Nick Redfearn discusses Pharma-related counterfeiting in SEA in the Law, Lore & Practice, PTMG December 2022 edition
Pharma and consumer health product counterfeiting in SE Asia's ten (10) countries ('the ASEAN bloc') presents several unique challenges. The ASEAN bloc is a huge healthcare market, with Indonesia being the largest market, followed by Vietnam and Thailand. Pharma companies see the region as a highly attractive commercial growth opportunity. Unfortunately, fake pharmaceuticals are widespread, risking the health of vulnerable persons and undermining legitimate returns on investment for research and development groups. In fact, one broad study by the United Nations Office on Drugs and Crime found that up to 47% of anti-malarial medicines in SE Asia were fraudulent in some way.
Most counterfeit pharma and health products are imported into the region, with only some local production (following manufacturing shifts from mainland China to Vietnam, Cambodia, and Myanmar especially). As well as finished goods, active pharmaceutical ingredients (APIs) often come into the region from India and China. Since only some patents are filed in SE Asia, action against API imports can be challenging. Some imported healthcare products are split into components, and separate branded labels and packs are sent. Operators in China are the main players in counterfeit production.
Customs in the region remain weak; Thailand and, to a lesser extent, Vietnam have well-functioning Customs systems. Both make seizures regularly, so healthcare companies should record key brands. The Philippines has a recordal system, but the seizures rarely occur for recorded brands (instead, random seizures occur unrelated to recordals). Indonesia has a new recordal system, but to date, few records have been made due to the application complexity, and a couple of seizures have occurred. Malaysia has no Customs IP system at all.
Singapore rarely sees counterfeits enter its market; the real challenge is the vast transit business (involving all kinds of illicit goods, including counterfeits) through the largest transhipment port in the world. E-commerce boomed during the pandemic in SE Asia. Many e-commerce platforms offer a wide range of healthcare products, even those usually sold by prescription. Some marketplaces actively stop offering of regulated health products, while others are lax. Healthcare companies must put in place several strategies to:
- Survey, identify, trap purchase, and verify listings, usually with analysis of labelling, batch numbers, etc. to identify counterfeits and unregulated products
- Use Notice & Takedown processes. This can be through an outsourced vendor, or a local provider (especially where language or distance causes low takedown efficiency)
- Identify major traders (repeat, large scale, or other red flag-based targets) for online to offline investigations, warning letters, and legal actions against the worst. Given most are small merchants, low-cost enforcement is critical. Ministry of Health regulatory complaints may be more effective than Counterfeit/IP complaints in some countries
- Engage with the major platforms to improve takedown quality, initiate specific actions against repeat and high-volume traders, and support legal actions
The Pharmaceutical Security Institute regional office in Singapore is active in this space. They have initiated Memorandums of Understanding (MOUs) with e-commerce platforms. There is also a wider effort to improve the cleanliness of SEA e-commerce marketplaces. Similarly, the UK IP Office initiated an MOU between platforms and IP owners in the Philippines.
The Thai DIP also created one to improve merchant investigations. Indonesia is now also looking at an MOU in early 2023, with the UK IPO's help.
Investigations and enforcement against counterfeits in most SE Asian countries remain a challenge. Covid hampered efforts to improve enforcement. Thailand generally can carry out effective raids. Similarly, the Philippines has a National IP Coordination Centre to drive raids. Some jurisdictions, particularly Thailand and Indonesia, suffer from police corruption at differing levels, so enforcement warrants careful scrutiny. Vietnam tends to be slow and bureaucratic. Few countries' criminal authorities will initiate and then run cases effectively without some level of supervision by the brand owner. The situation leads to an overall lack of criminal deterrents. IP owners should view the pandemic as having paused IP enforcement improvements, and renewed effort is needed to get authorities back into the habit of making progress in enforcement.
Below are several recent case examples:
In 2022, Indonesian police arrested producers of various health products, including Becomzet vitamins and Bio Insuleaf herbal diabetes supplements, in Rembang in North Central Java.
In 2020 in Lombok, two (2) men were arrested for selling counterfeit medicines that they had purchased through online shopping sites and that they supplied to eastern Indonesian islands.
In 2019 police busted a pharmaceutical wholesaler, PT Jaya Karunia Invesindo, which had been repackaging generics into non-generic patent-protected drugs, which they sold at a higher price.
In 2022, Customs seized 30 million pesos (around USD $585,000) worth of counterfeit medicines at two storage units in Parañaque. The seized drugs were packed in cartons with Chinese characters. Among them were counterfeit versions of branded medicines Alaxan FR, Bioflu, Biogesic, Medical, Neozep, and Panax. Also included were fakes of the antiparasitic medication Ivermectin and Phenokinon-F Injection, as well as the supplements Immunpro and MX3. Adel Rajput, a Pakistani, was arrested.
In early 2022, Manila's Special Mayor's Reaction Team (SMaRT) arrested Monique Gamboa, an online seller of fake medicines that were supposedly manufactured by Unilab. After a test-buy Gamboa offered 18,000 tablets of Bioflu and a box of Neozep tablets. A prosecution has now started.
Also, in early 2022, seven (7) persons were arrested for allegedly selling over Piso P2 million worth of unauthorized Clungene COVID-19 antigen rapid test kits and counterfeit medicines in Quezon City. Hangzhou Clongene Biotech makes a genuine product. In addition, around 300 boxes of test kits valued at P1.2 million, a Ford car and a cell phone were confiscated. The sellers had used Facebook for their transactions.
Pampanga police raided and arrested a 47-year-old man after discovering seven (7) sacks of counterfeit medicines in his residence. These included Celecoxib, Cefuroxime, Etoricoxib, Emeprozole and Recombinant Human Erythropoietin, and two sacks of Co-Amoxiclax.
In 2020 two Chinese citizens were arrested in Cavite for possession of P10 million worth of Covid medicines. Police said 27 boxes or 259,000 capsules of Linhua Qingwen Jiaonang, a Chinese medicine, were seized.
In 2021, police arrested a 34-year-old man for selling 41,000 suspected trade markinfringing respirators with an estimated value of over SGD S$ 201,000. Late in 2021, police arrested a woman selling 300 fake thermometers online. The fakes only displayed a 37°C reading!
Customs seized 1,520 strips of illegal medicine at the Johor Causeway Bridge Woodlands checkpoint entering Singapore from Malaysia. The illegal medicines were concealed in the rear door panel of the car; 2 Singaporeans were arrested.
In 2019 the Interior Ministry's Counter Counterfeit Committee seized thousands of illegal Chinese herbal pills and sex-enhancement medicines. Police raided three shops. Some had no marketing approval; others were expired.
In 2022 Vietnam fired a deputy health minister after he was accused of involvement in a fake medicine trading ring. Police investigated him in November after being accused of permitting a local company to import over 54 billion dongs (USD $2.38 million) worth of fake medicine for domestic sale. Truong Quoc Cuong was head of drug and cosmetics management.
In 2019 a former CEO of a private pharmaceutical company in Saigon was sentenced to 17 years in prison for smuggling fake cancer medicines. His company apparently purchased them from Canada's Helix Pharmaceuticals, which does not exist; in reality, the fake medicines were Indian imports of a low-quality compound. The variety of these cases shows a widespread problem involving both international and domestic transactions.
Noticeably, the number of seizures is tiny compared to the real scale of the issue. Moreover, cases rarely lead to prison time. Exacerbating the crisis are online marketplaces and a lack of cooperation and diligence between the Ministry of Health and criminal enforcement officers and Customs. On the positive side are the success of the Philippines' National Coordinating Centre, which is bringing multiple agencies together, Thailand's well-run Customs system, and the improvement through MOUs of SE Asian e-commerce platforms. Still, healthcare companies require public authorities to take more of a lead with regard to building effective enforcement programs in SE Asia.
This article is covered by the latest edition of Law Lore & Practice, Pharmaceutical Trademark Group (PTMG) also covering PTMG 100th conference in Lisbon in 2022.
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