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Counter measures

From a legal perspective, dealing in counterfeit medicines is wrong on several fronts
Operation Stormgrand, an investigation by the The Medicines and Heatlthcare Products Regulatory Agency (MHRA), uncovered the largest ever counterfeit medicines racket in the UK with £1,500,000 worth of fake drugs being seized by HM Revenue and Customs (HMRC). Four men were convicted in September 2007.

Counterfeiting operates on a global scale. The men convicted as a result of Operation Stormgrand were only part of the UK distribution arm of a worldwide counterfeiting ring, operating from China, India and Russia and extending to the Caribbean and the US.

Estimates of the market share of counterfeits range from 1 per cent for developed countries and 10 per cent for developing countries. Total sales of counterfeit drugs could surpass $75bn in 2010, according to the World Health Organisation (WHO). Internet sales are a particular problem; the WHO estimates that medicines purchased online from sites that conceal their physical address are counterfeit in more than 50 per cent of cases.

From a legal perspective, dealing in counterfeit pharmaceuticals is wrong on several fronts. First the supply of counterfeit medicines constitutes a breach of medicines marketing legislation. All pharma­ceuticals must have been granted a marketing authorisation before they are launched on the market and it is generally an offence to market a medicine that has not been authorised.

The most obvious and dangerous form of counterfeit drug is fake pharmaceuticals manufactured by unlicensed producers. Often no attempt is made to replicate the therapeutic attributes of the original product and, worse, dangerous chemicals may be added.

Another form of counterfeiting involves tampering with the product; liquid medicines are diluted, tablets can be crushed, mixed with other ingredients and then reconstituted into tablets at lower dosages.

A third type of counterfeiting is where the product itself is not tampered with, but the packaging is re-labelled to indicate, for example, a higher dosage than is actually present, or to obscure an expired use-by date.

One viewpoint is that the greater the range of packaging on the market for the same product, the greater the acceptance by customers that the genuine product comes in many different guises, and the more likely it will be that counterfeits will go unnoticed.

Counterfeits also often involve an infringement of the intellectual property rights of the original producer. Fake products frequently infringe the trademarks and/or copyright in the original packaging and patient information leaflets. In addition to giving rise to civil liability, both the unauthorised use of a trademark and dealing in articles that infringe copyright, constitute criminal offences. 

Pharmaceutical companies have been implementing measures to help identify and reduce the incidence of counterfeit products. Two such remedies are supply chain management and product identification and tracing.

The more tightly a supply chain is controlled, the fewer the opportunities counterfeiters have to put their illicit goods on the market unnoticed. Many pharmaceutical companies are therefore now monitoring their products more closely throughout the supply chain. This may involve reducing the number of wholesalers; obtaining further details of relevant partners, transit providers and port locations; and monitoring contract manufacturing partners to ensure that they are producing only authorised products and not running an extra shift to produce goods for illegal distribution.

Some UK companies have introduced direct-to-pharmacy (DTP) supplies where a logistic services provider arranges physical supply of the product to pharmacies, but the product remains in the ownership of the pharmaceutical company until it is delivered to the pharmacist. One of the principal reasons for such an arrangement is to help avoid counterfeits entering the normal wholesaler supply chain.

Competition law is particularly relevant in the context of supply chain management techniques and should be carefully considered before such techniques are implemented.

Genuine products may be tagged by various means to ensure either their traceability through the supply chain or to enable them to be easily differ­entiated from counterfeit products, or both.

Tagging may be overt or covert, with covert tagging being more difficult for counterfeiters to detect and imitate but also also more expensive.
The most common form of overt tagging is the use of holograms and digital printing techniques. Covert tagging mechanisms include:

  • Electromagnetic tags - which give off a signal when scanned
  • Radio frequency identification (RFID) tags - where chips store and transmit this data to a local receiver
  • Bio-molecular 'taggants' - where a complex molecule may be introduced into packaging or the product itself.

    Taggants are extremely difficult for counterfeiters to detect but manufacturers need to use complex forensic methods to examine products for taggants. Many manufacturers use a combination of methods to help protect their products against counterfeiting.
    The legal enforcement procedures that were employed in Operation Stormguard were only enacted when the goods entered the UK. Although many other countries have similar measures in place, countries with rapidly developing economies, do not.

    There have been recent attempts to harmonise and co-ordinate the criminal enforcement of intellectual property rights across Europe. A draft directive on the criminal enforcement of intellectual property rights has been adopted by the European Parliament and is currently being considered by the European Commission.

    Unfortunately, the draft has become somewhat mired since it strayed from its original focus on counterfeiting and piracy to seek to criminalise all intellectual property infringements. This broadening of scope has been much criticised for potentially limiting free trade, by stifling the ability of businesses to challenge each other's intellectual property for fear of criminal sanctions. This could make it very difficult for new market entrants.

    A wider initiative to address counterfeiting was launched by the European Commission in October 2007. The Commission announced that it would seek a mandate from the European member states to negotiate a new Anti-Counterfeiting Trade Agreement (ACTA) with major trading partners, including the US, Japan, Korea, Mexico and New Zealand.

    The goal of ACTA is to combat counterfeiting by increasing international co-operation, leading to harmonised standards and better communication between authorities.
    It is hoped that additional countries will sign up to ACTA over time, helping to  spread harmonised standards.

    In particular Increased co-ordination between more developed nations may help to increase the pressure on countries such as China to toughen its stance on counterfeits.

    To prevent, or at least reduce, the escalating problem of counterfeit medicines, co-ordination is required between existing national authorities (such as MHRA and HMRC in Operation Stormgrand) and between government authorities and pharmaceutical companies. Recent initiatives instigated by the European authorities should encourage such co-operation.

    The authors: Sarah Hanson and Rebecca Singleton, CMS Cameron McKenna's international life sciences practice.

  • 1st May 2008


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