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Good Intentions – Bad DrugsWashington, DC

Thursday, 10 March 2005

Robert D. Moore, Executive Director; Global Security Group

Merck & Co., Inc.

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In Perspective “Counterfeiting of Pharmaceuticals is now a global trade”

Source: Eye on Europe – Stockholm Network Autumn 2004

“China…is an economic gorilla; its counterfeiting is turning into quite the beast as well – yet slowing down the counterfeiters in China and elsewhere will take heroic efforts…Counterfeiting thrives on…globalization itself. Globalization is the spread of capital and know how to new markets.”

“Armed with digital technology, counterfeiters can churn out perfect packaging”

“Financing comes from a variety of sources, including Middle East middlemen, local entrepreneurs and organized crime”

Source: Business Week – 7 February 2005

“New technologies are clearly providing the offense an advantage over the defense”

Source: David Kay – Center for Strategic & Int’l Studies; Washington, D.C.

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EPOGEN® / PROCRIT®

110,000 counterfeit vials of EPOGEN® reached market in 2002 Used to boost red blood cells in cancer pts Low-dose vial relabeled as high-dose Same vial, cap etc used Wholesaler purchased legal product, PROCRIT®,

and relabeled as EPOGEN® $22/vial vs. $445/vial $48,000,000 profit

Source: www.fda.gov

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Factors Leading To Increased Counterfeiting

Well funded counterfeiters Organized crime, syndicates, illicit drug cartels

Varying degrees of intellectual property laws Advancing technology to duplicate products and

packaging Global economies and international commerce Internet as a sales and marketing tool Relatively light penalties MONEY

Estimated earnings of $32- 46 billion per yearSource: WHO Fact Sheet No. 275 – www.who.int/mediacentre/factsheets/2003/fs275/en/print.html

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How Does It Happen? Interception of expired goods

Relabeled to extend expiration date Theft of authentic product

Often relabeled to hide theft Relabeled authentic product

Change potency/dosage information Generic materials marketed as authentic Completely counterfeited

Most often performed in parts May contain actual API at reduced concentrations

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Stolen Genuine Products

Adulterated Product

Counterfeit Product

Diverted Product

Expired Product Contraband

Pharmaceutical Criminal Distribution System

Distributor / Repackager

GovernmentHealth

Systems

Hospitals Pharmacies Export

Patients

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Counterfeit Commerce

Source: Merck Global Security

Source: Merck Global Security

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Counterfeit Manufacturing

Source: Merck Global Security

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China: Tienam 2003

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China: Tienam (2003)

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England (2004) A small appliance store was found to be a front for

counterfeit pharmaceutical operation capable of producing and packaging 500,000 tablets per day Used high tech tablet presses and blister packaging

machines similar to those used in the pharma industry Authorities seized 580,000 counterfeit tablets and

raw materials for another 5.5 million tablets valued at $11.5 million

Drugs were traced to countries all over Europe and the Mediterranean

Despite 14 prior convictions, operator sentenced to 5 ½ years in prison for copyright infringement

Source: www.timesonline.co.uk

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Merck’s Strategy

ClientsSales & Marketing GroupsGovernments, Patients & Healthcare Providers

Immediate Response Evaluation Team

Global Security Regional DirectorManufacturing Quality Assurance (Central)Manufacturing QA Legal Support (Central)

Key DecisionsTestingInvestigationRegulatory

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Visual Inspection of Product

Source: Merck Global Security

Merck’s Strategy

Source: Merck Global Security

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CONCLUSIONS Counterfeit medicine is a challenging global problem Incidences are increasing Supply chain management is key issue As counterfeiters become more sophisticated, the

methods and technologies to detect them need to follow Major pharmaceutical companies are aggressively

pursuing product security measures, as well as detection capabilities, to assure the safety of the drug supply

By it’s nature, the Internet is a commercial channel for counterfeiters

Merck’s Strategy

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CONCLUSIONS

Manufacturers have: Recognized criminal nature of this issue Responded by:

Assisting government authorities Building structures to thwart counterfeiters Continued evaluations of supply chain security Dedicating resources, and Supported stronger penalties

Merck’s Strategy