When her son’s diarrhea wouldn’t stop, Diana Canessa, cash-strapped and panicky, scraped together some change, grabbed her last diaper and headed for the emergency room at Lima’s public hospital for children. It was there, she says, that a nurse offered free oral rehydration therapy for her son, Fabrizio, and free meals and diapers for her.

Canessa was given a form to fill out. “I didn’t understand some of the words,” she said. “But they told me, Apurate, mamita. Apurate.” Hurry, hurry. After the two-day treatment, Fabrizio’s diarrhea subsided. Canessa got diapers and rash cream and a taxi home. But when the diarrhea returned a few days later, the people at the hospital were less helpful. “They gave me a ball and some more cream and sent me home,” she said. “They said the problem was his diet.” Then one day she saw a man on the news talking about how babies at the children’s hospital had been given an experimental oral rehydration therapy containing a genetically modified rice solution made in the United States. Soon she was telling her story to reporters. She fears Fabrizio’s allergies and chronic health problems are related to the treatment he received. “Nobody said anything about it being an experiment,” she told me. “I would never have agreed if I had known. I worry all the time.”

It could have been worse. In 2008, in the Argentine province of Santiago del Estero, seven babies died while taking part in trials for an experimental vaccine made by GlaxoSmithKline to prevent pneumonia and related diseases. Their mothers claimed they also didn’t know.

Or consider what happened in the case of Ketek, an antibiotic drug used for respiratory tract infections. In 2000 Sanofi-Aventis conducted a series of clinical trials in the United States and abroad. One Alabama doctor was paid $400 a head to recruit patients and caught the eye of FDA reviewers for signing up subjects in droves. She ultimately went to jail for falsifying data in 91 percent of her cases; another doctor presiding over trials was arrested on cocaine and gun charges. Despite warnings from its reviewers, the FDA allowed Sanofi-Aventis to submit foreign trial data in place of that compromised domestic research—Ketek got the green light for sale in 2004. It wasn’t until 2007, after a dozen deaths from liver failure had been reported, that the FDA recommended restricting its use—a day before Congress was to investigate.

Foreign clinical trials for US-bound drugs have been commonplace for decades, and ethical breaches are a frequent side effect. Last year, a professor at Wellesley College unearthed evidence of a particularly egregious case from the 1940s in which scientists working for the Public Health Service deliberately infected Guatemalan prisoners, mental patients and soldiers with syphilis and other sexually transmitted diseases in order to study the effects of penicillin. President Obama apologized to Guatemala’s government and called for an investigation into the incident as well as current standards of practice. When the Presidential Commission for the Study of Bioethical Issues submitted its report in September, commission chair Amy Gutmann said, “We must look to and learn from the past so that we can assure the public that scientific and medical research today is conducted in an ethical manner.”

But is it? A generation ago, most human testing took place in American academic institutions. Now it’s a global game dominated by corporations, called contract research organizations (CROs), that help Big Pharma bring new molecules from the lab to your medicine cabinet. More and more drug companies are turning to CROs for assistance with trial design and recruitment, regulatory compliance, marketing and branding—last year the CRO market was worth $20 billion, an estimated 100 percent jump from a decade ago. And CROs, in turn, are increasingly running trials in the developing world because doing so is cheaper and faster: regulations aren’t as onerous, patient recruitment is easier and informed consent is less clearly defined.

The Food and Drug Administration is clearly unable to keep up with the astounding surge of outsourcing in recent years. According to the FDA, the number of trials in developing countries has grown 8 percent a year since 1997. A 2010 report by the inspector general of the Department of Health and Human Services (HHS) notes that 40 to 65 percent of clinical trials on FDA-regulated products in 2008 took place overseas. Of nearly 6,500 foreign trial sites that year, the FDA inspected only forty-five—less than 1 percent.

What’s worse, the dramatic rise of offshore clinical trials has coincided with a loosening of standards guiding their practice. At a time when federal regulators should be scrambling to improve oversight, they are instead making it easier for the pharmaceutical industry to speed drugs to market.

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Although recent coverage of American drug studies in the developing world has tended to focus on India and Africa, trials south of the US border have quietly spiked. The HHS report found that Central and South America had the highest number of subjects per site and accounted for 26 percent of all subjects enrolled in foreign trials.

Peru, a nation of 30 million where few people have health insurance and one in three lives in poverty, has the highest number of volunteer patients in South America and ranks among the world’s leaders in total number of clinical trials. In 2008 more than 13,000 Peruvians took part in trials testing drugs intended for the United States. The FDA did not send a single inspector.

The country is a “paradise of human experimentation,” says Herberth Cuba, a Peruvian gynecologist who runs a watchdog group called the Peruvian Medical Association, or AMP. In a cafe in Lima’s posh Miraflores district, he talked about “medical colonialism,” a system rife with financial conflicts of interest where powerful Peruvian doctors who run big public hospitals find it all too easy to benefit from recruiting patients for trials. He said Peru has many competent and honest doctors but that poverty leads to exploitation. It was Cuba whom Diana Canessa saw on television talking about the rice experiment, and it was AMP that sued on her behalf, only to find the case stalled. “A judge asked to see the clinical trial data, but it had been destroyed,” he said. “That’s how it works in Peru. If an investigator doesn’t like what the data says, he burns it.”

The agency that monitors and approves clinical trials in Peru, part of the country’s National Health Institute, is known by its Spanish initials, OGITT. A former OGITT investigator, speaking to The Nation on condition of anonymity, provided several confidential government documents to support the claim that the agency is rife with corruption, a place where anyone getting in the way of multimillion-dollar trials faces heavy pressure.

In a 2007 memo to OGITT’s top official, for example, the agency’s head of investigation reported that an HIV/AIDS trial had been flagged as “controversial” and that a technical committee had been put together to review it. But just twenty-four hours later, the same official told his supervisor that the trial did not meet the legal requirements to justify the committee’s review, and asked that it be approved. In another document from 2007, OGITT medical reviewers reported that a Peruvian researcher at the country’s cancer hospital (known as INEN) failed to report adverse side effects of a trial to the government, as required by law. Other papers show that superiors in OGITT’s office of inspection knew that trials slated for inspection lacked government authorization. And in at least one case, a disingenuous informed-consent document that failed to inform a patient with aggressive non-Hodgkin’s lymphoma about participation in an experimental treatment was signed with a fingerprint, presumably by an illiterate.

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After the Guatemala syphilis scandal broke last fall, the heads of the National Institutes of Health (NIH) and the Centers for Disease Control and Prevention wrote that no such studies could take place these days because US-funded research is now subject to approval by institutional review boards (IRBs). These voluntary ethical oversight committees are made up of healthcare professionals and community members who have legal authority to stop clinical trials deemed unethical.

But for all the faith we’re asked to put in IRBs, there is evidence of big problems. Because the FDA also requires drug companies to have IRB approval for their private research, for-profit companies have popped up to sell their ethical review services to the highest bidder. In 2009 the Government Accountability Office netted a Colorado-based IRB that had approved a fake research study invented by undercover investigators. “The IRB system is vulnerable to unethical manipulation,” a GAO official told a Congressional committee.

If our IRB system is so messed up, what about those in South America and other parts of the developing world? How can they hope to hold their ground against Big Pharma?

“Drug companies come to Latin America because they think IRBs will be less strict and knowledgeable,” says Miguel Kottow, a Chilean bioethicist. Many critics cite the case of Carlos Vallejos, a former Peruvian health minister who now heads INEN, the public cancer hospital, while remaining a major shareholder in a private health insurance company serving cancer patients.

But Agueda Muñoz del Carpio Toia, a bioethics professor who teaches at Peru’s Catholic University and chairs its IRB, believes Peru has strong regulations and a competent IRB system, though she concedes that the country should be more vigilant against financial conflicts of interest. “We need better ways to identify and deal with these problems,” she said.

Muñoz has received training from the NIH through its Fogarty Center, the world’s largest trainer of research ethics in the developing world. She is confident that the training she and others like her have received has helped make IRBs stronger in many Latin American countries. Others say Fogarty does more harm than good, particularly by enabling a double standard for research ethics: one for poor people in the third world, the other for rich people in the United States and Europe.

In the early 2000s, Fogarty funded a US researcher at the University of Miami who wanted to determine if massage therapy would boost the immune systems of HIV-positive children in the Dominican Republic. They were dying of AIDS but not taking antiretroviral drugs available in the United States at the time (not all clinical trials involve drugs or devices). The researcher paid forty-eight families $5 per clinic visit, twice a week for twelve weeks. The children were “randomized” into two groups. One received therapeutic massage; the other, made up of twelve HIV-positive children, met with a nurse for “reading, talking, playing quiet games” as part of “the friendly visit control group.” When the study was finished, according to a report in The Journal of Alternative and Complementary Medicine, the researchers apparently packed their bags and left without offering any of the dying children life-saving drugs.

“This is a terrible study for a number of reasons, including the fact that it is biologically implausible,” says Marcia Angell, a senior lecturer in social medicine at Harvard Medical School and former editor of The New England Journal of Medicine. “This would have been impossible to do in the US. No reasonable IRB would approve it. The worst part is that this was supported by the NIH, which could afford to treat those children.” The University of Miami has not responded to requests for comment.

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An emerging “standard of care” debate asks if drug companies conducting trials should be able to do in a third world country what they can’t do in the United States. This is a key question to ask as global guidelines evolve. For years, the FDA made its researchers conform to the Declaration of Helsinki, an international human rights document developed by the World Medical Association to protect human subjects from unethical research. In 2008, in a highly controversial move, the FDA replaced Helsinki with “good clinical practice” (GCP), a set of industry-backed technical standards meant to harmonize research.

The FDA claims that the switch to GCP grew out of concerns that the Helsinki amendment process could create confusion by contradicting US regulation (the document has been amended six times since its inception). But Ruth Macklin, a well-known bioethicist from the Albert Einstein College of Medicine who collaborates with the Fogarty Center, says that wasn’t the real reason it was dropped. “I think the agency abandoned Helsinki because it has strong prohibitions against the use of placebo trials when there exists an effective medication,” she said. “The FDA wants placebo controls because they are the gold standard of research. And companies want them because it is cheaper.”

Drug companies would have you believe that the ethical standards for drug testing abroad remain high. In a statement last year, the industry’s trade association, PhRMA, argued that “the same strict regulatory standards apply to foreign trials as trials conducted domestically.”

PhRMA is right to say that the FDA “has jurisdiction over clinical trials conducted in foreign countries for drugs approved in the U.S. or being studied for approval in the U.S.” Investigational new drug applications, or INDs, can serve as a layer of oversight and legitimacy, a way for companies to get pre-approval from the FDA while giving the agency a chance to monitor studies in real time. But the industry is increasingly finding—and, many argue, the US government is helping to create—regulatory loopholes to avoid such close scrutiny.

For years the FDA required drug companies doing IND studies outside the United States to follow US regulations concerning institutional review boards. But the agency regularly grants waivers to the IRB requirement. “Nowadays, it is generally acceptable for a sponsor wanting a waiver to do little more than state that it intends to use an IRB that complies with GCP,” says Michael Carome, a former associate director of the HHS Office for Human Research Protections who now works for the advocacy group Public Citizen.

US law requires all studies for new drugs (and old drugs marketed for new uses) to get an IND, but drug companies don’t have to get FDA pre-approval for foreign studies, even though they are able to submit the results of these off-the-record studies for FDA consideration. So if a non-IND study goes badly, a company can simply bury the problem. But if the study goes well, the firm introduces the data to the FDA with a promise that GCP was followed.

“The FDA is supposed to protect people and ensure data quality,” said Liz Woeckner, who directs CIRCARE, a group advocating stronger human research protections. “But they only find out about these foreign non-IND studies after they are closed, sometimes years after. How can you protect people and verify data quality in that situation?” You can’t.

Gerald Schatz, an attorney and retired associate professor at Michigan State University who now serves as vice president at CIRCARE, believes that foreign non-IND studies are “the crux of the matter”: “A big fear is that reckless researchers or firms may find it easy to go far from regulatory scrutiny and conduct preliminary, early-phase research off the record to find out whether to abandon the idea or to pursue it in the licit, on-the-record procedures.”

PhRMA’s claim that “the same strict regulatory standards apply” around the globe is disingenuous for another reason: GCP isn’t a universal set of guidelines; it is only a model for countries to use when developing their own regulations. In some places, like the United States, national regulations have stricter standards than GCP. But developing countries eager to court foreign business have an incentive to be more relaxed in their approach. “The problem is that the FDA doesn’t rigorously assess what GCP means in the country where the research is being conducted,” says Carome. “Because each country has different interpretations of GCP, there is great variability in how GCP is implemented and, by extension, in how well human subjects are protected.”

Amid allegations of regulatory failure, in July the HHS issued a notice of proposed revisions to US laws to address “how current regulations for protecting human subjects who participate in research might be modernized and revised to be more effective.” It sounds like a step in the right direction, but some critics are worried that the revisions, if enacted, would further erode existing standards in the name of improving them.

Asked to comment on such concerns, Julie Kaneshiro, of the division of policy and assurances at the HHS Office for Human Research Protections, insists that the revisions would “increase protections for individuals” and would replace IRB oversight with “mandatory standards for data security and information protection.”

But Schatz counters that they would “weaken existing protections by removing from IRB oversight large portions of research, primarily in the behavioral and social sciences, notwithstanding the extent to which such research might constitute invasion of personal privacy.” What’s more, he says, the proposal threatens to dispense with the legal requirement “to protect the rights of human subjects of behavioral and social research and biomedical research.”