fake medicines: the importance of brand competition to medicine quality

7/29/2019 Fake medicines: the importance of brand competition to medicine quality

1/6

www.emhn.org Fake Medicines in Asia

MAR

2013

EMHN BRIEFING No.2

Fake medicines in AsiaThe importance of brands tomedicine quality

Philip Stevens

The extra

regulation

called orby many

commentators

may well

entrench

the corruptrelationship

between

criminals and

certain drug

regulators.

Fake medicines are becoming a

critical problem in Asia, constituting

between 15 and 25% o the market in

countries like India and Indonesia1.

Even highly regulated markets like Ma-

laysia have a prevalence rate o around

5%, according to Ministry o Health

studies. There is near consensus that

concerted action is needed at the in-

ternational and national level to solve

this major threat to public health, with

most commentary ocusing on the lack

o regulation in poor countries where

the problem o ake medicines is mostacute2. Is regulation the answer, or are

other mechanisms such as intellectual

property rights and civil law more im-

portant?

The limits of regulation

Although most commentators and pol-

icymakers argue or deeper and more

comprehensive medicines regulation in

the worst-aected countries, regulation

is not a panacea, despite the important

role it has to play in standard-setting

and broad market surveillance. Such

top down solutions do not properly

address the causes o the problem o

ake medicines, which revolve around

manuacturers being unable to protect

their brands rom countereiters, who

are able to ply their nearious trade with

little risk o civil or criminal legal action.

Furthermore, in countries with a weak

rule o law, which tend to have high

rates o ake medicines, drug regula-

tion agencies (DRAs) are particularly

susceptible to corruption because o

the large amounts o discretionary

powers they hold. There are many

cases o local and national DRAs being

implicated in corruption over the last

several years, perhaps most notably

when the head o the Chinese DRA

was executed or accepting bribes

rom countereiters. In 2012 the Indian

Central Drugs Standard Control Organ-isation was labelled corrupt by its own

parliament.

Even discounting or corruption, DRAs

are merely the icing on the cake or

ensuring the quality o the medicines

supply. Even though it could theo-

retically check each actory or Good

Manuacturing Practice, it would be

impossible or a regulator to check

every manuactured batch, test every

pill, or ensure a plant operates to the

required standards at all times. Neither

can they intercept and check every

consignment o imported medicines or

active pharmaceutical ingredient. Even

a well-resourced DRA such as the US

Food and Drug Administration does

not attempt such a task, let alone those

in Asia.


2/6


EMHN BRIEFING No.2

March 2013

Brand Competition and drugquality

The quality o medicine supply in de-veloped markets such as the US and

the EU is extremely high not because

o the existence o regulators such as

the FDA or EMEA. Rather, the quality o

medicines is high because companies

jealously deend their reputations or

manuacturing products o a consis-

tently high quality. I consumers begin

to perceive that reputation is unjus-

tied, companies would rapidly lose

market share and go out o business.

Central to this is a companys brand,

which signals to consumers the quality

o a product. But to signal quality eec-

tively, manuacturers need to be able

to consistently prevent unauthorised

copies and use o their brand. The main

mechanism or so doing is registration

and enorcement o trademarks, some-

thing that is easy to do in the US and

EU, but dicult in many Asian countries.

Intellectual property andbrand integrity

Trademarks are a orm o intellectualproperty that enable vendors to sig-

nal the high quality o their product

to potential purchasers. Trademark

owners have strong incentives to en-

sure that the quality o their product is

maintained because their reputation

and hence uture protability depend

upon it. In many lower and middle-in-

come countries, it is dicult to enorce

trademarks even or local companies.

Where trademarks cannot be enorced,

cheaply produced poor quality copies

will typically crowd out good quality

drugs, as has happened in countries

with a high prevalence o ake med-

icines such as Indonesia, India, China,

Cambodia and Vietnam.

Brands are not just formultinationals

The inability to protect trademarks

aects not just the well-known multina-

tional pharma powerhouses, but also to

the many local generic manuacturers

who orm the backbone o the indus-try in Asia, such as Kotra Pharma o

Malaysia or Cipla o India. The repu-

table brands o these companies have

not arisen spontaneously or through

government-mandated regulation, but

rather through consistent investment

in the actories and manuacturing

standards necessary to produce high

quality medicines. Importantly, these

investments have been made to gain

competitive advantage, as the reputa-

tion or quality and saety embodied

in the companys brand is the key to

its continued commercial success.

In many Asian countries, however, both

branded and local generic companies

are unable to protect their brands

against countereiters, posing a risk

not just their bottom line, but also to

unwitting patients. For instance, Indian

It would be impossible for a regulator to check

every consignment and package of imported

pharmaceuticals.


3/6


EMHN BRIEFING No.2

March 2013

though there are serious public health

consequences rom their actions.

Intellectual property rights are an im-

portant legal tool in the ght against ake

medicines, but they are by no means

the only weapon. Civil law also has an

important role to play by protecting the

consumer against mis-sold or deective

goods. Civil law enables consumers

(or their relatives) to obtain redress

rom the manuacturer or supplier o a

harmul product, and this liability both

compensates those who are harmed

and discourages manuacturers and

suppliers rom selling countereits. In

many less developed countries, how-

ever, civil law is either poorly dened,

dicult to enorce or politicised. In the

case o the tainted baby milk scandal

that enveloped China in 2008, or in-

stance, it appears that the government

may have intervened in the usual civil

litigation process to prevent victims

rom having their cases heard at all3.

In many countries, law enorcement is

also corrupt. In such places, criminal

countereiting gangs may be able topay corrupt law enorcement agents to

turn a blind eye to their activities. I a

case does make it to court, the gangs

may be able to pay o the judge and

thereby induce a avourable judgement.

In summary, a high quality medicines

supply is not a product o regulation, but

rather a result o competition between

dierent brands, and the successul in-

terplay between civil law and trademark

protection. This allows consumers to

obtain redress against negligent manu-

acturers through the courts on the one

hand, while allowing manuacturers

o quality medicines to deend their

brands on the other. Regulation has a

role, but it is no substitute or a unc-

tional institutional environment. In the

long term, thereore, a high quality drug

supply can only be achieved rom the

bottom up, as companies seek to main-

tain competitive advantage through

maintaining the integrity o their brands.

Functioning property rights in the orm

o trademarks, and a strong rule o law

are essential to this process.

Countries that have lower levels o

ake medicines or instance Malaysia,

Singapore and Hong Kong have paid

attention to these undamental issues,

and are now reaping the benets (even

though some ake medicines still to

penetrate the legitimate medicines

supply, although at ar lower rates than

the 25% seen in countries like Indone-

sia).

Technological solutions tofake medicines

Reorming legal and civil institutions to

create a hostile environment or coun-

tereiters is a long-term process. In the

short-term, shortcomings in legal and

regulatory systems can be circumvent-

ed by new technologies which allowconsumers to veriy the quality o med-

drug manuacturer VS International is a

leading exporter o the antibiotic cipro-

foxacin to Arica, but the company has

had to institute a range o anti-counter-

eit measures due to the widespread

aking o its brand in Nigeria.

Far rom being an anti-patient pro-cor-

porate tool, then, intellectual property

in the orm o trademark protection is

a necessary pre-condition or a mar-

ketplace lled with quality products.

Trademarks protect all producers o

quality products, big and small, as well

as their customers. Pro-consumer

advocates should thereore welcome

the inclusion o trademark protection

in local legal regimes and international

agreements such as the World Trade

Organizations TRIPS agreement (in-

deed, the 1994 agreement requires that

the trademark laws o member jurisdic-

tions are compatible with each other).

Trademarks should not be conused

with patents, which are another orm o

intellectual property designed to helppromote innovation. The World Health

Organization has claried that patents

have nothing to do with ake medicines,

which is reasonable given that they tell

the consumer little about a products

quality.

The role of the law indefending brands

For trademarks to perorm their role o

signalling quality, drug manuacturers

need to be able to deend their brands;

this requires strong, independent

courts, a proper rule o law and ecient

legal systems. Unortunately many

legal systems are beset with corruption,

bureaucratic and are slow to judgement,

making it dicult to pursue a success-

ul trademark inringement case. This

allows countereiters to inringe uponvaluable brands with impunity, even

Trademark

protection is

a necessary

precondition

or a

marketplace

lled with

quality products.


4/6


EMHN BRIEFING No.2

March 2013

icines, and manuacturers to deend

their brands against countereiters.

The private sector has made various

attempts to use technology to make

their products suciently dicult to

copy as to make it uneconomical to

produce countereits. Early eorts

ocused on the use o trademarked

branding, combined with idiosyncratic

pill shapes and colours. Countereiters

quickly learnt how to mimic these orms,

so companies began to introduce tam-

per-evident packaging. As these too

became subverted by countereiters,

more sophisticated measures had to be

taken, including the use o holographic

images on packaging.

Malaysias Meditag scheme

Malaysia in 2005 made it a requirement

or the packaging o all traditional and

Western medicines to bear a hologram

with a serial number issued by the

Ministry o Health. However, Malaysiaquickly ound that countereiters were

able to ake the ocial hologram itsel,

leading the Ministry to introduce a

more sophisticated version in 2006.

High quality countereit holograms

have also been well documented in

anti-malarial drugs sold in South East

Asia4. This raises questions about

the long-term viability o the Malaysian

Meditag scheme in its current orm, as

holograms have proven to be insu-

ciently sophisticated to deter the most

determined countereiters.

2D and QR barcodes

As a result o the limitations o technol-

ogies such as holograms, researchers

have begun to explore other avenues,

many o which take advantage o the

massive upsurge in mobile and smart-phone ownership that has taken place

in many developing countries. One

model developed by mPedigree in

Ghana consists o a scratch-o panel

on the packaging that reveals a 2Dbarcode. The patient then simply uses

a mobile phone to SMS the code to a

Freephone number, which then con-

rms i the product is genuine.

Quick response (QR) codes are anoth-

er promising avenue. These printed

squares are an advanced version o

the 2D barcodes, which allow cam-

era-enabled smartphones to scan the

package or instant authentication by

the manuacturer.

Radio Frequency ID (RFID) tags are

used by Pzer in the United States to

protect requently-countereited prod-

ucts such as Viagra, while other com-

panies are developing DNA coding, in

which synthetically-produced strands

o DNA are tted into a label and a

checking device. Both systems can beused all along the supply chain to en-

sure that products are genuine. They

also have the advantage o not requir-

ing line o sight in order to be read by

a specialised scanner, so can be usedin combination with tamper resistant

packaging.

However, such technologies are ex-

pensive when compared to barcodes

and scratch panels, and their high cost

makes them unsuitable or the item

level in poorer countries. Then there is

also the act that members o the pub-

lic do not carry specialised scanners

required or these technologies, eec-

tively removing the consumer rom the

authentication process. There are also

concerns that the heating eect o RFID

can aect covalent bonds in protein

and biologic products. The US FDA has

thereore advised against using RFID

tags on biologics and protein drugs, al-

though recent research suggests radio

requency radiation has no detectable

eect on such products

5

.

Quick response (QR) codes allow camera-enabled smartphones to scan the package for instantauthentication by the manufacturer


5/6


EMHN BRIEFING No.2

March 2013

The private

sector shoulduse its

innovative

capacity to

experiment

with dierent

technological

solutions to

brand

inringement.

The dangers of governmentmandated technology

These technologies are all highly in-

novative, and can work well in certain

contexts to help manuacturers protect

their brands. There is now an entire pri-

vate-sector industry dedicated to de-

veloping new technologies and meth-

ods to saeguard brands, ensuring that

the technology will always be one step

ahead o the countereiters. However,

this could be potentially undermined

when governments attempt to make

particular technologies mandatory in

an attempt to stem the trade in ake

medicines. India has recently gone

down this route, making it mandatory

or all pharmaceutical exporters to print

barcodes on their outer-most packag-

ing, as did Malaysia with its Meditag ho-

logram scheme, implemented in 2005.

Mandatory requirements can place

excessive costs on small manuactur-

ers and retailers, acting as a barrier toentry and protecting larger companies

rom competition. It may also hamper

access to medicines or the poorest,

who are sensitive even to the slightest

rise in the price o a medicine. And

even i the cost o a technology is a ew

US cents per unit it may signicantly

impact on the ability o pharmaceutical

companies to manuacture protably

mass volume generic medicines, which

are the staple o the pharmaceutical

industries o many Asian countries.

Furthermore, by laying down specic

technological requirements, such regu-

lations will entrench those technologies

that happen to be avoured by ocials

at a particular time, be it the hologram

in Malaysia or the 2D barcode in India.

This will crowd out the spontaneous

development o alternative, innovative

technologies, undermining competition

and stifing urther innovation.

Conclusion

The most undamental cause o the

spread o ake drugs in Asia has been

the inability o manuacturers to protect

the identity o their products. This is

largely down to a lack o unctioning

rule o law, which makes it very dicult

or manuacturers to protect their trade-

marks and brands via the civil and crimi-

nal courts thereby handing a ree rein

to countereiters. The extra regulation

called or by many commentators may

well entrench the corrupt relationship

between criminals and certain drug

regulators.

Strengthening the rule o law is a vital

but long-term process. In the mean-

time, the private sector should take

advantage o its innovative capacity to

experiment with dierent technological

solutions to brand inringement. It iswell placed to lead this process, as it

has unparalleled access to the entire

pharmaceutical supply chain, as well as

the clear nancial incentive to protect

its revenue. Governments should en-

courage this process, but rerain rom

mandating specic technologies or

systems.

About the Author

Philip Stevens is Executive Director

o Emerging Markets Health Network

Philip can be contacted at

[email protected]


6/6


EMHN BRIEFING No.2

March 2013

EMHN is a project o Malaysias Institute or Democracy and Economic Afairs (IDEAS) that aims to help

emerging markets address their health challenges by exploring the potential o markets and the private

sector. EMHN works with its network o scholars, think tanks and thought leaders to ensure this perspective

is heard in policy debates in Asia, Latin America and Arica. Examples oEMHN activities include:

Coordinating the writing and dissemination o policy papers, monographs and opinion editorials

Conducting public seminars and events

Providing commentary to the media on topical health policy issues

References

1See EMHN brieng paper no.1 or urther details

2For instance, Oxam (2011), Eye on the ball: medicine regulation not IP enorcement can best deliver quality medicines, Brieng paper 143

3Beijings ood saety problem, Wall Street Journal, 15 October 2008, available at http://online.wsj.com/article/SB122400110147832865.html

4Newton, P et al (2008), A collaborative epidemiological investigation into the criminal ake artesunate trade in South East Asia, PLOS Medicine,

available at http://www.plosmedicine.org/article/ino:doi/10.1371/journal.pmed.0050032

5Uysal et al (2012), Eects o Radio Frequency identication related radiation on In Vitro Biologics, PDA Journal o Pharmaceutical Science

and Technology, 66:4, 333-345

WE CAN ONLY SURVIVE WITH YOUR SUPPORT. YOU CAN MAKE A CONTRIBUTION BY ELECTRONIC TRANSFER :

Account Name: IDEAS Berhad

Account No:1456 000 178 6053

Bank Address: CIMB Bank, Bukit Tunku Branch, 50480 Kuala Lumpur

SWIFT Code: CIBBMYKL.

IDEAS is approved by theCharities Aid Foundation, which allows UK taxpayers to make tax-ree donations by opening an account at

www.caonline.org

fake medicines: the importance of brand competition to medicine quality

Documents