tax havens such as the Bahamas, where the surveillance of dubious flows ... but the American cabinet LegitScript showed that two firms (Internet.bs and AB.
July 4th, 2012
How can we fight drug counterfeiting? Franck Guarnieri & Eric Przyswa / Director of Crisis and Risk Research Center at Mines ParisTech ; consultant, associate researcher at Crisis and Risk Research Center / July 4th, 2012 The problem of counterfeit drugs has emerged as an acute issue in the public debate over the last ten years. Both China's entry in the World Trade Organization and the growth of the Internet have deeply influenced the evolution of this problem. Meanwhile, the forms and issues at stake are not very well known. Today, the problem has grown to such a magnitude that it has become crucial to rethink our fight against drug counterfeiting. There is no plain and easy way to precisely define this phenomenon. The primary obstacle comes from the wide scope of definitions that vary according to the institution concerned. According to the World Health Organization, drug piracy is involved whenever medicines “are deliberately and fraudulently mislabeled with respect to identity and/or source. Both branded and generic products are subject to counterfeiting. Counterfeit medicines may include products with active ingredients or with insufficient active ingredients.” The definition given by the Council of Europe is different. It gives less importance, in the definition and representation of the counterfeit product, to the intention of the counterfeiter. Consequently, even accidents in the medicine production chain can be considered as crimes. This problem is often encountered in the field, where the distinction is rarely made. According to a survey made in south-eastern Asia, quality flaws are more common (10% of the analyzed drugs) than intentional counterfeiting in the WHO definition (between 0.3% and 0.5% of the analyzed medicines). These multiple definitions make it difficult to aggregate global results. Approximate results, from the WHO especially, report that over 50% of the drugs sold on the Internet could be counterfeit. This figure is very difficult to assess, especially considering the evolution speed of virtual flows. The truth is that it’s difficult to assess precisely the scale and magnitude of the problem… and even large institutions don’t have the means to do it. This issue should be handled by specialist independent academic research centers, working on smaller scales. The second obstacle comes from the multiple factors that disrupt rational analysis. A typical example is that of parallel importations of medicines through the Internet, which are often linked to the issue of counterfeiting, whereas they
concern mainly distribution. Stolen or misappropriated medicines along with drugs that were not granted marketing authorization share a similar fate. Confusion comes from the fact that the level of danger isn’t clearly estimated, while all counterfeit drugs don’t share the same degree of hazard: “counterfeit medicines can include products with authentic active ingredients but with imitated packaging; others with different active ingredients, no active ingredient at all, or insufficient active ingredients”. Last, there have been permanent tensions between developed and emerging countries such as India and Brazil about the issue of generic drugs and market competition with branded products: in this context, the problem of counterfeiting is often used as a controverted argument. As for the specific case of the Internet, most actors make little difference between online official drugstores (for example, those that are authorized in the US) and non-legal ones. Grey zones, white zones and flow fragmentation Beyond the issue of definitions, there is also the increasing complexity of traffic on a global scale. This brings an extra twist to the analysis, especially from the legal point of view: the concepts of illegality or crime are considerably weakened by the multiple interpenetrations created by both globalization and the Internet. The concepts of “grey zone” and “white zone” grasp this evolution. In the “grey zones”, the border lines between the legal and illegal are completely blurred. Free zones such as Dubai are very good examples: in these territories, customs officers can’t intervene… and the traffic and counterfeiting surveillance is quite random, due to local corruption problems. There are also financial grey zones, tax havens such as the Bahamas, where the surveillance of dubious flows linked with counterfeit medicines is a delicate matter. Andrew Strempler, former CEO of RXNorth, was able to escape several complaints from drug industries, by transiting shipments through the Bahamas (as well as Hong-Kong, the United Arab Emirates and Great Britain), using flaws of the international legislation to organize traffic without need to worry. Last, there are also “digital havens” where it is virtually impossible for drug firms to claim their rights. In the field of drugs, we can quote the example of a recent study that shows how counterfeit Viagra spams are emitted from providers that are hosted in regions where payments are almost impossible to intercept (Azerbaijan, Denmark, and the Caribbean). These “digital paradises” also concern the more specific case of deposits of domain names. There are about 450 firms that can deposit domain names for Internet sites in the world,
but the American cabinet LegitScript showed that two firms (Internet.bs and AB Systems) monopolized over half the name deposits for online drugstores that distribute counterfeit medicines. Despite this fact, these two sites have never been threatened by the ICANN, the organism responsible for depositing domain names on the Internet and who almost never intervenes during its governance. The concept of white zone is borrowed to the military field. It translates the fact that some strategic territories don’t figure on any official map. This term can be used in the field of counterfeiting as, according to several sources, the Chinese (or Russian) armies are directly implied in drug counterfeiting for their own use. Obviously, these territories are isolated. It’s difficult to confirm this information but from a general point of view, the concept of white zone is relevant because many industrial areas, especially in China, are lawless zones, dangerous and difficult to access. As shown over twenty years ago by researcher Dick Hobbs, the goal of criminal organizations must above all be grasped in its local context. Globalization and the Internet have indeed helped a certain form of “outsourcing” of most illegal flows, both real and virtual but paradoxically, the local form of drug counterfeiting, which is the source of most problems, remains a mystery difficult to unveil. That’s one of the main reasons why it is so difficult to trace the origin of counterfeiting. Firms can achieve mobility to escape pursuits or benefit from local corruption networks. Finally, counterfeiters know how to skillfully handle the fragmentation of their production and distribution system. This problem is especially true in the United States where a complex supply chain enables counterfeiters to integrate the distribution system in multiple weak points, especially by targeting small providers. Counterfeit medicines are then ready to incorporate the retailer network but the dilution of flows makes it very difficult to detect the corrupt firm. In Europe, counterfeiters play with boundaries by fragmenting the packaging steps and sending counterfeit medicines following “offloading” techniques: i.e. transit through third countries that “as far as possible, are not considered as counterfeit producers in this given field” (Barbara Prick). The issue is to not arouse the suspicion of customs officers who perform their controls according to the origin of medicines. Whether in Europe or in the United States, counterfeiters try to optimize what sociologist Ronald S. Burt calls “structural holes”. These holes involve thirdparties that will grasp illegal opportunities on a legal market: the increasing complexity of the supply chain of medicines offers today multiple opportunities to take advantage of these gaps. Internet is the perfect embodiment of this fragmentation because distribution sites are generally affiliation programs made from a source site that recollects
most of the benefits. Fragmentation is at the heart of the network of these criminal organizations. Their members are active for a short period of time and on specific tasks. Technically speaking, it is virtually impossible to stop the growth of these sites: a site that disappears can be easily replaced. Finally, the postage system of counterfeit medicines follows the “ant traffic” technique. It shows that the increasing fragmentation of the problem challenges the efficiency of the fight against this problem. At a European scale, the most important organization analyzed at this day is without doubt that of Peter Gillespie, a 65-year-old British citizen arrested in 2007 for leading a complex counterfeiting network across several countries. The false medicines were shipped from China by sea via Hong Kong, Singapore and Belgium and were then packaged as French medicines that were sold in Great Britain through “parallel distribution channels”. According to the Medicines and Healthcare products Regulatory Agency, it was the first big case where counterfeiters used this distribution technique. Between December 2006 and May 2007, Gillespie imported 72000 counterfeit medicine packages – the equivalent of over two million doses. Approximately one third of these batches concerned serious diseases such as prostate cancer (counterfeit Casodex from AstraZeneca), heart problems (counterfeit Plavix from Sanofi) and schizophrenia illness (counterfeit Zyprexa from Eli Lilly). Gillespie was also the manager of a firm based in Luxemburg that imported pharmaceuticals from China for a value of over 1.4 million pounds and with a retail value of over 4.7 million pounds. That would have meant a 3 million pounds profit. Thousands of British patients suffering from cancer have used counterfeit medicines through the drugstores and hospital network: 100.000 doses have been provided to terminal patients and exposed them to major risks, as according to the MHRA, these counterfeit medicines contain 50% to 80% of active ingredients plus an extra part of unknown composition. Gillespie argued that he thought he had been importing French medicines from Brussels by lawfully taking advantage of price differences between countries through “parallel trade”. However, the medicines in question were inside boxes labeled in Chinese… and Gillespie had bought machines to make labels because “he wasn’t satisfied by the quality of the existing labels”. According to him, the Asian origin of the medicines was probably due to the bonds between France and its former Indochinese colonies… He was sentenced to eight years of prison and four other men we charged for complicity. According to the prosecutor Andrew Marshall, it’s the most
important case of medical control deficiency that has happened in the European Union. Obsolete Institutions? One counterfeiter was caught, but how many are yet to be apprehended? Due to the dynamics of the phenomenon, the fight against counterfeiting is facing a tough task. If we take in account the complexity of flows, their international dimension and the opacity the systems, we can easily understand that national agencies are completely overwhelmed while global institutions are not efficient enough. The anti-corruption fight is too often organized around bureaucratic logics (e. g. the IMPACT program of the WHO) or by the setting up of ambiguous organizations that combine both an institutional dimension with lobbying actions. The most often quoted example is that of the Business Action to Stop Counterfeiting and Piracy, established by the International Chamber of Commerce (ICC). The European Medicines Agency however was also publicly questioned on potential conflicts of interest. In fact, the question is worth asking: are we talking about protecting the health of consumers or the interests of the pharmaceutical sector? The two aspects are obviously linked, but we would surely be better off by clearly separating these issues, at least for the sake of the credibility of the organisms in charge of taking actions. The fragmentation of the issues at stake certainly disorganized the fight against counterfeiting. Some initiatives are linked with intellectual property rights, as the widely discussed ACTA treaty, or the European Counterfeiting and Piracy Observatory (still waiting for its operational status). Others like the European Network and Information Security Agency (www.enisa.europa.eu) are focused on the cybercriminal aspects and don’t really include counterfeiting within their scope. In the last few years, a new player has stepped inside the game: the pharmaceutical industry has upgraded its strategy (which was up to now centered on intellectual property) to set up anti-counterfeiting actions based on the public health parameter – while avoiding to be accused of conflict of interest, as their primary goal is clearly to defend their own interests. European laboratories such as Sanofi, AstraZeneca or Novartis are at the cutting edge of these new strategies, with investigative initiatives that partly replace police missions in some higher-risk countries. What role is left to the institutions in the organization of a fight which is increasingly led by private players? In a context where traffic doesn’t seem to decrease, it is crucial for national state
agencies to assume their full responsibilities. The question is also relevant in the case of some NGOs that are trapped by ideological biases towards industrials. Towards new strategies The evolution of the game of actors could lead to develop more precise and more efficient expertise and strategies. A new approach could pave the way for new international organizations that would show flexibility, mobility, and favor cooperation logics. In this perspective, the creation of the Medicines and Healthcare products Regulatory Agency in the United Kingdom in 2003 is one of the rare European efficient initiatives in this field. Their professionalism, the quality of their investigators, their implication within the financial dimension of medicine counterfeiting – which involves different money laundering techniques – has helped solve many complex cases. Another relevant initiative: the creation in Paris of the International Institut Against Counterfeit Medicine that aims at increasing the number of international organizations dedicated to counterfeit medicine detection, as well as foster agreements between countries by promoting a strategic reflection on the issue by focusing on prevention. The increasing maturity of consumers, the limitations of a fight centered on intellectual property and most of all, the counterfeiters’ abilities have forced the players to reorganize their fight on a more pragmatic basis. Indeed, globalization and the Internet have challenged rent situations as well as simplistic rhetoric about counterfeit medicines. These techniques must be used on a global scale and focus at the same time on high-risk regions than can receive massive flows of counterfeit medicines in no time during local conflicts. Health crisis situations (like for H1N1) can also trigger the spread of counterfeit medicines. Surveillance can’t only be conceived from a criminological point of view, because criminal organizations in medicine counterfeiting are generally economic and industrial players rather than mafias or networks of organized crime. This type of criminality is difficult to predict using conventional police techniques, thus encouraging us to organize a realtime transversal analysis using different expertise skills – more specifically, economists and management researchers, who are unexplainably absent from these problems.
BIO
Franck Guarnieri is director of Crisis and Risk Research Center at Mines ParisTech. He also heads the « Sciences du risque et du danger » collection at Lavoisier publishing. A scientific counsellor for Preventeo company, Mr. Guarnieri is a member of Natural Sciences and Engineering Research Council of Canada, of Fondation de recherche pour une culture de sécurité industrielle (FONCSI), and an expert for the French National Research Agency (Agence nationale de la recherche) and the European Union (Information Society Program). An associate researcher at Crisis and Risk Research Center (Mines ParisTech), Eric Przyswa is a consultant, working for both NGO and companies. He has recently published Cybercriminalité et Contrefaçon (FYP, 2010) and he is currently finishing a report for Institute of Research Against Counterfeit Medicines.
