Updated: Jun 22
What do we imagine when we hear the 'counterfeit goods'? Fake high-end Carerra or Rolex watches? Lookalike Louis Vuitton bags? While indeed these fake high end luxury goods grab attention, counterfeiters mint millions by manufacturing much humbler products, fake medicines and pills for instance. Fake life style medicines including those used for health and cosmetic enhancements etc. contribute to the counterfeit pharmaceutical market which is pegged as a €188 billion (US$200 billion) annual business, making them the largest segment of the €1.6 trillion fake goods sold worldwide every year. Even in the markets with most security and regulations in the world, at least 1 percent of all drugs in circulation are counterfeit. For instance in Germany alone more than 5 million counterfeit tablets were caught in 2015. In developing regions of Asia and Africa, the proportion of fake pharmaceuticals can be as much as 70 percent.
Roughly one-third of the world’s countries lack effective drug regulatory agencies, making them easy prey for counterfeiters. Although there is no international consensus of what makes a drug counterfeit, the World Health Organization (WHO) defines them as “drugs that are deliberately and fraudulently mislabeled with respect to identity and/or source.” They explain that counterfeits are a type of substandard drug, which are “genuine medicines which have not passed the standards and quality testing protocols set for them.” In 2019, WHO analyzed drug samples and found that 10.5 percent of pharmaceutical drugs in low and middle-income countries like India are fake or substandard. The absence of anti-counterfeiting measures exposes millions of people to potentially lethal chemicals and undermines the growth strategies of companies. More ominously, counterfeiters are moving beyond their traditional focus on “lifestyle” drugs that ensure higher margins.
CONSIDER SOME FACTS:
1%–30% of drugs in circulation are fake and developing countries are more affected than developed countries due to stringent regulatory measures in the latter.
1 million patients die annually from toxic counterfeit pharmaceuticals
450,000 preventable malaria deaths each year are caused by counterfeit pills. Online purchases of counterfeit drugs are major contributors.
The World Health Organization estimates that 50% of the drugs for sale on the Internet are fake, and 90% of these have detrimental effects.
The rising tide of counterfeit drugs reveals numerous gaps in governmental and industry efforts to safeguard global pharmaceutical supplies. Even the stricter security regulations in effect in European countries are far from foolproof. Drug companies are spending billions of dollars every year to combat this growing threat to their bottom lines and public health. However, the cost-centric view of supply chain security misses the opportunity created by a new generation of anti-counterfeiting technologies and related services that offer more than just stronger defenses against fake drugs.
Counterfeit pharmaceuticals exact a devastating human toll. Some 1 million people die annually after taking fake drugs, according to WHO estimates. Some are killed outright by counterfeits containing toxic ingredients such as rat poison or floor wax. Even when fake drugs don’t kill people, they can cause serious harm. Many contain few or no active ingredients, allowing patients to suffer and sometimes die from preventable or curable illnesses. Less tragic but equally real are the financial consequences of counterfeiting. Along with suffering about €188 billion annually in lost sales, drug-makers are spending big money on marginally effective anti-counterfeiting measures.
A new mandatory method called “mass serialization,” often combined with “track-and-trace” features, is becoming the worldwide standard for regulators working to stem the tide of fake drugs. Although it is not an authentication method, mass serialization can be used to trace products. Mass serialization encodes each drug package with a unique identifier, usually a bar code or a QR code. Manufacturers can use linear, two-dimensional, or radio frequency identification (RFID) coding. As each package comes off the production line, its identifying code is entered into an online database. From there on, each package can be monitored and checked against the database at each point in the supply chain, from manufacturer through wholesaler, re-packager, and pharmacist.
The E.U.’s Falsified Medicines Directive mandated drug companies to adopt mass serialization and other anti-counterfeiting measures in 2019. Manufacturers operating in the E.U. have to add unique identification numbers to the outer packaging of all prescription drugs, and equip containers with tamper proof seals.
A glaring weak spot is the bar code attached to exterior drug packaging - boxes with blister packs of tablets, and bottles containing loose pills. This might allow a counterfeiter with a Smartphone camera and access to production or distribution facilities to compromise codes on external containers. Counterfeiters can use photos of legitimate bar codes to create forged ones and use them on packs of falsified drugs,
New technologies under development promise the enhanced anti-counterfeiting protections and higher risk/reward payoff that executives say they want. These systems are harder to crack, so they don’t require frequent, costly overhauls. And they fill a critical gap by enabling companies to embed identifiers below secondary packaging.
What’s more, advanced anti-counterfeiting systems go beyond thwarting fake drugs to create value in other ways. The same capabilities that enhance detection of counterfeits also drive supply-chain efficiencies.
Pharma Companies are incorporating new technologies into end-to-end anti-counterfeiting solutions with differentiating capabilities such as monitoring of high-value product flows, creation of custom-tailored data sets, and automatic reporting of counterfeiting attempts.
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DATA Source: Annual press conference of the German Customs Administration, April 2016; Interpol, “The dangers of counterfeit medical products”; Sophic Capital, “A Simple Solution to Protect Consumers and Pharma Companies from Dangerous Fake Drugs,” 2014; Lancet, “Rise in online pharmacies sees counterfeit drugs go global,” 2015; PwC Strategy& analysis
Source: IfD Allensbach (ACTA 2015 and ACTA 2016); James Dudley newsletter, Jan. 2017; NetNames, “The risks of the online counterfeit economy