Prescription roulette: Are discount drug sellers safe?

Prescription drugs: Risk vs. cost

On a busy stretch of U.S. Highway 441 in central Florida, about a mile from a Walgreen's pharmacy and a mile and a half from the nearest CVS, sits a small storefront in a strip mall offering an alternative.

"Canadian Discount," says the bright red and yellow sign on the window.

Inside, a woman wearing a headset is busily typing away. On the wall near her desk is a giant American flag, as well as paintings of icons like Nelson Mandela, Clint Eastwood and Michael Jackson (the Jackson painting is labeled "not for sale.")

The woman cheerfully takes our order for a 90-day supply of the prescription cholesterol drug Lipitor. The price: $112.07, or $1.25 a pill. A Duane Reade pharmacy in New York City would later charge us more than five times that amount—$7.15 per pill—for what was supposed to be the exact same drug.

Shops like these are popping up everywhere, particularly in Florida with its high population of seniors. The firms are not pharmacies, nor do they claim to be. Known as "facilitators," they simply place orders for people who are wary of using the thousands of sites offering discount prescription drugs online. The businesses claim to operate legally, though the U.S. drug industry says they are exploiting a legal loophole.

Regardless, some people swear by the businesses.

"People need to save money, and drug prices are too high," said a customer of the Canadian Discount Rx store in Belleview, Florida, who declined to give her name. "It's simple economics."

Americans spend more than twice the average for industrialized nations on pharmaceuticals, according to OECD data. A major reason is that prescription drugs in the U.S. are so expensive. But people who venture outside the U.S. system—either online or through facilitators—are taking a big risk according to Carmen Catizone, executive director of the National Association of Boards of Pharmacy, which monitors the industry.

"The dose is too high, too low. Some of these medications, the coloring has been from highway paint, they've been manufactured in facilities that are infested by rats, rodents. There are no sanitary conditions, no oversight of how that product is prepared. So it really is Russian roulette."

A six-month CNBC investigation has found that while there are considerable weaknesses in the alternative sales outlets, the risks are not always as serious as some in the industry claim. As a result, consumers are often left with a difficult choice: pay high prices for near-certain safety, or pay deep discounts and take a calculated gamble that can—and sometimes does—pay off, beating big pharmaceutical companies at their own game.

RX roulette: Inside the lab

Scientists on the beat

At a Pfizer laboratory in Groton, Connecticut, scientists in lab coats and safety goggles are hard at work. One is taking measurements using a spectrometer. Another is carefully photographing packages of Viagra.

They're not developing new drugs here. They are testing medications they purchased on the sly, helping to build criminal cases for the authorities.

Brian Donnelly spent more than 20 years as an FBI Special Agent. He is also a pharmacist, with advanced degrees in toxicology and pharmacology—all of which make him uniquely qualified as Pfizer's Director of Global Security, seeking out drug counterfeiters around the world.

"Not unlike a drug investigation, we start many times at the street level," he explained in an interview. "Through a variety of techniques, we try to work our way back to the suppliers, and ultimately, in a perfect scenario, back to the manufacturer.

Donnelly's team has developed sophisticated technology to spot counterfeits—including a handheld device, for use by investigators in the field, that can test a pill for authenticity in a matter of minutes.

Senior scientist Amy Callanan, who demonstrated the device, said her team has discovered some frightening ingredients in samples that proved to be counterfeit.

"Boric acid—ant killer—that's always a big one," she said. "That's kind of scary if you are taking an insecticide."

"For some reason we see a lot of acetaminophen in all different counterfeit products. We'll see it in counterfeit Xanax. We'll see it in counterfeit Viagra."

Donnelly says his team has traced the supply chain around the world. In one case, he says, a Canadian supplier of Lipitor was distributing a counterfeit version manufactured in China.

"The Lipitor would be manufactured in China, and then it would be shipped out of China through Hong Kong, which is a free trade zone. From there, it went to another free trade zone in Dubai. It then went from there to Heathrow," he explained. The product would then go to the Bahamas where a fulfillment center would pack up individual orders and send them to the customer in the U.S.—by way of the United Kingdom.

"You're saying to yourself, why would you go through all that trouble? It's to keep the myth, that this is coming from a country that you rely on…so you're comfortable that it's coming from England."

Donnelly says one of his biggest concerns these days is the brick-and-mortar facilitators, like the storefront in Florida.

"They do the same thing as if you were to go online and order your medication, and then it comes back to you from someplace overseas," he said.

To prove its point, Pfizer agreed to test products we purchased, which is what brought us to the strip mall in Belleview, Florida, and gave our investigation a surprising twist.

Undercover buy

Feverpitched | iStock | Getty Images

Using valid prescriptions, we placed orders for brand name Lipitor at four facilitators in central and southwest Florida. We also ordered from two Internet pharmacies, as well as two traditional pharmacies in New York and New Jersey.

While the traditional pharmacies filled our prescriptions on the spot, it took several weeks for the shipments from the facilitators to arrive. One of the proprietors explained that rush shipping was impossible, since it might raise concerns with customs officials. Another conceded that the law was "all a gray area," but insisted the business is legal.

When the shipments from the facilitators arrived, they seemed to confirm the scenario the Pfizer team had described. All came from the same address in London. And the pills themselves were round, rather than the characteristic oblong-shaped tablets we received from the traditional pharmacies.

Removing all the packaging to keep the test blind, we sent samples from each purchase to Pfizer's lab in Connecticut, fully expecting the results to come back as counterfeit. We were wrong.

For each sample from the facilitators, Pfizer provided a six-page report, each with the same conclusion: "Authentic Pfizer manufactured drug product not intended for distribution in the U.S. market."

(The two samples we purchased online came back with slightly different results. One, like the facilitators, sent authentic product not intended for U.S. distribution. The other sent a generic equivalent of Lipitor. Four purported Viagra tablets the site sent as a "bonus" proved to be counterfeit, containing an anti-inflammatory compound along with the drug's active ingredient.)

Big pharm wages war against Internet drug sales

Different pills for different folks

It turns out Pfizer makes multiple versions of Lipitor, the top-selling drug in history. Donnelly said the chemical composition of the drugs is identical. "Whatever product Pfizer makes is going to be a top shelf product."

The price, however, is decidedly different. And the owner of one of the facilitators we visited says that is proof his business and others like it are providing "a much needed service" to thousands of clients who could not otherwise afford their medication.

"The fact is that these medicines are manufactured by Pfizer itself and sold to millions of people in other countries," said William Hepscher of The Canadian Medstore in an email.

Hepscher said he takes care to make certain the overseas pharmacies he orders from are licensed in their home countries.

But Pfizer's Donnelly says buying drugs this way nonetheless carries considerable risk.

"Anytime you go outside of the U.S. system, meaning the closed system that's regulated by the FDA, you're circumventing a system that's put in place for your safety. So what happens is when you go and import a product from another country, your safety is only as good as the safety that's in place in those particular countries," he said.

He also notes that if a product manufactured for sale overseas is recalled, there would be no way for a U.S. buyer to learn about it. He also noted that in the case of the counterfeit Lipitor from China that was shipped through free trade zones to the U.S., the supplier apparently turned to counterfeiters after the demand for real product outweighed the supply.

For consumers who can't afford the higher-priced U.S. version of the drugs, Pfizer notes that it has spent more than $7 billion in the past five years on an assistance program known as "Rx Pathways."

The facilitators say they are helping consumers too, without sacrificing safety.

"We save a lot of money for a lot of elderly people," said owner Joon Boody at Canadian Discount Rx Services, the shop in the strip mall in Belleview, Florida. "I have a lot of happy customers."

—By CNBC's Scott Cohn