When Maxine Blount was detected with malignant cancer infection, doctors decided to treat her using a combination of chemotherapeutic drugs. Alongside, Epoetin alfa (Procrit) was administered to prepare her better for each chemotherapy treatment, reduce pain and help recover fast. However, a few dosages later, it was detected that the Procrit she purchased from the local pharmacy is a counterfeit with insufficient medication in it. Maxine Blount died a year later with much pain and suffering.
The Maxine story unfolds the clear danger of counterfeits. Counterfeits and parallel trade threaten to crack the healthcare value chain. Growing trade in counterfeit products will create social and economic costs and further burden the global healthcare expenditures.
According to the latest WHO report, counterfeit medicine is defined as "any product that is deliberately and fraudulently mislabeled with respect to identity and/or source." The word counterfeit is universal and can be applied to drugs/biologics and devices. In case of drugs, it covers both high value (branded) and high volume (generic) medicines.
According to WHO counterfeits are:
" Those with the correct ingredients but fake packaging
" With different ingredients
" Without or with insufficient active ingredients
These counterfeit medicines influence the healthcare value chain at different positions. See Figure 1.
Figure 1: Indicates influence of counterfeits: cracks in the global healthcare value chains.
Recent evidences on counterfeits establish the scope and scale of the problem. Globally, counterfeiting is not just limited to high value branded drugs. It now includes everything the pharmaceutical industry produces globally from high value life style, therapeutic and life saving prescription drugs to generic therapies for malaria, AIDS/ HIV and TB.
World wide parallel trade seizures include branded life style drugs like Viagra, Cialis, and Oxycontin, targeted therapeutics like Reductil, Lipitor, Zyprexa, Combivir and Gleevec, life saving drugs like Erythropoietin's (Epo, Epogen, Neupogen, and Procrit), branded and generic antibiotics, antivirals like Tamiflu, generic antibiotics, vitamins, anti-malarial's like Artusenate, vaccines, hypnotics and drug therapies for HIV/AIDS, TB.
Counterfeits and parallel trade on medical device solutions is also on the rise. This includes complete devices like glucose monitoring solutions, mesh implants, catheters, stethoscopes and device components for assembling intra-aortic pumps, cardio-vascular and orthopaedic solutions.
Given the operational nature of parallel trade and secrecy around supply of counterfeit products, estimates for market size often proves difficult. In 2006, gross product sales for the pharma industry, was estimated at $602 bn at an average annual growth rate (AGR) of 8%, while gross sales for the generic pharma products or the high volume medicines, were estimated at $44.4 bn with an AGR of 12%. Also, gross device sale was estimated at $260 bn with an AGR 6%. The industry is expected to show strong growth until 2010.
Figure 2 & 3
Further, 85% of gross sales are accounted by top three markets - US, EU and Japan. The rest 15% comes from Eastern Europe, Australia, Latin America, China, India and Asia pacific countries.
The WHO and International Federation for Pharmaceutical Manufacturer Association (IFPMA) indicates that growth in counterfeit trade is outperforming that of the industry. Counterfeit drug trade today account for 10% of the industry sales by value and is estimated to be close to $60 bn. Further, it is estimated to reach $75 bn (by value in 2010). On the other hand, counterfeit devices account for 6% of the global sales and are estimated to be close to $16 bn in value. However, the market estimates do not include either un-audited pharmaceutical/device sales or un-accounted markets.
Secondly, counterfeits and parallel trade is a global menace creating cracks in the healthcare value chain. This is observed to be more global now, and disproves the western theories, which blame the developing nations for encouraging the trade. For example, 20% of the branded drugs and close to 60% of the generics sold globally are counterfeit. Apart, in US alone it is estimated that close to 15% of the branded drugs sold are counterfeits, as compared to 20% in Europe.
Globally, the incidents of parallel trade, including counterfeits, diversions and thefts are on the rise. Comparative data shows that the number of counterfeit incidents reported and seized has increased 40% in 2005 to 781 cases from 557 in 2004. Similarly, when data was compared on the number of countries involved in the parallel trade, there is 32% increase to 89 in 2005 from 67 in 2004.
The counterfeit data establishes two trends:
" Globally, healthcare is under pressure for the cost effective and alternative solutions
" Most of the innovations in the west have not really percolated enough in the east to demonstrate the healthcare value, since counterfeits account for 80% of the national drug sales in the least developed world. (See Figure 3: Showing the percentage of counterfeits against national industry sales and Figure 4: Top 10 destinations where counterfeits are seized)
Significant cross border price differentials often attract many small and medium pharma manufacturers to counterfeit and parallel trade. For example, the US price for branded medicines is 67% higher than that of in Mexico or Canada. One estimate puts counterfeits trade from Mexico to US to be as high as $650 mn per annum. The Mexican issue is quite serious, since counterfeit versions of drugs like Lipitor, Viagra and Evista, which can be very dangerous, are readily available in border towns like Juarez, Los Algodones, Nogales and Tijuana. Cross border trade often becomes one of the most used methods for counterfeit and parallel supply. This is evident from Europe, where counterfeit drugs enter via Eastern Europe and Russia.
There is also rapid growth in internet pharmacies. The internet allows official drug monitoring bodies to be bypassed and provides counterfeiters with ready access to consumers and markets. A recent example was the sale of illegal generic copies of Viagra (sildenafil, Pfizer) in UK resulting in patient concern and possible threat to national healthcare system (NHS, UK).
Thirdly, counterfeit manufacturing is spread equally across Latin America, East Asia, Russia and Eastern Europe with countries like China, South Korea, Vietnam, India, Mexico, Colombia, Argentina, Latvia and Ukraine playing active role. However, there is no factual data about the scale and scope of the problem within each of these countries. But, in countries like India (~16000 units) and China (~1500 units) many small and medium pharmaceutical enterprises produce counterfeits. These units, which form part of the wage intensive and unorganized sector, are often motivated by profits resulting due to restrictive and differential pricing.
Cost of counterfeits and parallel trade is sum of both social and economic cost resulting in burden on the national healthcare expenditure. Social cost of counterfeit trade is the result of patient suffering, loss of life and additional medical resources required for recovery. The economic cost is the cost of healthcare solution, provider payer process burden, public health burden and cost of healthcare delivery system. Further, this can also involve indirect costs like loss of industry confidence and national healthcare programmes. This will put industry under tremendous pressure to not only discover drugs, but also create safety processes/technologies that will enable access to right medicine to right patients at right cost. Industry needs to invest in tracing the counterfeits, remodel of the packaging and distribution systems and building security measures.
To validate the point of social cost due to counterfeits, let us look at few examples. A recent official estimate in China suggests that approximately 192,000 Chinese patients are reported to have either suffered or dead, since 2001 due to counterfeit drugs and parallel trade. In countries like Haiti, Nigeria, Bangladesh and Argentina more than 500 patients, predominantly children, are known to have died from the use of the toxin di-ethylene glycol used in the fake paracetamol syrup, while in Niger, the authorities received a donation of 88,000 Pasteur Merieux and GSK vaccines from neighboring Nigeria, post inoculation on some 60,000 patients resulted in death of more than 2,500 people.
Apart, social costs will include cost of procurement and regulation. For example, the recent discovery of counterfeit antiretrovirals in central Africa raises the prospect of a disastrous setback in the treatment of AIDS in sub-Saharan Africa, unless vigorous action is implemented. Similarly, a nongovernmental organization in a Southeast Asian country bought 100,000 inexpensive 'artesunate' tablets only to find they were counterfeit.
Several factors like social, political and economic are involved in counterfeit trade. Demand for cheaper alternatives, coupled with cost and access to quality healthcare is driving parallel trade and counterfeits. In general profit motive is built where demand exceeds supply or where there is higher price differential for meeting the demand elsewhere. Further, counterfeit drugs may not require infrastructure/ facilities and no overhead costs due to quality assurance or meeting GMP standards.
Corruption and conflict of interest, many a times, adversely impact the regulatory enforcements. Pharmaceutical companies and governments are reluctant to publicize the problem to health staff and the public, apparently motivated by the belief that the publicity will harm the sales of brand-name products in a fiercely competitive business.
Weak legislation is often identified as the single most important factor driving counterfeit trade. At present, out of the 191 WHO member states, about 20 per cent are known to have well developed drug regulation, 50 per cent are at various stages of implementing drug regulation and the remaining 30 per cent either have weak or no drug regulation. Enacting deterrent anti-counterfeiting legislation alone will not solve the problem. It needs to be enforced. Lenient punishments for offences tend to encourage criminal activities such as medicines' counterfeiting, particularly when the penalties for counterfeiting non-medicinal products are more severe. (Above Figure 5: Retail Price / Duties & Taxes).
Pharmaceuticals/ ingredients meant for export are often under-regulated when compared to those that are intended for domestic use. Most of these ingredients are exported through free trade zones and associations. In 2000, the US FDA had linked adverse events in 155 US citizens to drug ingredients originating from China and found that 4, 600 bulk drug/API exports to the US are not inspected.
A safe and global healthcare value chain should be the priority for all. This will require formation of global alliances for early detection and harmonization of enforcement procedures. Policymakers and enforcement authorities need to prioritize the fight against counterfeiting of medicines. Tighter, compulsory control of the supply chain and tackling of counterfeiting at the source of entry into the distribution chain is required. Harmonization of reporting forms in line with the WHO's Rapid Alert System (RAS) and establishment of controls to the online trading pharmacies' will help in creating safe healthcare vale chain.
Public-private collaboration
Cooperation agreements between the industry and the authorities are already in place in Colombia, Argentina, Brazil, Paraguay and Venezuela. In some countries (Argentina, Colombia) lobbying is being made in Congress to obtain the category of criminal offense and to increase penalties.
For example, the US Pharmaceutical Market Access Act of 2003, passed in July, requires counterfeit-resistant technology in drug packaging, similar to that used by the Bureau of Engraving and Printing on US currency. The act also allows US consumers to purchase FDA approved prescription drugs manufactured at FDA approved facilities from 25 industrialized countries.
The Rapid Alert System (RAS) communications network sends reports on the distribution of counterfeit medicines to the relevant authorities. RFID and more sophisticated technologies for product tracking need to be developed and applied globally.
One the other hand, industry must play more proactive role and move from its current position on intellectual property and protection for innovation. Cost should be treated against the existing demand for such solutions like lowering the cost of HIV/AIDS drug therapies in developing countries will not only improve patient access to quality medicine but will reduce the profitability for counterfeit trade.
Value based pricing, for example, is adopted in countries like Australia. Here the Pharmaceutical Benefit Pricing Authority (an official, independent body) determines the drug price on the basis of therapeutic value. Pooled procurement and negotiated bulk purchase schemes, is also ideal for countries with small national populations like the Caribbean nations or for the bulk procuring agencies like national health departments. This method enabled 50 per cent reduction in prices and allowed the countries to develop a single multi-country unit with expertise in drug evaluation and price negotiation.
The present international trade rules, which permit compulsory licensing, offer sensible ways of doing this. In this context, the Indian drug industry is a good example. India, for example though has enacted patent laws, will be able to produce medicines under compulsory licensing. Besides, under the national list of essential medicines, the state can control price of these medicines so as to ensure universal accessibility. For example, Lariam, a treatment for Malaria costs $37 in the United States, but only $4 in India and AZT. Also, an AIDS treatment costs $239 per month in the US, but only $48 in India.
(The author is an industry expert and views expressed here are his personal.)