Parallel profits

Bulgaria’s medical drug dealers

Lax controls over the ‘parallel trade’ of expensive pharmaceuticals makes Bulgaria’s health care system ripe for plunder. Patients are the losers.

Nadia Miteva has artificial knees and hips. Wire runs along her upper vertebrae to stabilise her neck bones. When she speaks, she presses a red button on a tube in her throat, installed during recent vocal cord surgery. “It’s collateral damage from the rheumatic disease,” she said. For Miteva, who runs a community centre in the southern Bulgarian village of Sladun, near the town of Svilengrad, only one thing keeps her severe rheumatoid arthritis at bay: a weekly shot of an immunosuppressive drug called RoActemra. Without it, she is in agony.

“The pain tears you from inside,” Miteva, 44, said. “Sometimes you just want to rip off your skin.” Three times this year, supply problems meant she was unable to get RoActemra at the nearest pharmacy that stocks it, an 80-kilometre bus ride away in the provincial town of Haskovo. It normally takes 24 hours for the pharmacy to get hold of the drug. But for 43 days in the spring, 36 days in late summer and eight days in late autumn, the orders did not come through. All she could do was wait by the phone and endure.

Miteva was not the only one cut off from treatment. According to the Association of Rheumatic Illnesses, RoActemra shortages hit pharmacies in other southern towns too, including Dimitrovgrad, Stara Zagora, Kazanlak and Panagyurishte. “Some people constantly have trouble finding the medicine,” said Boryana Boteva, president of the association that supports 30,000 sufferers of rheumatic diseases across Bulgaria.

RoActemra is just one of dozens of drugs that health experts say are disappearing from pharmacy shelves in Bulgaria as middlemen scoop them up to sell in other EU countries at a profit. Such distributors are drug dealers of an exclusive kind. They specialise in patented pharmaceuticals, exploiting price differences across borders. Under EU rules on the free movement of goods and services, it is all perfectly legal.

Known as “parallel trading”, this is how it works. Authorised distributors import medicines from multinational drugmakers to countries such as Bulgaria, Greece or Portugal where they are priced relatively cheaply in line with benchmarks used by national authorities. They then export some of the pharmaceuticals — typically around 10 per cent — to countries like Germany, Britain or the Netherlands, where medicines cost much more. Distributors repackage the drugs with labelling in the language of the new market, sell them at the higher prices and pocket the difference.

More than 320 distributors are authorised to conduct parallel trade by the Bulgarian Drug Agency, BDA. While many countries have measures to prevent shortages in drug stocks at home because of parallel traders exporting to other EU states, Bulgaria has some of the laxest controls in Europe, health experts say. Further disruption happens in the shadows of Bulgaria’s parallel drugs market as fraud and theft take a bite out of supplies, an investigation by the Balkan Investigative Reporting Network, BIRN, reveals.

From unscrupulous pharmacists to criminals who stalk online support groups to purchase drugs, BIRN uncovered thriving underground activity to siphon pharmaceuticals from the healthcare system. Meanwhile, health officials say some hospitals may be falsifying data to inflate the amount of drugs needed for expensive cancer treatments, creating a surplus of vials of precious medicine that can then be resold. Authorities say drugs pilfered through such scams are almost certainly being re-sold abroad.

Nadia Miteva stands outside a hospital in the southern Bulgarian city of Plovdiv. A shortage of drugs to treat rheumatoid arthritis left her in agony earlier this year. Photo: Dimitar Iliev

‘Exporters are mocking us’

Champions of parallel trade see it as a way for healthcare systems to bring down costs. In Germany, pharmacies are legally required to source at least five per cent of their stocks through parallel imports. It is not only richer countries that benefit. In Bulgaria, three distributors are authorised by the BDA to import around 40 drugs from countries where prices are cheaper including Romania, Greece, Hungary, Italy, Czech Republic, Latvia and Lithuania.

“It helps the process of regulating prices in the EU market for original pharmaceutical products,” said Daniela Daritkova, chief of the Bulgarian parliament’s health commission. Dimitar Petrov, deputy director of the National Health Insurance Fund, NHIF, put the value of Bulgaria’s legal parallel drugs market at around 153 million euros in 2016.

Germany is the top target for exporters in a legal EU-wide parallel market worth around five billion euros a year, according to the latest sector analysis by Swiss consultants Birgli, done in 2013. That is no surprise given that a pack of RoActemra 162 mg costs the German healthcare system 1,782 euros, almost 70 per cent more than in Bulgaria. While parallel exports account for 10 per cent of activity in Bulgaria’s pharmaceutical market, certain medicines are in such demand that 50 per cent of stocks are shipped abroad, according to internal health ministry analysis cited by a ministry spokesman. RoActemra is one of those drugs, the spokesman told BIRN.

‘We need the state to regulate trade in a proportional way to protect our health needs’

— Atanas Koundourdjiev, former deputy minister of health

Asked about Nadia Miteva’s missing RoActemra, BDA chief secretary Svetlin Spirov said: “We can’t be sure if the same vials went somewhere in parallel trade. For one batch number, there might be 100,000 vials. So a single vial is untraceable. This would be solved if every pack had a data matrix code.” Transparency advocates see a real-time tracking system as the key to pre-empting shortages and stamping out illicit trade in Bulgaria. They also want greater powers for authorities to control exports.

“We need the state to regulate trade in a proportional way to protect our health needs,” said Atanas Koundourdjiev, former deputy minister of health. Legislation introduced in 2014 allowed the BDA to block any parallel exports it saw as problematic, but the constitutional court decided that the law contravened EU principles of freedom of commerce. A former senior health ministry official who declined to be identified said the ruling came after lobbying from distributors.

Distributors are still legally required to notify the BDA of their intention to export drugs, a month before they do so, but all the agency can do is monitor flows. And even that is difficult given the sheer volume of notifications clogging up the system. “We’re helpless,” said the BDA’s Spirov. “The exporters are just mocking us.” Between July 2016 and July 2017, distributors informed the BDA of their intention to export 78,220 packs of RoActemra 162 mg. That number dwarfs the 6,000 packs imported to Bulgaria from Roche, the manufacturer of the drug, during the same period, according to data from the drugmaker.

Boryana Marinkova, CEO of the Bulgarian Association for Medicines Parallel Trade Development, an industry body, said the discrepancy was due to the fact that distributors file separate notifications of intent to export to multiple EU countries for any given drug, whether or not they actually send them. “These 78,000 applications are only the technical sums of numerous intentions,” she said. “This figure can’t be seen as actual exports at all.”

A customer pays for medicine at a pharmacy in Sofia. Photo: Iliana Kirilova

‘Illegal trade all around’

New legislation before parliament would give the BDA sharper teeth. In addition to allowing the agency to ban exports under certain circumstances, amendments to the law would bring penalties for wrongdoing into line with EU standards. Because the NHIF covers the cost of prescription medicines, it is illegal for pharmacies or individuals to sell drugs back to distributors. Illicit parallel trade in medicines in Bulgaria is worth around 50 million euros a year, NHIF deputy director Petrov said.

Fines for flouting the law are 1,500 euros for a first offence and 2,500 euros thereafter. That compares with respective fines of 30,000 euros and 50,000 euros in Portugal. Under the new legislation, pharmacies could be fined up to 25,000 euros for selling drugs to distributors while parallel traders could be fined 50,000 euros for illegal exports. However, the Bulgarian Association for Medicines Parallel Trade Development said the new legislation was unnecessary.

“The existing legal framework provides sufficient mechanisms and tools for control,” CEO Marinkova said. She urged the health ministry, tax authorities and BDA to step up enforcement of existing laws through regular audits of wholesalers and pharmacies. Asked about the problem of drug shortages caused by parallel trade, Marinkova said: “The law states clearly that all wholesalers are obliged to cover local market demand first and only after covering the national needs can they export the excess quantities of medicinal products.”

Bribes and incentives

Sources from Bulgaria’s health ministry, National Health Insurance Fund and hospitals independently described a scam in which vendors are said to collude with distributors and doctors to boost sales of medicines using profits from parallel trade. According to the sources, who declined to be identified, this is how it works.

Some unscrupulous local agents for international drugmakers are keen to increase their market penetration, so they team up with distributors to bribe doctors to prescribe their medicines instead of rival products. Distributors are happy to foot the bill for these bribes because they see it as a chance to drum up more business with the drug producers and get on their lists of preferred distributors.

To free up money for the backhanders, the distributors exaggerate domestic sales of drugs in their declarations to independent consultants providing market analysis. Meanwhile, they divert some of the profits from parallel trade to a secret pot of money. The local agents complete the deception by reporting the falsified domestic sales back to their head offices, so the drug producers are none the wiser.

“For example, out of 100 packs imported to Bulgaria, 50 might go to re-export,” one source said. “Of those 50 [sold abroad], 30 per cent of the profits flow back to designated doctors [as bribes].” The result is that more drugs are being re-exported in reality than on paper, sometimes leading to shortages. “Yes, I’ve heard of such schemes,” said Decho Dechev, head of the St Ivan Rilsky Hospital in Sofia, which is not implicated in any wrongdoing.

BIRN found plenty of evidence of illegal sales to distributors by pharmacies. Invoice data from the Revenue Agency obtained by BIRN showed that six distributors bought medicines worth 2.2 million euros from pharmacies between April and August 2015. Although the sales were against the law, the pharmacies still declared income from the transactions to tax authorities, suggesting they may be more afraid of the Revenue Agency than they are of the BDA.

According to the invoice data, a company called Falcons 2000, which is registered in the tiny western town of Slivnitsa and owns several small pharmacies, sold 368,000 euros of medicines to a distributor called Chirita. Falcons 2000 declined to comment. Asked about the illegal purchases, Chirita owner Amir Mohamed al Husaini, confirmed the transactions and justified them on the grounds that they made sound business sense. “Pharmacies can buy those medicines straight from a producer on promotion, with a discount of up to 30 per cent,” he told BIRN. “A store-to-store [manufacturer-to-distributor] deal couldn’t get such a low price.”

In early December, police arrested al Husaini and six others after raiding 60 other addresses in Sofia, Slivnitsa, Plovdiv and Shumen as part of investigations into the alleged illegal acquisition of medicines for parallel trade, according to Ivan Geshev, chief of the special prosecutor’s office in Sofia. On December 11, the Special Prosecutor’s Office charged al Husaini and five of the arrested with being part of an organised criminal group. The seventh man was charged with money laundering.

Meanwhile, Revenue Agency data showed that a company called HG-Hristo Jelev, which owns a pharmacy in the mountainous town of Kotel in central Bulgaria, sold 114,000 euros of drugs to distributor MN 2011, registered in Asenovgrad, between April and August 2015. Pharmacy owner Hristo Jelev acknowledged that the sales were against the law but said that the fact he paid taxes on them mitigated any wrongdoing. “I don’t have working capital and those payments are advance financing for future supplies,” he told BIRN. Distributor MN 2011 declined to comment.

“The National Health Insurance Fund can’t cope with the pharma mafia”

— Ilko Semerdjiev, former Health Minister

The BDA has little power to stop illicit transactions. “In 2016, the agency carried out around 40 checks in pharmacies, all of them planned in advance, none in response to real-time alerts,” former deputy health minister Koundourdjiev said. The purpose of such checks was to see if pharmacies have the correct documentation for the medicines they stock, he said. But industry insiders say many drug sales to distributors are done completely under-the-table, with no paper trails.

“There is no need even to look at invoices,” said the marketing director of one of Bulgaria’s biggest distributors, who declined to be identified. “The illegal trade is all around us.” He said organised criminals were part of the racket, buying drugs without prescriptions from pharmacies and then selling them straight to distributors. For example, tough-looking “smart guys” regularly visit certain pharmacy chains in Sofia and the southern city of Plovdiv with handwritten lists of medicines, which they buy at 15 per cent premiums, he said.

Illegal trading in pharmaceuticals is all over the internet too. Classified ad sites, health forums and social media are teeming with announcements enticing patients with prescriptions for sought-after drugs to sell their medicines.

Kiril Yordanov, the author of one such post, said he would pay 990 euros for a medication called Humira and other treatments for rheumatoid arthritis. Humira usually costs 820 euros in Bulgaria and 1,878 euros in Germany. In April, BIRN called him and pretended to be interested in selling a pack of a biopharmaceutical called Enbrel. Yordanov sounded business-like. He spoke of batch numbers and expiry dates. He stressed the importance of new-looking packaging without any blemishes.

BIRN phoned him again in mid-July, this time with no pretence, to ask why he was buying up drugs. “I buy the medicines for myself because I don’t fit the criteria of the commission,” Yordanov said, referring to the panel of medical experts who approve expensive treatments for patients like Nadia Miteva. BIRN discovered that Yordanov’s wife, Yordanka Ilieva Barzakova-Yordanova, is a pharmacist listed in the register of the Plovdiv branch of the Bulgarian Pharmaceutical Union.

In 2015 and 2016, she worked for a distributor, Agilis Pharma in Plovdiv, which exported 30.8 million euros of drugs to EU countries between January 2015 and May 2017, according to National Revenue Agency figures. In 2017, she started working for Mylan NV, a global pharmaceutical company that makes and distributes generic and patented drugs. BIRN contacted Barzakova-Yordanova and asked if her husband had supplied medicines procured through internet sales for export via Agilis Pharma, Mylan or other distributors. She declined to comment. Agilis Pharma and Mylan also declined to comment when asked if Barzakova-Yordanova had supplied drugs for export or resale.

Staff at the St George Hospital in Plovdiv measure out expensive cancer medications. Photo: Dimitar Iliev

A question of weight

Cancer treatments are among the most expensive medicines. They account for 50 per cent of spending by the NHIF, or around 153 million euros last year. That is more than five times the fund’s spending on cancer drugs in 2000, according to Jeni Adarska, head of the Association of Patients with Oncology Diseases. The increase reflects a rise in cancer rates worldwide — but the NHIF suspects it is also fuelled by thefts at hospitals.

One senior source at the fund said at least eight hospitals were thought to be doctoring patient data to order more drugs than required, presumably to sell the excess amounts to parallel traders. In early 2017, the NHIF started spot checks at oncology departments. “The fund experts entered like a police squad and started to measure the weight of each oncological patient,” said Lucia Dobreva, former chief of Uni Hospital, a sleek new private hospital in Panagyurishte. Uni Hospital was not implicated in any wrongdoing.

Safeguards in Portugal

With relatively low drug prices, Portugal is a major parallel exporter of patented medications, including cancer drugs. But the government has put in place robust measures to monitor stocks and prevent shortages. A real-time electronic tracking system helps the health ministry’s agency for controlling drug supplies, INFARMED, keep tabs on the whereabouts of medicines along every stage of their journey from producer to patient. A database called the Information System for Health Technology Assessment, SIATS, provides instant notification of any shortages, allowing authorities to suspend exports to other EU countries if local needs are threatened.

Meanwhile, an information-sharing system called Via Verde [Green Road] lets users connect the dots electronically from prescription to pharmacy order to distributor to manufacturer. This makes it almost impossible for medicines to be diverted for illicit parallel trade. Electronic tracking systems led to a year-on-year fall in drug shortages of almost 15 per cent in 2016, according to Humberto Martins, one of the directors of the National Association of Pharmacies in Portugal.

Hospital oncology departments also have strict procedures to make sure every milligram of precious cancer medication is accounted for. At the Portuguese Institute of Oncology, the pharmaceutical department houses around three million euros worth of cancer medications, according to department chief Antonio Gouveia.

In a state-of-the-art dispensary, pharmacists wearing gloves, masks and protective clothing measured out doses of cancer treatments into vials (Photo: Dimitar Iliev), careful not to waste a single grain as they dissolved powders into liquid under an extractor hood. Cameras monitored the space inside and outside the storage facility, where two enormous refrigerators kept chemotherapy drugs under strict temperature control: 2-8 degrees Celsius.

Hospitals in Portugal procure drugs through a transparent tender process. “I buy and distribute to patients oncology medicines worth 36 million euros yearly,” Gouveia said. In Bulgaria, tendering is done by distributors and there is no cap on how much money can be allocated by the National Health Insurance Fund, NHIF, which reimburses distributors for 100 per cent of the price of oncological drugs. Health experts say this makes cancer medicines especially tempting for parallel traders.

To understand what the experts were up to, it is important to know that doctors decide how much of a chemotherapy drug to prescribe based on a patient’s body weight. The heavier the patient, the more treatment is called for. The results from the fund’s spot checks were eye-opening. “There are hospitals where the average weight of patients is 108-110 kilograms,” said Petrov. That compares with an average weight for men and women in Bulgaria of 72.5 kilograms in 2016, according to the National Statistical Institute. The assumption was that doctors must be misstating patient weights to justify excessive orders, Petrov said. Once correct doses are measured out, the surplus amounts can be quietly set aside.

Only one person has been convicted of stealing oncology medicine from a hospital. Petia Kocheva, chief pharmacist at Marko Markov hospital in the Black Sea city of Varna, was found guilty last year of purloining 39 vials of Herceptin, used to treat breast cancer, in a case the health minister at the time, Petar Moskov, described as “morally much lower than drug trafficking”.

A Varna court sentenced her to four-and-a-half years in prison but a regional court subsequently suspended her sentence. The Varna court ruled that she simply took the vials, worth 22,000 euros, from the hospital pharmacy. The prosecution said Kocheva knew the oncology department had undocumented vials of the drug in their refrigerator — so she thought the crime would go unnoticed.

The prosecution called a pathologist, Dobrinka Radoinova, for expert opinion on the matter of the alleged extra vials. The pathologist analysed the medical history of 75 breast cancer patients at the hospital, comparing how much Herceptin was actually administered with amounts paid for by the NHIF. She concluded that there was a big discrepancy between the two — enough to fill about 76 vials of Herceptin, worth some 42,700 euros. Contacted by BIRN, Vasil Popov, director of oncology at the Mark Markov hospital, denied any wrongdoing on the part of his department.

Statistical oddities are cause for alarm for health officials in Bulgaria trying to protect the public purse from fraud. Ilko Semerdjiev, who had a brief stint as health minister between January and March 2017, put it harshly in a post on Facebook in July. “The NHIF can’t cope with the pharma mafia,” he wrote. “Overspending on reimbursed medicine is just one part of it. The other is the re-export abroad. Thus we have double and triple profits — from medicines paid for by the state and profitable reselling in the EU.”

Deputy Health Minister Lidia Neicheva said in a meeting of the supervisory board of the NHIF in late October that parallel trade was costing the state dearly as the fund scrambled to make up shortages. “One of the reasons for overspending on medicines is their re-export,” Neicheva said, according to a transcript of the meeting published by the NHIF. “That’s the reason, and we all know it. If ‘healthy’ parallel trade is in the region of up to 10 per cent, in Bulgaria it is 50 per cent.”

In October, three masked thieves broke into a warehouse in Sofia belonging to German pharmaceutical distributor Phoenix. Despite a selection of drugs to choose from including morphine, they only stole oncology medications, local media reported. Phoenix CEO Yulian Nedelchev declined to comment on the theft but the BDA told BIRN the stolen medications were worth 600,000 euros.

“Morally much lower than drug trafficking”

— Petar Moskov, former Health Minister

“There are two possibilities,” BDA chief secretary Spirov said. “One is that the medicines went to parallel trade, but it’s unlikely that a hospital in the EU would purchase them like that. The other is that they went to Bulgarian hospitals and were exchanged for medicines with older batch numbers, which could then be re-exported.” In February, BDA chief Asena Stoimenova described the insidious effects of parallel trade before the parliamentary health commission. “Bulgaria is not the first country to face the problem of shortages, but is the last to solve it,” he said.

First published on 13 December 2017 on

This text is protected by copyright: © Dimitar Iliev. If you are interested in republication, please contact the editorial team.
Copyright information on pictures, graphics and videos are noted directly at the illustrations. Cover picture:
Drugs are vanishing from Bulgarian pharmacies as traders scoop them up to sell overseas. Photo: © Iliana Kirilova

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