Counterfeit In Pharma: 3 Strategies To Protect Your Brand, Reputation and Customers

Counterfeit In Pharma: 3 Strategies To Protect Your Brand, Reputation, and Customers

Drug counterfeiting is a significant and growing issue in the innovations-lacking pharmaceutical industry. It poses major health and safety threats to the public, but it also affects legitimate producers as they lose sales and risk harming their reputations. International organizations, governmental law enforcement, and policy-making authorities, as well as pharmaceutical activists, are taking a number of actions to prevent fake medicines from entering the markets, however, it is not always enough. In this article, we share some tactics manufacturers, CMOs, wholesalers, 3PLs and dispensers can implement to protect their brands, business partners, and customers.

What Makes a Drug Fake?

World Health Organization defines a counterfeit medicine as one which is deliberately and fraudulently mislabeled with respect to identity and/or source. And, according to the European Drug Agency, it is a medicine made by someone other than the genuine manufacturer, by copying or imitating an original product without authority or rights. 

These may appear in a variety of faces including medications with no active pharmaceutical ingredient (API), those with an incorrect amount of API, an inferior-quality API, a wrong API, or contaminants, as well as products that expired and were repackaged. And the most dangerous types of fake drugs are those that were incorrectly formulated and/or substandard medicines. Not only finished products can be falsified, but also active/bulk ingredients, labeling, etc. Both branded and generic products can be counterfeited.

Why Are Pharmaceutical Products a Target?

According to the World Health Organization, approximately 11% of medications sold in developing countries are counterfeit. They account for approximately 144,000 additional deaths annually from imitation antibiotics and anti-malarial drugs alone. Europol, in its turn, states that counterfeit pharmaceuticals are “a substantial threat to the EU and affect most, if not all, Member States.” Latest studies show that substandard and falsified medical products constitute 1% of the trade in developed countries, and up to 30 % in certain Asian, African, and Latin American countries.

No doubt, the pharma industry is one of the most regulated sectors, so the question is: Why do medicines attract counterfeiters that much? 

In fact, there is a complex of logistics, regulations, and other reasons that make medical products a high target for fraudsters. Here are the most common ones:

– Fakes can be made relatively cheaply with lower financial risks for criminals.

– Globalization of pharmaceutical production and supply chains.

– Lack of rigorous and universal drug regulations. The requirements vary greatly in industrialized countries, while the governments in the developing world still lack adequate enforcement.

– Even in countries with stronger compliance requirements, the risk of prosecution and penalties for counterfeiting are inadequate.

– The end-user has little knowledge of the product. Medicines are a ‘credence’ good, which means their qualities cannot be observed by the consumer after purchase.

– Falsified pharma products are very similar to actual ones, usually, they have nearly identical packaging and drug forms.

– Price is a critical driver of fake medicine consumption, especially in low-income or rural communities.

– Inappropriate medication use (IMU) by consumers, especially by elderly people, or for another purpose, such as getting high.

In other words, the lack of common drug regulations, the complex nature of the global pharmaceutical supply chains, and the sophistication of counterfeiters of medical products make it difficult for regulators, pharma companies, and consumers to solve the problem.

What Products Are Affected?

The EUROPOL report shows that the most common fake drugs include the following:

  • anti-cancer drugs
  • analgesics, 
  • antioestrogens, 
  • antivirals, 
  • antihistamines, 
  • anxiolytics,
  • psychiatric drugs, 
  • erectile dysfunction medicines, 
  • anabolic substances, 
  • metabolic regulators, 
  • self-testing kits for HIV and other infections

And, according to WHO, antimalarials and antibiotics are amongst the most commonly reported substandard and falsified medical products.

Other high-demand, expensive medications like antibiotics, vaccines, cholesterol-lowering agents, anti-arthritis medications, and hormone replacements are the biggest targets for fraudsters.

The same picture could be seen during the COVID-19 pandemic when criminals had new opportunities to capitalize on the high demand for certain goods. Fafe medical and personal protective equipment products were among the most proliferating both online and offline. The report published by INTERPOL with respect to its global operation conducted in March 2020 shows that only falsified medical products related to COVID-19, including 34,000 counterfeit and substandard face masks, are worth 14 million USD.

US brands are more often affected according to the OECD/EUIPO database for the 2014-2016 period. They were followed by manufacturers and producers from the United Kingdom, France, Austria, Germany, and Switzerland.

What is the Danger of Falsified Medications?

According to statistics, the total number of counterfeit incidents concerning pharmaceuticals worldwide has risen from 196 in 2002 to almost 6000 in 2021. Undoubtedly, they had substantial effects both on the world economy, and public safety.

Implications For Public Health

Counterfeit medicine proliferation poses serious global public health and safety hazard. Fake drugs are not only unuseful for the treatment of illnesses they are intended to, but also have long-term consequences for consumers such as antimicrobial resistance, organ failure, drug-resistant infections, overdose, or even death. Thus, while it is not as obvious as with the price marks, counterfeit medications substantially obstruct public access to safe and efficient healthcare.

Some of the major negative impacts of pharmaceutical counterfeiting on consumers include

• Treatment failure in serious diseases like malaria, TB, and HIV/AIDS. It is estimated that counterfeit anti-malaria and anti-tuberculosis drugs alone cause 700,000 deaths each year.

• Growth of resistance to critically important agents aтвбas a result, the spread of drug-resistant pandemics, including HIV and influenza.

• Adequate treatment delays that in the most serious, life-threatening diseases can lead to death.

• Side effects, because counterfeiters use cheap materials such as flour and baking soda to simulate original tablets. And often it can be extremely harmful contaminants including cement, gypsum, talcum powder, sawdust, industrial solvents, yellow highway paint, and spurious pharmaceuticals.

Implications For the Pharma Industry

The impact of counterfeits on the industry is multiple and includes:

  • Delays in innovations. Because of the lost revenues legitimate industry players have fewer resources for developing new and better treatments.
  • Negative impact on the world economy and tax revenues. Globally, the market of falsified medical products is estimated to be worth between US$200 and US$432 billion.
  • Funding of illegal manufacture of medicines and even terrorism with money received from the sales of fake drugs.

Particularly, for pharma companies, major problems posed by fraudsters are as follows:

  • lost sales, 
  • costs of protecting brands, 
  • loss of reputation, 
  • potential cost of managing the disposal of counterfeits
  • litigation costs involving counterfeiters and possibly people who were unknowingly victimized by counterfeits.

Existing Strategies to Combat Counterfeit Drugs

To with such a complex problem as substandard and counterfeit medicines, all the parties should be involved. 

Government authorities are developing regulations for the circulation of medicines. For example, the EU Falsified Medicines Directive (FMD) of 2011 and Delegated Regulation (EU) 2016/161 oblige manufacturers to trace prescription medicines. According to the EU FMD requirements, pharma companies also have to use data matrix codes, databases matching with national verification systems, and solutions for detecting the integrity of product packaging (Tamper Evident sealing). In the U.S., Drug Supply Chain Security Act (DSCSA) requires manufacturers and distributors to provide serialized transaction information and transaction statements for each product they sell. Compliance with pharma regulations is becoming mandatory in other markets, including Argentina, Brazil, the Middle East, and a large number of countries in Asia and the Pacific region.

Enforcement actions also take place in developed economies. Most recently Europol conducted operation Shield II from 1 April to 15 October 2021 with the aim to target the trafficking of counterfeit and misused medicines and doping substances. The operation was led by the French Gendarmerie (Gendarmerie Nationale/OCLAESP), the Finnish Customs (Tulli), the Hellenic Police/Financial Police Division, and the Italian Carabinieri Corps (NAS Carabinieri). It also involved law enforcement authorities from 26 countries (20 EU Member States and 7 third-party countries), the European Anti-Fraud Office (OLAF), the World Anti-Doping Agency, and the private sector. In course of this operation, 25 criminal networks were revealed, and 25 million units of counterfeit drugs with a total value of €73 million were seized. 

On the other hand, customers are encouraged to take preventive actions and change their attitude in terms of purchasing fake drugs by pharma manufacturers, NGOs, and other activists. Some anti-counterfeit pharma social campaigns include the WHO’s webpage on “substandard and falsified medical products;” US Food and Drug Administration’s Know Your Source, Filled with Empty Promises, and BeSafeRx; Alliance for Safe Online Pharmacies’ Buy SafeRx; and Pfizer’s Fight the Fakes.

And, of course, pharma companies can take a number of actions to protect copyright, revenues, and reputation. In this section, we will focus on the three most efficient strategies.

1. Raise Awareness

One of the most effective ways to combat counterfeiting is to educate consumers. It’s pharmaceutical companies who can create and distribute materials on how their genuine products differ from the falsified ones on their websites, social media, or in the form of flyers in the dispensing points. It will be especially instrumental if producers and 3PLs put an additional protective design or any other visually distinguished unique identifiers on packages. Pharma companies can also launch massive awareness campaigns to show the public the most common ways how counterfeits enter their houses and teach them the practices that will help to avoid buying unoriginal items. Smaller producers can cooperate with different health and law enforcement authorities, NGOs, and other activists in their fight against falsified medications. On the other hand, companies can raise awareness of the need for increased law enforcement and stiffer penalties that go beyond copyright infringement, etc.

2. Introduce Strict Authenticity Verification Procedures

Most often frauds take place when there is a shortage of particular medications or when someone working in the health authorities overorder products and resale some of them. That’s why it is of critical importance to ensure visibility and traceability throughout the whole supply chain from receiving raw materials to dispensing finished products to the patients. There are several steps companies can make to take control of the medication's logistics journey. First, they can assign a dedicated individual or group to monitor the security. Second, introduce authenticity verification at each point. Most often it is required by the governments that each product has its serial number that can be checked by distribution and dispensing partners upon receipt. However, the serialization of drug products itself is not enough, there are still a lot of cases when hard-copy documentation is used for verification which cannot be either 100% safe or easy to cope with, especially during customs control at the port of entry, etc. 

3. Incorporate New Technologies

All of the above can perform relatively good in a long play, however, these methods will take a lot of time and costs before you will see the results. New technologies can improve dramatically and outperform all of the mentioned strategies. 

Let’s talk about blockchain. Due to its ability to maintain data integrity, it is especially useful to ensure drug authenticity verification at different points in the supply chain. In such a way the manufacturer can generate and assign a unique code to each item, and all the supply chain participants can in their turn verify the authenticity and integrity of the products by checking them with the corresponding database.

In PharmaTrace we use blockchain technology paired with AI and machine learning to build secure and efficient network ecosystems for our clients. We have solutions that can help pharmaceutical companies to generate and securely communicate serial numbers, track & trace products throughout their journey from the factory to the end user, as well as manage product recalls and shortages hassle-free. Each application is unique and tailor-made to achieve the particular goals of a particular customer. This allows not only maintaining seamless cooperation with partners, but also reducing operational costs, and predicting product demand.

Final Words

Falsified medicines enter the market because of the absence of a unified regulatory base in the pharmaceutical industry, complicated supply chain management, and the ingenuity of the fraudsters. Drug counterfeiting impacts negatively the economies, public health, and safety, as well as drives away revenues from legitimate manufacturers and puts at risk the reputations of the pharma brands. To cope with it companies can take plenty of strategies from raising awareness about the issue to ensuring rigorous drug authenticity verification procedures. The most efficient ones are those that are backed by new technologies such as blockchain, AI, and machine learning as they allow the pharma companies not only to effectively track and trace medications throughout the supply chain but also ensure data security and integrity, predict product shortages and help manage inventory in an easier way.

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