By Ann Roberts Brice

The United States has its fair share of drug counterfeiters, and some of them are connected to organized crime. Sources of counterfeited and diverted medicines are sometimes traceable to domestic locations, but more often to India and China and other countries on trade routes in between. The profits are good, and the criminal penalties are lacking, which creates a lucrative risk/reward profile for criminals. Internet pharmacies that dispense illegal medicines have proliferated in recent years, making the challenges of combating illegal drugs in the United States even more complex.

While U.S. drug counterfeits appear to be holding at a steady 1% or less of pharmaceuticals sold, the ease of Internet purchasing combined with the current economic downturn may cause this percentage to rise sharply. Cheaper drugs, even those from questionable sources, are likely to become increasingly more attractive to consumers. Realizing this, drug companies and industry leaders are actively creating solutions to address the problem. The response is both collective and individual as technologies are adopted and legislation is sought that will diminish the incentives for criminals.

The 1% rate for the United States is typical for so-called industrialized countries, including most of the EU, Australia, Canada, Japan, and New Zealand. “A lot has to do with the infrastructure that’s in place, the number of plant inspections, the standards, and the will to enforce them,” commented Dr. John Glover, president of John Glover Consulting, Inc. and formerly a Bristol-Myers Squibb security executive with 30 years of FBI service. “In contrast, the United States has a closed supply chain, the will to keep it safe, and strong regulatory and enforcement bodies in place, including the FDA, FBI, U.S. Immigration & Customs [ICE], and Homeland Security,” added Glover. He also notes that increasingly more pharmaceutical products are being manufactured in India and China. The FDA recently opened inspection offices in those countries and others. PhRMA maintains that its members’ overseas plants have strict programs for compliance with all the appropriate regulations.

The Internet Pharmacy Dilemma
As to vulnerabilities inherent in the Internet, the FDA emphasized there are dozens of ‘legitimate’ domestic Internet pharmacies. However, a full half of the 400 Internet websites that are accessible to U.S. consumers both dispense and offer a prescribing service without a physical examination.

The FDA says that half of the Internet sites are located in foreign countries, which means it is impossible to separate the U.S. problem of counterfeiting from the worldwide one. The WHO estimates more than 50% of the medicines purchased online from “illegal sites that conceal their physical addresses” are counterfeit.

U.S. Counterfeiting Problems
Not all intrusions into the pharmaceutical supply chain can be blamed on overseas sources. Several years ago, a crime ring operating in Florida managed to infiltrate the country’s legitimate supply chain with counterfeit drugs. The case received national attention when Katherine Eban, an investigative journalist, exposed these criminal activities in her book, Dangerous Doses, published in 2005.
In an interview with Life Science Leader, Eban criticized not only the criminal counterfeiters but also the ‘corrupt’ distributors in the supply chain who were responsible for supplying the medicines to retail pharmacies. “A prescription drug can go through a dozen hands before reaching the pharmacy,” she commented. “Most people think that drugs go from the manufacturer to the wholesaler to the pharmacy, which should be the model. People don’t realize the huge proliferation of secondary distributors and how they just trade drugs among themselves.”

Eban testified about her findings at the Congressional Subcommittee hearing, “Sick Crime: Counterfeit Drugs in the United States,” held in November 2005. Soon after, the big three drug wholesalers, i.e. AmeriSource Bergen, Cardinal Health, and McKesson, agreed to no longer buy from the secondary market, and drug store chain CVS also announced it would no longer buy from wholesalers who bought from the secondary market. In addition, many states changed their laws to tighten and restrict who could be authorized to become a drug distributor. Other actions have been taken to ensure that ‘nonauthorized’ distributors in the secondary market comply with certain safety requirements, although experts agree that more needs to be done.


            Katherine Eban,                       Donald Dobert,                       
               author of                                      president,   
         Dangerous Doses                            ATL, Inc.


   
             Thomas Kubic,                            Dean Hart,
           executive director,                        executive VP,
                      PSI                                    NanoGaurdian

Fighting Back
With their reputations at stake, drug companies are fighting back collectively as well as individually to prevent future intrusions into the legitimate supply chain. Twenty-six drug companies have become members of the Pharmaceutical Security Institute (PSI), as compared to 14 members when the nonprofit group was founded in 2002.

PSI’s membership, which consists of the companies’ top security officers, assists law enforcement and customs officers in investigating organized crime activity. Its executive director, Thomas Kubic, said he has seen an increase in resources for addressing counterfeiting during the past several years.

Individually, companies are applying anticounterfeiting technologies to product packaging on a risk assessment basis, Kubic said. If there are indications that one product (e.g. an antidiabetic) has been copied in a particular region, “they ramp up there.”
Kubic added that strategies for identifying drug products include lot numbers, batch numbers, reference samples, bar codes, and radio frequency identification (RFID). Manufacturers, for the most part, believe there is no single technology that works best with all products.

Two Types Of AntiCounterfeiting Technologies
Security systems using ‘on-packaging,’ such as bar codes and RFID tags, are one of two basic types of anticounterfeiting technologies. The other type is newer and is applied ‘on-dose.’

Wisconsin-based ATL, Inc. is a producer of security label systems that are placed on packaging. Its products include tamper-evident closures, anticounterfeit holograms with the company’s logo, and RFID tracing and tracking. ATL’s security labels use a nondegradable, invisible, digital forensic code that can be hidden in the ink, adhesive, or varnish and cannot be duplicated by counterfeiters. The digital code set up for the brand is incorporated into the pedigree documentation. ATL has designed customized security for nearly 60 pharmaceutical firms, including Abbott, J&J, Pfizer, Merck, Aventis, and Lilly.

On-dosage technology is also being used but less frequently because it is new. One on-dose technology, developed by NanoGuardian, can be applied directly to capsules, tablets, and vial caps for use “in tracing and authenticating from plant to patient,” said Dean Hart, NanoGuardian’s executive VP. The technology uses the firm’s proprietary forensic NanoCodes to provide information such as batch and lot numbers, country of origin, and wholesaler. Its NanoEncryption technology takes the coatings on tablets, for example, and manipulates it at the micron level without changing any bioequivalence or dissolution profiles. Hart noted that process does not alter the product and the technology does not require additional regulatory approval.

Companies are taking other anticounterfeiting actions internally, sometimes even before medical products are launched. Management tends to create internal task forces or departments whose members have expertise in technical operations, security, brand protection, and marketing.

Working together, the task forces evaluate the vulnerabilities and potential risks of the firm’s overall product mix. After that, each individual brand is evaluated on its potential for counterfeiting or diversion in the global marketplace.

In evaluating individual brands, sample questions your team might pose include: How is or will the medicine be priced? (If not a blockbuster, if it is specialized medicine that sells for $250 per dose, it could become a target.) Are there products in the category that have been counterfeited before? (There may be an established supply chain that exists for counterfeiters.)

In the case of a product yet to be launched, they might ask: Will this product be launched first in the United States, or will it be launched first in the EU and later in the United States? (If approved in the EU first, U.S. patients may turn, on hearing of it, to Internet pharmacies to purchase the new drug.)

The products that are profiled by manufacturers’ security officers as ‘high risk’ include ones that are expensive, high volume, or appear to be vulnerable, such as diet or weight loss tablets.

“There’s a perception that lifestyle drugs are mainly being counterfeited, but it’s really all types, not a particular class,” commented Kendra Martello, assistant general counsel of PhRMA. A PSI report confirms that 639 different medicines were counterfeited worldwide in 2007. PSI traced 1,513 incidents that year. Of these, genitor-urinary accounted for 37%; anti-infectives 12%; central nervous system 12%, gastro-intestinal 9%, cardiovascular 9%, and other 21%. The products were both branded and generic.

Can Legislation Help?
The landmark Prescription Drug Marketing Act (PDMA), passed in 1987, was one of the first pieces of legislation aimed at combating counterfeit drugs. Among other things, it mandated that wholesale distributors be licensed by the states in which they operate. The PDMA also required wholesale distributors who are not authorized distributors of record to provide to the recipient of the drugs a statement indicating each prior sale of the drug, including the names of the parties involved, which is generally referred to as a drug ‘pedigree.’ However, according to PhRMA’s Martello, the PDMA’s provision that the so-called ‘pedigree’ extend all the way back to the manufacturer has still not been implemented, pending the outcome of a lawsuit filed by RxUSA Wholesalers, Inc. involving small secondary wholesalers. Another of PDMA’s provisions “prevents products that have circulated overseas from being brought back into the United States and is key in ensuring the safety of the U.S. supply chain,” explained Martello, whose trade group strongly opposes legislation that would open U.S. borders to drug imports.

More recently, a handful of bills have been introduced in Congress to help ensure the safety of the supply chain, but they either have not gained the necessary support, or if passed, have not yet had their requirements implemented.

In April 2008, the Safeguarding America’s Pharmaceuticals Act was introduced, advocating uniform federal standards for tracking a drug that would supplant state initiatives. The bill needs to be re-introduced in the 111th Congress.

The Food & Drug Administration Amendments Act (FDAAA) of 2007 tasked the FDA with developing standards and identifying and validating effective technologies for securing the drug supply. An e-pedigree is envisioned that would replace the paper pedigree first mandated by the PDMA. However, the e-pedigree process, which uses bar codes and RFID, requires a lot of work to implement, as “you’re dealing with a huge range of products and players in the distribution chain,” said Martello, who cited technological and privacy issues among those that need to be addressed.

On Jan. 28, 2009, an import safety bill named the FDA Globalization Act of 2009 was introduced following the recent salmonella outbreak traceable to a domestic peanut plant. The bill focuses heavily on food but also on drug safety. The bill seeks to increase the number of inspections in foreign facilities that manufacture drugs sold in the United States. It is also intended to tighten entry of imported drugs lacking safety documentation and to provide stronger criminal and civil penalties against counterfeiters.

The Manufacturer’s Responsibility
The slow progress of policy makers causes some industry skeptics to question the government’s ability to move ahead expeditiously, particularly in the area of track and tracing, which again shifts the safety burden to manufacturers. Donald Dobert, president of ATL, sees the need for manufacturers to take charge. “They must want to embrace this without federal mandate,” he said. “Whatever is proposed will have to be something that brand holders want, something simple to use and multifunctional.”

NanoGuardian’s Hart commented, “Ultimately, it’s the drug manufacturer’s product. However, it also behooves distributors to work diligently with manufacturers to ensure a tight supply chain.” An interesting analogy advanced by one industry expert is that just as the vast majority of companies are heavily invested in R&D, they need to invest substantially to make sure the patient gets the ‘authentic’ medicine researchers worked so hard to develop.

Worldwide counterfeit incidents in 2007 grew nearly 25% to 1,759 incidents. The question is whether that means more crime is taking place or simply better reporting, law enforcement, and cooperation among countries. The numbers represent only what was known in 2006 and 2007, according to PSI.

Looking ahead, whether counterfeiting is increasing or decreasing is difficult to prove, but recent reports show that the awareness of this problem is definitely on the rise, which experts believe could help plug the gaps in the supply chain’s vulnerabilities.

Global Stings And Seizures Target Drug Counterfeiters

On January 15, 2009, a U.S. District Judge in Houston sentenced Kevin Xu, a Chinese national, to six and a half years in prison without parole for selling counterfeit and misbranded pharmaceuticals in the United States. The Xu case was one of three recent high profile seizures of counterfeit prescription medicines that speak to the global nature of the problem.

It is “virtually impossible” to separate the U.S. problem from the worldwide one, commented Thomas Kubic, executive director of the Pharmaceutical Security Institute (PSI). Illegal online pharmacies and counterfeit drugs are proliferating throughout the world, despite efforts to rein them in by drug manufacturers, regulators, and law enforcers.

“Effective border control is extremely difficult,” added Kubic, former assistant deputy director of the FBI’s Criminal Division. “The free trade movement, ease in goods transport, small partial shipments, and worldwide express” all contribute to the challenges posed to regulators and law enforcers in dealing with the global issue.

The vulnerabilities of the system are due in part to the growth of the Internet, according to Kubic, who views the Kevin Xu case as classic because of its bicontinental scope and bold online activities. Xu’s business-to-business website allowed him to operate as a kind of counterfeit drug “broker” to distributors around the world.

While Xu was arrested in Houston, his firm, Pacific Orient International Ltd, was located in China, and he marketed and exported the counterfeit medicines from there. To lure him to the United States, agents from U.S. Immigration and Customs Enforcement (ICE) and the FDA’s Office of Criminal Investigations devised a sting operation.

The undercover investigators, posing as potential customers, contacted Xu through his website. Xu shipped to the agents samples of Tamiflu to treat influenza; Plavix for blood clotting; Zyprexa for schizophrenia, Aricept for Alzheimer’s, and Casodex for prostate cancer. The pharmaceuticals that were received appeared identical to legitimate branded drugs. However, after testing by pharmaceutical companies and the FDA’s Forensic Chemistry Center, the products were discovered to contain less than the active ingredient on the label and also had unknown impurities.

Xu offered a stock list of 25 drugs that he could produce, all of which were trademarked by five of the top ten pharmaceutical manufacturers. Some counterfeiters are becoming so advanced with their technology that they can copy holograms and even the bar codes used by manufacturers on packaging, say industry experts.

According to ICE, Xu received more than $1.5 million from selling counterfeit pharmaceuticals globally during 2007. Besides his prison term, the court ordered Xu to pay about $1.2 million in restitution to Eli Lilly and $128,363 to Pfizer.

The Xu case was one of 56 cases opened by the FDA’s Office of Criminal Investigations in 2008. This is more than in any year since 2004 when 58 cases were investigated.

Two other cases, code-named Operations Medi-Fake and Pangea, highlight the increased cooperation between government, regulators, customs officials, law enforcement, and drug companies to combat drug counterfeiting outside the United States. In Operation Medi-Fake’s two-month crackdown last November and December, the European Union’s customs agents seized more than 34 million illegal or counterfeit pills and tablets. It was the EU’s first coordinated campaign of this nature with member states’ customs experts and pharmaceutical specialists meeting in advance to develop risk profiles. Medi-Fake focused on five key airports viewed as high risk for the transfer of illegal medicines in and out of the EU particularly Brussels. In a simultaneous takedown, both generic and branded medicines, including antibiotic, anticancers, antimalarias, and anticholesterols, along with painkillers and Viagra, were interdicted by customs officers. Medi-Fake’s success is expected to pave the way for future similar actions. The pharmaceutical industry’s role was to provide proprietary information on drugs considered high risk, including for example, how Lilly shipped its pallets and where they were manufactured, so inspectors could readily identify them, noted Kubic, whose PSI group represents the top security officers of 26 major drug companies.

PSI also cooperated on the third case, Operation Pangea, carried out last November, which focused on the online sale of illegal medicines and resulted in a series of arrests and seizures. The goal was not to take the case back to the source in China or India, which is “too lengthy a process,” said Kubic, but to make arrests at the distributor level and make the public aware of which medicines are being sold. Interpol claims the pills marketed by the Internet pharmacies contained little or no active ingredients, and some profits derived from them may have gone to organized crime. The World Health Organization’s IMPACT Taskforce and the Permanent Forum on International Pharmaceutical Crime helped to coordinate the effort with Interpol. Interpol’s activities in Operation Pangea spanned Australia, Canada, Germany, Ireland, Israel, New Zealand, Singapore, Switzerland, the United Kingdom, and the United States. Full details have not been made available as the investigations are ongoing in some of these countries.