Consider the rise of the online pharmaceutical market. Consumers are buying more drugs online and the online pharmaceutical supply chain is growing. During the last three years, according to the MarkMonitor Brandjacking Index, visitors have flocked to online pharmacies. This traffic translates to almost $11 billion in annual sales, a striking increase compared with the $4 billion estimated in 2007 when we first started to study this market. However, the most noteworthy growth occurred in the supply chain for pharmaceuticals, with business-to-business (B2B) exchange listings for bulk quantities of pills and active pharmaceutical ingredients growing by 23% in 2009. The 692 listings that we identified represented an increase of 67% from our first study, in 2007.
As more people try to save money when purchasing drugs and more companies look to streamline operations, especially in the current economy, the cost savings and efficiencies of e-commerce become even more attractive, presenting a tempting opportunity for online fraud and brand abuse on both the supply and demand side of the equation.
The broad reach and inherent anonymity of the Internet provide a potent cocktail for potential fraudsters who may exploit its openness and cross-border nature to take advantage of well-known brands. In 2009, the Brandjacking Index found almost 3,000 online pharmacies, of which only four were VIPPS-certified, the certification program of the National Boards of Pharmacy. Just as a legitimate business would do, these fraudsters invest marketing dollars and use search advertising to drive business to their online pharmacies. To underline that point, we examined 186 advertisers touting the availability of major drug brands and found that only 13% of the advertisers were certified by VIPPS or CIPA, the Canadian authority.
We also examined how the supply chain is impacted by the role of B2B exchanges. These exchange listings offer bulk quantities of pharmaceuticals at significant discounts as well as bulk quantities of active pharmaceutical ingredients, often for patent-protected drugs. Almost two-thirds of the listings that we examined sold active pharmaceutical ingredients (APIs) in powder form. These huge quantities could supply thousands of doses. This practice is not just questionable, but points to violations of patents and intellectual property statutes as well.
Interestingly, unlike in previous years, we found that most of the exchange listings indicated a country of origin for their wares, as 90% of the listings that we examined specified a source geography. China led the list at 49% of the listings, followed by India at 17%.
But are the drugs legitimate at these online pharmacies and B2B exchanges? A definitive answer requires controlled buys and extensive testing but pricing provides a valuable clue. When examining pricing at 30 randomly-selected non-certified pharmacies, we discovered price discounts of up to 90% from the prices offered by certified online pharmacies for the same dosage of the same drugs. These aggressive discounts are a strong indicator that the drugs being sold by non-certified pharmacies are of suspect quality.
Pharmaceutical manufacturers can combat these risks using a multi-pronged strategy that secures the means of distribution and ecommerce while monitoring for new instances of abuses and counterfeiting. An ideal online brand protection strategy includes several components:
- Detect abuse with an active Internet monitoring program: This may appear daunting but remember: Technology created this problem and technology can help you solve it. Automated brand abuse monitoring tools can detect almost any type of potential abuse. The best tools will help you prioritize the most egregious offenses so you can concentrate your efforts. State-of-the-art tools will also help you to manage and track your enforcement efforts.
- Respond to abuses with a strong enforcement program: Vigilance reaps rewards in the digital world just as it does in the physical world. Responses vary from cease-and-desist letters and takedown notices for B2B exchanges to cooperation with physical security firms and law enforcement authorities to target manufacturing and distribution centers serving ecommerce outlets.
- Prevent abuse with a proactive domain portfolio management strategy: You can work to eliminate brandjackers’ digital land grabs by solidifying your ownership of the most lucrative online real estate – domain names, or Web addresses. Keep a careful inventory of your Internet properties and identify gaps needing coverage with offensive and defensive domain registrations. Be sure that your portfolio is visible and within your control so you can keep the portfolio up-to-date with changing market conditions.
Pharmaceutical manufacturers must be diligent in fighting against online brand abuses. As consumers increasingly turn to the Internet to buy medications, brandholders must proactively help to protect these customers so they are not faced with the potentially life-threatening risk of buying fake or sub-standard medications. The challenge is exacerbated by brandjackers who employ state-of-the-art marketing techniques to lure consumers to conceivably illegitimate sites that exploit loose controls over online sales of drugs in both the consumer and business-to-business sales channels. As in the physical world, a vibrant online brand protection strategy is a must to safeguard customers and brands.
For a more detailed look at the Brandjacking Index discussing the online pharmaceutical market, please visit www.markmonitor.com.
About the Author
Frederick Felman is chief marketing officer at enterprise brand protection firm, MarkMonitor.