA is not entirely clean, right? So you've got a bunch

00:57:29.240 of bad actors, right? The belief is the bad actors are now out. And how does that change the FDA going

00:57:35.840 forward? And what are the implications for these inspections?

00:57:38.540 So the FDA is this agency that never has enough funding, never has enough resources, and never has

00:57:44.600 enough authority. There's not a cabinet member from the FDA who sits at the table with the president.

00:57:50.320 So the FDA ultimately reports up to HHS?

00:57:53.580 HHS.

00:57:54.180 HHS, yeah.

00:57:54.840 Right. So it's sort of a stepchild as an agency. It's a kind of under-resourced agency, which

00:58:02.060 is in charge of safeguarding like a quarter of our economy. I mean, anybody who has had a meal

00:58:09.920 they haven't died from or taken a pill that hasn't killed them, we're all relying on the FDA to save us.

00:58:16.960 So it's an incredibly important agency. It's been lacking in authority. So there's always a question

00:58:24.600 of whether it has been an effective policeman. But in theory, after the big generic drug scandal

00:58:31.040 of the late 80s, we were off to the races. The generic drug industry recovered from the scandal.

00:58:37.160 It became, as we've talked about, a crucial player in PEPFAR, a sort of life-saving player,

00:58:42.620 as brand-name drug prices rose and rose. Generic drug industry was ever more important until it came

00:58:51.640 to be 90% of our drug supply.

00:58:54.940 And you also write that we're kind of at the mercy of non-U.S. suppliers for the feedstock for

00:59:02.780 branded drugs as well. I think, is it 40%?

00:59:05.900 So 80%. So basically what happened was, starting in around 2005, as generic drugs are growing in our

00:59:15.380 market, the FDA is hit by this wave of globalization. Suddenly, it's got way more plants to

00:59:22.480 inspect overseas than it does within the U.S. We've got many more applications for drugs coming in from

00:59:29.660 overseas than in from the U.S. So the FDA is tasked suddenly with becoming a global agency almost

00:59:38.980 overnight. And then fast forward to where we are now, which is 80% of the active ingredients in all

00:59:45.920 our drugs, brand or generic, are coming from overseas. 90% of our drug supply is generic, and the majority

00:59:53.060 of those drugs are being made overseas. 40% of our generics alone are coming from India. We make almost none of

01:00:00.260 our own antibiotics anymore, which means if you go to a pharmacy and fill an antibiotic prescription for your

01:00:06.880 kid, it's coming from India or China.

01:00:09.120 So suddenly we're in this whole new world where the FDA, which has in the past struggled to inspect

01:00:18.460 plants that are like driving distance from their headquarters, is now having to send inspectors

01:00:24.420 7,000 miles away.

01:00:25.920 Which brings us back to Dinesh.

01:00:27.700 Right.

01:00:28.380 When does Dinesh start to figure out that, okay, I acknowledge I've gone from the pristine campus of

01:00:36.000 Bristol-Myers Squibb to rural India, it's going to be different. But when does he realize it's

01:00:42.140 different in an unethical way or in a way that isn't what he signed up for?

01:00:46.220 The mentor from Bristol-Myers Squibb who recruited him to come to Rambaxi, Rashmi Barbaya.

01:00:52.280 Well, this is not Kumar. Kumar was his boss there.

01:00:54.580 Well, so start with Rashmi Barbaya. Barbaya says to him, I'm leaving. And he's disgusted with the

01:01:00.640 company and he won't really say why. So Dinesh is upset. He moved his whole family over there.

01:01:05.660 But now his boss is leaving. But he gets a new boss, Raj Kumar. He's a kind of blue chip

01:01:13.020 professional who came from GlaxoSmithKline in London. And he comes in as the head of research

01:01:19.240 and development. And he's been on the job about six weeks where he summons Dinesh to his office

01:01:26.160 early in the morning. And he says to him, we have a big problem. It turned out that the World

01:01:32.920 Health Organization went and inspected this contract research organization that was doing

01:01:38.120 some testing for Rambaxi. And it turned out that the tests were fake. Like the patients that they

01:01:44.340 were testing the drugs on- Wait, I'm sorry. So the CRO was themselves fraudulent?

01:01:48.880 The CRO was fraudulent. And the quote unquote patients that they were testing the drug on

01:01:55.740 didn't really exist. And they were just sort of Xeroxing blood test results. But Raj Kumar,

01:02:03.340 his new boss, had learned that that might not be the only problem that Rambaxi has. He's beginning

01:02:09.280 to get suspicious. And he's very ethical. So he gives Dinesh an assignment. He says,

01:02:15.560 I want you to take your team. And I want you to research all of the global drug filings

01:02:21.820 of Rambaxi. So all the applications that the company has submitted to regulators around the

01:02:28.000 world, I want you to research them, figure out, is the data real? Is the data fake? Where does the

01:02:34.780 company's liabilities lie? And so that's what Dinesh begins to do.

01:02:39.400 It's hard to sort of understand what you just said. I mean, I understand the words you said. And

01:02:44.880 because I know the story, this isn't the first time I'm hearing said words. It's quite another

01:02:49.280 thing to try to actually put yourselves in the shoes of, for example, Kumar and the people who

01:02:58.120 are there seeing this for the first time. Because your thinking is, wait a second, this isn't a

01:03:04.220 mistake. A mistake is the wrong batch of the drug got shipped to this study and the patients are

01:03:13.240 receiving something incorrect. Or there was a contaminant in this batch. We didn't know about

01:03:19.000 it. In fact, even if you go into next level mistakes, like there's a contaminant that's there.

01:03:24.700 We saw the data. Now we are trying to cover it up and pretend it didn't happen well. We repeat the

01:03:29.320 experiment. Like you can come up with lots of shades of dark gray. This is as black as it gets. I mean,

01:03:36.260 this is sort of make believe. I mean, put it this way. If you're going to the level where you are

01:03:42.120 fabricating data to this extent, at best, you're shipping a placebo pill. That would be the best

01:03:49.000 scenario. At worst, you're not even taking the time to ensure you're shipping a placebo.

01:03:54.460 So at that point, Raj Kumar, Dr. Raj Kumar did not know what he was looking at. He'd heard murmurings

01:04:02.000 about some falsification. He'd gotten this letter from the World Health Organization saying that the

01:04:07.740 CRO was submitting fake data. Was the CRO an Indian company or a non-Indian company? It was an Indian

01:04:13.340 company. So at that point, Kumar is coming to Rambaxi with a mindset from his time at GlaxoSmithKline,

01:04:22.500 where anybody who signs off on a regulatory filing is certifying that it's all legit.

01:04:29.700 Yeah. So this is a failure of imagination at this point. He can't even imagine what's going on.

01:04:34.700 He's not sure what's going on, but he's saying to Taker, I want you to take your team and tell me

01:04:41.040 what's going on because I don't know. Now I have questions about the legitimacy of some of these

01:04:48.480 filings. Okay. Does Dinesh ever go back and talk to his original boss and find out? Because if six weeks

01:04:55.100 or eight weeks on the job, your new boss drops this bombshell on you, do you go back and think,

01:04:59.720 wait a minute, does this have anything to do with why my old boss left? Who's the guy who recruited me

01:05:04.080 here in the first place? Well, at this point, Taker is wondering that. His boss left with a great deal

01:05:10.640 of bitterness. There were some murmurings about some huge settlement he got. He had said cryptic

01:05:17.220 things to him like, I was trying to change the tires on a car that was going 80 miles an hour,

01:05:22.900 but he never said what he knew. He just left. So Taker begins this crazy research project,

01:05:33.380 which is to do research on every single global filing that the company has made going back 20 years.

01:05:39.300 So the questions were, what was the data that was filed with different countries?

01:05:46.000 What was the raw data connected to that data? Did the raw data exist? How were the studies done?

01:05:52.920 Where were the studies done? At what manufacturing plan? What were the processes and procedures

01:05:58.880 that led to the creation of that data? I mean, this is this sort of vast undertaking that Taker's team

01:06:05.840 began on. And, you know, because of just a word about Dinesh Taker. I mean, he was this kind of

01:06:13.560 single-minded, very ethical, and somewhat sort of blinkered individual who was like given a task,

01:06:22.440 and he was going to do that task. And he didn't step back and say, well, wait a minute here, folks,

01:06:30.040 I'm investigating my own company. So what are the possible ramifications of that?

01:06:35.840 I mean, he didn't really stop and think about that. He was just intent on getting the right

01:06:40.620 answers. So of the filings that he investigated going back to the early 80s, what did he find?

01:06:46.940 So his team begins to uncover Rambaxi's secret, which is that they have basically fabricated data

01:06:56.020 for more than 200 drug products in 40 countries. Some of the data they just completely made up,

01:07:02.900 some of it they manipulated or altered. In some cases, they were using brand name drugs,

01:07:08.880 which they would just crush up and test in order to generate data that of course made the drugs look

01:07:14.400 bioequivalent because they were testing the brand name drugs and representing them as their own.

01:07:20.360 And then presumably when approved, they would then ship what? I mean, if you're going to go through

01:07:24.600 the trouble of testing on a brand, you're not going to ship a brand. That would be too expensive.

01:07:28.680 So what were they actually selling? So they were making generic drugs in their laboratory. But in

01:07:35.440 many cases, these generic drugs were either totally untested or did not meet specifications. I mean,

01:07:41.680 for example, you're supposed to do stability testing on drugs, which means you put them in

01:07:47.680 these special chambers that replicate conditions of heat and cold. And you're supposed to test three

01:07:54.400 months, six months, nine months, 18 months. These are various stability stations that you test to

01:08:00.000 see, does the drug remain stable? So if you're selling a drug into Mozambique where it's very hot,

01:08:06.280 you have to be able to reflect that those drugs will remain stable at very hot temperatures.

01:08:11.880 You know, he discovered they were testing all of these different periods of stability. They would

01:08:17.360 test them all on the same day and they would alter the data and then make it appear as though it was

01:08:22.480 three months, six months. And what's the denominator on this? You said 200 drugs falsified across 40

01:08:28.740 countries. Is this 200 out of 200,000? I'm being facetious. 200 drug products. So that would be like

01:08:38.140 much of their inventory. In other words, had he found any evidence they did anything correctly? No.

01:08:44.460 In other words, that 200 is the denominator and the numerator.

01:08:48.320 I am not certain, but it looked like it. That basically-

01:08:53.680 It's unlikely that they did five of them right and then they BSed their way through 200 of them.

01:08:58.880 Right. So that basically this was how-

01:09:01.940 This was their business model. The business model was fraud.

01:09:04.860 Right. Their business model was fraud and everyone in the company was in on it in that

01:09:10.680 people were given orders to swap out ingredients, to replace higher quality ingredients with lower

01:09:18.100 quality, to do all the stability testing on the same day, to use the brand name drugs.

01:09:22.620 And that was just how the whole company rolled.

01:09:26.600 So a little PowerPoint presentation gets whipped together.

01:09:31.420 I'll tell you something.

01:09:32.880 Do you have a copy of that PowerPoint presentation?

01:09:34.480 I do. And a lot of people want it and I haven't posted. I've posted one slide of it online in a

01:09:40.240 Twitter thread, but yeah.

01:09:42.160 Are you permitted to, is there a legal reason or is there a reason you haven't been able to

01:09:45.600 post the whole PowerPoint presentation?

01:09:47.420 Maybe because I don't want to crash the internet. I was once approached by the Atlantic magazine as

01:09:52.640 they went to a group of investigative journalists. What is the biggest fraud? What is the most remarkable

01:09:58.840 fraud in the history of the world? And I've given them an example. This was before I did this book.

01:10:04.200 But I will say that it is hard to imagine a more incriminating document than this PowerPoint,

01:10:13.460 which basically says we have falsified data in every market where we sell drugs, in every product

01:10:23.160 that we sell. We have done it simply for the purpose of facilitating our business needs. We have put

01:10:30.540 all our partners at risk and there is only one solution, which is to notify every regulator in

01:10:40.100 every country where we sell our drugs, pull all our drugs off the market, and fly right.

01:10:47.700 So basically two guys put this PowerPoint presentation together.

01:10:51.260 That's right. Dinesh and his boss.

01:10:52.960 Dinesh and Kumar. And it's hard for me when reading this to put myself in their shoes because

01:11:02.320 truthfully a part of me thought, are you guys idiots? I mean, I totally get the naivete at the

01:11:10.120 outset with, hey, this CRO, this contract research organization seems a little shady. Let's go do a

01:11:16.160 little digging. I don't know where my analogies are coming from today. That's like me coming over

01:11:21.120 to your house, Catherine. You invite me over for dinner and you give me a little something to eat.

01:11:26.560 You bring me a nice bowl of soup and I'm eating it and I find a tip of a thumb in it. And I think,

01:11:31.620 I look at your hand and you have perfectly tipped fingers and thumbs. And I think,

01:11:35.980 that's really odd. I wonder if there are more bodies in here. And I send my kid, I say,

01:11:42.940 hey, I'm going to sit here and keep eating dinner. You go look throughout our house and see what you

01:11:48.760 find. And 30 minutes later, while you and I are still eating dinner, he comes back and says,

01:11:53.860 daddy, there's 200 bodies stashed in the house. And my first reaction is, I'm going to put a PowerPoint

01:12:01.300 presentation together and say, Catherine, I found 200 bodies. In fact, there's not a room in your house

01:12:07.360 that doesn't contain 10 dead bodies that have been mutilated. I think we should do something

01:12:12.780 about it. Like it wouldn't dawn on me that you are the killer of all of these people.

01:12:18.500 Taking this PowerPoint presentation, which became known as the SAR document. What does that stand for

01:12:23.500 again? The self-assessment report. I love it. Taking the SAR document into the boardroom. I mean,

01:12:31.940 I guess if I'm going to, you could argue, maybe they somehow thought that the CEO was the only one in on

01:12:37.460 this on the board and the non-executive directors had no clue. I mean, I guess in their defense,

01:12:43.960 that's possible, but it seems improbable. And I guess it actually in their defense speaks to the

01:12:50.960 lack of a regulatory environment that they could go to. In other words, if this were in the US,

01:12:55.700 that SAR doesn't go to the board of Pfizer, that SAR goes directly to the FDA and the New York Times.

01:13:01.540 You know what? That's probably what it speaks to. I think that is a really good point. But also I

01:13:08.000 will say, Faraj Kumar, coming from GlaxoSmithKline, so this heavily regulated environment, and he's like,

01:13:15.980 oh my God, every single drug product is tainted with fraud. But he tells Dinesh Tucker,

01:13:23.020 I'm a little bit hopeful that I'm going to present this to a subcommittee, the board of the directors,

01:13:29.040 and they're going to let me fix it. And again, I just have to, because you're going to tell us what

01:13:35.440 happened, which is certainly among top 10 most ridiculous moments in the history of corporate

01:13:42.980 board governance. But do you think on some level, do you think he kissed his wife and kids a little

01:13:49.440 harder that day when he left for the office? Was there some part of him that thought he wasn't ever

01:13:53.780 coming home again? Because in the movies, he'd have been killed. He wouldn't have left the boardroom.

01:13:59.300 I mean, and if it were a funny movie, if it were like Austin Powers, it would have been like one of

01:14:04.040 those little, you've probably haven't seen Austin Powers in a while. Of course, I still know every

01:14:07.500 scene off by heart. But there's the funny version where the chair like catches on fire, or a little

01:14:12.140 trap door opens and you drop, or it ejects you into a shark tank. And the not as funny version of this,

01:14:18.820 in the Godfather Goodfellas version of this, on the way out to the car, you get sort of clubbed,

01:14:24.300 bag over the head, you're never seen again. How did he not think that that was a strong possibility?

01:14:30.280 I'm not exactly sure what was going through his mind at that moment. But one interesting anecdote

01:14:36.560 that we didn't mention is as Dinesh Thaker was putting together his findings, he comes home and he has

01:14:43.820 his three-year-old son there. And he realizes, wait a second, I gave him a Rambaxi drug because he had an

01:14:51.240 ear infection and he did not get better. And the doctor then switched him to actually to a GlaxoSmithKline

01:14:58.480 antibiotic and the boy got better right away. So he is, as he's doing this research, he's putting

01:15:05.040 the pieces together and he's like, okay, I'm not going to give my family a Rambaxi drug until I know

01:15:11.520 the truth. So Raj Kumar is now in the boardroom and he's handing out his document. How many pages

01:15:18.400 are in the self-assessment review document? The SAR. I love that just the name is so nondescript.

01:15:25.140 Yeah. 24 slides.

01:15:28.180 Just 24 slides.

01:15:29.780 24 slides with smoke coming out and fire coming out of every single one.

01:15:34.960 I'm just picturing him at the office printer, just rattling these things off. You know, if he's

01:15:41.660 anything like me thinking about, do I staple vertically or horizontally? Do I go with the

01:15:46.680 diagonal staple on this one? Or do I just put the little mini clip on it? So many options.

01:15:51.340 Yeah.

01:15:51.620 Color, black and white. Do I want to be showy or not showy?

01:15:55.020 Yeah.

01:15:55.480 Okay. How does the board receive this?

01:15:57.440 So he presents this to a silent boardroom. Like you could hear a pin drop. And just to give a

01:16:04.760 context, I mean, sitting in that boardroom, it was a subcommittee. It was the scientific

01:16:09.540 subcommittee of the board of directors. So you've got a guy like Tahinder Khanna, who is the,

01:16:16.720 was Lieutenant Governor of Delhi. You've got super high profile surgeon in India. I mean,

01:16:23.560 you've got real power players in that room and the room is silent. And then one of the

01:16:32.160 board members asks, well, can we not bury the data?

01:16:37.300 Which also is a funny question to me because Kumar has clearly gone to great lengths to uncover this,

01:16:47.280 synthesize it, and now present it. My general take on this is a culture of incompetent incompetence.

01:16:56.600 You see, if you want to be a true fraud, shouldn't you be watching more gangster movies?

01:17:01.980 Shouldn't the board's response have been, Raj, this is exactly the kind of stuff we are looking

01:17:09.640 for our lieutenants in the field to bring us. Thank you. We will take action immediately.

01:17:15.620 By the way, can we borrow your laptop? We want to make sure we have more copies of this.

01:17:19.620 And then they let him leave and then they destroy the laptop and then they unceremoniously, like,

01:17:24.420 again, not to give the criminals too many pointers here, but was anybody competent in this arena?

01:17:31.120 Like these guys don't even know how to get out of a bad situation. Because now you've just told the

01:17:35.760 guy who's telling you, I think this is the biggest scam in the world. Yes, it is. And we want to

01:17:43.300 continue hiding it. It's important to note the mentality comes in part from being in a culture

01:17:51.160 of impunity. I mean, they're not afraid of their own regulators. They can buy off their own regulators.

01:17:56.880 Well, clearly, right, because they have the lieutenant governor of one of the largest cities

01:18:01.140 is on their board. Right. They're not worried about regulators storming their offices. In their

01:18:06.960 mindset, they think this can be covered up. And I guess it speaks to not having a... I mean,

01:18:11.720 even though India is a democracy in the sense, their press presumably doesn't have the chops that a

01:18:17.420 press would have in Western Europe or North America. I think that that is true. So Brian

01:18:23.960 Tempest, who was the president, he was sort of an acting president for a year. He says he tells Raj

01:18:29.800 Kumar to leave behind his laptop, which then gets broken down piece by piece.

01:18:35.200 I'm picturing like office space with the base. Like, by the way, that photocopier hasn't been

01:18:40.380 working either. So that photocopier plus Raj's laptop, get him in the parking lot.

01:18:45.620 Right. And throw it all into the Ganges.

01:18:47.640 Right.

01:18:48.280 And they had sent the secretary out of the room. So there were no minutes of the meeting.

01:18:54.280 And basically, to Raj Kumar, he got his answer right there.

01:18:59.400 So what does Raj do at that point? What does he tell Dinesh?

01:19:01.700 He tells him what happened. And two days later, he submits his resignation.

01:19:06.700 With or without a hush package?

01:19:08.960 It's a question I don't know the answer to.

01:19:11.000 Because his predecessor probably went through something similar. And it sounds like there

01:19:15.640 was a settlement.

01:19:16.360 There was, I think, a very large settlement. I mean, his sources had told me he got a million

01:19:21.180 dollars upon leaving. So I don't know what kind of settlement Raj Kumar may have had. But

01:19:27.780 all of these very dramatic events left Dinesh Thakur, the sort of architect and author of all

01:19:35.500 of this information, alone without protection in the company.

01:19:39.900 At this point, does Dinesh realize he's in trouble?

01:19:42.780 I don't think he fully understood how much trouble he was in.

01:19:46.880 So what happens next?

01:19:47.820 So then the auditors of Rambaxi come into his department to say they're going to do a review.

01:19:56.260 It seemed clear at that point that they were looking for some sort of dirt on him. And what

01:20:02.160 happens next is that they plant dirt on him. And they put his IP address on some porn searches.

01:20:10.840 And he is accused of looking at porn on his work computer.

01:20:16.600 Which, by the way, still, that also made me laugh out loud. Because we're in a culture

01:20:21.520 where apparently if you look at porn on your work computer, it's a terminable offense.

01:20:26.600 Go to jail. Do not pass go. Do not collect $200.

01:20:30.820 Lie, falsify data, jeopardize the lives of millions of people. That's standard operating

01:20:37.720 procedure. We'll promote you for that. But don't you ever look at porn around here.

01:20:43.920 I never quite thought of it that way. But you may have a point. And an attorney for Rambaxi,

01:20:49.060 who left the company and spoke to me later, said, you know, in retrospect,

01:20:53.620 I don't think he was doing porn in the office.

01:20:56.300 I mean, again, I'm laughing only because I need another response beyond rage. I just I have to

01:21:09.560 make fun of a lot of this, even though there's nothing funny about this. Dinesh, remind me how

01:21:14.180 many kids he has. Does he just have the three year old?

01:21:16.860 So at that point, he has a toddler, basically at home and his wife and he's moved his young

01:21:24.700 family over to Gergowan from New Jersey. And is his wife also from India originally?

01:21:30.720 She is. And is she abreast of what's going on?

01:21:33.600 No. And that was another very interesting thing in both reporting this and writing it and thinking

01:21:40.600 about it. They had an arranged marriage. They had seemingly a good working relationship,

01:21:47.700 but really never communicated about any of this. She didn't know why he was down in his basement

01:21:55.120 office working until midnight, collating these streams of data.

01:21:59.540 He was actually looking at porn on the company computer. You obviously missed that detail.

01:22:03.800 He never told her. She never asked.

01:22:06.860 So he's kind of going through this alone. He's lost his mentor who brought him.

01:22:10.340 He's now lost his boss. All jokes aside, this is an incredibly frightening,

01:22:15.040 isolating experience for him.

01:22:16.580 And so he submits his resignation letter.

01:22:20.720 What year? Are we up to 05 now?

01:22:22.800 Yeah. In 2005.

01:22:24.460 Okay. He comes back to the US at this point, if I recall?

01:22:27.140 No. So there he is in India and he's trying to get on with his life. He's doing some consulting,

01:22:34.280 but of course he had no plan to leave. It's not like he had a job lined up.

01:22:38.440 So he's worried about money and he's trying to figure out what to do next.

01:22:43.700 So what comes to him?

01:22:44.720 So it's monsoon season. He's lying there at night and all he can think about is all this data that

01:22:52.200 he prepared on all of these world markets. And the thing that he really focuses on, which is interesting,

01:22:59.040 is he knows that the AIDS drugs that the company is sending to Africa are terrible. He knows that

01:23:07.160 they're not going to cure people. He knows that they are going to degrade in the heat in what are

01:23:12.640 called zone four conditions. And he can't get over what he's uncovered. He just can't get over it.

01:23:20.920 Do we know, looking back now, what percentage of PEPFAR's incoming drugs were coming directly

01:23:27.560 from that company?

01:23:29.120 They were certainly a very substantial player in PEPFAR. I mean, they were definitely supplying

01:23:36.200 a lot of drugs to that program. I don't know what percentage.

01:23:39.680 And it's interesting, again, bringing it back to, on the one hand, PEPFAR changed the culture of

01:23:46.620 generic acceptance. Did PEPFAR include anything in it that said, oh, and by the way, whatever generic

01:23:53.700 drug maker that's going to sell a product directly into this program will have an even higher level

01:23:59.300 of scrutiny than the FDA current authority is, given that we're going to spend, I mean,

01:24:05.020 billions of taxpayer dollars on this. You'd think that that would give the FDA, which is basically

01:24:11.340 like, here's a private purchase agreement. Now I really have the authority to put my foot in your ass?

01:24:15.860 FDA approval was viewed as the gold standard.

01:24:19.540 It almost sends a negative message, which is if we need a higher level of standard,

01:24:23.560 it undermines our basic approval.

01:24:25.420 Really, worldwide, I have to say this, the view is there is no higher standard than the FDA's

01:24:32.260 approval. It is the gold standard. Many regulatory agencies, they will just look to the FDA for

01:24:39.400 guidance. Oh, they approve this company, we'll approve this company. That's it. And regulators around

01:24:45.000 the world sort of hang on the FDA's decisions.

01:24:48.380 So Dinesh is unemployed, but realizing that there's a tsunami coming metaphorically, as well as

01:24:55.880 potentially literally through the monsoon, which is we're about to unleash a torrent of,

01:25:02.880 at best placebo, at worst, something harmful to an entire continent.

01:25:09.580 Well, it wasn't even about to. It was happening. I mean, those drugs were going

01:25:14.340 regularly to Africa. I mean, millions of patients around the world were getting all those drugs

01:25:19.900 as he lay there and he couldn't sleep.

01:25:22.520 So what did he do?

01:25:23.520 So he did something very interesting. He set up an email account and he gave himself a pseudonym.

01:25:29.840 And the pseudonym he gave himself is Malvinder Singh, who was then-

01:25:35.960 The CEO.

01:25:36.600 The CEO of the company. So Malvinder Singh was this sort of scion of the Rambaxi family. It was his

01:25:44.780 grandfather who had started the company, his father who was revered, who took it multinational. And

01:25:51.540 Malvinder Singh quickly ascended to the role of CEO after Brian Tempest left. But Malvinder Singh,

01:25:59.540 I mean, that was like a name familiar to every Indian household. He was a famous-

01:26:04.660 Yeah, it would be like Bill Gates or Jeff Bezos in the United States.

01:26:07.480 So he creates this Yahoo email account where he's Malvinder Singh. And he starts writing to

01:26:13.880 regulators around the world. And he's a very educated fellow, but he writes in broken English.

01:26:19.760 And he pretends to be a bench scientist at the company. And he basically writes and says,

01:26:25.260 I am being forced to falsify data against my will, very dangerous, et cetera. So to the FDA's credit,

01:26:32.840 almost every regulator around the world blows him off. Thank you for your interesting email and we'll

01:26:39.040 be back to you in due course. He keeps writing to the FDA and keeps writing. He doesn't get a response.

01:26:45.200 And finally-

01:26:46.260 Any attachments to these emails? Is he actually showing any of the-

01:26:49.700 Not yet. Not yet. Not yet. Keeps writing. And then finally, out of just pure frustration,

01:26:56.000 he writes to the FDA commissioner, who at the time was Lester Crawford. And he writes to him and he says,

01:27:02.480 he puts aside the broken English, puts aside being a bench scientist. And he says,

01:27:07.300 I am pleading with you to put a stop to this crime. And several days later, he gets an email back.

01:27:14.080 And it is from a deputy at the FDA saying, we're in receipt of your emails from this date, this date,

01:27:20.620 this date, this date, this date. We'd like to talk to you.

01:27:23.380 So he comes to the US or they come out to India?

01:27:25.880 This is interesting. So Dinesh had thought, all I need to do is tell them there's a fraud.

01:27:33.300 Right. And then I'm done with this.

01:27:34.440 I'm done.

01:27:34.820 They'll show up and they'll do what they do.

01:27:36.760 They'll come racing across the world. They'll descend on the company and my job has been done.

01:27:43.000 And what he did not realize is that he was barely even at the beginning. So when they say,

01:27:49.140 we would like to talk to you, he's surprised. Talk about what? I told you-

01:27:53.020 I just told you.

01:27:54.900 Oh boy. So what begins is this kind of weird game of chicken with the FDA,

01:28:03.480 where they're asking for more information, more documents. They don't know who he is.

01:28:09.680 They just call him M.

01:28:11.660 He's using the same name as the CEO. They haven't figured out that that's a pseudonym.

01:28:15.600 Oh, well, they know he's not the CEO of the company.

01:28:18.140 Yeah. Yeah. Yeah. Yeah. So, but they haven't asked him his real name. Like they know that

01:28:21.100 obviously that's not his real name because it wouldn't be by coincidence.

01:28:23.740 Right. Right. Okay. So he's presumably at this point dripping out pieces of the SAR and the

01:28:31.680 supporting documents that led to it.

01:28:33.860 No, he hasn't yet said anything about the SAR. Okay.

01:28:37.800 And he keeps sending them emails.

01:28:39.820 Is he talking about the specific company or is he talking more? Okay.

01:28:43.080 No, he's talking about the specific company and he's sending snippets of emails that basically

01:28:48.920 implicate officials at the company in fraud. But meanwhile, while this is going on, what is the

01:28:54.560 FDA doing? It's approving one drug after another made by Rambaxi.

01:28:59.720 Including atorvastatin.

01:29:02.120 They did. They didn't do it yet because that was later in the story.

01:29:05.740 Ah, that was 07 if I remember.

01:29:06.960 It was actually 2011.

01:29:09.100 Oh, geez.

01:29:09.920 So they had been investigating the company for almost six years and they knew it was saturated

01:29:17.080 with fraud at the point that they approve atorvastatin.

01:29:20.380 Ah, because we're coming up to the Valentine's Day massacre.

01:29:23.180 Right.

01:29:23.520 All right, let's go there.

01:29:26.520 But finally, these FDA officials, I mean, they're doing some investigations around what he's telling

01:29:33.400 them. And they finally say, we understand that you have a document that basically delves into this

01:29:42.880 and we would like to see it. And at that point, he says, well, do I need a lawyer? I mean, good

01:29:48.460 question. They provide him with reassurances. He gives them the document. And as you said,

01:29:53.540 so that leads to a raid on the company on February 14th of 2007.

01:30:00.760 And I mean, I guess it's wise that the FDA, of course, chose to raid the U.S. plant.

01:30:08.500 The headquarters, the corporate headquarters.

01:30:10.540 I didn't realize the corporate headquarters was in the United States. So you're just saying the

01:30:13.100 U.S. headquarters.

01:30:13.740 The U.S. headquarters.

01:30:14.300 Yes, yeah, yeah, yeah. What is their authority there versus their authority in India? Presumably

01:30:18.560 they have a fraction of the authority on Indian soil, correct? Can they raid an Indian plant?

01:30:23.780 No. They have no authority in India.

01:30:26.140 I see. So that's why they do these kludgy sort of, hey, we're going to come do a

01:30:30.480 surprise inspection in two weeks. I mean, let's take a step back and think about this. So

01:30:37.040 we are completely dependent on countries manufacturing life-saving drugs. We have no

01:30:44.740 authority, no real legal authority on the ground. We have no U.S. attorneys in India. I mean,

01:30:51.100 we can't serve a search warrant. But hang on a second. This seems kind of crazy to me given

01:30:54.800 that, let's use the TSA as an example. Okay. So we have complete authority on U.S. soil who gets

01:31:01.620 on and off a plane. Don't we have some authority who gets on and off a plane that's coming into

01:31:06.340 the United States, even if it leaves on foreign soil?

01:31:09.640 Well, that's interesting you should bring that up because aviation is governed by an international

01:31:14.500 treaty. And all these countries are signatories to a treaty. We have no treaty on drugs,

01:31:21.140 even though it's completely globalized. We have a few formalized agreements, but they don't give us

01:31:27.300 any legal authority. So we need the equivalent of airline security in the drug world. We need some

01:31:32.960 ability to police. The United States doesn't seem to care if someone flies between Nigeria and

01:31:38.720 Bangladesh to the same extent that they would care if you were flying from one of those two places

01:31:43.520 into the U.S. Right. But what the aviation treaty says is you all in your own countries have to police

01:31:53.460 your airlines and set up your airports in the following manner. And you're all agreeing to do

01:31:59.380 that. And if you don't do that, you can't enter our airspace is what it says. Yeah. And so that's

01:32:06.220 obviously missing here. And so to your point, the FDA had no choice other than to raid the U.S.

01:32:14.980 headquarters. Right. That was the most they could do. Right. But I mean, on the other hand,

01:32:19.380 it does make sense that they go and raid those headquarters because that is where they're sort of

01:32:24.200 launching all their drug applications into the U.S. market. So what did they find during that raid?

01:32:30.280 Oh, man. So they find, for example, we should talk a little bit about Sotret. So Sotret is the generic

01:32:38.480 version of Accutane, which is a drug that targets adolescent acne largely. But it is such a dangerous

01:32:46.840 drug, leads to miscarriages, suicidal ideation, that the FDA gives it a black box warning. Rambaxi was the

01:32:56.840 first to launch generic Accutane in the U.S. market, but they knew that the drug was completely

01:33:02.280 defective, didn't dissolve properly. The dissolution was messed up. They had an internal document that

01:33:09.700 basically says, we know this drug is failing. We're marketing it anyway. And the cover page on this

01:33:17.540 document said in big letters, do not share with FDA. Wasn't that the actual name of the document as

01:33:24.260 well? Like that was the file name or something like FDA agents. Okay. So just go into the search

01:33:30.340 engine and just search for keywords. Do not share FDA. Just see what comes up. So, I mean, they get

01:33:37.180 that document. They get the SAR. The amount of documents they get is so huge and so incriminating.

01:33:46.040 And it's on the basis of that, that the investigation is fully launched. But again, this is 2007.

01:33:53.380 Right. Okay. As you alluded to, it will be many years before this story comes to its natural,

01:34:00.960 ugly, deadly, whatever ending. What is actually happening from 2007 to 2013 or whenever this thing

01:34:10.640 finally resolves? Like what does an FDA investigation mean when you have that much evidence? Like this

01:34:17.020 isn't the way we invest crimes. Like this guy got a house full of dead bodies. Well, I mean, okay,

01:34:26.360 I understand the neighbors think it smells a little bit funky. And every time someone comes over for

01:34:30.500 dinner, nobody ever leaves, blah, blah, blah, blah. But now you went over to the house and you found

01:34:35.100 the bodies, right? So what are the next steps when you have this much proof? And I'm sorry, does this

01:34:40.700 involve the Department of Justice at this point?

01:34:42.620 Yeah. So the FDA, they can't subpoena anybody.

01:34:46.740 They have no subpoena authority.

01:34:47.740 They have no subpoena authority. So for any case they want to make, they need a U.S. attorney.

01:34:52.680 So they involve the U.S. attorney's office in Maryland. And basically the whole case just

01:34:59.500 grinds down into slow motion. They're trying to interview witnesses. Rambaxi moves people to India.

01:35:06.600 So they're sort of out of read.

01:35:07.520 So they're subpoena free.

01:35:08.640 Right. So they're subpoena free. They're battling, the FDA investigators are battling

01:35:14.120 U.S. attorneys about who to interview, what documents to pursue. They're fighting with

01:35:20.620 Rambaxi's lawyers. They are trying to sort of track the frauds. And what they're trying to figure out,

01:35:29.000 what are we going to charge this company with? What do the frauds mean for the quality of the drugs?

01:35:35.060 I mean, have you spoken with anybody at the FDA who could speak to what the internal view was

01:35:41.060 circa 2007? Because with the revisionist history, you could sort of say, look, if you really want

01:35:47.500 to put the boots to these guys, you say, hey guys, either you cooperate immediately and fully with

01:35:52.720 the investigation or we are suspending all of your sales in the United States pending resolution of

01:35:58.740 this. That's a huge hammer to drop on somebody. And you can't drop that every time because if you're

01:36:04.340 ever wrong, there's no telling what the magnitude of that lawsuit would be in reverse. But one, it

01:36:10.140 seems like in this situation, you had enough evidence that you at least could have ethically

01:36:14.740 made that threat. Clearly, they didn't have the legal chops to make that threat. Or did they? If

01:36:19.460 they're the FDA, don't they have the singular authority to suspend a drug by a company? They didn't

01:36:25.380 need the Department of Justice or Congress to say, yep, you guys are cool telling these guys no more

01:36:32.100 drugs sold in the United States or, by the way, through PEPFAR while we're at it, using taxpayer

01:36:36.100 dollars until you fully comply with this and our investigation is complete. I'm still struggling

01:36:40.780 to understand the heel dragging. Are they back in 2003 India where the naivete is this can't be

01:36:48.060 nearly as bad as it looks? Well, so first of all, in terms of what was going on inside the FDA,

01:36:54.100 FDA investigators were trying to figure out sort of each permutation of the fraud. So,

01:37:01.900 wow, they're doing all of their stability testing for six, nine, 18 months all on the same day. So

01:37:07.840 that's one revelation. Wow, everybody in the company appears to be in on this. That's another

01:37:13.580 revelation. But as this is unfolding, the other side of the FDA, which is the sort of regulatory

01:37:20.300 approval side of the FDA, keeps on approving the company's drugs.

01:37:24.160 I see. So good point you're making here, which is structurally the FDA has enough silo in it that

01:37:31.240 the people that are dealing with this company from a drug approval standpoint are not the same people

01:37:36.620 that are investigating them. But there's presumably not a Chinese wall between them.

01:37:41.340 Well, right. And, you know, by the end of this, there's like a Rambaxi enforcement team that's

01:37:46.140 30 people large. And then people start saying to each other, why are we working so hard to keep

01:37:52.760 this company in business? Why don't we shut it down? Why don't we take this application integrity

01:37:58.720 policy, this tool that came from the generic drug scandals of the 80s, and use it to just take all

01:38:04.640 these applications basically offline, which would have the effect of shutting the company down?

01:38:09.460 Why aren't we doing that? And it's weird because I got, the book is based on 20,000 internal

01:38:16.120 FDA documents, among many other interviews. I was sifting, I have all the email records

01:38:22.440 from inside the FDA about this company.

01:38:25.240 Do these through a Freedom of Information Act?

01:38:26.800 No. Well, first of all, I mean, anybody who's reported on the FDA will tell you,

01:38:31.260 you file a Freedom of Information request, and you can, if you're lucky, expect to get a couple

01:38:36.680 of documents two years later. So I filed 16 Freedom of Information requests for this book.

01:38:43.340 I even sued the FDA. I hired a lawyer to try to get some documents through the FOIA mechanism.

01:38:49.800 But the bulk of the documentation was coming through sources who were leaking documents.

01:38:55.440 Wow.

01:38:56.200 Yeah.

01:38:56.540 I didn't realize the FOIA would be that inefficient within the FDA.

01:38:59.720 It is not effective. It is, let's put it this way, if you really want to get information, I mean,

01:39:04.980 almost none of the information that the book is based on, I would have ever gotten through FOIA.

01:39:09.220 I'll keep that in mind. So the next time I'm choosing between a root canal and something

01:39:13.220 equally painful, FOIA the FDA. I had no idea, actually. Okay. So I just want, I'm sorry to

01:39:22.980 interrupt you. Just keep going. This story tells itself.

01:39:25.640 Yeah. So then it comes to this point where Rembaxi had the first to file for the biggest

01:39:33.560 generic drug launch in history, which was generic Lipitor. And there you have the FDA bureaucrats

01:39:40.100 sort of parsing the details from their application and saying, well, is there a fraud in this application?

01:39:47.500 There's fraud in every other application, but do we know that there's fraud in this one?

01:39:53.760 Ultimately, they didn't find direct evidence of fraud in that application.

01:40:00.200 But based on what? Did they inspect a single Indian plant?

01:40:04.080 So they send, so last minute, right? And Congress is writing them letters saying,

01:40:09.760 we need generic Lipitor now. We're going to be saving billions of dollars with generic Lipitor.

01:40:15.680 You can't delay this approval any longer.

01:40:18.120 Wait, is Congress at this point aware of what the FDA is investigating?

01:40:22.240 Not fully because the FDA does not disclose it. They do a raid on Rembaxi and a congressional

01:40:29.900 investigator calls over and asks the FDA, what are you investigating? Are you investigating drug

01:40:35.300 quality? And they say, no.

01:40:36.780 What are they investigating?

01:40:37.960 Drug quality.

01:40:40.780 Culturally, why is the FDA hiding their good investigative work from Congress?

01:40:46.900 Wouldn't it give them more breathing room? I mean, Congress is breathing down their back.

01:40:50.880 And look, if you put yourself in the shoes of Congress, they're doing the right thing.

01:40:54.180 They're trying to protect the American taxpayer. They don't have the window of visibility into the

01:40:59.760 safety issues. They are looking at this purely. They're naive enough to believe, as we all are

01:41:03.900 prior to your work, that atorvastatin is Lipitor, except it costs a fraction of what Lipitor costs.

01:41:11.700 So every day this drug is not approved, the U.S. taxpayer is on the hook for X more dollars.

01:41:17.620 FDA, come on, guys, get it going. And the FDA is somehow doing good work, but being sheepish about

01:41:24.140 it. It's almost like if you didn't know better, you'd think there was a second conspiracy theory

01:41:27.560 here, which is that this is not incompetence, but rather political pressure, for example,

01:41:34.160 would be one thing that jumps to your mind, right? I mean, this is, in many ways, the story of

01:41:38.600 Rembaxi is a cultural damnation of India, if we're just going to be blunt and create a whole bunch

01:41:43.800 of enemies and everyone on Twitter is going to light you and me up for saying that. But there's

01:41:47.760 no way around it. This is a cultural damnation of an enormous nation.

01:41:52.000 And I will say the book launched about three weeks ago in India, and boy, has it, yeah. I mean,

01:41:59.600 I have been under fire.

01:42:01.340 And this is funny. All of my workings with people in India, which is, there's only one time in my life

01:42:06.540 I've really had a lot of interaction with people in India, which is when I worked at a company,

01:42:09.720 a global company called McKinsey & Company. And we had a huge presence in India,

01:42:13.480 and we had a huge, especially from a technical sort of analytics standpoint, we had so much of

01:42:18.940 our horsepower in India. So in other words, I want to be careful that I don't misrepresent that I know

01:42:23.700 anything about India other than my own direct experience, which is these people that were

01:42:27.660 coming out of the IITs, the Indian Institutes of Technology, which is like, I don't know,

01:42:32.340 they've got like an MIT in every state, basically, these IITs. These guys were unbelievable.

01:42:38.500 Like I have nothing but great things to say about all of these people I worked with

01:42:43.020 through McKinsey, who were, again, by and large, graduates of the IITs,

01:42:48.520 mathematicians, statisticians, computer scientists, primarily. I mean, they were exceptional people,

01:42:53.300 which tells you that the problem is not the people per se, but something within the hierarchy

01:42:59.320 of companies that somehow slowly can corrupt a subset of people. I mean, like, what do you think

01:43:06.520 is actually at the root cause of this? I know I'm taking us a little bit off the story,

01:43:09.500 but we've sort of been dancing around this issue a little bit, and I don't know how to reconcile

01:43:14.340 these two things, which is there's an amazing system of education in India that produces amazingly

01:43:19.320 bright people who are incredibly hardworking. And yet there's a systemic problem, at least with

01:43:26.880 respect to one industry, which then makes you wonder, well, is petroleum going to be any better?

01:43:32.260 Is textile any better? If you go through all of the other industries, maybe the stakes aren't as

01:43:37.920 high. I don't know. But what reason do we have to believe that this isn't a broader issue than one

01:43:43.280 company? I had done a big magazine article on Rambaxi before I launched into the book. And that ran in

01:43:52.000 May of 2013. And we got all these comments in from readers. And I remember one of the comments

01:43:58.720 was talking about a word I'd never heard before, which is Jugaad. I'm like, what is that?

01:44:05.380 Spell that?

01:44:06.040 J-U-G-A-A-D. It's a Hindi word. So in some contexts, it has positive connotations, which is Jugaad is a

01:44:17.180 spirit of creativity that allows you to overcome obstacles. So that can be incredibly positive in

01:44:26.600 India, where average daily life is so difficult. And the systems are so onerous, the legal systems,

01:44:35.880 anything, getting a driver's license, navigating contracts, I mean, that's all extremely challenging.

01:44:42.380 But Jugaad has a very dark connotation, which means it's basically eliminating all obstacles and

01:44:50.320 getting to the desired goal by the shortest, by any means necessary. And Jugaad, as I came to learn,

01:44:58.900 is something that is really prized in Indian companies. And it's a kind of the rules don't

01:45:06.940 matter, the regulations don't matter, what matters is the goal. And Rambaxi was a company that told its

01:45:14.800 employees what mattered, because they had posters hanging on the wall, which talked about this $15

01:45:21.580 billion goal for, I think, 2015. Basically, it was a financial goal that mattered. And that sort of

01:45:31.480 began to explain why this company behaved the way it did. And frankly, as I began to report and

01:45:39.940 expose that Rambaxi really was not an outlier in the Indian generic industry, that in a number of

01:45:48.180 companies, I don't know to the degree of Rambaxi, but this is how you did business.

01:45:54.020 Now, again, before we get back to the story, I think this thread is worth pulling on a little bit

01:45:58.940 more. We in the United States are not strangers to unbelievable fraud. And we think of WorldCom and

01:46:06.580 Exxon and Theranos and all of these companies that are just complete and total frauds. And so one

01:46:13.080 could argue it's no different. This just happens to be an example in an industry where the consequences

01:46:19.040 were greater. The consequences of Enron's fraud were Californians got screwed out of some electricity

01:46:24.920 and a bunch of shareholders lost money. And both of those things suck, but it's not as viscerally

01:46:30.720 upsetting as people taking bad drugs. So do you think that it is the case that there is just as

01:46:37.640 much fraud here in the United States, but the denominator is so much larger that it's sort of

01:46:43.480 dwarfed? Do you think it's that, well, culturally we're all the same and the difference is in the

01:46:50.320 United States or in the West, the regulations simply do not permit. You couldn't get away with

01:46:56.700 what they're doing. And this is not a condemnation of Indian people or Indian culture. It's a

01:47:02.660 condemnation of a regulatory environment that, as you said, minors in the major and majors in the

01:47:07.860 minor, which is to say, it takes an act of Congress to get a driver's license, but any buffoon can make

01:47:14.080 a drug. It should be the other way around. Not that a buffoon should get a driver's license, but it

01:47:19.540 should be easier to do things that are easier there and harder to do things that are harder there.

01:47:23.880 So I'm giving you the book ends of it. Where do you think it lies?

01:47:27.480 First of all, whenever we have these exposés of companies that are corrupt to the core,

01:47:34.080 it's always shocking. I mean, it's shocking to see such a big fraud. Theranos, Enron, VW,

01:47:41.780 the Volkswagen fraud with the emissions. It's always shocking.

01:47:44.800 It's interesting. The examples you give are exposed within. I don't know about VW,

01:47:48.800 but Enron was exposed internally. Theranos exposed internally. You could argue that that is a cultural

01:47:56.220 difference is, even though it was ultimately exposed internally, you could argue it was much

01:48:02.140 harder to expose Rambaxi internally. I mean, it ultimately was exposed internally, but the culture

01:48:07.900 of dissent might be greater in the United States. Is that possible?

01:48:12.180 So first of all, people talk about a culture of compliance and companies have cultures and they

01:48:20.040 sort of reflect these cultures to their and train their employees in these cultures. And employees

01:48:27.920 from Western drug companies that I talk to, a lot of them talk about the training, the cultural training

01:48:34.560 of compliance and what that's like. And part of the way that you develop a culture like that is you

01:48:40.420 have to because you have regulators who are vigilant. You have regulators who are on the scene.

01:48:46.140 So that's really not the case in India. They're not worried about their own regulators. They could

01:48:51.500 buy off their own regulators or their regulators simply don't show up. And so you don't have the same

01:48:57.020 culture of compliance. It's not something that is sort of organic to a company.

01:49:03.160 And you wonder if you took Pfizer, BMS, Novartis, and moved them to India under the exact same

01:49:12.380 regulatory environment, would it be a matter of years or generations, if at all, that the internal

01:49:19.980 culture of manufacturing excellence would vanish? I mean, it's a Gedanken experiment, but has it been

01:49:25.300 done? Is there any example of Western or European companies degrading or the reverse?

01:49:32.640 Well, it's interesting you should mention this because Novartis has just found itself in the

01:49:37.140 middle of quite a sizable scandal. So they just got approval for a drug called Zolgensma, which is

01:49:46.000 the most expensive drug ever approved. The treatment is $2.1 million. It's a gene therapy drug.

01:49:54.340 One month after they got approval from the FDA, they disclosed to the FDA that there was data

01:50:00.520 manipulation in some of the animal studies for that drug. And apparently they knew about it two

01:50:07.160 months before they got approval. So right now, obviously, this book has stirred up a lot of

01:50:14.000 emotions in India. And one of the accusations that has been lobbed against me is, well, why don't you

01:50:20.380 talk about fraud in Western companies? And they're not impervious. And it's a very complicated issue. I mean,

01:50:25.840 there's certainly fraud in Western drug companies and in Western companies generally. But I think the

01:50:31.540 difference and the difference as it sort of filtered down to the FDA is that here was a company that

01:50:38.660 seemed completely lawless, where employees across the board were directed to violate regulations and

01:50:46.420 they did what they were told, which would be very, very hard to have as a situation in the U.S.

01:50:52.980 where you have anybody could go run to the FDA. Whistleblowers are legally protected here.

01:50:58.600 There's financial rewards for them.

01:51:00.380 Yeah. I mean, I think that's fundamentally the difference is systemic versus non-systemic corruption.

01:51:06.740 And when you think of the most egregious examples in North America, they are systemic. They're

01:51:12.320 fortunately not that many, but when they're there, so using Theranos as an example,

01:51:17.760 Theranos had very few corrupt individuals, but because the corrupt individuals were at the

01:51:22.960 very top of the pyramid, they could organize the exact nature of the silos to perpetuate the fraud

01:51:29.780 until internally it was no longer sustainable. I don't know enough about Enron, but my recollection

01:51:35.480 of the story is Andy Fastow was probably the architect of that, the CFO. My reading of history is that

01:51:42.860 Ken Lay, the CEO, probably not, but he was sort of too uninvolved. And who knows what the truth is about

01:51:50.320 Jeff Skilling. I suspect Skilling sort of sheepishly encouraged Fastow and whatever. But the point is

01:51:57.680 you had the two of the top three lieutenants in a company and then who knows what the trickle down

01:52:02.780 was. But again, eventually a senior person there basically said, well, I mean, it actually started

01:52:08.400 through an analyst questioning things, but internally the house of cards fell down when internal people

01:52:14.060 sort of came forward. So I don't know. I mean, this Rambaxi is so clearly an example of the most,

01:52:21.080 that might be the single most systemic example of corruption because it went to the board and fully

01:52:25.920 permeated the board. I mean, I would argue at least at Theranos, the board was just incompetent,

01:52:31.460 but not outright complicit. Here you had something epic. And so again, I want to come back to the story

01:52:38.380 because we're not even done yet. But do you have any sense of how prevalent this is? Because we're

01:52:43.800 going to end this podcast with a practical discussion, which is what the hell do we do?

01:52:48.160 I don't want the listener to think I haven't forgotten the question that is on everybody's mind,

01:52:52.740 which is Peter, Catherine, thanks for the soliloquy, but I've got a bunch of pills I'm

01:52:58.520 taking tomorrow morning and my kid's got an ear infection. What do I do? So we're going to end

01:53:05.060 there, I promise you, but I can't help but escape. To answer that question, you sort of also have to

01:53:10.920 understand the prevalence of this problem. Right. So Rambaxi to me was like the jumping off point for

01:53:18.280 the reporting quest, which is to figure out whether it was a total outlier or the tip of the iceberg.

01:53:26.000 And my question was, how does this industry really work? So my reporting ended up taking me

01:53:34.660 deep into the FDA and to an inspector named Peter Baker. He's a young investigator, an analytical

01:53:42.820 chemist, kind of a badass. He's like in a motorcycle group with tattoos. He's not what you would think of

01:53:49.080 as a regulator with a pocket protector and a checklist. So when the FDA wants investigators to

01:53:56.640 go and work in their India office, which is just chronically understaffed and nobody wants to go there.

01:54:02.660 I don't understand why. Is it the water? The water, the food, the difficulty getting around. I mean,

01:54:07.620 so many reasons. But he sticks up his hand. He's up for the adventure. And he's just an interesting

01:54:13.500 character. He grew up in a family of Mennonites in a grass seed farm in Lebanon, Oregon. And they would

01:54:20.940 often go on all kinds of missionary work. Anyway, but he winds up at the FDA's India office in 2012.

01:54:29.000 And some of the FDA investigators are what are known as conference room investigators. So overseas,

01:54:37.480 the FDA pre-announces its inspections. It tells the companies they're coming. The FDA investigators are

01:54:45.540 the guests of the company who arrange their local travel, arrange their hotels. They show up,

01:54:53.160 they get. I don't see any conflict here. I'm not sure where you're going with this, Catherine. This

01:54:57.000 seems completely reasonable to me. They get a. They get souvenirs. They get souvenirs. And they

01:55:02.480 arrange for massages. Right. What could possibly go wrong? They get like Gandhi snow globes and they

01:55:09.160 get the welcome ceremony, the opening slideshow. So Peter Baker was like, I don't want any of that stuff.

01:55:15.520 And how old was Peter at the time when he first stepped foot in there? He was 32. Wow. So the

01:55:20.480 chutzpah of this guy to, uh, to just show up and say, no, no, no, no, no, no. It's a new sheriff in

01:55:25.600 town. When I read your book, by the way, I don't know why. Well, I read a summary of it first and I

01:55:32.860 took him to be a gray beard. I don't know why I just had it in my mind. This is the guy with the end

01:55:38.340 of his career. The steely eyed, seen it all, done it all, been through the eighties, served

01:55:46.200 in nom. Like that was the impression I had initially. Well, it's really funny. If this

01:55:51.600 book gets made into a movie, which it might, Matt Damon could play him because he's a dead

01:55:56.700 ringer. That's what he looks like. You heard it here first, people. Matt, if you're listening or

01:56:02.940 anyone who knows Matt's listening, this is the pitch for this role. So some of these investigators

01:56:07.780 are sort of conference room investigators. They go in, they sit in the conference room. Show me

01:56:12.660 the PowerPoint. I'm going back to the hotel. That's right. Bring me the document. So he's like,

01:56:16.640 nope. He pioneers this new method of inspection. He goes to these manufacturing plants. They're like

01:56:24.140 huge cities. They could be over dozens of acres. There's a lot of buildings. You're finding a needle

01:56:30.720 in a haystack if you think you're going to actually step foot and see a direct mistake. Instead,

01:56:37.020 you are going to see something that is directionally smelling wrong.

01:56:42.220 Right. So he decides he's going to start by going to what's called the quality control

01:56:47.980 laboratories. So these are sort of these areas off of the manufacturing floor that audit the

01:56:55.040 manufacturing. And basically, if you are a law-abiding pharmaceutical company, you're using

01:57:01.280 the data that's coming in from the manufacturing floor to see if there's any problems. So are there

01:57:06.140 any drugs that should be taken offline that are not meeting specifications? What are the test

01:57:10.900 results? But if you're a corrupt drug company, you might be using the quality control laboratory

01:57:19.700 to figure out how to manipulate the test results, how to kind of see what drugs don't meet specifications

01:57:28.620 and figure out how to make failing drugs pass. So he goes into the computers. Instead of saying,

01:57:37.000 print me out a document, he looks in the computers. And that's how he begins to track

01:57:43.400 the metadata in these systems where they have deleted evidence.

01:57:48.760 And not that I know anything about computers, but I'm not an idiot. If you showed me a bunch of

01:57:53.100 computer files, like I wouldn't know anything about how to detect mass deletions. Did he have

01:57:58.460 some training in this?

01:57:59.600 No, he had no training, but he figured it out. He figured it out because he had worked in a

01:58:05.320 quality control laboratory in the branded drug sector before he became an FDA investigator.

01:58:12.740 So at least he knew what the fingerprint or signature of this looked like.

01:58:16.300 Right.

01:58:16.880 Every once in a while, do you just, you know, we talk about all the bad things that happen,

01:58:20.320 but sometimes it's worth contrasting it with just the dumb luck that sometimes

01:58:24.340 just comes our way. And what if Peter hadn't have been the guy to put up his hand and say,

01:58:29.160 I'm going to take one for the team and go to India and get diarrhea for a few months. And by the way,

01:58:35.000 I'm competent enough to do this job.

01:58:36.680 Yeah. Because in fact, I mean, what he found was incredibly dramatic. I mean, he inspected

01:58:45.320 86 drug plants in India and China over a course of five years and he found some element of data fraud

01:58:54.760 or manipulation in four fifths of those plants.

01:58:57.340 And what's nice about the way he's looking is you can give them all the warning they want.

01:59:02.020 They can put all the window dressing they want in anticipation. Even if, because I remember you

01:59:06.780 wrote about how often the companies were tipped off. He'd show up on Tuesday, but the company had

01:59:12.140 been tipped off earlier. But where he's looking, they're not going to necessarily fix unless the

01:59:17.760 companies start talking to each other and say, oh, by the way, but you know, presumably he's not

01:59:21.200 disclosing where he's seeing their mistakes.

01:59:23.420 Well, they did start talking to each other. So in fact, there was like an industry wide WhatsApp

01:59:29.080 chat that they had where they were talking about him and his inspection methods because he became

01:59:36.540 so he's like Lucifer to these people. He is Lucifer. He became so devastating to these companies. And

01:59:44.160 just to give an example of what's at stake, the book opens with this scene. He goes in to inspect

01:59:50.380 this plant run by this company, Walkhart. And he encounters this employee who's trying to

01:59:55.820 smuggle running down the hall to smuggle a garbage bag of documents out of the plant on his second day

02:00:03.340 of the inspection. And it's a chase scene. So if you want to know what a chase scene in a sterile drug

02:00:09.540 manufacturing plant looks like. I'm picturing Matt Damon just chasing some dude down a hall

02:00:14.820 with a Jason Bourne swipe kick out at the end. But well, it's actually a low speed chase beneath

02:00:24.060 these. It's a speed walk. It's a speed walk beneath these fluorescent lights. And the irony is that it is

02:00:30.100 sterile drug manufacturing plant. The employees are, if they're trained properly, are trained to

02:00:35.820 move slowly because you don't want to disrupt the airflow. It's like a unidirectional airflow. And so

02:00:42.460 all the movements are supposed to be very controlled. So if you have a chase scene in that environment,

02:00:47.380 it's a low speed chase, which is how the book opens. It's a scene out of Austin Powers.

02:00:52.480 Yeah, it's crazy. Because it's like the irony of it. It's like it's a chase, but it's really slow.

02:00:57.120 But he figures out where the bodies are buried in these plants. I mean, he used the torn documents

02:01:08.160 in that garbage bag to reconstruct that there was a hidden area of this plant where they were

02:01:15.360 manufacturing sterile injectable cardiac drug for the US. They were doing it on corroded equipment

02:01:22.180 that left metallic particles in the drug. That's bad, right? That's actually not good.

02:01:28.240 Yeah. That's not good. What is Peter doing today? So Peter has left the FDA and he is a consultant

02:01:34.820 for a auditing company that audits manufacturing plants. You said something a moment ago that I

02:01:42.580 wanted you to finish what you were saying so I didn't interrupt, but I think it's worth calling out.

02:01:45.880 80% of the companies he audited, I want to go back to what you were saying, had some irregularity.

02:01:54.380 So that's option A. Option B were not quite at the standard of the finest Swiss, German, and US plants.

02:02:02.820 Option C were as bad as Rambaxi. I mean, walk me through this. What is the implication of what Peter

02:02:09.300 found? The implication of what Peter found is that fraud and particularly data fraud. So that is

02:02:17.280 manipulation of quality data to make failing products sellable is endemic.

02:02:25.900 Do we have a positive control for that? In other words, has someone done Peter's analytics on the

02:02:30.880 best of the best? And is the background number on that 30%? Because of course, at this point now,

02:02:37.500 there's nobody listening to this who trusts anything that comes out of a drug company. And frankly,

02:02:41.580 I don't think the brandeds are viewed that much more favorably than the generics because I think

02:02:46.700 we've made the case that they're just under more scrutiny and they have deeper pockets. So you could

02:02:52.520 argue, well, they might not be doing the egregious nonsense like putting glass particles into pellets or

02:02:58.880 giving you sawdust or doing their work on rusted machines, but it certainly wouldn't be hard to make

02:03:06.040 the case that there could be data fraud, which is exactly the stuff that Peter's autopsies and

02:03:10.620 forensics uncovered. So do we have a sense of what that background number is?

02:03:14.680 So I'm actually hopefully going to be publishing something relatively soon that will put some numbers

02:03:21.920 to that. But I think you could say there is really endemic fraud in Indian and Chinese manufacturing

02:03:29.520 plants. And that is not to say that fraud doesn't exist in the US plants, but the kind of egregious

02:03:37.940 shredding the documents, bringing in data fabrication teams, doing secret tests.

02:03:45.420 What does your business card look like when that's your day job? Honey, please meet my husband,

02:03:50.240 Bob. Bob, great to meet you, Bob. What do you do? Oh, I work in pharma. Oh, great. Are you a chemist?

02:03:56.220 No, no. I'm more on the data side. Oh, are you a data scientist? No, no. I'm in data fabrication.

02:04:02.640 Oh, fantastic. Well, so this is one of the mind-blowing things that I learned is that these

02:04:09.720 companies, a number of them do have data fabrication teams. They bring in teams to fix these plants and

02:04:19.720 fabricate documents before the FDA comes in.

02:04:22.760 You have to connect with Carol Tavris because the extent of cognitive dissonance that must exist in

02:04:28.000 a person whose stated explicit day job is data fabrication. I'm really curious about that

02:04:35.360 psychology because it's basically white collar mob work. If you're a hit man in the mob, that's your

02:04:41.140 job. You get paid and you got to whack people. But we just don't think of that being plausible in

02:04:47.580 the white collar sort of upper echelon of pharmacology. How is this any different,

02:04:53.440 right? Except it's more efficient at killing. At least the mob guy can only kill like one dude at a

02:04:58.160 time, right? These people have the potential to kill tens of people, thousands of people at a time.

02:05:05.720 They just don't get the blood on their hands. That's really the difference.

02:05:08.500 There's this amazing quote. One thing I've been asked is, well, what shocked you most in reporting

02:05:13.160 this? There's this anecdote in the book where this US executive at Rambaxi becomes suspicious about

02:05:19.980 the data because it's too perfect, which looks exactly like the brand data, right? She realizes

02:05:26.140 that the AIDS drugs are really terrible. And on a conference call with like a dozen executives of

02:05:31.840 the company, she raises this question about the quality of the AIDS drugs going to Africa. And the

02:05:37.840 medical director of Rambaxi says to her, who cares? It's just blacks dying, which is like,

02:05:44.500 what do you do again? Like, what's the point of your job? You're working at a drug company. It's

02:05:50.100 something.

02:05:51.140 Yeah. It'd be hard to come up with just one thing that from your work that would have

02:05:54.460 floored you because it's really, it's sort of one, with all due respect, I think that's part of

02:05:59.580 what makes this book a little tough is it seems too impossible at times. It sort of seems like

02:06:05.700 if you made this a movie and it was pure fiction, it would be rejected because it wouldn't have

02:06:12.320 enough suspense. It wouldn't have enough irony. It would be too over the top. With that, let's bring

02:06:20.660 it back to, I want to let you, I keep interrupting you. I apologize. I want to let you get back to the

02:06:25.140 story of how does at least the tale of this company and Dinesh come to a close? Because there's another

02:06:30.640 point we didn't mention here, which as all of this nonsense is going on, they're in play as an

02:06:35.560 acquisition by a Japanese company. So, I mean, now we're perpetuating fraud on multiple levels.

02:06:43.140 We are also perpetuating fraud in the context of due diligence for a mega acquisition.

02:06:48.960 That acquisition by Daiichi Sankyo, which was Japan's second largest drug company, I sort of

02:06:55.860 thought of it as almost like a reverse Godzilla movie where Daiichi Sankyo is coming from this

02:07:03.160 very formal, polite culture. The Japanese, they come in to do their due diligence and Malvinder Singh,

02:07:13.260 the Indian executive, just rolls them.

02:07:17.220 And this is not the guy with the Yahoo address.

02:07:19.480 Right. This is the real CEO. The FDA has already raided their company. They've got this smoking

02:07:27.140 gun, SAR, PowerPoint. They suppress it from the Japanese through the whole due diligence thing.

02:07:34.800 They give their employees a script of how to talk about what the legal troubles are. They create

02:07:41.980 a false set of minutes from the meeting where the PowerPoint is disclosed. They hide any reference

02:07:49.300 to it in the Justice Department documents they disclose. So Daiichi Sankyo ends up having no clue

02:07:56.960 which, I mean, a lot of people are like, who were their lawyers? This is ridiculous. But they end up

02:08:02.380 paying Malvinder Singh and his brother $2 billion for their shares in Rambaxi. And Malvinder Singh gets out of

02:08:10.900 the burning house like just before the whole thing collapses. And Daiichi Sankyo slowly begins to realize

02:08:19.060 realize that they have bought this company that is fraudulent to the core. And several years in,

02:08:27.420 they realize they're on the hook for $500 million, which is the fine that Rambaxi ends up having to

02:08:37.100 pay to the Justice Department to settle the case against them.

02:08:40.860 Now, does ultimately that money get paid by Singh himself? Where does that money actually come from

02:08:45.300 in restitution? No. Daiichi Sankyo pays it out. So no one has ever gone directly after Singh?

02:08:51.680 No. So then what happened is once the case settled and Daiichi Sankyo was out of pocket $500 million to

02:08:58.820 pay for Rambaxi's crimes, they end up, Daiichi ends up taking Malvinder Singh to a court of arbitration in

02:09:06.820 Singapore and get all of Rambaxi's lawyers, because now Daiichi Sankyo is Rambaxi, to testify against

02:09:14.060 Malvinder Singh in this arbitration hearing. And the court, in a turnaround, awards Daiichi Sankyo

02:09:22.680 $500 million that Malvinder Singh is now on the hook for. And so right now, I mean, his offices were

02:09:29.940 just raided in India. Amazingly, he took this to an Indian court to say that the judgment is not

02:09:36.360 enforceable in India. And amazingly, an Indian court ruled against him.

02:09:41.000 Well, I mean, as a skeptic, I would say it's easier to turn on one man than one culture.

02:09:45.840 Mm-hmm. Yeah. I mean, it's been very, very interesting to watch it play out.

02:09:50.120 And Daiichi has, of course, divested this entire bomb of crap. This little turd bag has now been

02:09:55.980 purchased by Sun, hasn't it, or something?

02:09:57.700 It has. It has. Rambaxi does not exist in the same way that it used to. So this once,

02:10:04.000 you know, very proud Indian company no longer exists.

02:10:09.220 In the end, at least financially, though I suspect not emotionally, Dinesh was made whole

02:10:14.360 through the whistleblower.

02:10:15.680 Yes. So he becomes a formal whistleblower under what's called a Key Tam legal case. So his identity

02:10:24.140 was secret. They reach a settlement. He gets a percentage of the settlement. So he ends up

02:10:29.400 with $48 million. But his life really unraveled. He and his wife break up. He's had a very difficult

02:10:38.520 road to hoe.

02:10:39.580 Is he in the U.S. now?

02:10:40.720 He goes back and forth between India and the U.S.

02:10:43.420 And he feels safe in India?

02:10:44.760 You know, it's quite extraordinary because whistleblowers are routinely killed in India.

02:10:49.620 So when he was thinking about blowing the whistle on Rambaxi, that was a sort of central

02:10:55.240 calculation, was the danger to himself. And he ended up really rolling the dice on that. And he's

02:11:02.240 become an ongoing antagonist to the industry because he's now an activist and an advocate

02:11:08.920 for safe drugs. And he has just decided that that's how he's going to live. But he has survived

02:11:17.480 this ordeal. But emotionally, I think it's been very scarring.

02:11:21.680 So it seems to me that perhaps the most compelling answer we have to the question that is probably

02:11:29.360 at the top of everybody's mind, which is, what is the prevalence of this problem? What is there,

02:11:34.420 or maybe another way, what's the penetration of this? You've done a case study of hopefully the

02:11:40.680 worst of it. We don't know. But you've gone a few inches wide and several miles deep. But then

02:11:46.680 Baker comes along and Peter's assessment is, well, I've casted a much broader net. I haven't gone as

02:11:53.820 far into each one, but I have found the fingerprints of fraud on 80% of what I've viewed. By the way,

02:12:02.040 that was 80% of non-U.S. generic manufacturers or all manufacturers, inclusive of U.S.

02:12:09.320 So these were 80% of the plants he inspected in India and China.

02:12:14.440 And that's right. Okay. So they were all in India and China. So 80% of what he inspected in India and

02:12:17.960 China. And that, again, that was a big number. So you could argue the law of large numbers starts to

02:12:23.400 kick in. And that is representative of your sample size. So are we to take away from this that if you

02:12:32.520 go into CVS, Walgreens, pick your favorite pharmacy, you buy your drug, and assuming you

02:12:39.580 can even figure out what company sold it, which turns out not to be easy, we're going to talk about

02:12:43.800 that. If it comes from a company that is Indian or Chinese, you wouldn't be overly paranoid to assume

02:12:51.460 there's an 80% chance that there's some misinformation in what you're taking, which means, again, that could

02:12:57.900 mean it's still fine. That could mean it's not as potent as it says it is. It doesn't have the shelf

02:13:03.620 life it says it is. Like, I don't want to create mass hysteria. I want to walk through what really is

02:13:08.420 implied by what you're saying. It is hard to know for certain, and it's hard to put a number on it. But here

02:13:15.840 are some sort of things that I can say. We know that because of the kinds of frauds exposed in the

02:13:25.020 book, Americans have gotten drugs that in some cases are not bioequivalent, have foreign particulate

02:13:33.500 matter in it, or toxic impurities, or are not as sort of represented. So we know that for certain.

02:13:41.760 We know, for example, that millions of Americans were taking blood pressure medication,

02:13:49.680 balsartan, balsartan, losartan, herbisartan, that was found to have the active ingredient contain

02:13:57.600 carcinogens. And these came from Chinese and Indian manufacturing plants. And dozens of versions of

02:14:06.480 those drugs have been recalled. And those carcinogens were in the drugs for maybe about six years.

02:14:12.520 And I'll throw in my own personal story here. I have seen three examples of this in my practice,

02:14:21.360 which prior to seeing your book were really infuriating because I thought I was crazy

02:14:27.520 having these arguments. But sometimes you prescribe drugs for which they have a predictable measured

02:14:32.940 response. There's nothing subjective about it. Oh, an antidepressant. Did you, I don't feel like

02:14:39.780 this is helping me any, maybe I have a placebo that those are very difficult to figure out.

02:14:43.900 Even the antibiotics, they're hard to figure out. Maybe it just took a while for the drug to kick in

02:14:49.540 and now it kicked in sort of thing. But when you look at lipid lowering drugs, it's really clear

02:14:56.880 what's supposed to happen and when it's working or not working. Now there's gradation. So we might be

02:15:02.860 missing things that are missing things that are underworking. But on three occasions over the past

02:15:08.700 two years, I have prescribed a patient Crestor. And again, as a doctor, when you write Crestor,

02:15:15.940 it means nothing. It means for the most part, the patient will be substituted resuvastatin unless

02:15:22.280 otherwise specified, resuvastatin being the generic equivalent of Crestor. And in these three particular

02:15:28.980 examples, there was zero change in the LDL cholesterol. Now, when a patient is on 10 milligrams

02:15:36.060 of Crestor for three months and there is zero change in the LDL cholesterol, there are only two

02:15:42.680 explanations that I can think of. Theoretically three. But for argument's sake, the patient's not

02:15:50.220 taking the drug or the drug doesn't work. I like to think that I have a non sort of threatening tone

02:15:58.040 with my patients. So I always assume it's the first. And I'm like, hey, any chance you ran out

02:16:04.140 of your meds before, you know, a couple of weeks before the drug test? And by the way, the answer

02:16:07.460 to that question is often yes. So a lot of times I will see these issues or you give somebody

02:16:11.720 allopurinol for uric acid, the uric acid doesn't go down or it's been down. And then all of a sudden

02:16:16.920 it's back up. And a lot of times, yeah, the answer is, you know what, for the last two weeks,

02:16:20.900 I forgot I needed a refill. I was on the road, blah, blah, blah, blah. But there are three occasions

02:16:24.960 where that was clearly not the case. And this patient, and I just, I really, I have great

02:16:30.840 confidence that the patients were in fact taking the medication, not a budge. And after the second

02:16:35.380 one, I said, I asked my staff to kind of dig in a little bit. And I said, is the patient actually

02:16:41.200 getting Crestor or were they getting a generic equivalent? And one thing led to another. And

02:16:46.660 basically in those situations, because it was too difficult to get the patient back on branded,

02:16:53.060 you just switched to atorvastatin, which I now realize you're just rolling the dice going from

02:16:57.360 one piece of BS to another piece of BS. But I've seen this issue. There's no question I've seen it.

02:17:03.700 And I suspect I'm not seeing it to its full extent because I'm only seeing it for drugs in which

02:17:11.560 the measured response is so clear and so objective. You think of, as you said, all the drugs that we

02:17:17.900 would miss this, we would miss this on. So what I'm discussing as an example pales in comparison to

02:17:25.260 the myriad problems that could exist, the contaminants, the partial efficacy, the time

02:17:31.620 release drug that is not a time release drug and therefore is delivering too high a dose in a shorter

02:17:36.640 period of time. And does that explain the GI upset? I mean, I'll give you another example.

02:17:40.960 Tons of patients complain that generic extended release metformin, which is a drug I prescribed with

02:17:47.620 some regularity, doesn't work as well as the true glucophage XR does. And metformin is a drug that can

02:17:54.540 produce a lot of GI side effects. So I'm kind of stuck. The book describes, for example, these two

02:18:02.420 doctors at the Cleveland Clinic who began to piece together that some of their patients who, and these

02:18:09.700 are cardiac drugs, were stabilized on the brand and then became unstable when they were switched to the

02:18:16.160 generic. And in some cases, heart transplant patients were suffering organ rejection from a

02:18:22.980 generic... Tacrolimus. Yeah, the tacrolimus. I think for doctors, once they become aware of this as a kind

02:18:30.200 of category of thought as a possibility, some of them begin to diagnose the drug supply, not just their

02:18:37.600 patients. Well, so we're in the process of doing something that's going to take a while. But after

02:18:42.700 reading your book, I sent a long apologizing email to three people on my staff who were going to be

02:18:49.060 the ones to take one for the team on this, which was, we're going to go through every drug we prescribe.

02:18:54.820 And luckily, that's a very small list for our practice because we don't have many patients and

02:18:59.040 we really narrow the focus of the type of stuff we're working on. I mean, we're not the ones out

02:19:02.640 there writing antibiotics and stuff routinely. But that's still a list of probably 30 drugs. For every

02:19:08.580 one of those drugs, I need to know every single generic manufacturer. And then we need to do the

02:19:16.140 full colonoscopy on everyone according to publicly available information. Have there been any filings

02:19:23.020 against these companies? Just do a quick Google search news or Google this name, FDA, blah, blah,

02:19:29.280 blah, blah, blah. Kind of go through that exercise. And I think this will take us three months to do.

02:19:34.200 That's how miserable an exercise it's going to be. But what I hope emerges from this is a

02:19:39.840 probabilistic heat map that basically says going forward, again, I don't think we can ever ensure

02:19:46.060 with certainty, even with the branded drugs. But the goal here is probabilistic. It's increase the odds

02:19:51.620 in your favor that if you need resuvastatin, atorvastatin, pick your favorite generic anything,

02:19:58.420 hydrochlorothiazide, which one are you absolutely not touching? Where do we preferentially do it?

02:20:05.560 Anything else you would recommend that I do as a physician or a patient do as they navigate this?

02:20:12.420 So on my website, because I mean, let me just say, since the book came out, I have been flooded with

02:20:19.100 emails from patients who want to know, are their drugs safe? Where were they manufactured?

02:20:23.340 By the way, just the thought of that is, to me personally, like, I can't imagine a bigger

02:20:29.000 torture. Anyone, people listening to this know how much I hate email. I waste no opportunity to

02:20:33.340 talk about how much I hate email. The only thing that I could hate more than email would be getting

02:20:37.900 a thousand emails a day asking me to dig up the answer to a question like that. They're the only

02:20:44.420 one sending you that email. Oh, yeah. I mean, it's impossible. I am inundated. But I also feel-

02:20:51.720 There's an obligation, but you need a system to solve this. You're not personally going to be

02:20:56.940 the one that gives them the answer to their question. Right. So what I created on my website

02:21:01.360 is a guide to investigating your own drugs, which is basically like, okay, what are patients going to

02:21:07.720 do? Now, we need new laws. I mean, you shouldn't have to be Sherlock Holmes for your own drugs,

02:21:13.080 but basically it leads them step-by-step. Figure out who manufactured your drug.

02:21:17.980 Is that readily available on the front of the bottle?

02:21:20.420 It should be.

02:21:21.620 Because you don't often get the actual bottle from the manufacturer. You're almost always getting

02:21:26.920 a bottle that's a plain, you know, whatever yellow or green bottle that has a sticker on it that the

02:21:33.280 pharmacy puts on. Does that sticker usually contain the generic company's name?

02:21:36.820 So it varies from state to state. I mean, there are different disclosing requirements and it should.

02:21:42.160 But I mean, if you're not getting that information on a dispensing label, you need to ask your pharmacist

02:21:47.240 who's the manufacturer. And when I go to a pharmacy or actually before I even go and pick up a prescription,

02:21:53.360 I ask who's the manufacturer? Who else makes it? I mean, I switch all the time from one generic to another.

02:22:00.160 Are you a pharmacy willing to do this without your physician's intervention?

02:22:03.220 Yes. Because I go to an independent pharmacy. But I think, you know, if you're in Express Scripts,

02:22:09.680 if you're CVS, I think it's harder. I think for the big chain pharmacies, it's harder.

02:22:15.560 Yeah. The PBMs, I contemplated in the last couple of days whether I wanted to go down the PBM

02:22:20.580 rabbit hole with you. And I hope you'll be okay with the fact that I have decided not to.

02:22:24.420 That's fine. I think it's too big a topic. Do you want to say two sentences about it so people

02:22:30.580 would understand why Caremark or CVS or Express Scripts are going to be harder to navigate

02:22:35.940 in as much as it offers them any hope? I mean, or is it worth, are we just opening up a can of worms

02:22:41.300 that's way too complicated? I mean, I can basically say that I think the optimal thing is to go to a

02:22:47.440 brick and mortar pharmacy and have an exchange with a human being. I mean, that is ideal. I mean,

02:22:53.660 pharmacists, some don't really know about this issue, but some know a lot. I mean,

02:22:58.480 I've gotten a lot of mail from pharmacists saying like, I've been hearing this for years from my

02:23:04.440 patients that this drug didn't work or that. I mean, you can have a dialogue with your pharmacist

02:23:09.120 about it. Okay. Is GoodRx the app on your site? Do you let patients know about that?

02:23:14.380 No, I don't even know about it. So GoodRx, a really, really brilliant app that allows you to at

02:23:19.660 least price compare them. And that is a way that you can, if you decide you want to go down this

02:23:24.820 route of being brick and mortar, you can basically price shop. And it's really interesting. Like if I

02:23:29.160 didn't have my phone on airplane mode right now and wasn't worried about it buzzing nonstop, I'd

02:23:33.160 turn it on and show you. You sitting right here right now, I would just type in atorvastatin. It would

02:23:37.980 say, select your dose, 10 milligrams, use current location, right? It's got the GPS. I can tell it the

02:23:43.980 zip code. And it will, in a radius of ascending order, tell me the price for 30, 10 milligram

02:23:52.840 atorvastatins cash pay by pharmacy. And you'd like to think they're all the same, aren't they? Not even

02:23:59.420 close. So that you couple that with your analysis and you at least can get into the situation where

02:24:06.820 you walk in and you could know your maximum out of pocket. And by the way, there's still a good

02:24:11.340 chance your insurance company will cover it because typically the insurance company is just

02:24:14.240 differentiating between the generic and the branded. They're not going to, at least until

02:24:18.060 you tell me different, I assume they're not going to fiddle between two different generics if you

02:24:22.000 specify one versus the other, are they? Right. But the problem with the price is that often the

02:24:28.340 drugstore chains will be dispensing the lowest cost generics, which may be the worst manufacturers in

02:24:37.560 India. Do drugstores typically carry more than one generic? Well, they often can order one generic

02:24:44.100 or another one from their wholesalers because they're ordering from, you know, Cardinal and

02:24:48.720 Amerisourcebergen and McKesson. I mean, I have a feeling I know how this is going to work for our

02:24:53.000 patients. What I suspect we will end up doing is partnering with one brick and mortar pharmacy

02:24:58.100 and saying, we will make you our exclusive partner on this. And in exchange for it, you will do exactly

02:25:04.240 what the F we say, which means you are absolutely under no circumstance selling us anything other

02:25:10.840 than X, Y, Z, do, do, do, do, do, do, do, do, do, do. And we will never think about this again. And all

02:25:16.240 of our patients will mail order from that pharmacy directly to them. But that's, I don't know that

02:25:22.200 doctors will have the time to do that. Or, I mean, I don't know, this is, you hit the nail on the head,

02:25:29.220 which is, on some layer, the patients need to put pressure on the payers, which is both the

02:25:36.940 insurance company, indirectly through the PBM, and Medicare. And because patients, I don't think

02:25:43.720 individually, or even frankly, collectively outside of this, have the ability to pressure

02:25:48.900 the FDA and or the drug manufacturers. But the payers certainly can. I mean, if the payers decide,

02:25:55.940 we are not reimbursing you wholesale as a company until you get your act together, well, that should

02:26:01.800 be a sign to fix things, right? Well, let's take this one step further. Imagine if there was a pharmacy

02:26:08.960 chain that said, you know what, we're going to test every drug that we dispense, not every pill.

02:26:16.660 Right, but do a random sampling. Do a random sampling, which is what should be happening,

02:26:20.860 by the way. But outside of, like, could any of them afford to do this, or would they do this?

02:26:24.220 Unless there was a big enough error, and a big enough issue that this could become a

02:26:27.320 differentiating sales factor. Well, okay. So there's this small pharmacy

02:26:31.220 called Valisher, and that's what they do. That's their business model.

02:26:36.000 Where are they based?

02:26:36.980 So they're based in New Haven, Connecticut. And that is their business model, which is that they

02:26:41.840 test every drug.

02:26:44.020 How do you spell that?

02:26:45.140 V-A-L-I-S-U-R-E.

02:26:48.000 And presumably, they can sell across state lines?

02:26:50.800 They're a mail-order pharmacy.

02:26:51.980 They're a mail-order pharmacy.

02:26:52.700 They're a mail-order pharmacy, yeah.

02:26:54.240 Got it.

02:26:54.500 So here's something very interesting, which is, with the recall of these blood pressure

02:26:59.620 medications that were found to have this carcinogen, an NDMA, which is actually created

02:27:06.400 in the production of liquid rocket fuel, and that is bad for you.

02:27:10.000 Which makes you wonder, what on earth were these doing? Anyway, I'm sure there's some reasonable

02:27:14.280 reason why these things could have been in...

02:27:16.100 Well, one of the questions that the FDA has been investigating is whether they were reusing

02:27:21.160 solvents.

02:27:22.280 Ah, yeah, that would make sense.

02:27:23.940 Anyway, so the FDA detected three different carcinogens in these drugs. Valisher, through

02:27:32.240 their testing, identified a fourth. That is not very reassuring. I mean, it's great that they

02:27:37.180 found one, but like, why didn't the FDA find this? And why didn't the FDA find it?

02:27:42.460 How does Valisher afford to do this? Are they that large a mail-order pharmacy?

02:27:45.960 Well, right now, they've got funding. I mean, they're a startup.

02:27:49.560 Oh, I see. Okay, got it. So this is all baked into the business model.

02:27:52.900 The business plan. What's interesting about this, just to go take a small tangent, the

02:27:57.240 FDA does these pre-announced inspections overseas, and their inspector went to one of these plants

02:28:04.060 in China. I can't remember. It's Zhejiang Huahai plant. And the investigator found that the company

02:28:14.120 was not investigating impurity spikes in its own drugs as required. So the inspector recommended

02:28:22.580 that this plant be sanctioned as official action indicated, like the most serious, which would have

02:28:28.440 forced them to take action. Back in Maryland, FDA officials said, eh, it's okay. Voluntary action

02:28:34.380 indicated. Not such a big deal. One year later, this plant is in the middle of this worldwide recall

02:28:41.380 of drugs because there are impurities in the drugs. So the FDA actually found this, did nothing about it,

02:28:49.780 and now here we are. It's not a positive story.

02:28:52.600 I'll go back to the question I posed a long time ago that I told you I'd come back to, which I've been

02:28:56.920 thinking about a lot, only again for the purpose of like, sometimes history just offers us insight.

02:29:01.960 If it were the Hatch-Waxman-Eben Act of 1982 or whatever, and you have the advantage of being

02:29:09.540 transported back in time knowing everything you know today, how would you amend that act to reduce

02:29:16.120 the probability of this? So the key thing would be to reform the first to file deal sweetener.

02:29:23.480 And it has been reformed since then because now it's not which minute you file, but which day you

02:29:31.000 file, which means a lot of these generic companies are all filing on the same day and sharing the

02:29:36.760 exclusivity, which takes a little bit of heat out of the market, gets rid of that sort of Lord of the

02:29:42.480 Flies environment in the parking lot that we talked about. But I think the biggest reform wouldn't

02:29:49.240 necessarily be to the Hatch-Waxman Act. It would be to the FDA. In terms of authority? First of all,

02:29:55.080 overhauling their foreign inspection program. I mean, my God, a pre-announced inspection? Does that

02:30:01.760 solve anything for anybody except for the drug companies? Why give a plant eight weeks advance

02:30:07.340 notice that you're coming and then ask them to plan the trip for you? I mean, you could argue that

02:30:12.460 Peter Baker found a way around it. In other words, it's probably less about the regs around the

02:30:19.380 inspection and more about the chops of the inspectors. Although in an ideal world, you want

02:30:23.600 both of those on your side. That's a huge part of it. How do you get more Peter Bakers at the FDA?

02:30:28.080 Well, Peter Baker proposed that very thing. He said, let me run a training program and train all of the

02:30:34.780 inspectors to do these kinds of inspections. And they sidelined him. I mean, he was basically

02:30:41.740 taken off of inspections and he left. He left the FDA. He's no longer there. He was passionate about

02:30:49.660 what he did. So there is, I mean, the book really exposes to some extent that the FDA does not really

02:30:58.320 want to know what's going on in these plants. This has the sad ending of a Michael Lewis story,

02:31:04.060 you know, where you have some conclusion, but then there's a realization that you haven't really

02:31:10.560 solved the problem. Like mortgage-backed securities still kind of suck. And there are still a whole

02:31:16.320 bunch of these sort of crappy credit default swaps out there. And, oh, by the way, we haven't really

02:31:22.080 reformed lending as much as we'd like to think we have. And, oh, and by the way, nobody really got

02:31:26.920 spanked for the egregious mistakes that, you know, got made. And I had a different idea, by the way,

02:31:33.340 on sort of a disruptive idea around the regulation of this. I think part of this could be addressed

02:31:40.320 by doing something, a derivative of the following. So it wouldn't be this, because this is just the

02:31:45.280 first dumb idea that I have. If you extended the protection for the primary drug maker, so the

02:31:51.600 branded drug currently has whatever, it's 20 years, and it's complicated because that's from the first

02:31:57.180 patent filing. There's different patents. But you basically say, look, you will have longer to sell

02:32:02.640 this drug exclusively. But in exchange for that, you are now transferring all of the know-how to the

02:32:09.920 generics. So we're basically, you could make it such that the NPV is the same to them. You will make

02:32:16.320 the same amount of money on this drug. We will delay the time the generics can come in. But basically,

02:32:22.980 the generics now have nothing to do except assume full manufacturing and production capacity. In other

02:32:29.200 words, the act of 82 said you don't have to do clinical trials anymore. We're now basically

02:32:33.780 saying you don't have to reverse engineer anymore. It's an interesting idea. So there is a kind of

02:32:40.020 generic that is somewhat like that. It's called an authorized generic. So that's one of the things

02:32:45.560 that's in my guide to investigating your own drugs, which is that brand companies, because they don't

02:32:51.500 want to let go of all their market share necessarily in all their profits, what they'll do is they'll

02:32:56.180 partner with a generic company, they'll authorize that generic company to make the generic, and they

02:33:03.240 will transfer their recipe. And with that, does the FDA grant that other generic producer exclusivity

02:33:10.480 for a period of time in exchange for that? No, not at all. So what is the advantage? Why is the

02:33:15.840 main company transferring, basically giving that one generic producer such a head start? They make

02:33:21.080 money off it. They can make money off of it. They still retain a piece of it, basically,

02:33:25.040 through some sort of licensing agreement. Okay. So that's even a more elegant way than what I said.

02:33:29.380 What I said, that's actually just a smarter way to make that happen. I mean, maybe that just becomes

02:33:33.040 the way to do it. There are only basically authorized generics where the parent company still shares some

02:33:38.900 of the rent. And in exchange for that, they guarantee. And you know what? You want to go really draconian

02:33:44.620 on those guys? By the way, you're on the hook to determine the authenticity of the product. So bring it all

02:33:51.460 the way back to the parent company. So you're going to get paid more money, but now you have

02:33:55.760 more responsibility. If your authenticated generic producer goes rogue, you're paying for it. So don't

02:34:03.100 have the FDA exclusively be the one that has to police them. Have them all policed from the parent.

02:34:08.880 It's another way of saying, look, it would be great if we could catch every drunk driving teenager

02:34:15.140 out there. And yeah, we could put more cops on the street and we could give them more tools and

02:34:20.000 more breathalyzers. But wouldn't it be great if every parent was policing their own 16-year-old as

02:34:25.380 well? It's a belt and suspenders approach. So maybe that's part of the answer. Interesting.

02:34:30.080 That's possible. I mean, at the moment, who knows what is possible? I mean, we can't come to any

02:34:36.920 agreement over drug pricing. Every seeming approach has failed. Brand name drug prices continue to rise.

02:34:44.840 I mean, it's just our drug supply is really in a free fall. We've got drug shortages. There's no

02:34:51.120 incentive for quality here. And a lot of these companies are really getting away with it. You

02:34:56.200 know, FDA investigators are walking into these plants, finding egregious conditions, and the FDA

02:35:02.180 is downgrading their findings. So it's hard to say what can practically be made to happen. But I do think

02:35:09.940 Congress, for whatever it's worth, is looking into it. I mean, it is sad because so many problems,

02:35:16.720 the people that have the means, both educational and financial, will be okay. Like, I'm not worried

02:35:21.820 about me and my family or you because we have the knowledge. We can take the time to do it. And by the

02:35:27.980 way, in a moment, if we have to, we're willing to pay more and we have the disposable income to do

02:35:33.640 that. There are a lot of people for whom that's not true. They simply don't have the time. They don't

02:35:38.220 have the knowledge. They don't have the extra income to do that. And those people will

02:35:42.680 disproportionately suffer here. And those are really, if you really stop to think about it,

02:35:46.640 I mean, that's the four alarm fire for Congress. Congress exists first and foremost to make sure

02:35:51.660 that it's that floor that doesn't fall any lower. We can sort of talk about the ceiling. And I didn't

02:35:58.660 realize that you had put together sort of a tool on your site to make this easier, because I do think

02:36:03.800 that in the short run, we can't wait for Congress to solve this. I mean, I think we're just going to

02:36:07.980 individually have to take ownership over this to some extent.

02:36:11.140 It's important for patients to realize most patients, if they go to a pharmacy,

02:36:15.120 they get dispensed drugs. They don't think about who makes it. They don't even think about it. I mean,

02:36:20.420 they may be switched from a brand to generic, not realize it. They may be switched between generics.

02:36:25.720 They don't realize it.

02:36:26.640 I've never personally paid attention to this until a couple of years ago when I started noticing this

02:36:31.920 funny business with resuvastatin. And if I'm not paying attention to this,

02:36:35.860 how could I possibly expect anyone else to?

02:36:39.120 Right. I mean, most people don't pay attention to it because the FDA has told us

02:36:43.820 that it's all equivalent. There's nothing to pay attention to. They've got it. There's no

02:36:47.840 difference between brand and generic, generic and generic. It's all the same. So the first step

02:36:52.440 is for everybody to pay attention to who's making the drug and how it works.

02:36:56.900 Well, Catherine, we're going to link really heavily to your work and your site, a number of other

02:37:01.980 things. If you decide to release the beautiful 24 page self-assessment report document, the most

02:37:11.260 innocuous title to a document in the history of corporate espionage, we would love to host it.

02:37:18.340 Like I said, I think a great compendium to this interview. Is there anything I didn't ask you that

02:37:22.620 you've wanted to talk about? And we joked about this off mic at the beginning. You know, I said to

02:37:26.080 you when you walked in, I said, don't worry, this is not a 20 minute interview with sound bites and

02:37:30.420 stuff. We can talk about this stuff in as much detail as you want, but I want to be sure we've

02:37:34.140 talked about everything you've wanted to talk about and we didn't leave anything on the table.

02:37:37.940 Well, I think we've basically covered it, but just sort of my closing thought is that generics are

02:37:45.120 supposed to be this great leveler. You know, it's like the democratization of drugs that like the

02:37:51.340 rich and the poor alike can have access to these great cures. And to find out, I think that the

02:37:58.700 companies sort of cashing in on that image are really selling that short in a very devious way

02:38:08.320 is painful to realize. It's a real sort of great hope, public health hope that has a very dark

02:38:15.800 underbelly. Well, I think I, and the listeners now probably have a better sense of why even Sam

02:38:24.440 Harris could become angry, which says that anger is not always a bad thing. And you've probably

02:38:31.220 taken a lot of your own anger and rage and channeled it into something incredibly productive.

02:38:36.260 I gather that you're still quite involved. I mean, based on what you've said, I mean,

02:38:41.380 you're still involved in seeing that attention is brought to this topic. Specifically, are you

02:38:47.060 spending much time in DC?

02:38:48.140 I have been talking to Congress and I think they are, I can't say that they're gearing up to get

02:38:54.800 results, but they're gearing up to look into it.

02:38:57.860 Catherine, where can people follow you on social media?

02:39:00.240 Yep. So on Twitter, where I'm pretty active, it's at Catherine Eban. My website is CatherineEban.com.

02:39:08.180 LinkedIn, I think is Catherine Eban. So...

02:39:11.180 I see a theme here. I don't know what it is, but I see a pattern.

02:39:15.480 And I will say that my 12-year-old is my Instagram page manager. So you'll have to

02:39:20.820 bear with me there.

02:39:22.360 Hello, Kitty. By the way, that makes me want Olivia, my daughter, to manage my Instagram page.

02:39:26.920 Yeah, it's the way to go, I'm telling you.

02:39:28.960 I would take so much time off my hands.

02:39:30.860 Absolutely.

02:39:31.600 Catherine, it's been an absolute pleasure. I thank you first for taking the time to come here. I can

02:39:37.780 only imagine how mind-numbing it must feel to talk about the same thing over and over again with yet

02:39:43.620 another stupid person interviewing you. I hope this wasn't that painful. But more broadly,

02:39:48.820 thank you for this incredible work you've done and the public good that I believe will come from

02:39:53.580 it in the long run.

02:39:54.520 Thank you so much. And it was not at all tedious. It was super fun.

02:39:58.680 Awesome. And you got to go through a few Topo Chicos, so...

02:40:01.960 Thank you.

02:40:02.940 You can find all of this information and more at peteratiamd.com forward slash podcast.

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The Peter Attia Drive - September 16, 2019

#71 - Katherine Eban： Widespread fraud in the generic drug industry

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