by José Luis Cárdenas Tomažič

Adapted from the Spanish column originally published in El Economista on September 23rd, 2022 (Medicamentos subestándar y competencia: Un esfuerzo continuo).

It has become something of a mantra to say that competition leads to greater access to a variety of goods and services, thereby generating greater welfare for society. This assumes that the goods competing are substitutes and essentially homogeneous—that is, of similar quality—so that the virtues of competition can fully materialize.

As early as 1970, Nobel laureate George Akerlof warned us in “The Market for ‘Lemons’” about certain market failures arising from imperfect information—specifically, asymmetries that prevent consumers from distinguishing between different qualities when comparing goods. This phenomenon is particularly complex in the case of medicines, where patients and health systems assume—and should be able to assume—that these products meet the quality standards required by regulatory agencies. It is an undeniable fact that a patient is not in a position to differentiate between varying levels of pharmaceutical quality.

Poor-quality or substandard medicines represent a serious public health problem, especially in emerging economies and developing countries, and they can have a significant impact on the national clinical and economic burden.

To date, attention has largely focused on the issue of falsified medicines, but substandard medicines also reach patients due to poor manufacturing practices and inadequate quality control in the production of legitimate medicines (whether innovative or generic). Substandard medicines are widespread and pose a health threat, as they may inadvertently lead to failures in healthcare—such as antibiotic resistance and the spread of diseases within a community—as well as death or additional illnesses in individuals.

The World Health Organization defines substandard medicines—also referred to as “out-of-specification” products—as those that have been authorized by regulatory agencies but fail to meet quality standards or specifications, or both. Among other issues, they may contain insufficient active ingredients, excessive impurities, or inconsistent pharmacological responses due to variability in their composition.

These medicines constitute a serious health problem from multiple perspectives. While falsified medicines have perhaps received the greatest attention in relation to preventable deaths, the use of substandard medicines by health systems also leads to increased morbidity and mortality: a formulation with insufficient active ingredient may result in a lack of clinical response and, in extreme cases, death. Adverse events may also occur due to an excess of active ingredients.

For example, the inadvertent use of suboptimal doses of medicines is likely one of the key factors contributing to antibiotic resistance and, consequently, to the greater spread of diseases. A 2017 study by the WHO and the University of Edinburgh estimated that, globally, up to 72,000 additional deaths per year from pediatric pneumonia could be attributed to substandard or falsified antibiotics.

Additionally, the use of substandard medicines by health systems generates higher costs, either due to their lack of clinical efficacy or the adverse effects already mentioned, which patients must endure and which require further interventions such as emergency care, hospitalizations, and more.

There is still no complete clarity regarding how deep and widespread the problem of substandard medicines is. In fact, studies estimating the size of the global market for low-quality and falsified products—without distinguishing between the two—vary significantly, ranging from 10 billion to 200 billion dollars annually. What is clear is that these issues are more prevalent in countries with less robust pharmaceutical regulatory systems than in those considered to have “stringent regulatory oversight,” such as the United States, certain European Union member states, Australia, Canada, Japan, the United Kingdom, Switzerland, among others. The WHO estimates that 1 in 10 medicines in low- and middle-income countries is either substandard or falsified.

What can be done to minimize the problem of substandard medicines?

On the one hand, it is essential to better quantify the problem—particularly through improved systematic data collection and precise, transparent documentation of information on the manufacturing and distribution of substandard medicines. This would help health authorities target their efforts more effectively.

On the other hand, strong regulatory oversight by national medicines agencies is required, along with cooperation among them and greater harmonization of their requirements. In this regard, the international harmonization efforts of the ICH (International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use) are worth highlighting, particularly in relation to quality requirements, such as Good Manufacturing Practices guidelines, and efficacy, including pharmacovigilance. Likewise, PIC/S (Pharmaceutical Inspection Co-operation Scheme) plays a key role in the inspection of pharmaceutical manufacturing plants. In the same vein, the introduction of bioequivalence as a requirement for generic medicines—promoted by organizations such as the WHO—has helped healthcare professionals and patients identify interchangeable medicines.

Addressing the challenge of substandard medicines is highly relevant for governments and regulators, both from a public health perspective—given their impact on patients—and from an economic standpoint. Otherwise, competition will not lead to greater access to medicines and overall welfare, but could instead drive a decline in quality (“race to the bottom”), ultimately affecting society as a whole.