Download International.Initiative

1
The Threat of Counterfeit Pharmaceuticals;
The Need for an International Initiative
Gene R. Haislip, B.A., LL.B., LL.M.
The unprecedented growth of global commerce, communications, and banking during the
later part of the 20th century, has created new optimism for economic and social progress.
The end of the Cold War, with its polarization and partial division of the world into
closed societies, has resulted in a rapid increase in these developments. Just now, one of
the areas receiving increased attention because of its special complexity is that of medical
care and especially pharmaceuticals. The emphasis on pharmaceuticals is entirely natural
since they are (1) commodities which can be easily traded, (2) increasing in both variety
and effectiveness, (3) account for an increasingly large share of medical costs and (4)
critical for the treatment of such high-profile maladies as AIDS, malaria and tuberculosis.
Unfortunately, these same advances in commerce and technology also create new and
highly lucrative opportunities for organized criminal activity that causes massive death,
suffering and social corruption. The most widely publicized example of this is the
manufacture and traffic in illicit drugs of abuse that has swept the globe in the last three
decades. This is an area to which the author has devoted many years of government
service. But the purpose of this article is to call attention to the less well known, rapidly
2
increasing problem of counterfeit pharmaceuticals which are not drugs of abuse. Recent
reports from Africa, Asia, Brazil, Russia and The United States have described these
increases.
Whether desired for abuse or for legitimate medical need, certain dosage forms and
preparations acquire ‘brand name’ recognition on the part of their respective consumers.
This recognition is often the way that prospective distributors and consumers identify the
desired product and, like widely recognized currencies, these too may be counterfeited
and bogus products thus passed into circulation.
The World Health Organization (WHO) defines a ‘counterfeit medicine’ as “one which is
deliberately and fraudulently mislabeled with respect to identity and source.”1 The
definition is a useful one as it relates to all kinds of fraudulent and dangerous products,
including not only products that look like legitimate drugs, but also those which may be
out-of-date, or of compromised quality. In as much as the unifying principle is the
element of criminal fraud and the uncertain quality and identity of the ‘medicine’, it will
be useful to include within the scope of concern those pharmaceuticals that may have
been criminally diverted from a legitimate source. This is desirable because (1) there is
reason to believe that such activities will increase, (2) criminal diverters are unlikely to
maintain their stocks under required conditions and (3) they will necessarily have to
falsify the last point of origin.
3
Historical Experience and Current State of Data
The origin of the current problem is largely unknown but was dramatically portrayed in
the famous post-war motion picture of 1949 entitled “The Third Man” in which Orson
Wells starred as an unscrupulous master criminal who diverted, diluted and sold lethal
doses of penicillin in occupied Vienna. By the early 1970s, the counterfeiting of
amphetamine and secobarbital capsules became a familiar part of the illicit drug traffic
along the US – Mexican border. This was soon followed by the massive counterfeiting of
Quaalude tablets (methaqualone) in Colombia for illicit distribution in the US.
Subsequently, similar developments involving stimulants and depressants were
documented in eastern and Western Europe, Africa, the Middle East and Asia.
In the case of controlled substances, it is important to note that, unlike general
pharmaceuticals, both national and international police and drug control authorities
actively seek such evidence and regularly analyzing suspicious seizures. For many years,
this writer traveled extensively in connection with these problems and often encountered
anecdotal reports from public health and medical authorities concerning the large-scale
counterfeiting of other pharmaceuticals. But there were no police agencies specifically
tasked to pursue such reports and they were seldom collected. However, as at present,
some large pharmaceutical companies did undertake their own investigations and were
sometimes successful in obtaining the cooperation of foreign authorities. Their activities
4
have no doubt been responsible for much of the attention that the issue has thus far
received.
At present, authorities of the World Health Organization (WHO), major pharmaceutical
companies and knowledgeable experts all agree that the problem is large and growing.
WHO has devised a system for the collection of case reports from national authorities on
a voluntary basis. In response to WHO’s request, 137 countries have identified liaison
officers. As in many other circumstances, WHO relies upon a private collaborating center
to actually collect and analyze the reports. In its most recent newsletter, the center
provided some detail of 46 different cases that had been reported in the period of Jan.
1999 to Oct. 2000.2 Inquires with responsible officers of ICPO Interpol indicate that it
does not have a specific database dealing with this issue.
In addition to the above, various articles frequently appear in journals and the news
media describing specific incidents or special studies. For example, a recent issue of
Lancet described studies in Nigeria and the countries of South East Asia showing that a
very large percentage of the medicines available in pharmacies and hospitals lacked all or
a sufficient amount of the drug indicated.3 But, at the present time, one may say that
there is no comprehensive international database concerning itself with such criminal
activities.
5
Nature of the Problem and Availability of Means
A great accumulated history of cases in the files of DEA, FDA, the United Nations Drug
Control Program and other national drug enforcement agencies have clearly documented
the ability of criminal groups to manufacture, counterfeit and divert drugs. There are
cases in which laboratories and counterfeiting operations have been established in
bathrooms, garages, school buses buried underground, factories rented by the week or
weekend, secret facilities established within factories, secret factories with expensive new
equipment hidden in warehouses or suburban homes and so much more. The evidence is
overwhelming and may be summarized as follows:
 Criminal groups both large and small, wealthy and modest, and based in both
industrial and developing countries are well aware of the great profits which can
be made from counterfeiting and diverting pharmaceuticals.
 These groups almost universally have no regard for the health and safety of
consumers of their products.
 All of the necessary technological means and skills are readily available for the
establishment of small or extremely sophisticated and large operations.
 Both the means and customs of global commerce are such as to inadvertently
facilitate this type of criminal activity.
6
Status of national and International Countermeasures
In 1988, the World Health Assembly adopted a resolution (WHA 41.16) calling upon
“governments and pharmaceutical manufacturers to cooperate in the detection and
prevention” of the increased smuggling of counterfeit pharmaceuticals. Thereafter, the
WHO and the International Federation of Pharmaceutical Manufacturers Associations
(IFPMA) organized a workshop in April of 1992,4 which defined many of the difficulties
of dealing with the issue. In 1999, the Department of Essential Drugs and Other
Medicines of the WHO published Guidelines for the development of measures to combat
counterfeit drugs.5 The guidelines provide an excellent compendium of the massive
deficiencies of both national and international institutions for dealing with the problem.
These include:
 Inadequate legislation and regulatory control at the national level
 Inadequate designation of authority and lack of enforcement resources
 Lack of consistent collection of data and analysis of suspect pharmaceuticals
 Inadequate controls over international commerce, especially in free trade zones
 Reluctance of companies to report diversion and counterfeiting of their products
 Lack of mechanisms for the sharing of information internationally and between
national agencies
To this list one must also add the total lack of treaty requirements and obligations and
staff to monitor compliance. Those concerned with the problems of controlled
7
pharmaceuticals, such as the writer, have the great advantage of three almost universal
treaties imposing an array of controls on international commerce as well as obligations of
national reciprocity and law enforcement cooperation. In addition, there are international
institutions staffed with professionals who work to facilitate observance of these
requirements. Moreover, experience has shown that these treaties have been extremely
valuable in dealing with actual problems of diversion and illicit activities. In the
problem of diversion and counterfeiting of general pharmaceuticals, one can only
conclude that the basic institutional foundation for successful countermeasures is
almost totally lacking.
Increasing Opportunities for Counterfeiting
The counterfeiting of pharmaceutical products, like the illicit traffic in drugs of abuse, is
a criminal activity undertaken for profit. The extent to which it is likely to occur is
governed by three factors; (1) the availability of the means of producing or acquiring the
commodity, (2) the risk of detection, loss, apprehension and penalty, and (3) the prospect
of the profit to be realized. The ready availability of the means of production and
inadequacy of controls have been described but the remaining factor is worthy of some
further comment.
The profitability of counterfeiting or diverting drugs of abuse for the illicit traffic is well
known and need not be discussed here. The situation with regard to general
pharmaceuticals is much more complex. As a generality, it may be observed that the
8
profitability of counterfeiting a pharmaceutical product will be determined by the
difference between the cost of producing and marketing the counterfeit product as
compared to the customary sales price of the legitimate product under a similar
circumstance.
It will be obvious that in some circumstances, even the counterfeiting of common aspirin
can be profitable and such cases have occurred. However, opportunities for maximum
profit will generally prevail in those circumstances involving products under patent
protection that are more costly and in popular demand. In the first place, the price of
these products always exceeds the customary costs of production, marketing and normal
profit because the manufacturer includes an additional charge for the expenses of
developing the product and increasingly, the advertising campaigns to sell it. In fact, the
manufacturer may charge even more since it has a temporary monopoly on the product.
In these circumstances, even a quality product produced in disregard of the patent would
sell at a handsome profit. An entirely bogus product might be sold at profits that would
rival the illicit drug traffic.
 World Trade and Pharmaceutical Production and Pricing
It is important to emphasis that the counterfeiting of pharmaceuticals has primarily
occurred within developing countries, due to their relative lack of law enforcement
resources, regulatory infrastructure and sometimes frequent problems of corruption. In
fact, there have been cases in which foreign criminal organizations have located their
9
operations within such countries in order to avoid detection. Certain problems of global
trade and pharmaceutical production may be expected to increase both the circumstances
and demand that will encourage global pharmaceutical diversion and counterfeiting
within this context.
The principal factor driving the increase in pharmaceutical diversion and counterfeiting is
the escalating cost of medicines that, in developing countries is sometimes prohibitive.
The consequences of this can be seen in the political and public policy tensions that have
arisen between developing countries seeking low cost generic substitutes and those who
seek to uphold pharmaceutical patent rights. But it can be seen that similar consumer
concerns are also effecting policies within the United States and perhaps other developed
countries.
 Developing Countries
The manufacture and trade in patented pharmaceuticals is an activity specifically
included within the World Trade Agreement under the annex relating to intellectual
property rights, the so-called ‘TRIPS’ (Trade Related Aspects of Intellectual Property
Rights) agreement. Under this annex, member states must enact laws that will insure that
patents are granted and respected, protecting the commercial interests of the creators of
such pharmaceuticals. At present, 142 countries have joined the World Trade
Organization (WTO) and it may be expected that others will do so. The WTO is not part
of the United Nations, but is nevertheless expected to achieve similar universality.
10
A careful reading of the TRIPS Agreement seems to make it clear that a central purpose
with regard to pharmaceutical and other patents is to protect innovators from generic
competition during the life of the patent protection of 20 years. Developing countries and
the 40 least developed countries are given until 2005 and 2006 respectively to put these
legal protections in place. This would mean however, that access to these drugs would be
subject to the prices established by the patent holder. In many cases, this effectively
eliminates availability for most of the population of developing countries.
The case of drugs for the treatment of AIDS has become the most politically visible
example of this dilemma. The patented pharmaceuticals recently developed for this
decease may cost patients as much as $18,000 a year, a sum far beyond the means of the
millions of sufferers of this affliction in various developing countries. But of course,
generic copies of the drugs can be produced for a fraction of this cost. A firm in India
presently claims to be able to offer certain of these for as little as $350 a year.
In view of this dilemma, the government of South Africa enacted a law to permit the
importation or licensing of generic forms of patented AIDS drugs in disregard of the
patent holders rights and arguably, the TRIPS Agreement. This resulted in 39 foreign
manufacturers filing suit to protect their patent rights. This in turn, lead to a great deal of
unfavorable publicity accusing the manufacturers of greedy indifference to the plight of
those who were suffering. In the end, the companies capitulated in this political drama of
logic and law versus life, and withdrew their suits in April 2001.
11
It was an outcome that many may applaud, but which established a precedent that was
immediately recognized. In June of 2001, a large group of developing nations submitted a
position paper to the WTO, stating that they did not regard the TRIPS Agreement as an
impediment to licensing their own generic producers of patented pharmaceuticals or of
importing them from others who had done so.6 The paper also cited the precedent in
South Africa as well as the recent Resolution 2001/33 of the UN Commission of Human
Rights recognizing “access to medicines in the context of pandemics as an essential
human right.” The paper concludes by observing that when confronted with specific
situations where patent rights over medicines are not conducive to social and economic
welfare, “Members may take measures to insure that they will be achieved.- such as the
granting of compulsory licensing.”
Several countries, including Brazil, recently announced their intention to revoke or ignore
existing patents in order to produce their own low cost, generic AIDS drugs. In some
cases, it appears that this is effectively used as a threat in negotiating lower prices from
manufacturers. There is nevertheless strong reason to believe that local manufacture of
expensive drugs is likely to increase, especially in developing countries. Although an
understandable trend, unfortunately this will unquestionably provide many new and
fertile opportunities for the traffic in counterfeit drugs.
12
 Pressures Within the United States
From the foregoing, we see that the driving force behind the desire of developing
countries to license generic manufacturers in disregard of existing patents is based on the
obvious need for lower cost pharmaceuticals. But an examination of recent Congressional
actions in the US shows that the very same concerns are beginning to drive national
policy toward permitting the importation of lower cost pharmaceuticals, notwithstanding
the difficulty of insuring their quality. In the fall of 2000, aware that many drugs
manufactured in the US could be purchased at substantially lower prices in other
countries, Congress passed the Medical Equity and Drug Safety Act permitting the
reimportation of US manufactured pharmaceuticals, provided that the Secretary HHS
made certain findings regarding safety.
Many consumers have also discovered that a range of pharmaceuticals can be purchased
at bargain prices across the Canadian and Mexican borders. Among other measures, this
lead Congress to amend the Controlled Substances Act in November of 1998, to permit
persons to bring across US land borders up to 50 dosage units of any controlled substance
(other than Schedule I) without a valid US prescription. Some of these drugs can be sold
in the illicit traffic for as much as $60 to $100 per dosage unit. To many experienced law
enforcement officers, this must have represented an incredibly naive view of the nature of
the drug traffic on the Mexican border.
13
In addition to the above, the advent of the Internet has opened new avenues for ordering
pharmaceuticals from abroad. FDA policy permits receipt of such drugs through the
international mail subject to certain conditions. However, this activity has now increased
to an estimated two million parcels annually and FDA admits that its current policy can
not be applied in practice.7 A recent news article [Springfield, Mass. (AP), 7/31/2001]
described how a group of senior citizens received instruction at a Community Center on
how to break federal laws and save money by ordering pharmaceuticals online from
overseas suppliers. In July of this year, the House passed an FDA appropriations bill with
an amendment that prohibited the use of funds for preventing individuals (not in the
business of importing drugs) from importing drugs that appear to be FDA approved.
Finally, there have also been significant cases of large-scale illegal importation of
controlled substances is this manner.
Conclusions
From the forgoing it may be seen that in many developing countries and also the US,
there is a great public and political concern over the high cost of, and access to many
important pharmaceuticals. Obviously, this raises many important issues, most of which
are beyond the scope of this article. But it is clear that one consequence is to increase the
profitability of counterfeiting and diversion while at the same time, diluting the already
tenuous controls to combat them.
14
Another factor that will facilitate the counterfeiting of pharmaceuticals, is the growing
emphasis on the globalization of trade and the operational and political pressures that
may further reduce the effectiveness of world Customs services in detecting such
commerce upon either entering or leaving national territory. The advent of the Internet
and the reduction of political barriers to international mail and delivery are additional
factors that facilitate such activities.
Further, we conclude that the nature of the political dialogue is such as to suggest that
many authorities are unaware of the threat to public health and safety that such criminal
activities represent, or find them to be an acceptable consequence. Some observers, such
as the author, have found that this is a frequent conceit among some authorities that often
requires an accumulation of death and injury statistics to overcome.
Finally, it is clear that existing laws, treaties, national and international institutions,
expertise and enforcement and control resources are all inadequate to meet the challenge
of a major increase in the counterfeiting and diversion of pharmaceuticals.
Recommendations
At present, the principal need for initiating a more effective response to the threat of
counterfeit pharmaceuticals is the establishment of an increased level of priority and an
15
organizational locus for generating action. This needs to be achieved within some
minimum number of important national governments and at an international level. This
could best be accomplished by providing a clear national legislative mandate while also
recognizing the need for international action. Although it is necessary to improve and
enhance the law enforcement apparatus, it is even more important to establish a policy
initiative at a high level of government.
Once this is achieved, efforts should be made to bring together a selection of concerned
governments within the framework of an appropriate international conference using any
one of several possible fora such as the Organization for Economic CO-operation and
Development (OECD), WHO, or simply a judicious selection of invited states. An
adequate, interested and representative group of countries can be identified for this
purpose minimizing the risk of politizacion for other purposes. Representatives of the
pharmaceutical industry should be invited to participate in certain ‘bridge’ sessions. In
this case, their interests are in harmony with many of the public policy objectives and
their participation is needed both for expertise and support.
The objectives for an improved effort might include the following:
 Designation of a responsible agency and establishment of program
responsibility at a politically visible level
16
 Promotion of an international agreement for the purpose of the prevention,
detection and suppression of the counterfeiting and diversion of general
(uncontrolled) pharmaceuticals
 Improvement of existing criminal and civil legislation in order to prevent
and detect counterfeiting efforts
 establishment of a center of analytical expertise for all issues and activities
relating to the problem
 Establishment of a specific law enforcement office with adequate criminal
investigative personnel to pursue and coordinate investigations including
operational liaison with appropriate foreign law enforcement agencies
________________________________________________________________________
References
1
World Health Organization, Division of Drug Management Policies.
Counterfeit Drugs: report of the WHO/IFPMA Workshop
1992; April 1-3, (p.1)
2
World Health Organization.
Pharmaceutical Newsletter No. 3, 2000 (p.14 – 20).
3
Taylor RB, Shakoor O, et al.
17
Pharmacopocial quality of drugs supplied by Nigerian pharmacies
Newton P, Proux S, et al.
Fake artesunate in southwest Asia
Lancet
2001; 357: 9272
4
World Health Organization
Counterfeit Drugs (see note 1, above
5
World Health Organization , Department of Essential Drugs and Other Medicines.
Guidelines for the development of measurers to combat counterfeit drugs
WHO/EDM/Qsm/99.1
1999
6
World Trade Organization.
Developing Country group’s paper; 20 June 2001
IP/C/W/296
7
Hearing before the Subcommittee On Investigations of the Committee On Energy and Commerce;
House Of Representatives.
Testimony of William K. Hubbard, Associate Commissioner for Policy, Planning and Legislation,
Food and Drug Administration, (p ?).
June 7, 20001
Serial No. 107-30