UK: Phoney Pharmaceuticals

Last Updated: 2 April 2008
Article by Ed Harrison

A review of the trade in counterfeit medicines, and some associated Intellectual Property enforcement issues.

'A counterfeit medicine is one which is deliberately and fraudulently mislabeled with respect to identity and/or source. Counterfeiting can apply to both branded and generic products and counterfeit products may include products with the correct ingredients or with the wrong ingredients, without active ingredients, with insufficient active ingredients or with fake packaging.'

World Health Organisation definition.

Scale of the Problem

Counterfeit medicines are big business, both within the UK and on a worldwide basis. As with any black market activity, it is impossible to produce an accurate picture of the problem, but the numbers that are being suggested are terrifying. A recent estimate by the US Centre for Medicines in the Public Interest calculated that the value of worldwide sales in counterfeit drugs will reach US$ 75 billion by 2010, if the trade continues to expand at current rates.

The World Health Organisation (who) has historically reckoned that globally around 10% of all medicines are counterfeit. However, who has recently moved to a more geographically focused approach which suggests that in the more developed countries, the amount is more likely to be around 1% of the total market in medicines. However, the new approach highlights the fact that in less developed countries, the amount of counterfeit medicines is as high as 30% of the countries' entire trade in medicines. In relation to internet sales of drugs worldwide, the proportion of counterfeit products could be as high as 50%.

Human and Social Costs

The potential for damage to the individual is obvious. One of the worst counterfeit medicine cases encountered so far resulted in the deaths of around 2500 people in Niger in 1995, where around 50,000 people were inoculated with fake vaccines to treat meningitis. The vaccines had been supplied in good faith, but were sophisticated fakes.

Between 1995 and 1998 it is estimated that 119 children and infants died in Haiti and India after being treated with a cough syrup that contained diethylene glycol (a toxin also present in antifreeze).

On a larger scale, these individual cases can bring about a general distrust in drug based medicine. This is especially likely in less developed countries, where the potential for benefit to human health through use of such medicines is proportionately greater.

The nature of the counterfeit business (in whatever area) means that it is also commonly used by criminal gangs as a means of producing income, and also laundering money from other activities. A report from Interpol in 2003 also claimed that counterfeiting was becoming the preferred method of fundraising for terrorist groups and it is reckoned that a large percentage of the economy of North Korea is based on the export of counterfeit products (of all types).

If we also consider the more general social costs, the business of the medicine manufacturer is also being affected. Not only is the manufacturer losing out on income, but the reputation of the manufacturer and of the affected trade marks, is being severely damaged. Ultimately, this can result in economic damage that impairs continued investment in the development of new medicines and, in extreme cases, in the loss of jobs.

The Remedies

Technological Advances

Manufacturers continue to innovate in making it harder to copy genuine medicines. Technology is now being used to insert rfid devices into medicines, enabling them to be tracked and authenticated at any point. The longstanding concept of a watermark is evolving into the form of medicine 'dna', where lasers are used to pick up a unique infrared radiation emitted from the genuine medicines. The unique nature of the infrared frequencies can be used to distinguish genuine products from fakes.

However, such technological solutions only assist in countries where the technology exists and is affordable.

Distributorship Improvements

In the uk, following a recall of 120,000 packs of suspect Lipitor (used for lowering cholesterol) Pfizer Inc has taken the decision to transfer the distribution of their medicines to one company, in an attempt to cut out the number of companies involved in the movement of their medicines. Pfizer's own research estimated that as many as 20 to 30 different companies or individuals could be involved in handling the medicines between them leaving the manufacturing plant and being dispensed to the patient. Pfizer claims that the change was made to tighten the distribution chain and thereby reduce the chances of counterfeit products being able to enter the cycle.

Legal Enforcement

In most developed (and many undeveloped) countries, the legal tools exist that give the relevant authorities and the manufacturers the ability to take criminal legal action against not just those involved in producing counterfeit medicines, but also those who knowingly import, distribute, store or sell such products.

Many of the legal tools exist not as a result of general consumer protection laws, but increasingly because of the laws that protect Intellectual Property, and in particular Trade Marks.

Within Europe there is a generally harmonised approach to enforcement of registered trade marks, and legal changes over the last 10 to 15 years have produced an effective range of monitoring enforcement actions including:

  1. An EU wide monitoring service provided by customs authorities that watches for counterfeit products, following notification from the trade mark owner. There are also similar national monitoring schemes.
  2. National authorities responsible for general consumer protection have the power to bring criminal proceedings on the basis of trade mark laws. In the uk, the Trading Standards Office (TSO) has this function.
  3. National authorities responsible for regulating medicines also have the ability to bring criminal proceedings under trade mark laws. In the uk, the Medicines and Healthcare products Regulatory Agency (MHRA) has responsibility for this.

The legal backbone of this body of enforcement is found within the harmonised trade mark laws that apply around the eu. The laws all contain fairly strict sections which state that counterfeiting (and dealing in counterfeit products) is a criminal offence and which also specify that the local authorities have the power to enforce those sections of the laws. In the uk the relevant section in the Act actually obliges the authorities to act if counterfeiting is discovered.

The TSO has significant powers to deal with counterfeiters, and in many cases their authority to enter, search and seize property is similar to that of the police. In some more extreme counterfeiting cases, the police will also be directly involved in a raid on a suspected counterfeiter.

Manufacturers also have additional civil legal rights through the enforcement of Intellectual Property and in particular the infringement of registered trade marks. However in counterfeit cases such civil action is rarely appropriate, as it too slow to be effective in stopping most counterfeit activities quickly, and is expensive. However, manufacturers should, and do, actively assist the tso and mhra in taking criminal action.

Inherent within all of these legal systems is the fact that to take advantage of the majority of both civil and criminal legal actions, the trade mark for the counterfeited product must be a registered trade mark.

Most manufacturers of medicines have a sophisticated and active programme of trade mark registration, but it is important that this is maintained and kept up to date.

In a recent development, Interpol have announced that they are establishing a global database of ip crime, which would be available to law enforcement authorities, and which would feature information provided by other law enforcement authorities as well as manufacturers. It is intended to give an international framework to allow a swift and standardised means of reporting and dispersal of information relating to ip crime. In relation to counterfeit medicines, this resource may be particularly useful in identifying trends in the types of medicines being copied, and perhaps enabling the geographical source of the products to be discovered.

Education

There has been a recent flurry of schemes intended to promote awareness of the problem, and to educate those involved in how to deal with it. This ranges from advice to pharmacists provided by the mhra, advice to wholesalers provided by the British Association of Pharmaceutical Wholesalers (BAPW), through to international advice to national authorities by the International Medical Products Anti-counterfeiting Taskforce (IMPACT), which has recently been established by the who.

This need to educate has to be balanced with the need to avoid an unnecessary public distrust in the safety of all medicines. Indeed, it has been claimed, probably unfairly, that large pharmaceutical companies have purposefully not adopted a policy of publicising the problem precisely to avoid the negative implications of such an admission. However it is undeniable that education and public awareness will be a major factor in minimising the damage caused by counterfeit medicines.

The Future

Counterfeit medicines exist in a slightly separate sphere from other counterfeit products such as the entertainment and fashion industries, in that the reasons for stopping the counterfeiting are not simply legal or economic.

From a public health perspective the implications of failure to deal with the problem are obviously significantly more profound, not purely the death or damage to the health of an individual, but also the prospect of a general breakdown in trust between the ultimate consumer and those who work within the pharmaceutical industry and those who dispense and recommend those pharmaceutical treatments.

The pressure to get it right is great, and the onus lies firmly on the manufacturers and government bodies to make it as difficult as possible for counterfeiters to produce their goods in the first place and even more difficult to get those goods into the distribution and sales channels. It is perhaps unexpected to many that in most cases the legal tools for dealing with the problem stem from the seemingly obscure laws dealing with trade marks, but this is merely a return to the basic principle that a trade mark's main purpose is to guarantee a known quality and indicate a known origin. Whilst the trade mark laws have developed in sophistication to deal with an ever changing market, the fundamental principle of consumer protection remains constant.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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