The risks of drugs from foreign pharmacies

Today’s New York Times carries an article by Gabriel Levitt of, a certification agency for online drugs. In that he argues that the health risks of buying from foreign pharmacies are overstated, and should not be compared to the risks associated with counterfeit drugs. He argues that consumers are able to buy good quality drugs at huge discounts from foreign online pharmacies.

A paper that I recently published with my coauthors Ginger Jin and Roger Bate corroborates this assertion. In this paper, we use an audit sample and a consumer survey to study the intriguing market of online prescription drugs facing US customers. On the supply side, we acquired samples of five popular brand-name prescription drugs from three types of online pharmacies: tier 1 are US-based and certified by the National Association of Boards of Pharmacy (NABP) or, tier 2 are certified by or the Canadian International Pharmacy Association (CIPA) but not by NABP or LegitScript, tier 3 are not certified by any of the four agencies. Most tier 2 and tier 3 websites are foreign. We find that 37 of the 365 delivered samples were different from the products we ordered and therefore non-testable. Among testable samples, we do find failure of authenticity in 8 samples, but they were all from tier-3 websites. After controlling for testability and authenticity, tier 2 websites were 49.2% cheaper and tier 3 websites were 54.8% cheaper than tier 1 sites. Above all, on average, certified websites (tier 1 & tier 2) offered higher quality than non-certified websites (tier 3), which suggests that third-party certification is one way to alleviate asymmetric information about product quality. 

To study the demand side, we designed a survey that was distributed by RxRights (an organization whose members are actively looking for cheaper drugs). Among the 2,522 respondents who had purchased prescription medication and were concerned about the price of US pharmaceuticals, results showed that 61.54% purchased drugs online and mostly from foreign websites, citing cost saving as the leading reason. Conditional on shopping online, 41.11% checked with a credentialing agency.

In general, findings from our paper suggest that private certification agencies play an active role in both the demand and supply of online drugs. From consumers’ perspective, foreign websites offer significant cost savings relative to US websites, and these savings attract US customers despite the FDA warning about risks of buying from overseas. More importantly, many US consumers are cautious in their choice of foreign websites, by checking with certification agencies, using personal referrals, and sticking to a primary website. On the supply side, conditional on our testable drug samples, we found no failure of authenticity as long as the drugs were from certified websites, whether NABP approved or not. 

Our audit sample is too small and of only five products to justify the overall drug safety on all verified tier 2 websites. And our survey sample is limited to those most concerned about drug prices and aware of possibilities for purchasing online. Despite these limitations, both samples convey a consistent message that certification agencies deliver useful information for foreign websites and online consumers. It will be worthwhile to confirm this message in a larger and more representative sample of websites and consumers.


Also Visit
AEIdeas Blog The American Magazine
About the Author



What's new on AEI

How the Common Core went wrong
image Election countdown: The mood, measurements, and mechanics
image Rubio's defense speech: Fearless, informed, and refreshing
image Sorry Kerry, there is little role for Iran in fighting ISIS
AEI on Facebook
Events Calendar
  • 22
  • 23
  • 24
  • 25
  • 26
Monday, September 22, 2014 | 2:30 p.m. – 4:00 p.m.
Policy implications of the new US labor market normal

We welcome you to join us as a panel of economists discuss US wage and price prospects in the coming months and the implications for the Federal Reserve’s current unorthodox monetary policy.

Event Registration is Closed
No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.