Ten Tips to Fight Pharmaceutical Counterfeiting

The pharmaceutical industry is under extraordinary strain. Facing the wrath of consumers because of the cost of products, constantly answering the questions of state and federal legislators looking to control health care costs, and losing value in the marketplace, the industry’s hands are more than full.

By Raymond P. Castello, Principal, New York office of the law firm Fish & Richardson

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A less discussed but substantial problem impacts all of pharma’s other problems, counterfeiting. The World Health Organization estimates that counterfeit drugs make up about 10 percent of the global medicine market, and more than 25 percent in developing countries. With counterfeit drugs increasingly finding their way into global distribution chains and ultimately into patients' mouths, it is essential that pharmaceutical companies have effective enforcement strategies to combat the manufacture and distribution of counterfeit drugs.

The pharmaceutical industry, however, has difficulty confronting this problem, for very good reasons.  In particular, because the industry is so heavily regulated, admitting that so many drugs are really counterfeit could bring more stringent regulations at a time when pharma cannot afford it.  Still, pharma had better face this problem head on or drown in it as other industries have done.

The first step in solving any problem is identifying it. This requires recognizing it for what it is.  Counterfeiting, whether drugs or any other product, is a crime, period.  Though every civilized jurisdiction in the world recognizes this and has criminal sanctions for such conduct, brand owners are reluctant to treat counterfeiting as a crime.  If people were being attacked on its premises, a pharma brand owner would take measures to deal with such a crime wave.  It is time for the pharmaceutical industry to recognize counterfeiting for what it is, an attack on its product.  Once pharma truly recognizes this simple fact, it can follow these top ten tips below to protect its marks from counterfeiting thieves.

1. Think like a criminal

Once a pharmaceutical company recognizes that counterfeiting is a crime, it is easy to realize that counterfeiters are professional criminals. Just like you, they get up each morning and go to work, but their work is to steal. Protecting your product against counterfeiters should be approached in the same way as protecting your product against any other thief. The first logical step in enforcement against such a thief is to think like one. A mark owner must recognize this very important fact and act accordingly. The other nine tips are based on this premise.

2.  Spend up front

No one wants to hear this, but it is better to pay up front when one can plan for spending than it is to pay later as a result of an unforeseen event when the money needed is less available. If you own very valuable tangible property, you put that property in a safe place and spend money to guard it. When the government builds a prison, it spends money to build it in a way that minimizes escapes. It spends money up front so that it doesn’t have to pay later to catch the criminals. Now that terrorism has become a greater threat to national security, money is spent up front to prevent terrorism so that money must not be spent later to pay for the consequences. 

Especially as profits decrease, pharma does not want to hear that it should spend more money up front to combat counterfeiting, but it better listen.  How should an owner effectively spend his money?  Some of the ways are described below.

3.  Have an anti-counterfeiting program in place

I recently attended a seminar by a major investigation firm on proactive approaches to brand protection, and the first suggestion that was made was that a brand owner needs a unit whose sole responsibility is anti counterfeiting. Many already do, but all should. That unit should not just react to problems once they occur but should also be proactive.  The head of such a unit must be integrated with other aspects of the company.

Certainly, the head of anti-counterfeiting is not the most important person in the company, nor should he or she have a say in every important decision that the company makes.  It is essential, thought, that such a person have access to those who make important decisions, and he or she should meet with those people regularly.  In that way the anti-counterfeiting “tsar” can give advice on how other important decisions affect anti-counterfeiting efforts.  Obviously, it would be foolish to make important decisions solely based on their impact on counterfeiting.  It is equally foolish to make important decisions without considering their consequences on such an important and expensive problem.

4.  Monitor your personnel

As with other kinds of theft, counterfeiters are not all strangers to the victim company.  Most counterfeit operations begin with an insider.  It is important to recognize that the insider could be anyone.  Especially in pharma, that counterfeit insider is more likely to be a lower level worker.  The insider is not necessarily the brains of the outfit, but more likely the method of access to information about the product or to the product itself.

Pharmaceutical companies routinely conduct background checks on their employees, but these checks must include all employees, as well as the employees of contractors, including all cleaning personnel.  Any contract must have audit rights built into it.  Anyone who has access to information or product must be carefully screened.

Checking must not stop once one is hired. Periodic background checks need to be done after hire to make sure that new factors have not created new risks.  In addition, integrity checks may need to be done to ensure the honesty of staff.  Everyone who has access to information or product has the ability to be a counterfeiter, either as a principal or as an accomplice.  Pharma has to recognize this and act on it.

5.  Monitor your product

Monitoring your personnel leads to monitoring your product. A former investigator for a major pharma informs me that theft that led to counterfeiting was rampant at a particular plant. Better supervision was needed to make sure that rejected product was not stolen, allowing it to enter the market as a counterfeit product.

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