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Do you know...

... about the risks to pharma firms of being found liable over unsafe counterfeit drugs?

Q: What constitutes a `counterfeit' medicine?
A: There are a number of different definitions of a `counterfeit' drug:

The World Health Organisation defines a counterfeit medicine as one that is 'deliberately and fraudulently mislabelled with respect to identity and/or source'. The US FDA's definition is 'a drug which, or the container or labelling of which, without authorisation, bears the trade mark, trade name, or other identifying mark... of a drug manufacturer... which thereby falsely purports or is represented to be the product... of such manufacturer'.

These definitions deal essentially with labelling and trade mark issues, but do not perhaps highlight the real nature of the problem. There are many different types of counterfeit drugs, which may be categorised broadly as follows:

ï complete fakes: attempts are not always made to recreate the genuine therapeutic attributes of a drug; rather, ingredients are selected for whatever combination `looks right' - dangerous chemicals may even
be included

ï tampered fakes: original ingredients will often be tampered with; the liquid formulations might be watered down or tablets may be powdered, diluted and reformed with other ingredients

ï re-labelled fakes: authentic drugs are supplied but are mislabelled to show, for example, a higher dosage, or to obscure an expired `use by' date.

The complications and serious health consequences can be as severe for any of these categories of counterfeit drugs.

The other potential problems include patient confusion, brand dilution and the potential liability for manufacturers and others in the supply chain.

The problem has been exacerbated by the multitude of opportunities that exist to enter the supply chain.

In particular, several different types of packaging could be in circulation for the same or similar products; whether this is due to repackaging of parallel-traded goods, foreign imports, generic copies or otherwise, the result is confusion in the minds of consumers, opening the way for drug counterfeiters to enter a country's supply chain unnoticed.

Sometimes medicine manufacturers do not help themselves by `dumping' stock onto the market to meet their quotas, by not effectively monitoring and controlling medicine production and by allowing `overruns' to enter countries' markets at substantial discounts.

Possibly the greatest opportunity for drug counterfeiters to gain entry to the pharmaceutical supply chain, however, is provided through the vehicle of internet pharmacies.

The perfect crime
Not only are the opportunities great for counterfeiters to enter the supply chain, but the risks are also relatively low.

Counterfeiting drugs has been described as the `perfect crime' - if the patient's condition improves, no-one is the wiser; if the patient's condition fails to improve, then this will be attributed to their poor state of health, rather than to the drug.

By the time counterfeiting may be suspected, the evidence will have been consumed and often the packaging will already have been disposed of.

Even if a product counterfeiter is caught, the penalties are very low, particularly in comparison with those for narcotics trafficking. Furthermore, the counterfeiter will be aware of the
substantial financial gain that can be made by such activities.

For example, a 12-week course of the body-boosting drug, Serostim, used to relieve the wasting symptom of AIDS, can cost $21,000.

Corporate liability
The protection of human health is, of course, paramount to all those concerned with dealing with the serious problem of counterfeit drugs.

The actions taken by pharmaceutical companies against counterfeiting are also testament to a further consequence of the practice - that is to say the potential liability on the part of manufacturers, and others in the supply chain.

Q: Who can be found to be liable for counterfeit drugs?
A: While the precise legal position will vary in different countries, it is likely that an injured party will have two principal causes of action - based on contract or negligence.

Under the law of contract, the injured party will be likely to have an action against the retailer selling the goods. Under English law, for example, this is a cause of action with strict liability and there is no need for the injured party to establish recklessness, carelessness, or other intention on the part of the retailer. Since there are unlikely to be contractual arrangements with others in the supply chain, a claim in contract will only lie against the retailer.

A further cause of action may arise, however, in negligence, which may be brought against any member of the supply chain who has breached a duty to take reasonable care. Since negligence is not concerned with the product itself, or its quality, it will not be a defence for members of the supply chain to argue that the goods supplied were not theirs and that they should not, therefore, be held responsible for them.

Rather, members of the supply chain will be under a duty to conduct themselves to a reasonable standard of care to prevent harm to persons whom it might reasonably be foreseen will be affected by their actions. What constitutes reasonable care, to whom the duty extends and foreseeable risk, are subject to debate.

In the meantime, all supply chain members should exercise caution and ensure all reasonable steps are taken (and are seen to be taken) to minimise the risk to patients.

The Author
Sarah Hanson and Nick Beckett are partners in CMS Cameron McKenna's international lifesciences practice

2nd September 2008


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