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4 June 2018Americas

Protecting patients, and patents

Disease complications, antibiotic resistance, and even death. These are just some of the consequences counterfeit drugs can have.

According to the World Health Organization (WHO), up to two billion people cannot get medicines that are crucial to their health, while many millions are at risk of falling into abject poverty due to healthcare costs they cannot afford. The organization says that this limited access to quality medicines “creates a vacuum that is too often filled by substandard and falsified products”.

The WHO estimates that one in ten medical products circulating in low and middle-income countries is either substandard or counterfeit.

While counterfeit drugs can ruin patients’ lives, those manufacturing the fraudulent products are primarily motivated by just one thing: money.

“Commercial advantage is the driving force behind the creation of fake drugs by the counterfeiters,” comments Indonesia-based lawyer Gunawan Suryomurcito, consultant at Rouse.

“It’s a very lucrative business. It is said that by investing in making counterfeit drugs the profit margin is 70%, with very limited legal consequences compared to making narcotics which has only a 30% profit margin.”

According to the WHO, the global sale of legitimate medicines rose above $500 billion for the first time some 15 years ago. Since then, sales have doubled to reach approximately $1.1 trillion. The largest growth has occurred in middle-income markets.

Although this may have resulted in lucrative business opportunities for pharmaceutical companies, it has also opened the door to medicines, vaccines and other products that do not meet quality standards, says the WHO.

The business of counterfeit drugs can have severe consequences on human health, but it can also have damaging impacts on pharmaceutical companies. If a pharmaceutical company is targeted by counterfeiters, it can affect the reputation of the company.

“Users who were deceived by counterfeit drugs or suffered illness and other side-effects from using counterfeit drugs will stop using that particular drug either for fear of its side-effects or from the inability to identify real drugs from counterfeit drugs,” explains Singapore-based Alban Kang, partner at Bird & Bird.

“This will affect the goodwill and reputation of the brand and name of the pharmaceutical company.”

A variety of responses

While the problem of counterfeit drugs is an international challenge, not every corner of the globe has the same level of sophistication when addressing the issue, with different countries tackling the issue in different ways.

But even in developing countries, the authorities are tackling fake goods head-on.

The Indonesian Food and Drug Administration, working alongside the local police, usually takes immediate action to seize counterfeit drugs when they are reported, says Suryomurcito.

However, drug stores selling counterfeit drugs often have their own security systems in place and “have spies all over the place”, he claims. When something suspicious appears, the stores swiftly close.

According to Suryomurcito, there is no definition of counterfeit drugs in Indonesian law that governs production and distribution of medicines. “This fact combined with not-too-strict punishment articles in the laws and a weak enforcement system makes pharma companies frustrated in their efforts to combat counterfeit drugs,” he explains.

Suryomurcito describes the counterfeit manufacturers as “cunning and resourceful”. In several cases that were brought before the courts in Indonesia, the accused were not the real perpetrators of the infringing activity, but only “puppets”.

He comments that the real perpetrators often have the resources to buy their way out of facing litigation.

Although Indonesia may have difficulties in preventing the threat of counterfeit drugs, the country is taking steps to enforce stricter repercussions.

The new Indonesian Trademark Law and Geographical Indication Law (Law no. 20 of 2016) imposes a severe punishment against counterfeiters of drugs.

Suryomurcito explains: “Trademark counterfeiting of drugs which cause health risks or death are being threatened by a ten-year imprisonment and fine of IDR 5 billion ($360,000). Although IP rights sanctions may not be the best approach against counterfeit drugs, it’s quite a milestone in the quest of combating counterfeit drugs in Indonesia.”

Singapore, on the other hand, is relatively clear of counterfeit drugs compared to developing countries in Southeast Asia, says Kang.

“In a lesser developed consumer market, users are less perceptive to counterfeit drugs being sold in the market. Also, the high costs of genuine drugs is a factor in the rise of counterfeit markets,” he says, echoing the WHO’s research indicating that millions are at threat of falling into abject poverty due to the price of medicines, presenting an opportunity for substandard versions.

In an effort to prevent counterfeiters, pharmaceutical companies have a responsibility to help consumers understand the risk, says Kang.

“Pharmaceutical companies should ensure there is sufficient public education on the use of counterfeit drugs and should have anti-counterfeiting measures on their packaging so that users will be able to identify genuine products being sold in the market,” he says.

Ways to fight back

Offering a view from another jurisdiction, Canada, Gunars Gaikis, partner at Smart & Biggar/Fetherstonhaugh, says that as long as a pharmaceutical company has a secure supply chain, there shouldn’t be an issue with counterfeit versions of drugs entering into the market. “It’s all about supply chain management,” he says.

The large pharmaceutical companies tend to make the drugs themselves and supply them through a secure supply chain to various countries.

When the drug enters a country, it is then distributed to establishments within that country, such as pharmacies and hospitals.

“The hospitals and pharmacies and other health institutions that purchase drugs are quite careful and know to work within the existing supply chain,” he says.

While Kang says is it difficult to assess whether counterfeit drugs will become more prominent in the market, he says the problem won’t be going away.

“The issue will remain as long as there is a demand for such low cost drugs,” he believes. “Also, many of the counterfeit drug syndicates are involved in illicit drug operations as they have the resources to supply the market with such counterfeit drugs.”

In an era when e-commerce is becoming more widespread, internet pharmacies are providing counterfeiters with alternative avenues to get their fake medicines into the market.

According to the WHO, between 19 and 26 million people in the US alone now buy medicines over the internet.

Gaikis says: “In various countries people go online and feel they can get the drug they want more cheaply if they order it through an internet pharmacy.

“There are websites that offer all types of drugs and most of them are misleading. A patient in Canada may think they are getting a drug from Canada, but it could actually be coming from Mexico or some other less developed country.”

Gaikis adds that most capsules and tablets from pharmaceutical companies will have some sort of identifier, such as numbers or symbols, to represent that they are genuine.

Although brands will typically market products in boxes with logos on them, if some information on suspicious goods is not correct or missing, then an investigation can be triggered.

“In the extreme, the counterfeit product may not be identifiable visually,” he says.

In this scenario, chemical analysis may be the only way to find if the active ingredient is present, or if there is the correct dosage of it.

While supply chain management plays a significant role in protecting a pharmaceutical brand and its products through IP rights, there is still the risk of counterfeit versions slipping through the cracks and entering the market.

If a brand does see its counterfeit products on the market, there are variety of legal means available to commence legal action, says Gaikis.

“Any such company would probably go to court to obtain an injunction and an order to cease the counterfeit goods,” he explains.

“The basis for that could be patent rights, or there could be trademark issues if the counterfeiter is using the brand’s trademark, and there could be counterfeit issues.”

Because counterfeit drugs can lead to irreparable damage to human health, Gaikis comments that the judge would probably be sympathetic towards the pharmaceutical company and the counterfeit activity would be easy to stop.

But while judges may be sympathetic towards victims of fake pharmaceuticals, the counterfeiters certainly won’t be.

Fact file:

  • Between 19 and 26 million people in the US buy their medicines online
  • Pharmaceutical counterfeiters in Indonesia can face a ten-year imprisonment
  • One in ten medical products in low and middle-income countries is substandard
  • Up to two billion people cannot get important medicines