Illicit Trade

in Counterfeit Medicine

Dr. Kristina M. Lybecker

Department of Economics & Business

The Colorado College

March 30, 2015

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Roadmap

Motivation

Definition

Dimensions of the Problem

Adverse Consequences Health, Economic, Social, Environmental

Policy Responses

Links to Transnational Organized Crime

Concluding Remarks

Questions

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Motivation

1985: first identified as a problem in international commerce

Increasingly prevalent & profitable

Improved Partnerships & Cooperation

Knowledge is Power

Extent of the Problem & Possible Solutions

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Definition

“А 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.” (WHO 2015)

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Six Categories

Without active ingredients, 32.1%;

with incorrect quantities of active ingredients, 20.2%;

with wrong ingredients, 21.4%,

with correct quantities of active ingredients but with

fake packaging, 15.6%;

copies of an original product, 1%;

with high levels of impurities and contaminants,

8.5%.

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Terminology

Branded

Generic

Falsified

Substandard

Patent Infringement is not the issue.

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Dimensions of the Problem

“There are no data that allow anything more

than (badly) informed guesses as to the global

extent of the problem. . . the paucity of reliable

data means that it is difficult to know whether

the problem is getting better or worse, how the

epidemiology of substandard and falsified

medicines differ and whether interventions are

effective.”

Dr. Paul Newton, 2012

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Dimensions of the Problem

INTERPOL: up to 30% worldwide

WHO: 10% of the global market

World Customs Organization

USD200 billion

2008: increase of 596%

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US FDA

Counterfeit Drug Cases

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Factors that Facilitate

Counterfeit Trade

Fragmented

Supply Chain

Parallel Trade

Transshipments

Internet

Purchases

Mail-order

prescriptions

Inelastic

Demand

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Pharmaceutical Supply Chain

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Internet Sales

European Alliance for Access to Safe Medicines

60% counterfeit or substandard

90% no prescription required

National Association Boards of Pharmacy

97% “outside the law”

99% no prescription required

40-50,000 active online drug sellers

USD1 – 2.5 million / month

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Parallel Trade

Buy low, Sell high

20 – 30 intermediary transactions

Problems of Verifiability

Untraceable

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Global Phenomenon

Production trail: dozens of countries

May change hands 30 times

Europe: 37% originated in Syria

Top Five Origins (2010)

China

India

Paraguay

Pakistan

U.K.

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Adverse Consequences

Squandered Health Resources

Financial Cost

Diverts resources away from genuine treatment

Endangers existing drug supply

Second only to food

Even the Global Fund

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Adverse Consequences

To the Pharmaceutical Industry

Lost Sales and Revenues

Additional Security & Anti-counterfeiting technology

Reputational Damage & Liability

Diminished Innovation

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Adverse Consequences

To the Government

Regulation and Enforcement costs

Loss of Confidence/Trust in Public Health Programs

Decrease in Foreign Investment

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Adverse Consequences

Patient Health & Safety

Inconvenience, Unwanted Pregnancy, Fatality

Prolonged Illness, disability, treatment failure

Estimates

INTERPOL: 1 million

PLoS Medicine: 200,000 in China

International Policy Network: 700,000 (malaria, TB)

WHO: 200,000 (malaria)

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Anecdotal Evidence of Harm

US Heparin: contained none of the active ingredient, is suspected

as the cause of as many as 81 deaths.

Paracetamol: More than 500 children around the world died from

counterfeit cough syrup, tainted with ethylene glycol.

Nigerian meningitis epidemic: more than 50,000 people were

vaccinated with counterfeit medicine, resulting in 2,500 deaths.

Heart medication: 40,000 patients in Lahore, Pakistan. The drug

resulted in the rapid depletion of white blood cells and platelets

and led to the deaths of more than 100 patients.

Norvasc: Eleven people died in Ontario, Canada in 2005 after

being prescribed a counterfeit version of the heart medication,

containing only talcum powder.

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Adverse Consequences

Resistance

Global microbial resistance, more virulent forms

of disease

Undermining fight against infectious disease

XDR-TB: confirmed in 49 countries

WHO: 5% of new TB infections, as high as 35%

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Increasing Incidence of MDR-TB

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Policy Response

“…there is no global system for the mandatory reporting,

assessment, and dissemination of information on

suspicious medicines. . . It is extraordinary that, in

2014, such systems are widely in place for suspicious

aircraft parts but not for suspicious medicines.”

Lancet, 2014

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Policy Response

Great Successes

Nigeria’s NAFDAC

Operation Pangea

Uganda’s Community Health Workers

Product Verification Technology

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Policy Response

Great Promise

Medicrime Convention

Wholesaler Behavior

WHO’s Rapid Alert System

Global Steering Committee

.Pharmacy Domain

Raising the Cost of Counterfeiting

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Raising the Costs of Counterfeiting

Marginal Cost of Production

Cost of Production & Distribution

Probability of Detection & Monetary Penalty

Examples India: penalty for counterfeiting to the death penalty.

Cambodia: poster and radio education campaign has educated

patients to distinguish fake tablets

Nigeria: high-school essay contests to publicize the dangers of

counterfeit drugs

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Links to Transnational

Organized Crime

Wide Variety of Actors

Traditionally structured hierarchical crime groups

Highly organized, informal networks online

Small Groups of 3-10 members

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Organized Crime: Regional Perspective

Within North America and Europe: numerous investigations have

linked the Hell’s Angels to the production and distribution of

counterfeit medicines, in particular ED medications and steroids.

Canadian authorities began an organized crime investigation of

counterfeit oxycontin. The counterfeit versions of oxycontin have

been traced to at least three deaths.

In Mexico, most of the pharmacies located along the [US-Mexican]

border, are owned and operated by Mexican organized crime groups.

In Eastern Europe, OCGs are seemingly increasingly involved in the

manufacture and supply of doping substances.

The greatest OCG activity appears to be in Asia. OCG with likely

Triad connections distributed counterfeit ED medications, operating

primarily through local nightclubs and brothels in Malaysia.

In India, some local drug manufactures make legitimate products

during the day and run a night shift to make counterfeits.

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Terrorism: Bottom Line

“there is no conclusive evidence of an established

connection between OCGs operating with in the

pharmaceutical crime area and terrorism”.

INTERPOL, 2014

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Conclusion:

Three Modest Recommendations

Better Data

Investment in mechanisms and methodologies

More Extensive Information Sharing

Greatest Victories, Largest Failures

Development & Adoption of an

International Public Health Treaty

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“Counterfeit medicines are a greater

public health threat than AIDS or

malaria.”

- African Health Official1

1Statement of African health officials, as quoted by Harvey Bale, President of the International Federation of Pharmaceutical Manufacturers Associations (IFPMA) (Bale 2003).

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Thank you

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