Counterfeiting in the pharmaceutical industry; a look at the bitter pill in china

In June 2008, a district court in Guangzhou ruled that Qiqihar No. 2 Pharmaceutical Company, Ltd., as well as two other companies and a hospital in Guangzhou, were to share responsibility for 14 deaths that resulted from counterfeit drugs. The civil award, a combined RMB3.5 million, was calculated to cover medical expenses and mental suffering, and comes approximately a year after a Guangzhou Intermediate People’s court sent five Qiqihar employees to jail for their involvement in the counterfeit drug operation.

The case, though an illustration of China’s commitment to fighting the proliferation of counterfeit pharmaceuticals, highlights a nationwide epidemic. While counterfeit drugs are estimated to occupy approximately 10% of the Chinese market, fakes of certain products are said to exceed 30%, while fakes in certain cities may exceed 40%. Not surprisingly, the prevalence of counterfeits has led to health scares and the loss of life. Recently, in May of 2007, 11 people died after being injected with a medication tainted by a non-standard chemical. That July, 6 people died and 80 more fell ill after being treated with an antibiotic manufactured using “substandard disinfectants.”

Like melamine-laced dog food, and lead-tainted toys, China’s counterfeit pharmaceutical problems have gone global. In 1996, 89 children in Haiti died after consuming Chinese-produced cough syrup that contained anti-freeze. A few years later, Chinese-made diet pills took the lives of 5 women in Japan and Singapore. And in 2005, a California resident pled guilty to importing fake Viagra from China for sale in the U.S. market. The imported tablets, combined with his own manufacturing efforts at home, were valued at more than US$5 million.

The problem of fake pharmaceuticals stems from similar institutional and market factors as those of other goods. Yet, there are significant differences. Most plainly, while counterfeiting is viewed by the public and indeed many enforcement authorities as a “victimless crime,” counterfeit drugs exact a harm upon consumers that is beyond traditional anti-counterfeiting statistics, such as lost sales.
The counterfeit pharmaceutical problem in China is not an isolated phenomenon, but is exacerbated by a growing global trade in fake drugs. Regulatory amendments and on-the-ground enforcement actions in China must reflect the global nature of the problem, both in their efforts to stem its trade, as well as bring its perpetrators to justice.

Counterfeit Pharmaceuticals: A Global Perspective
According to the World Health Organization (WHO), counterfeit pharmaceuticals are medicines which are “deliberately and fraudulently mislabelled with respect to identity and/or source.” Such products can include drugs with correct ingredients, without any active ingredients, or active drugs sold in fake packaging.
Under such a definition, counterfeit pharmaceuticals currently account for 10% of the world’s drugs, and are growing at a rate of 13% annually. By 2010, counterfeit drugs are predicted to bring in approximately US$75 billion in revenue – a value 15% the size of the legitimate industry.

There are several reasons for this substantial growth. First, counterfeiting pharmaceuticals is a very lucrative business. Counterfeiters share none of the enormous research and development costs incurred by legitimate producers, yet are able to exploit continued high demand and low production costs.

Second, detecting counterfeit drugs is complex and costly.