Making a Killing

Making a Killing
The Deadly Implications of the
Counterfeit Drug Trade

Roger Bate

The AEI Press

Publisher for the American Enterprise Institute
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Library of Congress Cataloging-in-Publication Data

Bate, Roger.
Making a killing : the deadly implications of the counterfeit drug trade
/ Roger Bate.
p. ; cm.

Includes bibliographical references.

ISBN-13: 978-0-8447-4264-9
ISBN-10: 0-8447-4264-3

1. Drug traffic. 2. Drug adulteration. 3. Pharmaceutical industry—

Corrupt practices. 4. Product counterfeiting. I. Title.
[DNLM: 1. Drug Industry. 2. Fraud. 3. Drug and Narcotic Control.
QV 773 B328m 2008]

HV8079.N3B38 2008
364.1'42—dc22

2008015497

12 11 10 09 08 1 2 3 4 5

© 2008 by the American Enterprise Institute for Public Policy Research,

Washington, D.C. All rights reserved. No part of this publication may be
used or reproduced in any manner whatsoever without permission in
writing from the American Enterprise Institute except in the case of brief
quotations embodied in news articles, critical articles, or reviews. The views
expressed in the publications of the American Enterprise Institute are those
of the authors and do not necessarily reflect the views of the staff, advisory
panels, officers, or trustees of AEI.

Printed in the United States of America

 Contents

LIST OF ILLUSTRATIONS vii

ACKNOWLEDGMENTS ix
INTRODUCTION: THE SECOND-OLDEST PROFESSION 1
Definitions and Scope 4
1. COUNTERFEITING TODAY 8
Counterfeit Drugs in Industrialized Economies 8
Compromised Supply Chains 8
Internet Sales 9
Drugs Targeted 12
Counterfeit Drugs in Developing Countries 14
Africa 17
Latin America 20
Russia 21
Asia 23
2. HOW AND WHY DOES COUNTERFEITING OCCUR? 25
Incentives to Counterfeit 25
Corruption within Countries 27
Complex Supply Chains Encourage Fakes 28
Developed Countries 28
Developing Countries 33
Counterfeiting, Organized Crime, and Terrorism 35
Conclusion 37
3. STOPPING THE FAKERS 39
At the International Level 39
At the National Level 41

v
vi MAKING A KILLING
Developed Countries 41
Japan 41
United States 43
European Union 44
Developing Countries 45
Africa 46
Latin America 50
Russia 51
Asia 52
Unilateral Private Action 57
Independent Organizations 57
Pharmaceutical Companies 59
Pharmacists 60
4. POLICY RECOMMENDATIONS 61
At the International Level 61
Donor Agencies 61
Aid Agencies 62
At the National Level 63
Developing Countries 63
Western Countries 66
Public and Private Actors 67
Governments 68
Policymakers 71
At the Business Level 72
Pharmaceutical Companies 72
At the Individual Level 72
Public-Private Cooperation 73
CONCLUSION 75
NOTES 77
ABOUT THE AUTHOR 105
 List of Illustrations

FIGURES

I-1 Five Shilling Bill of Credit, “To Counterfeit Is Death” 2

1-1 Reports of Counterfeit Drugs by Therapeutic Class
Received by WHO, 1999–2002 13
1-2 Authentic v. Counterfeit Voveran (Pain Medication)
Pills 17
1-3 Percent Failure of Chloroquine (Antimalarial Drug)
in African Countries 18
2-1 Drug Supply Chains 31
3-1 Counterfeit Drug Cases Opened by the FDA,
1997–2006 43

TABLE
1-1 Prevalence of Counterfeit Drugs in the West and
the Developing World 14

vii
 Acknowledgments

I’d like to thank my colleagues Jack Calfee and Lorraine Mooney

and Andrew Jackson, chief of corporate security for Novartis, for their
useful comments on this book. I’d also particularly like to note the
excellent research of my current assistant Karen Porter and former
AEI researchers Evan Daar and Kathryn Boateng, who worked with
me on this project in 2007. In addition, the editorial staff at AEI
have provided valuable input and critiquing of all drafts of the
manuscript. Other experts, who’d prefer to remain anonymous, have
reviewed parts of the manuscript. I thank them for their help; they
know who they are.

ix
 Introduction
The Second-Oldest Profession

As long as people have been in the business of inventing, others

have been in the business of faking their inventions. Counterfeiting
has played a role in padding business profits, waging war, defraud-
ing governments, and undermining currencies. Today, fake medi-
cines are harming health and impeding pharmaceutical innovation.
Documents from the second century BC tell the story of a Gallic
winemaker who tried to pass off cheap local wine as a much finer
Italian vintage. Most wines were transported in clay jars, and mer-
chants would make an imprint on the stopper to indicate the wine’s
origin and quality. The unschooled Gaul made his own stopper to
resemble those of more established wines. But his plan had one
major flaw: He could neither read nor write. Instead of marking the
name of a recognized Italian winemaker, he settled for a few indeci-
pherable characters. The merchant’s clay stopper now sits in a glass
case at the Union des Fabricants’s Museum of Counterfeiting in
Paris, an example of one of the world’s first knockoffs.1
A faker will exploit every possibility. In 1690, Thomas and
Anne Rogers were executed in England for clipping the edges off of
forty pieces of silver to make new coins from them. Punishment
for counterfeiting was severe. Thomas was hanged, drawn, and
quartered; Anne was burned alive.2
In the United States in the early eighteenth century, lax control of
the money supply led many people to attempt to counterfeit money.
Mary Peck Butterworth, a homemaker in rural Massachusetts, used
a hot iron, a piece of cloth, and a quill pen to create counterfeit
versions of colonial currency.3 Later, during the Revolutionary War,

1
2 MAKING A KILLING

FIGURE I-1
“FIVE SHILLING NOTE, TO COUNTERFEIT IS DEATH”

SOURCE: Courtesy of the Eric P. Newman Numismatic Education Society.

NOTE: “To Counterfeit Is Death,” Pennsylvania Five Shilling Bill of Credit, printed by
Franklin and Hall, Philadelphia, 1758.

the British used counterfeiting strategically. British soldiers flooded

the American market with so much counterfeit cash that the conti-
nental became worthless—the origin of the phrase “not worth a con-
tinental.”4 The most famous American printer, Benjamin Franklin,
was acutely aware of the damage counterfeiters could do. He printed
detailed pictures of leaves on his currency that were too complex to
fake easily. He also printed the slogan “To Counterfeit Is Death” on
each of his notes—an expression more of frustration than fact.5
Fake and substandard pharmaceuticals have posed a threat to
people’s health for centuries.6 As technological capabilities advanced
through the nineteenth and twentieth centuries, counterfeiters
turned to faking whatever goods were most profitable or most eas-
ily procured and distributed without detection: cigarettes, jewelry,
digital media—and medicine.7 Modern efforts to combat such coun-
terfeiting have focused on establishing universal standards for
drug quality and empowering watchdog agencies.
 INTRODUCTION 3
Baseline standards for medicines were established in the United
States by U.S. Pharmacopeia (USP) in 1820. Societies of medicine
from all twenty-three states were invited to send delegates to meet
and discuss drug quality issues. The USP created a system of drug
production standards and a system of quality control, as well as
formulae (agreed-upon sets of symbols showing the chemical com-
position of drugs), and a national formulary (an updated list of
medicines and related information representing the latest clinical
judgments of physicians, pharmacists, and other experts). Only 217
drugs that met the criteria of “most fully established and best under-
stood” were included on this list.8
In 1848, Congress passed the Drug Importation Act, which
required U.S. customs officials to inspect and analyze imported
drugs for “quality, purity, and fitness for medical purposes.”9
Since then, the USP and other interested parties—including
drug manufacturers, pharmacists, patient groups, and the fed-
eral government—have attempted to protect patients from adulter-
ated medicines.
Despite such efforts, however, counterfeit drugs managed to
breach the system, and they continue to do so today, both in the
United States and other countries. In 1937, more than a hundred
Americans were killed when they took medicine containing the
dangerous solvent diethylene glycol. In 2006, more than a hundred
children in Panama died after ingesting the very same solvent mixed
into cough syrup. The solvent had been falsely identified and
exported as glycerin, a sweet-tasting syrup that is a common ingre-
dient in medicine, and, in the latter case, was traced to a Chinese
chemical company.10
Because counterfeiting represents such an easy and potentially
lucrative opportunity for commercial profit, and because it spans
industries as diverse as wine, electronics, and medicine, it likely
will never be eradicated. Still, if its characteristics are identified
and its real effects understood, its impact may be mitigated sub-
stantially. Nowhere is this more evident—and important—than in
the battle against the counterfeiting of lifesaving pharmaceuticals, a
trade with dangerous implications for public health.
4 MAKING A KILLING
Definitions and Scope

Fake drugs and active pharmaceutical ingredients most often origi-

nate in emerging industrial economies—especially India—before
entering the global market. Trafficking in counterfeit drugs has
become one of the fastest-growing criminal businesses. Improved
technological capabilities have enabled counterfeiters to produce
packaging that looks good enough to fool legitimate wholesalers and
retailers. The Internet offers fakers direct access to people seeking
too-cheap-to-be-true therapeutics, or to those embarrassed to get
prescriptions for “lifestyle drugs,” such as those that treat impotence.
Although rich countries are the most lucrative potential markets
for fakes, they also have the best protections against them. Most
developed economies have laws and enforcement procedures to com-
bat counterfeiting and other fraudulent activities. Many have national
drug regulatory authorities and organized chains of supply, with
highly educated pharmacists. The World Health Organization (WHO)
has estimated that fake drugs represent less than 1 percent of market
value in these economies.11
Much easier for counterfeiters is pushing high volumes of fake
painkillers, antibiotics, and antiprotozoals (such as antimalarial
drugs) into unregulated markets—that is, the poorest countries,
which are also the most vulnerable to infectious diseases. WHO esti-
mates that many countries in Africa, Latin America, and parts of
Asia have areas where more than 30 percent of the medicines on
sale may be counterfeit; in many of the former Soviet republics, the
proportion is 20 percent.12
The most obvious risk of unproven drugs is to a patient’s health.
Taking a drug with an incorrect formula of active ingredients—or
with the wrong ingredients—can have serious adverse health effects.
Taking a drug without any active ingredients, a common counterfeit-
ing instance, can lead a sick patient who thinks he or she is being
treated to forgo real treatment until it is too late. Taking a drug with
only some of the correct ingredients can cause a patient to develop
resistance to that particular drug, making it harder for the patient to
be treated with effective medicines later on. This has effects at the
 INTRODUCTION 5
population level as well, as resistance increases far more rapidly than
would otherwise be the case, making specific legitimate drugs or even
entire classes of drugs useless—even for those who have not previ-
ously taken counterfeit or substandard drugs.
WHO defines a counterfeit drug as one that is

deliberately and fraudulently mislabeled with respect to

identity and/or source. Counterfeiting can apply to both
branded and generic products and counterfeit products may
include products with the correct ingredients or with the
wrong ingredients, without active ingredients, with insuffi-
cient active ingredients or with fake packaging.13

Counterfeiting can also include bulk ingredients made to pro-

duce drugs.
Unfortunately, there is no consensus about this definition.
Countries issuing their own regulations against counterfeiting
have their own definitions, making information exchange among
them difficult and hindering the development of global anti-fake
strategies. Some countries do not enforce their regulations, and
others do not even have any regulations to enforce.
According to WHO, only about 20 percent of member states
have well-developed regulations against counterfeiting. Another
50 percent operate at varying levels of regulation and capacity, and
30 percent have weak regulation or none at all. Despite its policy of
confidentiality regarding reports of counterfeiting, fewer than 5 per-
cent of member states actually divulge such information to WHO.
The reports that are made are not validated, and some reports do
not distinguish between counterfeit and substandard drugs.14
The distinction between counterfeit and substandard drugs is
an important one. WHO defines a substandard drug as one which
does not intentionally have incorrect packaging, but may have the
incorrect quantity or ratio of ingredients. Unlike counterfeits, sub-
standard drugs do not represent deliberate attempts by miscreants
to dupe consumers, but rather are the result of a legal manufac-
turer’s shoddy production. This category also includes drugs that are
6 MAKING A KILLING

produced in compliance with WHO’s good manufacturing practice

(GMP) guidelines15 and pass quality inspections on the factory
floor, but are rendered ineffective by poor transit or inadequate
storage along the supply chain. This may be the result of either
ignorance or carelessness. Many pharmaceuticals, including sev-
eral vital antiretroviral (ARV), antibiotic, cancer, and antiprotozoal
drugs, require specific storage temperatures to ensure their effec-
tiveness. A 1997 study in a Zambian hospital, for example, found
that several HIV antibody assays no longer worked effectively
because they had been improperly stored or were past their
expiration date.16 In the developing world, distributors and local
pharmacies may not have the ability—or incentives—to adhere to
proper standards, especially for drugs requiring refrigeration dur-
ing transit and storage.
Substandard drugs are rare in the countries of the European
Union (EU) and in the United States, since both have comparatively
rigorous customs controls, import-quality regulations, internal
quality controls on wholesalers, and, most importantly, pharmacies
with reputations to maintain. In the developing world, however,
such drugs are rife.17 Weak regulation in these countries18 is also
increasingly allowing substandard and counterfeit drugs to infiltrate
the supply chains of the developed world.
Although the proliferation of substandard drugs is a major policy
issue worthy of attention, this book focuses primarily on counterfeit
drugs, that is, drugs willfully mislabeled as to identity or source.
Nonetheless, differences in definition aside, it is important to note
that the distinction between counterfeit drugs (intentionally defi-
cient) and substandard ones (unintentionally deficient) can be tenu-
ous in practice. This is particularly the case when one includes state
actors in the analysis. As discussed above, many developing-world
governments lack effective regulation to monitor drug production in
their countries. Nevertheless, prompted by political and economic
incentives, they continue to permit and even push for local produc-
tion enterprises that may or may not have the technical capabilities
to ensure compliance with GMP and ongoing quality checks.19 In
Thailand, for example, the government promoted the distribution of
 INTRODUCTION 7
a cheap—but substandard—ARV, GPO-Vir, that was produced by
the state-run Government Pharmaceutical Organization. By the time
the factory was forced to shut down in 2007 (with its reopening con-
tingent on improvements in its production facilities), resistance
among users of GPO-Vir had already reached a rate of perhaps 50
percent.20 By pursuing a local production project with little heed for
quality control, Thai officials intentionally enabled the production of
substandard products—second-degree counterfeiting, if you will.
In chapter 1, I will outline the extent of the counterfeiting prob-
lem around the world today, from Internet pharmacies in the United
States to Russia’s “gray” market, from Africa’s unscrupulous street
vendors to China’s fake export industry. Chapter 2 explores dynam-
ics of the counterfeit-drug trade, such as fakers’ economic incen-
tives, complex supply chains, unwieldy tariffs, and the involvement
of organized crime in the fake-drug trade. Signs of progress in
the fight against counterfeit drugs are described in chapter 3, from
country-level efforts around the world to international and corpo-
rate initiatives. Finally, chapter 4 offers several concrete and realistic
policy recommendations that can help make counterfeiting suffi-
ciently unprofitable as to render it impotent.
 1

Counterfeiting Today

Counterfeit pharmaceuticals are a problem all around the world,

and they affect people of various income levels. Although their
impact is concentrated among the poor in the developing world,
their distribution is by no means exclusive to them. This chapter
sketches the dynamics of drug counterfeiting, from Canadian
Internet pharmacies and the European supply chain to New Delhi
street vendors and illicit nightshifts at Russian drug factories.

Counterfeit Drugs in Industrialized Economies

The value of the counterfeit drug market in the United States has
been estimated at $39 billion annually.1 Such a figure is, at best,
a guess. The Pharmaceutical Security Institute (PSI), a nonprofit
partnership among pharmaceutical companies founded in 1996 in
part to determine the extent of the counterfeit drug problem,
reported that the value of seized counterfeit and diverted drugs in
the United States was only $200 million in 2003.2 But the total
number of counterfeit drugs undetected is likely to be much higher.
Statistics are no better in the EU, where data on seizures provide the
only accurate figures available. For example, the European Com-
mission announced that its customs department had seized 2.7 mil-
lion fake tablets in 2006, most of them originating in India.3
Counterfeit drugs make their way into developed countries in
several ways.

Compromised Supply Chains. In recent years, counterfeit and

substandard drugs have turned up in the supply chains of developed

8
 COUNTERFEITING TODAY 9
countries—the legitimate, legally recognized chains from drug pro-
ducers to consumers that include wholesalers and retail outlets. In
some instances, these fakes (which may also include medical prod-
ucts, particularly where the market is large) have found their way
into private U.S. pharmaceutical supply chains, which consist of the
pharmaceutical company, private wholesalers, and private pharma-
cies. In 2003, for example, fake Lipitor—a cholesterol-lowering
drug—was discovered in neighborhood pharmacies in the United
States.4 At some point along this supply chain, a counterfeiter passes
his or her drugs off as legitimate, often posing as a wholesaler acting
as a middleman between the manufacturer and the distributor. In
one case, a Canadian wholesaler who sold counterfeit OneTouch
diabetes test strips to U.S. pharmacies claimed to have bought the
faulty strips from a Chinese distributor of LifeScan products.5
Some distributors are complicit in the counterfeiting scheme,
knowingly purchasing cheap fakes and selling them to consumers
at the price of legitimate goods, making a killing. In May 2006
U.S. officials discovered a package from China containing several
thousand counterfeit Viagra and Cialis pills, which a Texas pharma-
cist had planned to sell.6
In the United Kingdom, fake versions of an obesity drug and an
impotence drug were discovered within days of each other in 2004.
Health officials said it was the first time counterfeit drugs had
breached the British supply chain since 1994,7 but the trend is up,
with nine known cases of fake drugs reaching patients in the past
three years.8 A chance inspection by British customs officers in
2007 uncovered a large operation in which fake Viagra was being
shipped to factories in Britain, where it was repackaged and sold
online to customers in thirty-five countries, including Great Britain,
the United States, and Canada.9

Internet Sales. Hundreds of online “pharmacies” advertise them-

selves as cheap, fast alternatives to typical drugstores in developed
countries. For Americans facing the highest pharmaceutical prices
in the world, these websites can be an enormous temptation. In
some ways, the Internet has improved the pharmaceutical market,
10 MAKING A KILLING

with increased patient access and economic efficiency, but it is also

a major source of counterfeit distribution. A 2004 study by the U.S.
Government Accountability Office (GAO) found that four out of
twenty-one medicines ordered from websites outside the United
States or Canada were counterfeit.10
An online pharmacy that hides its physical address is more likely
to sell counterfeits instead of the legitimate branded drugs it offers.
The source of the drug and its chain of custody remain largely
mysterious to the consumer. One website claimed to distribute
Januvaria, one of Merck’s flagship diabetes medicines. It proudly dis-
played Merck’s logo and even a photograph of its vice president for
public affairs. But Merck had no knowledge of the Internet entity; it
was a fake.11 As a warning to U.S. consumers, the Food and Drug
Administration (FDA) recently listed on its website online pharma-
cies that may sell counterfeit medicines in the United States, most of
the time without prescriptions.12 In February 2004, the FDA shut
down the website www.rxpharmacy.ws, whose domain name is reg-
istered in Samoa, for selling counterfeit contraceptive patches to
women in the United States.13 The patches contained no active ingre-
dients and were packaged in simple, resealable zipper plastic bags.14
Many online pharmacies that advertise to U.S. consumers claim
to be based in Canada, where government-imposed ceilings control
the price of drugs, and many Americans have flocked to these phar-
macies to fill their prescriptions. But many of these “Canadian
pharmacies” are really just web addresses for front companies that
ship counterfeit drugs. In July 2004, FDA officials purchased
so-called “generic” versions of Lipitor, Viagra, and Ambien from a
website advertising “Canadian generics.” But none of these drugs are
produced in generic form; all drugs the FDA purchased were coun-
terfeit.15 These “ghost” drugs may be particularly easy to counter-
feit: if the consumer does not know that the generic version of the
drug does not exist, the packaging used does not have to replicate
anything. As long as it appears to be professional, the consumer
may never know. In the case of the “Canadian generics,” the FDA
discovered upon further investigation that the registered owners of
the website were not in Canada, but in China and Belize.16
 COUNTERFEITING TODAY 11
In December 2005, the FDA tested a batch of imported drugs
from different Canadian pharmacies and discovered that many drugs
had been produced in other countries and were counterfeit.17 Other
shipments of so-called Canadian drugs have been traced to places as
diverse as Panama, Mauritius, and the Bahamas.18 Once such an order
is filled, it is boxed and shipped to an intermediary, often in the United
Kingdom. From there, the package is mailed to the U.S. consumer
without ever passing through Canada. The FDA estimates that as
many as 85 percent of drugs promoted as Canadian actually come
from other countries around the world, including India, Costa Rica,
and Vanuatu.19
Even drugs that actually come from Canada carry no safety guar-
antee. Mediplan Prescription Plus Pharmacy is one of the leading
Canadian Internet pharmacies that ships to the United States. The
FDA warned consumers in 2006 that versions of Lipitor, Crestor,
Celebrex, and seven other types of drugs shipped from Mediplan
into the United States were counterfeit.20 Some of the drugs tested
did not even originate in Canada, and many did not contain the
proper ratios of active ingredients.21
Online pharmacies that peddle counterfeit drugs are based in the
United States, too. In October 2006, the U.S. Drug Enforcement
Agency (DEA) arrested eleven employees of a Georgia-based drug
manufacturer that was selling fake pharmaceuticals over the Inter-
net to U.S. consumers. The group’s revenues topped $19 million.22
In 2006, the Federal Bureau of Investigation (FBI) investigated a
Philadelphia-based Internet pharmacy that smuggled an estimated
2.5 million dosage units of drugs into the United States from India,
including Vicodin, anabolic steroids, and amphetamines.23
The anonymity of the Internet is attractive to fakers and cus-
tomers alike—to the latter for buying drugs associated with social
stigmas. In 2007, for example, in the largest counterfeit-drug bust
in the United Kingdom to date, British customs officials unearthed
a conspiracy to supply millions of pounds worth of counterfeit
Viagra and drugs used to treat male hair loss. According to BBC cor-
respondent Jon Brain, the conspirators assumed that customers
would be too bashful about their use of such “lifestyle” drugs to
12 MAKING A KILLING

report problems to the authorities. When sentencing one of the con-

spirators, Judge Nicholas Price noted that consumers were “easy
prey, often too embarrassed to seek help from their doctors.”24

Drugs Targeted. For the most part, counterfeiters appear to target

certain markets with specific drugs. In industrialized economies,
evidence from confiscated fakes suggests that lifestyle drugs—
typically the impotence drugs Viagra and Cialis that are often
sold over the Internet—are favored. Customers buying from the
Internet are unlikely to be familiar with the appearance or effects of
the legitimate product, and they are less likely to complain if
they are dissatisfied.
If the counterfeit problem in developed countries were limited to
such lifestyle drugs, it would be an annoyance, but not a particu-
larly grave menace to public health. Assuming it does not contain
any poisonous substitutes, a counterfeit version of Viagra—while
ineffective—is generally not a matter of life and death. (An argu-
ment can be made, moreover, that informed consumers who
purchase drugs from suspect sources over the Internet might be
considered negligent.) Increasingly, however, counterfeiters are
beginning to target lifesaving therapeutic drugs distributed through
traditional (non-Internet) supply chains, posing an especially
insidious threat to people who desperately need the real thing.25
Figure 1-1 illustrates the reports of counterfeit drugs by therapeu-
tic class received by the World Health Organization between
1999 and 2002. Although it is impossible to say—given WHO’s
confidential reporting system—which countries reported which
types of counterfeit cases, anecdotal evidence points to increased
targeting of lifesaving drugs within developing and developed
countries.

pallets of counterfeit AIDS drugs. Valued at almost €1 million

In 2003, German officials raided a pharmacy and seized two

($1.45 million), the fake packaging and inserts discovered with

them were said by the original manufacturer to look very realistic.26
The United Kingdom’s Medical and Healthcare Products Regulatory
Agency (MHRA), which monitors medicines and medical products
 COUNTERFEITING TODAY 13
FIGURE 1-1
REPORTS OF COUNTERFEIT DRUGS BY THERAPEUTIC CLASS
RECEIVED BY WHO, 1999–2002

Antiasthma &
Hormones & Antiallergy (8%)
Steroids (18%)
Antimalarials (7%)

Analgesics &
Antipyretics (6%)

Antibiotics (28%) Other (14 therapeutic

classes, 33%)

SOURCE: World Health Organization, International Medical Products Anti-Counterfeiting

Taskforce (IMPACT), “Counterfeit Drugs Kill!” www.who.int/impact/resources/Impact
Brochure.pdf (accessed March 17, 2008).

made or distributed in that country and has the power to prosecute

counterfeiters, notes that criminals have shifted focus from using the
Internet to sell small quantities of fake (predominantly lifestyle)
drugs to individuals to targeting pharmaceutical wholesalers,
especially those that supply public entities such as hospitals or
aid organizations. By targeting wholesalers—actors further up the
supply chain—counterfeiters are able to capture larger and thereby
more lucrative markets more efficiently. In the summer of 2007, the
MHRA issued drug alerts to health-care professionals for
Plavix, a blood thinner; Zyprexa, a treatment for schizophrenia;
and Casodex, a hormone treatment for prostate cancer. Because
the wholesale price for a pack of twenty-eight Casodex pills in
Britain is £128 ($260),27 the profit margin available to a counter-
feiter for such therapeutic drugs is huge.
14 MAKING A KILLING

TABLE 1-1
PREVALENCE OF COUNTERFEIT DRUGS IN THE WEST AND THE
DEVELOPING WORLD
OECD countries
Last WHO/IMPACT Other authoritative
Country/Region estimate estimates

United States <1 percent

Europe <1 percent Other sources cite different
figures, some as high as
10 percent.a
United Kingdom <1 percent

(table 1-1 continued on next page)

Counterfeit Drugs in Developing Countries

The counterfeit-drug problem is most acute in less-developed

countries. Of the forty-six incidents reported to WHO between
January 1999 and October 2000, twenty-eight—about 60 percent—
occurred in the developing world (where reporting is rarer, which
indicates that the actual number must be higher than this).28
Country-level studies, surveys, and anecdotes tend to confirm this.
One study suggests that, on average, 25 percent of the drug supply
in these countries is counterfeit.29 In Brazil, for example, over two
hundred women became pregnant in 1998 after taking oral contra-
ceptive pills made of nothing but wheat flour.30 In Pakistan, gaps
in the process of drug registration and loose enforcement have led
to the proliferation of counterfeits.31 To date, deaths from adulter-
ated pharmaceuticals worldwide have disproportionately occurred
within the world’s least developed countries. Table 1-1 above illus-
trates the prevalence of counterfeit drugs in the developing world as
compared to the West. Again, because it is especially difficult to
trace the paths of drugs in the former, these estimates of fakes there
are likely much too low.
 COUNTERFEITING TODAY 15
(table 1-1 continued)

Less-developed countries
Last WHO/IMPACT Other authoritative
Country/Region estimate estimates

Africa
Nigeria 16 percent
Kenya 30 percent
Lebanon 35 percent

Asia
Cambodia 13 percent
China 8 percent (over-the-
counter only)
India 10–20 percent
Indonesia 25 percent

Eurasia
Russia 10 percent A different source places
the figure higher, at
12 percent.b
Former Soviet 20 percent
republics

Latin America
Colombia 5 percent
Mexico 10 percent
Peru 15–20 percent
Venezuela 25 percent
SOURCES: World Health Organization, IMPACT, “Counterfeit Medicines: An Update On Esti-
mates,” November 15, 2006, www.who.int/medicines/services/counterfeit/impact/TheNew
EstimatesCounterfeit.pdf; also, World Health Organization, “Counterfeit Medicines: fact sheet
275,” November 14, 2006), www.who.int/mediacentre/factsheets/fs275/en/index.html;
a. Associated Press, “Counterfeit Drugs Deemed Threat in Europe,” September 22, 2005; and
Joyce Primo-Carpenter and Milissa McGinnis, “Matrix of Drug Quality Reports in USAID-
Assisted Countries” (U.S. Pharmacopeia, October 15, 2007), www.usp.org/pdf/EN/dqi/
ghcDrugQuality Matrix.pdf; b. Coalition for Intellectual Property Rights (2003) as cited in
Andrew Kramer, “Drug Piracy: A Wave of Counterfeit Medicines Washes Over Russia,” New
York Times, September 5, 2006.
NOTE: As the text discusses and the table illustrates, defining the prevalence of counterfeit drugs
in the supply chain is difficult. Estimates are little more than educated guesses, and informed
entities can and often do disagree.
16 MAKING A KILLING

In general, the market for fake drugs in developing countries

tends to have a broader profile than in the industrialized world, with
the types of drugs counterfeited being not only lifestyle drugs and
painkillers but also lifesaving medicines, such as antiretrovirals
for HIV/AIDS, antibiotics, and treatments for malaria and tubercu-
losis. Counterfeit antimalarial pills in the developing world are
often quite sophisticated, and customers are easily duped into
believing they are the real thing. There are often few distinguishing
features between legitimate and fake pills, and sometimes the
counterfeits are so well done that a consumer has almost no way to
tell the difference.
As the near parity between the two packages in figure 1-2
illustrates, even the best-versed pharmaceutical security expert
may have difficulty distinguishing between fake and real goods.
For the average consumer—especially in impoverished nations,
where information about medicine and disease is sparse—it is
almost impossible. Most will not know what to look for to tell the
two apart.
In 2002, Paul Newton of Oxford University reported in the
British Medical Journal that 38 percent of antimalarial drugs bought
in Southeast Asia, where malaria is still prevalent, were counter-
feit.32 (A more recent study discovered a much higher number: fully
68 percent of artesunate drugs collected in Laos, Burma, Vietnam,
and Cambodia did not contain the correct amount of active ingre-
dient.33) Some of the drugs Newton collected contained small
amounts of acetaminophen, which temporarily lowers fevers but
does not kill the malaria parasite. This effect convinces the patient
that he is improving, when in fact a key symptom is merely being
suppressed. As a result, the patient does not discover the drug is
counterfeit until his illness is much worse.34
Drug counterfeiting in the developing world tends to be exacer-
bated by a lack of reliable statistics to accurately quantify the scope
of the problem, inadequate regulatory structures, and consumer
ignorance. Even so, unique political and economic conditions mean
that the size and scope of the problem vary among regions and
countries.
 COUNTERFEITING TODAY 17
FIGURE 1-2
AUTHENTIC V. COUNTERFEIT VOVERAN (PAIN MEDICATION) PILLS

SOURCE: Author.
NOTE: The package on the left is authentic, while the package on the right is counterfeit.

Africa. The problem of counterfeit drugs is especially severe in

sub-Saharan Africa. A 2005 study found that half the chloroquine
tablets in some selected African countries contained incorrect
levels of the active ingredient, rendering them ineffective; faulty
chloroquine contributed to a doubling of malaria deaths in the areas
under study.35 While improvements have occurred in some places,
such as Nigeria in the past few years (see “Stopping the Fakers,”
pages 46–48),36 there is still a long way to go before the pharma-
ceutical markets in many African countries can be considered safe
(see figure 1-3 on the following page).
One problem common to many developing countries is the
persistent willingness, often driven by wretched poverty, of many
18 MAKING A KILLING
FIGURE 1-3
PERCENT FAILURE OF CHLOROQUINE (ANTIMALARIAL DRUG)
IN AFRICAN COUNTRIES

100

80
Percent failure

60

40

20

0
Gab Gha Mali Ken Moz Sud Zim
on na ya amb an bab
ique w e

SOURCE: Charles Maponga and Clive Ondari, The Quality of Antimalarials: A Study in Selected
African Countries, World Health Organization, 2003, http://whqlibdoc.who.int/hq/2003/WHO_
EDM_PAR_2003.4.pdf (accessed March 17, 2008).

patients to buy drugs from street vendors or those selling drugs on

doorsteps. In Burkina Faso, for example, where national regulations
stipulate that consumers must buy medicines with a prescription,
many consumers regularly buy drugs without them in street mar-
kets where counterfeits are common. According to the Ministry of
Health, one in five pharmaceutical drugs bought in the capital city
of Ouagadougou is counterfeit and sold without a prescription or
expiration date.37 Breaking the rules may be a rational decision for
somebody who does not appreciate the risk, or cannot afford to
travel to a proper pharmacy because the informal trader’s goods will
probably be cheaper and more readily available, often because they
are not the real thing. Even branded products may be compromised
by poor storage conditions—such as being held up on a quay by
customs officials.38 This may contribute to an inherent mistrust of
 COUNTERFEITING TODAY 19
Western medicines and resentment of Western imports in some
countries, and make a locally produced version more acceptable.
This means that the poorest, least mobile, least educated people are
the most vulnerable to fakes.
In Africa, where HIV/AIDS and malaria kill millions of people each
year, the demand for medicine for these deadly diseases is enormous.
Unfortunately, as a result of poverty, low literacy, and general igno-
rance, counterfeiters have been able to take advantage of desperation.
In fact, many Africans will buy single pills at kiosks with no more
packaging than handmade envelopes. Even in pharmacies, where
blister packs (such as those in figure 1-2) are more likely to be avail-
able, there is close to no chance that a nonspecialist will have any
knowledge about the correct appearance of the products. The cus-
tomer must rely on the knowledge and integrity of the pharmacist.
In October 2007, a reporter for the news service Voice of America
visited a street market in Dakar, Senegal. The market is effectively
an unofficial pharmacy, and tables are piled high with boxes of
medications. A vendor said that while he knew selling drugs in the
market was illegal, he was not worried about getting caught. He
believed he was providing a valuable service because many of his
customers could not afford to go to the doctor to get prescriptions
or buy from pharmacies. He added that police did not bother him
because religious leaders protected his medicine sales.39 The prob-
ability that these drugs were substandard or outright fakes was high.
Even if the vendor’s products were genuine, it is highly likely their
efficacy would have been compromised by being exposed to the
tropical West African climate day after day.
It is difficult to quantify the penetration of fake drugs in Africa
because of the lack of data in many places. What is known is based
on isolated studies, from which estimates are made as to the situa-
tion nationally. A 2002 study in Senegal found that twenty-one
out of twenty-two samples of ampicillin (a common antibiotic) con-
tained only flour.40 Analysis of antimalarials in Angola, Burundi,
and the Democratic Republic of Congo in 2006 discovered that
46 percent of drugs had been incorrectly formulated; and in more
than 50 percent of cases, drugs were sold loose (without the original
20 MAKING A KILLING

primary packaging, with the name of the active ingredient, strength,

the expiry date, and, only in some cases, the producer’s name and
country written in pen), providing a ready opportunity for counter-
feiting.41 In Cameroon, a U.S. Pharmacopeia study found that
39 percent of samples had no active ingredients, insufficient active
ingredients, or the wrong ingredients.42 A survey in 2005 found
that almost 30 percent of drugs in Kenya were counterfeit, with
some being no more than chalk and water.43 With counterfeit-drug
sales estimated at $130 million every year, the costs of producing
such fakes provide huge profit margins to the unscrupulous.44
Nigeria presented the worst case of drug counterfeiting in
Africa until very recently when, under the leadership of its
tough chief pharmaceutical regulator, Dora Akunyili, the country
began taking significant action against counterfeiters (see pages
46–48). Consequently, the data from Nigeria are the most com-
plete available, but even there, the beneficial impact of more
rigorous oversight has not been consistently recorded.45 Data vac-
uums persist. Still, customs investigations and simple studies
of samples bought in markets, kiosks, and pharmacies in vari-
ous countries are building a body of evidence about counterfeit
drugs in Africa.

Latin America. The Pan American Health Organization (PAHO) has

reported that home production, importation, and redistribution of
counterfeits are increasing in Latin America. Illegal pharmaceuticals
have been found in hospitals and pharmacies throughout Latin
America, and increasingly, reports and discoveries are being made by
pharmacists and doctors themselves. The reports are encouraging,
but many patients continue to buy from street vendors or from the
Pharmacia Similares, which sell not branded original medicines but
copy medicines, which may include fake and substandard drugs.46
In addition, legitimate drugs are being stolen and their expiration
dates extended so they can be reintroduced into the regular
supply chain at a later date. The Dominican Republic’s Ministry of
Public Health reported in 2005 that about half of all pharmacies in
that country were operating illegally, and 10 percent of medicines
 COUNTERFEITING TODAY 21
imported were fake. Some confiscated medicines had expired more
than ten years earlier.47 In March of the same year, investigators
discovered an international network manufacturing fake tablets of
Lipitor in Costa Rica for shipment to the United States, where they
would have sold for some $8 million.
National pharmaceutical industry associations working with
government organizations, PAHO, and each other report similar
experiences. Sales of counterfeit, contraband, or adulterated drugs
in Colombia in 2004 were estimated to be worth $60 million, rep-
resenting 5 percent of all drugs sold in the country. The Association
of Pharmaceutical Laboratories of Peru reported a market worth
$66 million in 2006—up from $40 million in 2002. Manufacturers
in El Salvador estimate the losses to legitimate laboratories to have
been $40 million in 2005. Illegal pharmaceutical products represent
about 10 percent of Mexico’s market.48

Russia. One of the world’s largest “gray” economies is Russia’s, and

pharmaceutical businesses are fully integrated into it. The Lancet
reports that drug manufacturers often run legally by day but add
extra shifts at night “to produce extra quantities of a certified drug
that does not pass through quality control, or sophisticated copies
of well-known drugs are produced, often with reduced levels of
expensive active ingredients. These fakes can be exact copies or put
in packaging where only a letter or two is altered on the name.”49
Counterfeits produced on the side are then channeled to Russia’s
domestic market and, occasionally, to Europe and the United States.
Counterfeit-drug production is worth an estimated $300 million
per year in Russia, and although the government claims counter-
feiting is decreasing,50 it admits that up to 10 percent of medicines
are still faked. The Coalition for Intellectual Property Rights gives a
higher estimate of 12 percent.51
Russia’s underground market is characterized by unusually well-
made fakes, according to private investigators from Pfizer who sur-
veyed the Russian market in 2006.52 A decade ago, many fakes in
Russia were produced in basements and backrooms, but most now
come from the night shift at legitimate pharmaceutical companies.
22 MAKING A KILLING

About 70 percent of fake drugs in circulation in Russia are produced

inside the country, and an estimated 70 percent of these are copies
of foreign medications.53 Although thus far it appears that quality
has remained high, there is no incentive for counterfeiters to main-
tain quality, especially since counterfeiting is only a civil liability,
not a criminal one, and the fines are negligible.54
Political corruption and bureaucratic complacency in Russia have
allowed the counterfeit-drug trade to flourish. “We have had people
in the regional governments even saying about improper medicines,
‘What’s wrong with that, the quality is super and we’re going to buy
it,’” says Gennady Shirshov, executive director of Russia’s Union of
Professional Pharmaceutical Organizations (SPFO).55 But, recently,
there has been a shift. Russian authorities are just now realizing the
extent of the danger illegal drugs can pose to health. While they
have no statistics on the harm caused to patients by fake drugs, and
it is still generally thought that the sufficient—if not good—quality
of most of them has prevented deaths, they are becoming alarmed
by the possibility that about 45 percent of counterfeits in Russia are
medicines for serious cardiovascular or gastrointestinal illnesses.
The problem in Russia is especially hard to deal with because
those engaging in faking are protected, and some are extremely
influential and powerful. Vladimir Bryntsalov, a member of parlia-
ment and billionaire pharmaceutical magnate who once ran for
president, is currently under investigation, charged with collecting
54 million rubles ($2.1 million) from illicit sales of medicinal
alcohol. Bryntsalov’s company, Bryntsalov-A, and its subsidiary
Ferein, however, also produce up to 10 percent of Russia’s legitimate
pharmaceuticals. Producers like Bryntsalov (and others allegedly
linked to the Russian mafia) operate both in and out of the shadows,
using their legal status to obtain raw materials that can then be
diverted through channels not subject to stringent regulation.56
There have so far been no successful prosecutions of any senior
figure involved in counterfeiting.
In addition to being produced in-country, counterfeit and sub-
standard drugs are being imported into Russia at increasing rates.
According to sources in India,57 exports from India to countries in
 COUNTERFEITING TODAY 23
the Commonwealth of Independent States, including Russia, are
increasing, with cross-border associations of narcotic and fake drug
traffickers between Russia and India flourishing.

Asia. India is the source of most substandard active pharmaceutical

ingredients and counterfeit drugs in the world, with China not far
behind. Joined by Pakistan and the Mekong River Valley countries,
and enabled by the region’s myriad, unregulated small producers
(by some estimates, India has 22,000 drug producers, most with
annual revenues under $100 million), Asia might be considered the
fake factory of the world. According to the European Commission’s
2006 report, 31 percent of fake medicines imported into the EU
came from India, 31 percent from the United Arab Emirates,
and 20 percent from China.58 This is alarming for western nations
such as the United States, given that an estimated 20 percent of
generic drugs in the United States come from India or China, and
more than 40 percent of the active ingredients of drugs made in the
United States come from one of these two countries. Analysts esti-
mate that, within fifteen years, this figure may increase to more than
80 percent.59
Thus far, relatively rigorous import controls in the United States,
coupled with what appears to be self-regulation on the exporting
side (an assumption based on the low incidence of fakes despite
the high volume of imports), appear to have prevented any signifi-
cant influx of faulty products;60 all the same, the opportunity for
compromise in the system is worrisome, especially as organized
crime and terrorist organizations increasingly become involved.
While data on markets affected by exports from these countries
are plentiful, if unsystematic, information on the penetration of
counterfeit and substandard drugs within them is difficult to find.
Some of the best documentation available is on the website of
WHO’s International Medical Products Anti-Counterfeiting Task-
force (IMPACT).61 In India’s major cities, IMPACT reports, one in
five medicines sold in the period under investigation was a fake.
India’s pharmaceutical companies claimed a loss in revenue of
between 4 and 5 percent annually. The industry also estimated that
24 MAKING A KILLING

illegal drugs had grown from 10 percent to 20 percent of the total

market. Other observers, including investigators hired by domestic
and multinational pharmaceutical companies, say fakes range from
5 percent in some markets to as much as 30 percent in others.62
Yet the official estimate of the Indian government, as reported
by WHO, of “spurious” drugs (as fakes are known in India), is less
than 1 percent, with substandard drugs comprising less than
10 percent.63 China’s research and development–based pharma-
ceutical association has estimated that about 8 percent of over-the-
counter drugs sold in China are counterfeit.64
Not surprisingly, many poorer countries in Southeast Asia, with
geographical proximity to the myriad counterfeit producers of
China and India, and without the economic and political leverage
or enforcement power of wealthier markets (like Japan), are awash
in counterfeit drugs. As aforementioned, a 2006 study found
that 68 percent of artesunate drugs collected in Laos, Burma,
Vietnam, and Cambodia did not contain the correct amount of
active ingredient.65
Although fake drug markets in developing countries are varied,
they undoubtedly flourish in numerous locations and share similar
attributes. Any drug type can and will be faked based on market
potential for the fakers, which varies from market to market and
according to the presence of effective deterrents. Where politicians
have shown no political will to tackle the problem, the problem is
increasing. But it is not insurmountable, and where authorities have
demonstrated a willingness to enforce controls more rigorously and
crack down on counterfeiters, the problem is diminishing.
 2

How and Why Does

Counterfeiting Occur?

Counterfeiting happens because it is both highly lucrative—

particularly for goods with low marginal costs of production, such
as pharmaceutical drugs or electronics—and convenient. Little con-
sumer awareness coupled with weak regulatory structures means
that most counterfeiters are never discovered. Insufficiently puni-
tive penalties mean that consequences tend to be minimal for those
who are caught. Together, these elements make counterfeiting phar-
maceuticals a relatively high-reward, low-risk enterprise.

Incentives to Counterfeit

Like other counterfeit products, counterfeit pharmaceuticals exist

because there is a big market for the authentic original product and
because profit margins on sales of the counterfeits are high. Medicinal
counterfeiters exploit the often high prices of genuine drugs.
Real pharmaceuticals can be expensive for many reasons. The
popular, if ill-informed, view is that greedy multinationals want to
squeeze the last penny out of the sick and dying. Of course, there
are many bona fide reasons for prices to be far higher than marginal
cost. Research and development costs are the most obvious.
Although patents are designed to allow these costs to be recovered,
they have to be filed very early on in the process, so by the time a
drug reaches the market (if it does at all), the period of protection
may be too short to recoup the company’s investment. Technical
factors also push up costs. Active ingredients may be expensive or
difficult to acquire. The sweet wormwood plant (Artemisia annua),

25
26 MAKING A KILLING

which is the basis of the newest antimalarial drugs, is a case in point.

The plant takes fourteen months to grow—a very long time in a
market whose value is uncertain because antimalarials are often
donated or sold below cost. Companies take on futures contracts
with farmers, often in unstable countries, and they are subject to
foreign exchange risks as well as the whims of the international
donors that support the market.
But these issues are of little interest to copiers and counterfeiters—
and activists, for that matter—who consider only the retail price of
the drug. Counterfeiters who do not care if they use any active
ingredient at all and manufacturers who are not fussy about the
niceties of WHO’s good manufacturing practice (GMP) guidelines
can exploit the margin and rake in easy profits—provided their
products look good enough to pass for the real thing, and their
tracks are covered.1
Further incentive to counterfeit is provided by tensions between
pharmaceutical companies and the governments of developing coun-
tries. While developing countries do take some action to deter out-
and-out counterfeits, conflict between public health and industrial
drive may lead governments to protect nascent drug industries by
promoting domestic companies that produce copy drugs (especially
for export), even though the quality of such products may be poor.
India, for example, has more stringent regulations for drugs con-
sumed domestically than those that are exported. Substandard
drugs from government-backed entities in developing countries
constitute a major problem that may discourage the involvement of
higher-quality foreign suppliers.2 And as the number of legitimate
suppliers that produce poor-quality drugs increases, it becomes
easier for those trading fakes to introduce their wares into the mar-
ket. When combined with Internet pharmacies, porous borders,
colluding wholesalers, poor consumer awareness, and—crucially—
weak detection systems and ridiculously low penalties, these condi-
tions make counterfeiting alluring to criminals, as well as to
legitimate manufacturing laboratories that operate on the fringes of
legality. With lax regulation and control of GMP, manufacturers
may cut corners and produce substandard medicines—making extra
 HOW AND WHY DOES COUNTERFEITING OCCUR? 27
production runs a side business that may involve adulterating,
diluting, repackaging, and relabeling drugs to misrepresent dosage,
origin, or expiration date.3

Corruption within Countries

Outright corruption in various forms and at different levels within

countries worsens and possibly facilitates the counterfeit problem.
According to Maureen Lewis, a senior economist at the World
Bank, corruption in the health sector is rife.4 This is true in rich as
well as poorer countries, but better reporting systems, the threat
of litigation, and higher incomes for health professionals vastly
reduce the problem in the wealthier ones. In the developing world,
on the other hand, corrupt practices in the health-care sector often
force patients to pay directly for drugs that are supposed to be free
at point of use. This encourages patients to choose the cheapest
drugs available, which are more likely to be fake or substandard. In
the middle-income and poor countries of Moldova, Sri Lanka,
Morocco, and many others, more than 80 percent of the public
thinks the health-care sector is corrupt, with “informal” payments
for drugs common.5
A plethora of private, unlicensed sellers also enables the coun-
terfeit drug problem. In Ethiopia, for example, there is rampant
stealing of public-sector drugs, which are then resold in the private
market. In 2003, researchers in Nigeria found a significant rate of
non-payment to medical staff, and concluded that “the greater the
average number of months of salary non-payment in a facility . . .
the greater the probability that essential drugs (chloroquine, para-
cetamol, and antibiotics) [were] privately provided by facility
staff rather than being facility owned.”6 According to a 2001 study
cited by a Center for Global Development report, over 50 percent
of drugs had gone missing from public medical facilities in two
states in Nigeria.7 According to a 1999 estimate from Uganda, over
70 percent of drugs in the public sector went missing during the
period of one year.8 While these drugs may be produced according
to GMP, their diversion through the hands of unlicensed drug
28 MAKING A KILLING

sellers—who may be uninformed or inept at distribution—may

render them ineffective.
Many health workers are involved in corruption within the
health care systems, partly due to their low pay. Rafael Di Tella and
William D. Savedoff studied seven Latin American countries and
found routine overpayment for supplies—including drugs—due to
gross mismanagement and corruption. Given the enormous mar-
gins fakes can provide to those involved in their trade, corruption
in the drug supply chain nearly always involves fakes or substan-
dard drugs. Other problems, from petty theft of drugs by nurses and
doctors to widespread “leakage,” reveal myriad vast holes through
which fake and substandard drugs enter middle-income and poor
countries.9 Solutions to such problems may be rooted in reducing
corruption in the public sector rather than attempting to combat
fake drugs directly.10

Complex Supply Chains Encourage Fakes

It stands to reason that any complex system with many inter-

changeable parts is especially susceptible to being breached—it has
more vulnerabilities than a simpler system. This applies to the
pharmaceutical supply chain. Having a secure source of sound
drugs is no guarantee of safety if the supply chain is full of weak-
nesses and holes. Today’s supply chains offer many openings to
counterfeiters, from diffuse and little-regulated wholesale systems
in the United States and the EU to misguided trade barriers in
developing countries.

Developed Countries. In developed economies, the supply chain

between producer and consumer is short and, for the most part,
secure. In the United States, 98 percent of the nation’s medicine is
distributed through wholesalers. Of these medicines, 90 percent are
distributed by the “Big Three”—Cardinal, AmeriSourceBergen, and
McKesson—all longstanding, trusted channels. But another layer of
wholesalers—about 6,500—forms a secondary market that buys
and sells surplus medicine and is responsible for approximately
 HOW AND WHY DOES COUNTERFEITING OCCUR? 29
$9.3 billion worth of drugs.11 These further subdivisions improve
efficiency, industry insiders say. Regional wholesalers, for instance,
have contacts with distributors in certain regions of the country, and
even smaller wholesalers specialize in storing and delivering one or
two kinds of drugs.
But this is the stage in the supply chain at which counterfeiters
can most readily insert themselves, claiming they are wholesalers
who receive drugs from other wholesalers. A drug is passed from the
manufacturer to a wholesaler, which can then distribute it to even
more wholesalers—maybe as many as five between manufacturer
and pharmacist12—channeling it into a loosely regulated market in
which legitimate wholesalers may trade willingly or unwittingly with
counterfeiters posing as wholesalers. Drugmakers, Congress, and
law enforcement agencies have long complained that counterfeiters
posing as small wholesalers practice “diversion,” substituting fake
medicines with phony paperwork and realistic packaging into ship-
ments en route to pharmacies and hospitals. In these cases, the
authentic drugs diverted from the shipments are then resold. In
other cases, even legitimate wholesalers may buy drugs from coun-
terfeiters, believing they are getting a better bargain.13
Margins are so tight in the distribution chain, however, that
prices more than 10 percent lower than expected anywhere along
the supply chain should be treated with suspicion by middlemen,
retailers, and pharmacists buying the products.14 At times the phar-
macy, by buying the drugs at or below cost in hopes of making a
greater profit, is willfully (or at least tacitly) complicit in the coun-
terfeiting scheme.15
It is remarkably easy for someone to become a licensed whole-
saler; sometimes fees are less than $1,000. Once licensed, whole-
salers can legally buy and sell pharmaceuticals in the supply chain.
In Miami, for example, the owner of an auto body shop received a
license to be a drug wholesaler in Maryland.16 And in Nevada, a
twenty-three-year-old restaurant hostess received a license to oper-
ate an online pharmacy.17
Many of these small wholesalers operate out of homes and
garages and are subject to little federal regulatory oversight;
30 MAKING A KILLING

state-level oversight is spotty and inconsistent, too. In Florida, for

example, one needs only a refrigerator, an air conditioner, an alarm
to secure products, a $200 security bond, and a $700 license to
become a wholesale distributor.18 Tracking these small distributors
is a huge task that local law enforcement officials, usually under
pressure to investigate higher-profile narcotics crimes, have been
unable to confront.19 Maryland has seven inspectors for 632 whole-
salers, and Virginia has nine inspectors for 684 wholesalers.20
In Florida, a nexus for the illicit pharmaceutical trade in the
United States, nine drug inspectors regulate 2,699 businesses.21
With such low staffing levels, the regulation of even registered com-
panies slips—much less the interdiction of unregistered operations.
One FDA official estimated that companies that should be checked
every one to two years were instead checked every eight to ten.22
The FDA’s inspection of foreign drug producers is even less com-
prehensive, inhibited by a lack of resources, international legal
norms, and the agency’s own poor recordkeeping mechanisms. A
Government Accountability Office report released in October 2007
found that the FDA inspected 7 percent of all foreign manufacturing
establishments approved to export medicines to the United States in
a given year—meaning that it would take the agency more than
thirteen years to inspect each establishment just once. Inspections
themselves were problematic. Most tended to be tied to a given
facility’s application to market a new drug, rather than focused on
facilities manufacturing drugs already on the market; they were not
unannounced and could not easily be extended if problems were
encountered; and the FDA did not provide translators, forcing some
inspection teams to rely on English-speaking representatives of the
foreign establishments. Finally, the FDA lacks a systematic database
tracking all foreign establishments. One database indicates there
are about 3,000 foreign establishments registered to produce drugs
marketed in the United States; another indicates about 6,800.23
Consumer vigilance remains low because many Americans do
not even know the drug wholesale system exists. According to a
2006 Opinion Research Corporation poll commissioned by the
National Consumers League, 37 percent of Americans incorrectly
 HOW AND WHY DOES COUNTERFEITING OCCUR? 31
FIGURE 2-1
DRUG SUPPLY CHAINS

Infiltration of U.S.
drug supply
Pharmaceutical Counterfeiters
manufacturers

Exported
Discounted
groups Foreign Repackagers
Recycled Diverted shipments countries
Arbitrage
Parallel trade

90% Expired drugs Mixed in

Drug Diverters Importers
reclamation
sites
“Gray market”

Tertiary
wholesalers

Internet
Big Three Individual pharmacies
Secondary
wholesalers wholesaler importation

Pharmacies Online purchase

Pure drugs
Counterfeit
Consumer Compromised

SOURCE: Wyatt Yankus, Counterfeit Drugs: Coming to a Pharmacy Near You, American Council
on Science and Health, 2006, available at www.acsh.org/publications/pubID.1379/pub_
detail.asp (accessed March 20, 2008).
NOTE: This diagram depicts the complexity of the drug supply chain and the number of times
a single drug can change hands as it travels from the manufacturer to the customer. The dot-
ted lines represent the different routes by which counterfeit drugs can enter the U.S. supply
chain and make their way to American consumers.

think that prescription drugs go directly from manufacturers to the

pharmacy shelves.24
There is even more complexity in the European Union, which
operates a system called parallel trading under which it is legal to
buy drugs cheaply in one part of Europe and sell them at a higher
price in another part. In economics, this process of taking advantage
of price differences for a profit is known as arbitrage. Arbitrage gen-
erally increases efficiency because it corrects for price discrepancies
32 MAKING A KILLING

within and across markets. In practical terms, this is true for phar-
maceuticals, too. But arbitrage lowers efficiency in the drug market
because the market is unusual; its products require extensive R&D
but are cheap to produce, so an efficient level of pricing is above
marginal cost in wealthier markets.25 By increasing the number of
hands that drugs pass through in the supply chain, arbitrage raises
the chances that counterfeits are able to infiltrate it.
Another weakness in the chain is the network of wholesalers who
specialize in fulfilling cross-border transactions. For example, drugs
need to carry consumer instructions in the language of the country
in which they are to be sold, on paper and on the drug blister
packets, as well as on outer packaging. This (legitimately) requires
instructions to be translated and reprinted and calls for new pack-
aging to be prepared by middlemen. As discussed in chapter 1,
packaging is one of the primary means by which counterfeiters can
insert themselves into supply chains. The European repackaging
process gives them just this opportunity. A counterfeiter posing as a
parallel-trade intermediary, for instance, could claim that he legiti-
mately purchased a drug in a Spanish-speaking country, repackaged
it into English, and then sold it in the United Kingdom—when in
reality he bought the drug in another country with less stringent
manufacturing requirements than the Spanish-speaking country,
such as India. This scenario played itself out in May 2007, when the
United Kingdom’s Medical and Healthcare Products Regulatory
Agency was forced to recall batches of fake schizophrenia and hyper-
tension drugs after they were discovered to have been counterfeited
with forged French packaging.26 Similarly, in July 2005, the MHRA
found 70 packets of counterfeit Lipitor in the facilities of two differ-
ent UK wholesalers. The packets had proper identification numbers,
but this was only because the packaging had been forged. Around
2,500 packets of fake Lipitor had already been distributed in the
National Health Service supply chain before MHRA’s discovery.27
Important differences exist among the counterfeit-drug markets
in different countries in Europe. According to UK officials, for
example, the British drug supply chain is one of the safest in the
world, with counterfeits accounting for only about 1 percent of the
 HOW AND WHY DOES COUNTERFEITING OCCUR? 33
market.28 Still, they, like other European countries, have found
themselves increasingly susceptible to the infiltration of fakes.
French customs agents, for instance, reported seizing 542,000 fake
drugs in 2005.29 Finland appears to have a large counterfeit prob-
lem. In early 2007, Finnish customs officials confiscated 140,000
counterfeit drugs entering the country,30 a sizable number for a
population of 5.2 million.31 An obvious contributing factor is Fin-
land’s long Russian border,32 along with its lax transit laws, which
currently allow for the unrestricted transit of medicines, with ship-
ments of imported medicine investigated only if the patent-holder of
a particular medicine files a complaint with Finnish officials.

Developing Countries. For anyone who has tried to clear an item

through customs in developing countries, the endless paperwork
and bureaucratic heavy-handedness are all too familiar. A Customs
Modernization Handbook published by the World Bank lists eleven
separate steps necessary to clear customs in most countries.33
Throw into this burdensome mix poorly paid and occasionally
unscrupulous customs agents, as well as irregular tariff systems in
which no one seems to know the exact rates or bothers to look them
up, and corruption is almost inevitable.
The link between tariffs and corruption is clear.34 Tariffs provide
opportunities for irregular payments, and they delay product ship-
ment. Frequently altered tariff rates create opportunities for public
officials to extract bribes. Local officials often have exclusive knowl-
edge about the “correct” fees and possess the authority to change
them locally, giving them improper leverage. In some cases, they
waive official fees in exchange for bribes.
Capricious intervention by customs officials leaves importers
with little choice but to pay bribes to avoid delays, especially when
goods with short shelf-lives (for example, antibiotics and other
drugs that need refrigeration) are concerned. Such corruption con-
tributes to the instability of access to medicines in these countries.
Tariffs and the corruption associated with them also cause
problems for humanitarian organizations. The U.S.-based Catholic
Medical Mission Board (CMMB), a leading provider of global health
34 MAKING A KILLING

care, donates approximately $175 million in pharmaceuticals each

year to over fifty countries in approximately five hundred different
shipments. CMMB crosses many borders and is familiar with cus-
toms operations around the world. One would think such human-
itarian shipments would be exempt from duties and customs
clearance fees. But each time CMMB brings goods into a country, it
is asked by customs officials to pay questionable “administrative
handling fees” for documentation filings in proportion to the statis-
tical value of the shipment. In Vietnam, for example, some form of
payment is regularly demanded of CMMB upon the entry of its
donated medicines.
CMMB is not alone in its experience. Private companies are often
required to pay significant taxes and tariffs, even for drugs they price
at marginal cost, and in some instances for drugs donated for free
(in these cases, a price is imputed based on some reference price).
Janssen-Cilag, a research and pharmaceutical company based in the
United Kingdom, reports that it frequently pays import duties and
value-added taxes, plus a premium, on drugs it sells in Burma, lead-
ing to a price markup of an additional 15–20 percent.35
Gilead Sciences, a biopharmaceutical company, had its global-
outreach commitment tested in 2004 and 2005 when drugs
shipped to Kenya, Uganda, and South Africa were held up in ports.
In one case, a drug shipment meant for Médecins Sans Frontières
(MSF, known in English as Doctors without Borders) treatment pro-
grams in South Africa was repeatedly delayed. To make matters
worse, MSF—which is primarily in the business of providing med-
ical care—was ill-equipped to tackle the bureaucratic requirements
of obtaining permits and securing prepayments for the release of the
drugs, leading to even greater delays. After three years the situation
was resolved, but only after the services of local distributors had
been secured. Some Gilead officials remarked that such hurdles are
a significant deterrent to their ongoing commitment to the region.36
Not all drug supply efforts have met with this frustrating opposi-
tion. Larger donors, such as the President’s Emergency Plan for
AIDS Relief and the U.S. Agency for International Development,
have successfully demanded that tariffs and all forms of nonofficial
 HOW AND WHY DOES COUNTERFEITING OCCUR? 35
payments be suspended for their donations. Other agencies and
groups, however, have not had the same luck. Unlike aid from
EU member countries, a significant amount of American foreign aid
is disbursed by private organizations, which means it is not exempt
from tariffs.37
Sometimes developed-world hostility can threaten productive
trade relationships. China’s charge of Western media manipulation
of its counterfeit problem, though largely a defensive measure,
appears to have some truth to it—many Western media outlets and
politicians probably have reacted unfairly to reports of dangerous
Chinese goods.38 Rhetoric that raises suspicion without sound
evidence not only distorts the size of the problem; it threatens the
beneficial trade relationship between the developing and developed
worlds. It is important to remember that the threat posed by counter-
feits can only be countered by mutual cooperation. An overreaction
to the reports of the flow of dangerous goods coming out of devel-
oping countries may undermine future efforts to reduce it.

Counterfeiting, Organized Crime, and Terrorism

Because the counterfeit-drug industry is a highly profitable enter-

prise, especially in environments of weak regulation and enforce-
ment where penalties are slight, it has attracted organized criminal
groups like the Russian mafia, Chinese triads, Colombian cocaine
traffickers, and the Mexican mafia.39 Francis Burnett of the Carib-
bean Industrial Research Institute points out that many of these
groups were driven from narcotrafficking to the counterfeit-drug
trade because of the potential for high profits, with comparatively
low risk.40 This movement was accelerated by antidrug efforts that
increased the potential costs relative to benefits from trafficking
in narcotics. “Petty criminals, but especially organized criminals,
have identified [counterfeiting licit drugs] as a way to make big
bucks and with lower penalties than cocaine or crack or heroin,”
says Lewis Kontnick of Reconnaissance International, a Denver-
based consulting firm that works on counterfeiting issues.41 As Jim
Christian, head of corporate security for the drugmaker Novartis,
36 MAKING A KILLING

comments, “If you get caught with a pound of cocaine, you can
expect to do serious time. But if you are found with counterfeit
medicines, you might do only six months.”42 In May 2001, for
example, drug officials in Colombia discovered a counterfeit manu-
facturing ring in a poor neighborhood of Bogotá. Workers were
producing more than 20,000 counterfeit versions a day of the flu
drug Dristan. The ten people caught in the act and arrested were
free on bail within a few days.43
Stiffer penalties alone will not solve the counterfeiting problem.
As Randy Barnett, a law professor at Boston University and a former
criminal prosecutor for the Cook County State’s Attorney’s Office in
Chicago, explains, the deterrent power of potential punishment is
a function of both its severity and the rate of prosecution (that is,
the likelihood of getting caught and convicted). A government’s first
response to counterfeiting often involves increasing fines, periods of
incarceration, and other forms of punishment.44 Although a strong
step, the stiffer punishment may not have the desired effect. By
increasing penalties, a government may unwittingly decrease the
likely rate of prosecution, thereby canceling or even reversing any
added deterrence. In the United States, for example, convictions in
criminal trials demand evidence “beyond reasonable doubt”; ver-
dicts in civil trials permit a less rigorous “preponderance of the
evidence.” In criminal trials for serious offenses, where punishments
may be severe, the evidence hypothetically is held to the highest
standard. Even when a criminal is successfully prosecuted, punish-
ment in high-stakes cases may be delayed, further weakening the
penalty’s deterrent power.45
Harsher penalties also increase incentives for counterfeiters to
resist capture and prosecution. Potential defendants may bribe or
intimidate officials, especially customs agents. If a trial seems
likely, they will pay for better lawyers and may invest in buy-
ing off witnesses. While some potential counterfeiters may be
deterred, those who remain will tend to be more organized
and more violent. Making punishment more severe is usually a
step in the right direction, but only when it is joined with strong
enforcement.46
 HOW AND WHY DOES COUNTERFEITING OCCUR? 37
And the counterfeit problem extends far beyond the merely
criminal. In 2004, the departing U.S. secretary of health and human
services, Tommy Thompson, highlighted the vulnerability of West-
ern markets to counterfeits used by terrorist organizations, not so
much to cause direct injury and panic as to fund straightforward
terrorist actions.47 In March 2006, the U.S. Joint Terrorism Task
Force—an interagency initiative led by the FBI—charged nineteen
people with operating a counterfeit-drug ring that spanned
Lebanon, Canada, China, Brazil, Paraguay, and the United States.
Profits from the sales of counterfeits and other contraband were
used to support the terrorist group Hezbollah.48 Previously, coun-
terfeiting had been viewed by most authorities solely as an intellec-
tual property issue—something that might damage profits and
brand credibility but had little effect on anyone other than the
patent-holder. But Ronald Noble, the current secretary general of
Interpol, the world’s largest international police organization, warns
that “intellectual property crime”—which includes counterfeiting
medicines—“is becoming the preferred method of funding for a
number of terrorist groups.”49 At a meeting with WHO’s depart-
ment of essential medicines and policy in 2005, Interpol intelli-
gence officer Erik Madsen noted that emerging evidence showed
links between counterfeiting and organized crime and terrorist
organizations, including al Qaeda.50 Fighting fake drugs requires
calm, reasoned action, but the response must take on the urgency
warranted by these developments.

Conclusion

While it is clear from the aforementioned examples that counterfeit

and substandard drugs affect people across the globe and have
entered supply chains in many developed countries, much uncer-
tainty remains about the precise extent and character of the prob-
lem. Although the appearance of fakes in the United States and
Britain is disconcerting, few cases of deadly counterfeits have
been reported in either country. July 2007 marked the first time a
death in the developed world was officially linked to counterfeit
38 MAKING A KILLING

pharmaceuticals purchased over the Internet.51 Canadian investiga-

tors found e-mail records showing that over several months in 2006,
fifty-eight-year-old Marcia Bergeron had unwittingly purchased
counterfeit antidepressants and acetaminophen from several unli-
censed online pharmacies. The drugs, which contained dangerously
high levels of aluminum, phosphorus, titanium, tin, strontium,
arsenic, and other metals, ultimately killed her.
The threads of modern drug counterfeiting stretch around the
world and from the top to the bottom of the international commu-
nity—from rural Chinese workshops to large retail pharmacies; from
Interpol to street hawkers. Those involved in or affected by counter-
feiting are disaggregated groups with disparate interests. Even where
there is a will to take action, coordination is difficult. The middle-
aged American man buying fake Viagra from a fraudulent online
pharmacy has the FDA to look after his interests; the poor African
mother unknowingly buying fake malaria medicine in single doses
for her baby is more deserving of protection, but receives none.
Some local authorities, especially in the developing world, tolerate
domestic fakers, viewing them as Robin Hoods robbing rich foreign
firms to heal the poor. Some international aid agencies tolerate sub-
standard drugs that are produced by small, local firms as a way to
“improve competition.”52 But these perspectives should be tolerated
only as long as these drugs do not pose a threat to patients’ health.
Counterfeiters do not usually have long-term business plans;
they exploit opportunities for profit for as long as they provide bet-
ter returns than the next best alternative. Many world markets are
effectively unguarded, and the chances of detection or punishment
are negligible. The lack of credible deterrents draws the professional
criminal from more dangerous activities. Even legitimate actors
involved in manufacturing and distribution may be tempted to
moonlight. Regulation has yet to seriously mitigate the activities of
counterfeiters; enforcement of existing regulation remains lax. If and
when regulations are enforced, criminals may respond violently,
with the same level of aggression found in the war on narcotics.
 3

Stopping the Fakers

Although eradication of counterfeits is neither efficient nor possible,

steps are being taken to decrease its prevalence, particularly in the
area of medicine. Some are being implemented at the national level,
others by international organizations. Equally important are steps
being taken by private parties, such as pharmaceutical companies
and pharmacists.

At the International Level

Among multilateral actors, the World Health Organization has spear-

headed the movement to crack down on drug counterfeiting. The
agency’s International Conference on Combating Counterfeit
Medicines, held in February 2006 in Rome, led to the Declaration of
Rome, in which the global community recognized drug counterfeit-
ing as a “vile and serious criminal offence that puts human lives at
risk and undermines the credibility of health systems.”1
At the conference, members pledged to work together to address
the global challenge of drug counterfeiting through the creation of
the International Medical Products Anti-Counterfeiting Taskforce.
IMPACT includes representatives from all the major anticounter-
feiting players, including intergovernmental organizations, nongovern-
mental organizations, enforcement agencies, pharmaceutical manu-
facturers’ associations, and national drug and regulatory authorities.2
The role of enforcement within IMPACT is undertaken by Interpol,
the world’s largest international police organization. As part of its
partnership with IMPACT, Interpol has so far built partnerships with
countries in Latin America, Southeast Asia, and Africa to train police

39
40 MAKING A KILLING

in combating counterfeit drug–smuggling networks, coordinating

police operations, and tracking the flow of fake drugs.3
IMPACT aims to build coordinated networks across and among
countries to halt the production, trading, and selling of fake medi-
cines around the globe by

• raising awareness among international organizations

and other stakeholders to improve cooperation in com-
bating counterfeit medicines;
• raising awareness among national authorities and
decision-makers and calling for effective legislative
measures to combat counterfeit medicines;
• establishing effective information exchanges and provid-
ing assistance on specific issues related to combating
counterfeit medicines;
• developing technical and administrative tools to support
the establishment or strengthening of international,
regional, and national strategies; and
• encouraging coordination among anticounterfeiting
initiatives.4

IMPACT has made some progress toward these goals. It has

increased awareness of the dangers of counterfeit medical products
and has been a forum for anticounterfeiting initiatives. It spear-
headed a task force in Lisbon in December 2007 on developing
effective anticounterfeiting legislation and helped orchestrate a
February 2008 meeting among technology developers, drug manu-
facturers, and regulators to discuss using technology to combat
counterfeit drugs. Still, because IMPACT must function through
existing national structures and institutions—many of which have
proved incapable of combating fakes—its influence may be limited,
especially given WHO’s poor record of standing up to individual
nations with poor policies. In 2004, for example, before IMPACT
 STOPPING THE FAKERS 41
was formed, WHO withdrew eighteen antiretrovirals from its pre-
qualification list, and no member state required any of the compa-
nies involved to do a product recall (although one company,
Ranbaxy, voluntarily did so).

At the National Level

IMPACT aims to build networks that work through national gov-

ernments which, theoretically, have the legal authority and regula-
tory power to act on anticounterfeiting initiatives. In practice,
however, both the practical ability and political will for combating
counterfeiting vary widely from country to country. Some countries
have stringent national drug regulatory authorities—such as the
U.S. Food and Drug Administration or the EU’s European Medi-
cines Agency (EMEA)—while others have poorly functioning or less
efficient regulatory authorities, or none at all. Legal frameworks in
different countries define counterfeiting in different ways, or fail
to address it at all. Argentina, for example, has no law against coun-
terfeiting. Some aspects of counterfeiting may be specific to partic-
ular countries or regions. While national governments can benefit
from the knowledge-sharing and coordination of international
partnerships like IMPACT, each must confront counterfeiting as it
happens on its own home turf.

Developed Countries. Pharmaceutical counterfeiting of the inter-

national scope and sophistication observed today—often featuring
high-quality fakes produced in poorer, relatively unregulated coun-
tries and targeted at developed countries’ lucrative markets—is
relatively new, and governments in developed countries are still
coming to grips with how best to confront it. Japan, the United
States, and the European Union have focused on monitoring
imports and improving customs control.

Japan. With the third-largest pharmaceutical market after North

America and Europe,5 Japan represents a lucrative opportunity for
counterfeiters. Since 2002, the country has worked to streamline
42 MAKING A KILLING

and strengthen its regulatory system, by amending its Pharma-

ceutical Affairs Law (PAL) to include a risk-based classification
for products, revised manufacturing controls and quality assur-
ance standards, and increased postmarketing surveillance. In
April 2005, the government established a separate entity, the
Pharmaceuticals and Medical Devices Agency (PMDA), to pro-
mote a more efficient and transparent drug review and approval
process.6 Under PAL, PMDA is required to conduct GMP inspec-
tions globally. It has announced plans to hire 150 inspectors
and has sought assistance from the pharmaceutical industry to
train them. Prior to 2004, all individuals importing medicines
“for business purposes” were required to be licensed by the
government;7 under PAL, the government has strengthened
these requirements, calling for any business to be physically
located in Japan and have three controllers, one each for safety,
quality assurance, and general purposes. To gain approval to
market new drugs, companies must demonstrate an ability to
guarantee the safety, quality, and efficacy of the product, as well as
compliance with good quality, manufacturing, and vigilance
practices for manufacturing sites and for products already on the
market.8 These initiatives combine strong regulatory require-
ments with important company-level responsibility.
Nevertheless, as noted by Paul D’Eramo, chairman of the
International Society of Pharmaceutical Engineering’s regulatory
affairs committee, “It is difficult to know how the new law will be
interpreted and enforced by the government.”9 As of February
2007, for example, Japan had hired only 28 of the 150 planned
inspectors. Other critics say the official Japanese requirements
may be too rigorous, discouraging efficient international trade
with unnecessary rules and regulations. In a report released in
March 2007, the U.S. International Trade Commission noted that
between 2001 and 2005, the average time required to approve
new medical devices was higher in Japan than in other principal
global markets, including the United States and the European
Union. Although the 2005 PAL reforms made some strides in
reducing these times, “significant challenges” remain.10
 STOPPING THE FAKERS 43
FIGURE 3-1
COUNTERFEIT DRUG CASES OPENED BY THE FDA, 1997–2006

58
60
53

50
Number of cases

40
32
30
30 27

21
20
11
9
10 5 6

0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

SOURCE: U.S. Food and Drug Administration, “Counterfeit Drug Cases Opened by Fiscal Year,”
http://www.fda.gov/oc/initiatives/counterfeit/hdmanadcs1113_files/textmostly/slide3.html
(accessed August 3, 2007).

United States. The U.S. Food and Drug Administration is the chief
pharmaceutical monitoring agency in the United States, responsible
not only for the approval of drugs for mass distribution, but also
for informing citizens of the threat posed by counterfeit drugs and
providing regulatory oversight for drug production. In recent years,
the FDA has stepped up enforcement of counterfeit-drug opera-
tions inside and outside of the country. In 2004, the FDA’s Office of
Criminal Investigations (OCI) opened fifty-eight counterfeit-drug
criminal cases, up from thirty in 2003 (see figure 3-1 above). Most
of the drugs confiscated by the FDA in these cases were headed to
the black market or online pharmacies.11
In 2004, U.S. customs officials collected 3,000 packages sus-
pected of containing counterfeit or unapproved drugs. An analysis
of 180 of the packages revealed that 67 percent contained drugs that
either were never approved by the FDA or had been withdrawn
44 MAKING A KILLING

from the U.S. market for safety reasons. The drugs in 5 percent of
the packages had no active ingredient, and 28 percent contained
controlled substances banned from importation into the United
States.12
The FDA has constructed a system in which it can focus atten-
tion on the riskiest imports. “Intelligent, risk-based inspections are
more important than absolute numbers of inspections,” the FDA
announced in a June 2007 statement.13 The OCI has been respon-
sible for the convictions of several Americans engaged in illegal
pharmaceutical smuggling and production over the past five years,
including some people involved with Chinese counterfeiters.14
The FDA also issues and monitors the National Drug Code
(NDC) Directory, an index of bar codes required on all pharmaceu-
tical packaging. The NDC identifies the drug and includes such
information as dosage form, active ingredients, and strength, allow-
ing pharmacists and patients to differentiate among look-alike drugs
in order to prevent prescription error. The FDA requires pharma-
ceutical firms to update their NDC information in June or
December of each year. Drugs ordered over the Internet or sold in
certain pharmacies, however, may not have an NDC barcode or be
registered in the system, and many consumers may not know to ask
for this information.
Increasingly, the FDA is also working to place inspectors at the
point of production. In March 2008, Secretary of Health and
Human Services Mike Leavitt announced that the FDA had begun
negotiations with the Indian government to station officials in the
country in order to check the safety of products bound for the
United States. This was a “high priority,” Leavitt said, given that more
FDA approvals had been coming out of that country than any other
in the world.15 Congress has scheduled several hearings to consider
further expanding the FDA’s investigative presence abroad.16

European Union. Europe’s parallel-trading system,17 designed to

make Europe a de facto single market for pharmaceuticals, relies on
national systems to maintain the security of pharmaceutical trad-
ing. To protect against the growing volume of counterfeits on the
 STOPPING THE FAKERS 45
Internet and in European supply chains, drugs in the parallel-
trading system can be bought and sold only in licensed pharmacies.
Some European countries have attempted to regulate the parallel-
trading system on their own as well. Officials in Denmark, for exam-
ple, inspect factories that are engaged in parallel trading to avert
tampering with medicines.18
European officials also conduct enforcement activities. In March
2004, officials seized 500,000 dosage units of counterfeit medicines
in Valencia, Spain. In addition to the tablets, officials found 1.2 mil-
lion labels for use in the counterfeit operation. The drugs seized
were for serious illnesses, such as HIV/AIDS and cancer.19
In the United Kingdom, the Medical and Healthcare Products
Regulatory Agency relies on a voluntary reporting system called
a “yellow card scheme” to respond to incidents of counterfeit and
substandard drugs. The reporting system was instituted in the
1970s in response to the thalidomide disaster there.20 Since the
implementation of the system, over 400,000 cases have been
reported, but further details are limited.21

Developing Countries. Aided by their relatively strong regulatory

structures and enforcement agencies, developed countries have
experienced significant success in stemming the flow of counterfeits
into their markets. Developing countries, however, plagued by more
pressing problems than fake drugs—including an utter lack of
affordable drugs—have experienced less success. They often lack
the regulatory power to monitor local counterfeit operations.
Inefficiency and outright corruption in customs operations enable
the importation of fakes from India, China, and elsewhere.
For developing nations, regulatory bodies are often an expensive
and unaffordable luxury. According to WHO, only 20 percent of
member states have well-developed drug regulation. Of the remain-
ing members, only about 50 percent implement drug regulation
at varying levels of development and operational capacity. The
remaining 30 percent either have “no drug regulation in place or a
very limited capacity that hardly functions.”22 Some of the more
developed but poorly governed countries, such as Thailand, have
46 MAKING A KILLING

national regulatory bodies, but these may be no more than money-

making vehicles for political appointees.23 In such cases, action may
only be taken when pressure is put on a country by its neighbors
or international bodies to remedy a domestic problem. Lacking
adequate regulatory structures, countries must rely on action taken
by international bodies for assessing and combating the fake drug
problem. Indeed, these countries also rely on international organi-
zations to fund most of their health care. Developing countries often
lack data on the scope of their domestic counterfeit problems, mak-
ing enforcement all the more difficult. But reform is possible with
political will, as cases such as Nigeria illustrate.

Africa. Throughout the African continent, drug regulatory authori-

ties vary in size and scope; anticounterfeiting legislation, where it
exists, may be imperfectly enforced. A lack of rigorous, representa-
tive data collection in many countries makes it difficult even to
assess accurately the scope of the problem.24
Nigeria, as one of the richer countries in sub-Saharan Africa,
was for many years the chief market for counterfeit drugs. In
2002, Nigerian health officials estimated that counterfeits made up
approximately 40 percent of the drug market there.25 At one point,
a study put the estimate of fake antimalarials in Nigeria at 85 per-
cent of the total market.26
Nigeria’s regulatory body, the National Agency for Food and Drug
Administration and Control (NAFDAC), was established in 1993,
but for years it was largely ineffective in controlling the production
and distribution of fake drugs. Political support for NAFDAC was
weak. Not until several neighboring countries, including Ghana and
Sierra Leone, banned all pharmaceutical products made in Nigeria
did leaders in Abuja take action. In 2000, then-president Olusegun
Obasanjo dismissed the management of NAFDAC. In 2001, he
appointed Dora Akunyili to run it.27 She reorganized the agency
with Obasanjo’s full political support and strengthened import and
export security. The importation of drugs and other regulated prod-
ucts through land borders was banned outright, and limited to two
seaports (Calabar in the eastern part of the country and Apapa in
 STOPPING THE FAKERS 47
Lagos, the country’s most populous city in the southwestern part of
the country) and two airports (Murtala Mohammed International
in Lagos and Mallam Aminu Kano International in the north).
NAFDAC was also given the authority to demand that the Nigerian
Ports Authority, independent shipping lines, and airlines release
shipping and cargo manifests to agency inspectors.
Between 2001 and 2006, Nigerian officials destroyed more than
$109 million worth of fake drugs.28 In 2006, officials estimated
that counterfeits made up approximately 16 percent of the total mar-
ket, down from a high of anywhere between 40 and 85 percent.29
That year, NAFDAC created the West African Drug Regulatory
Authorities Network, a forum for West African drug regulators to
strategize on combating counterfeit operations in the region.30
Authorities appeared to be growing more adept at the complex
coordination required to identify and shut down counterfeit
operations. In March 2007, after seven months of planning and
coordination by different Nigerian agencies, NAFDAC closed
down the notorious Onitsha Bridge Head Market.31 Just a year
earlier, NAFDAC officials surveying the market had been attacked
and driven out by counterfeiters operating inside it; twelve
Nigerian policemen had fled the scene, and six of their vehicles
had been smashed.
In many African countries, inefficiency and outright corruption at
the borders tend to enable the importation of fake drugs, often from
India and China.32 Some importers dupe customs agents into believ-
ing their products are safe and legal. They may, for instance, hide
their fake drugs inside containers with other goods, like clothing or
household items, or simply declare them to regulators as other
items.33 Most often, however, counterfeiters capitalize on border
corruption.34 According to Akunyili, “The first line of action by drug
counterfeiters is to compromise regulators. When this fails, they fight
back with intimidation, harassment, blackmail, and threats.”35
Counterfeiters are able to “compromise regulators” by bribing them
to maintain lax regulations; they are able to compromise customs offi-
cials by bribing them to overlook certain packages. Regulators and
customs officials reluctant to play along will be threatened until they
48 MAKING A KILLING

acquiesce or leave their jobs. In 2003, Akunyili herself was the target
of an assassination attempt. A bullet grazed her head in a drive-by
shooting. She has admirably affirmed her commitment to the anti-
fake cause, but such menacing tactics are likely to frighten weaker
personnel working in the supply chain.
Other countries, such as Uganda, have also moved to
strengthen internal production standards. According to U.S.
Pharmacopeia, Uganda’s National Drug Authority carries out
mandatory, batch-by-batch laboratory analysis of all medicines
intended to treat malaria and tuberculosis before they are cleared
for entry into the country.36 Still, the relatively low number of reg-
ulatory personnel in Uganda (WHO reports that there were only
three to four per one million people in 1998, the lowest number
out of the ten countries surveyed) suggests that implementation
may be far from perfect.37
Indeed, weak health infrastructures and a lack of adequately
trained regulatory personnel often stymie the rigorous implementa-
tion of anticounterfeiting initiatives in Africa. Zimbabwe, for exam-
ple, appears on paper to have a robust drug regulation system. The
main functions of its core institution, the Medicines Control
Authority of Zimbabwe (MCAZ), include “licensing of manufactur-
ing, product assessment and registration, GMP inspection, import
controls and control of product quality,”38 as well as maintaining
controls over prescription of medication, licensing requirements for
the wholesale trade of drugs, and the inspection of drug distribution
and promotion channels.39 Still, economic instability40 and the coun-
try’s weak national health infrastructure mean that this regulatory
legislation has not been well enforced—and that it has done little to
combat counterfeiting.41 One problem is a lack of personnel; one
study estimated that in 2002, 27 percent of staff posts at the MCAZ
were vacant, and that the agency had only four staffers per million
Zimbabweans.42
In July 2007, the MCAZ issued an official statement about the
high levels of fake ARVs that were available in Zimbabwe. According
to officials, unlicensed individuals were selling “counterfeited, adul-
terated and contaminated” drugs in local markets and salons; the
 STOPPING THE FAKERS 49
market for unauthorized drugs in the country could run into the
billions of dollars.43
In Kenya, the situation is similar: Although drug regulatory
legislation exists, poor enforcement and a shortage of well-trained
regulatory staff render it ineffective. Kenya’s Drug Inspectorate Unit,
for example, has just ten inspectors for the entire country.44 The
Pharmaceutical Inspectorate Unit at the Pharmacy and Poisons
Board has only five staff members (all pharmacists); the board itself
has only seven members.45 Tasked with carrying out inspection,
regulation, and quality-control functions, these board members
tend to be desperately overcommitted.46
A lack of health facilities and the high cost of drugs also lead
many people to self-prescribe, relying on dukas (kiosks) for their
supplies of paracetamol, antimalarials, anti-inflammatories, and
antibiotics.47 Buying from dukas circumvents the regulatory struc-
ture, however weak it may be, making the population even more
susceptible to counterfeit drugs.
Given the lack of regulatory enforcement and a thriving informal
sector, it is not surprising that counterfeits have infiltrated the sys-
tem at an alarming rate. The Kenyan Association of Pharmaceutical
Industry estimates that $130 million worth of counterfeit pharma-
ceuticals are sold in the country annually.48 WHO estimates that 30
percent of drugs on the market in Kenya are counterfeit,49 and
some local sources place the proportion much higher, between 50
and 70 percent.50
According to Hezekiah Chepkwony, director of the National
Quality Control Laboratory for Drugs and Medical Devices,
reform is needed. “We recently received bulk raw materials of
Amoxicillin Trihydrate and Ampicillin Trihydrate that had no
active ingredients at all, yet these are some of the highly used [sic]
antibiotics in Kenya,” Chepkwony told the Kenya Standard in
August 2005. According to Chepkwony, political commitment
must be strengthened, legislation revised, and national drug
control authorities adequately funded and empowered. More
training needs to be provided for law enforcement and customs
personnel, and the Kenyan government needs to work with the
50 MAKING A KILLING

international community to stem the flow of counterfeit drugs

into the country.51

Latin America. In Latin America, anticounterfeiting initiatives at

the regional level have been led by the Pan American Health
Organization and two of its subsidiaries, the Pan American
Network for Drug Regulatory Harmonization (PANDRH) and the
Pharmaceutical Forum of the Americas.52 PANDRH exists to “pro-
mote drug regulatory harmonization for all aspects of quality,
safety and efficacy of pharmaceutical products” in all member
countries, coordinating initiatives and sharing knowledge among
member states.53 This is no small task; regulatory structures
remain diverse and highly fragmented, and WHO reports that
Latin America is “lagging behind” other regions in regulatory
coordination.54
In Peru, for example, a national drug authority exists within
the Ministry of Health (the Dirección General de Medicamentos,
Insumos y Drogas)55 but is struggling to control the production,
importation, and distribution of counterfeit pharmaceuticals.
WHO estimates that around two hundred pharmacies operate in
downtown Lima with neither registration nor authorization from
the Ministry of Health.56 In Venezuela, “strict controls” and “clear
norms and procedures,” coupled with the use of a computerized
drug regulation system, have made regulation more effective.
Even so, as a WHO study indicates, staff shortages and a lack of
financing have rendered implementation imperfect.57
When its interests are at stake, the United States facilitates the
transfer of expertise to Latin America. Because of its geographical
proximity and trade importance to the United States, Mexico has
enjoyed special attention from the FDA and the U.S. Department
of Health and Human Services.58 On the enforcement side,
Interpol launched Project Jupiter in the Americas, which was
praised by the 2005 Second Global Conference on Global
Counterfeiting (involving five hundred delegates from sixty-six
countries) as a model for effective transnational enforcement
operations.59
 STOPPING THE FAKERS 51
Russia. The Russian government has recently stepped up action
against counterfeiters and is even challenging the bureaucratic
corruption that has allowed the trade to thrive there. In 2007, police
and inspectors from the Russian Federal Agency for Monitoring
Health and Social Development (Roszdravnadzor) raided a run-
down Moscow warehouse and found an estimated two million
dollars’ worth of copies of popular, mostly foreign-produced drugs
such as vinpocetine (branded as Cavinton, a drug used for the treat-
ment of various cerebral insufficiency conditions), the cold remedy
TeraFlu, and the antibacterial co-trimoxazole.
According to Ramil Khabriev, the former head of Roszdravnad-
zor, rapid progress is being made. All drugs entering the country are
certified, and a new law enacted in June 2007 has made it possible
to take distributors and pharmacies—which are often in on the sale
of counterfeits—to arbitration court and annul their licenses.
Khabriev says that “the number of inspections has increased while
at the same time the quantity of counterfeits being found has
decreased.” This suggests that such efforts have been successful.60
While Gennady Shirshov of Russia’s Union of Professional
Pharmaceutical Organizations welcomes the government action
that has closed down the biggest manufacturers of fakes, he fears
that smaller producers making lower-quality counterfeits will move
in to fill the void. Law enforcement bodies are ill-equipped, and leg-
islation inadequate, to provide a deterrent.61
Meanwhile, Roszdravnadzor is considering introducing a system
of coded labels to identify legitimate drugs, and Intertech
Corporation in Moscow has developed a tool for the SPFO, using
near-infrared technology—common elsewhere in Europe—that can
identify counterfeit drugs and packaging within minutes. The suit-
case-sized device, which is linked to a personal computer, can test
liquids, powders, and receptacles for the content of ampoules and
pills. The SPFO wants to set up a database of profiles of legitimate
medicines to compare with suspected copycats.
But Sergei Boboshko of the Moscow-based Association of
International Pharmaceutical Manufacturers casts doubt on the
efficacy of security devices: “There are no stamps, no holograms,
52 MAKING A KILLING

no secret passwords, or anything that’s going to eradicate this

problem.”62

Asia. In May 2007, China announced that Zheng Xiaoyu, the former
head of the State Food and Drug Agency (SFDA), had been sen-
tenced to death after being found guilty of taking bribes from eight
pharmaceutical and medical equipment firms and illegally approv-
ing their products.63 Zheng’s sentence followed a series of medical
scandals that killed dozens in China and undermined national
and international confidence in the country’s fast-developing
pharmaceutical industry, which may have reduced the volume of
drugs exported from the country.64
The harsh sentence was intended to be a warning. After all, such
bribery had been business as usual, and many other officials had
accepted larger payments and received lighter sentences. Wang
Yuexing, board secretary of the SFDA, promised that his officials
would be more disciplined in processing new drug applications, to
the benefit of law-abiding pharmaceutical firms.65 As of late 2007,
this new approach appeared to be paying dividends: In December,
the deputy head of China’s Food and Drug Administration, Wu
Zhen, announced that pharmaceutical companies had withdrawn
more than 7,300 applications for drug registrations, approximately
24 percent of the total.66
The Chinese government has also moved to make licensing
requirements for drug manufacturers more rigorous. Since the July
2007 launch of a nationwide campaign to crack down on counter-
feiting, more than three hundred drug and medical-device manufac-
turers have been shut down for poor-quality products.67 Effective in
2008, the Chinese government will not grant licenses to pharmaceu-
tical companies with any “severe defects” in their drug manufacturing
processes, including the submission of false information. The rules
previously had permitted a producer to obtain a license if three
defects were found but corrected.68 Evidence suggests that pharma-
ceutical companies in the country are taking the government seriously.
Still, more reforms are necessary. As noted in the U.S. Trade
Representative’s 2007 annual report on the state of international
 STOPPING THE FAKERS 53
intellectual property rights, China still possesses “safe harbors,” or
unduly high thresholds for criminal liability. Because the minimum
value of counterfeited products required to initiate criminal prose-
cution—normally calculated on the basis of the price the counter-
feited product can fetch in the market—is prohibitively high in
China, published penalties can be little more than straw-man
threats.69 If only one counterfeit product is discovered, the manu-
facturer can only be prosecuted based upon the price of that single
product. In a move to correct this problem, the SFDA announced in
November 2007 that it plans to impose stiffer penalties (including
heavy fines, life imprisonment, and the death penalty) in counterfeit-
drug cases that lead to “very serious damage,” regardless of the value
of drugs involved. Defined as “serious deformities,” “grievous bod-
ily harm” to more than three people, or “slight injury” to more than
ten, “very serious damage” expands the number of cases in which
counterfeiters can be held liable.70
Even with such reforms, China will likely face significant logisti-
cal and social challenges in cracking down on counterfeit produc-
tion. The number of drug wholesalers in China has burgeoned,
bloated in part by the dismantling of the state-run, state-funded
public health system that began in the late 1970s. Released from
government pensions, the “barefoot doctors” have embraced the
selling of drugs as lucrative new employment.71 Sales of counterfeits
are ostentatious; as the Wall Street Journal has noted, fake Viagra
tablets can be bought in Chinese airport lounges.72
As discussed earlier, the other major Asian source of counterfeit
drugs is India. There we find that progress has been inhibited by
bureaucratic disagreement about the extent of the problem.73
Without a clear consensus on the prevalence of fakes in its domes-
tic drug market—existing estimates range from 3 to 30 percent,74
with the official estimate at less than 1 percent75—lawmakers have
been slow to reform India’s weak regulatory system.
Anticounterfeiting initiatives have also been hampered by the
country’s penal code,76 which has emphasized the illegality of traf-
ficking in narcotics but not the counterfeiting of patented drugs.
Although many private pharmaceutical companies, concerned with
54 MAKING A KILLING

protecting their brands, have conducted raids confiscating counter-

feit drugs, these raids have tended to result in little punitive action.
Only drugs deemed to be “narcotics” under the Narcotic Drugs and
Psychotropic Substances Act (NDPSA) of 1985 were considered
worthy of investigation by India’s Criminal Bureau of Investigations
(CBI). The faking of nonnarcotics was a local matter unworthy of
federal action.77 The latest drug law in India, a 2007 amendment to
the NDPSA rules, may improve matters.78
Drug laws in many other Southeast Asian nations are similarly
inadequate to prevent the penetration of fakes across borders. As a
recent editorial in Thailand’s Bangkok Post lamented, “Our present
drug law is more than forty years old and too outdated to deal with
e-commerce and counterfeit pharmaceuticals being shepherded
across borders.”79
In India, as elsewhere, inadequate regulation has been further
constrained by government bureaucracy and the lack of facilities
and trained personnel. As of 2003, at least eleven out of India’s
twenty-eight states did not have any laboratories for testing drugs,
and in the remaining seventeen states with functioning labs,
only seven were adequately equipped, according to Raghunath
Mashelkar, former director general of India’s Council of Scientific
and Industrial Research.80 Enforcement against counterfeiters
remains weak; the Hindustan Times reported in July 2007 that
counterfeit-drug manufacturers were able to forge documents that
allowed them to sell fakes to government-run hospitals at a hand-
some profit.81
Until recently, illegitimate drug producers in India also benefited
from the country’s patent system. For years India granted only process
patents instead of the product patents approved by the Organisation
for Economic Co-operation and Development (OECD) governments.
A process patent protected the process that the drug company in
question used to create a new drug, but not the end product of that
process. Therefore, any company that could reverse-engineer a
Western product and was able to produce the same drug using a
slightly different process could do so freely, thus under-cutting the
sale of the original, protected drug. This opened the door for numerous
 STOPPING THE FAKERS 55
generic producers to enter the market, and, with so many small firms
legitimately supplying it, cover was provided to fakers. Beginning in
2005, this system was reformed, and India began granting product
patents, making it harder for counterfeiters to enter the system.82
More reforms are planned in India. The Indian Central Drugs
Standard Control Organization, which is a part of the Ministry of
Health and Family Welfare, has intended to “intensify surveillance
of high risk areas,” such as marketplaces, border zones, and rural
areas, as well as implement rapid-alert mechanisms.83 The country
recently said it would conduct a nationwide survey of the presence
of fake drugs in the market.84
On the enforcement side, India has demonstrated some willing-
ness to convict and punish counterfeiters. In January 2008, a court
in Thane sentenced a man found guilty of manufacturing spuri-
ous medicines to fifteen years in prison and a fine equivalent to
$13,400.85 Perhaps most promisingly, Indian health minister
Anbumani Ramadoss announced, also in January 2008, that the
government planned to set up a central drug authority modeled
after and drawing on the technical expertise of the U.S. Food and
Drug Administration. The agency, however, will take six to seven
years to be completely operational.86
A problem that has become particularly acute in Southeast Asia
is the distribution of counterfeit antimalarials. One study estimates
that between 38 and 52 percent of blister packs labeled as arte-
sunate, a powerful antimalarial, contain no active ingredient.87
Increasingly, artesunate drugs that contain some active ingredient
(but in insufficient quantities to kill the parasite) are emerging
on shelves in kiosks and pharmacies. In Burma, for example, coun-
terfeit artesunate samples collected in 2006 were found to have
between 3.5 and 12.1 mg of artesunate per tablet, less than one-
fifth the amount in a standard, authentic tablet. Such counterfeits
have not only caused grievous loss of life, as sick individuals
who would have otherwise obtained authentic medicines effectively
went untreated; they have also made the parasite more resistant to
the once-effective drug. They have led to a loss of confidence in
artesunate-based medicines and in some cases have expanded
56 MAKING A KILLING

artemisinin resistance.88 As in Africa, the problem is exacerbated by

poverty; authentic artesunate and artesunate combination therapies
(ACTs) can be expensive, and consumers often opt for less expen-
sive alternatives, even when their quality is suspect. One approach
to solving this problem would be to flood the market with good-
quality drugs, such as with the proposal to offer a global subsidy for
ACTs. Many uncertainties with this proposal exist, however; the
cost may be prohibitive, and the subsidy may not work properly.89
Some countries in Southeast Asia are beginning to take measures
to combat the problem of counterfeit drugs by working to equip
consumers and pharmacists with a means to differentiate authentic
from fake products. In 2005, Malaysia introduced its Meditag pro-
gram, which required all products registered with the Malaysian
Drug Control Authority to bear a holographic security device, mar-
keted by Mediharta and affixed by one of the company’s labeling
contractors. In 2006, the program expanded by supplying pharma-
cies with decoder units designed to be placed on store counters or
shelves with instructions on their use. Pharmacists and even con-
sumers are encouraged to check the authenticity of a given medi-
cine’s Meditag by sliding the medicine pack under the decoder unit.
Consumers are also encouraged to verify the registration numbers
of the medicines by checking with the pharmacy enforcement
branch of the ministry or by visiting its website.90 In addition to
enabling consumers to police their own purchases, Meditag has but-
tressed local law enforcement. Some of Malaysia’s three hundred
roving enforcement officers are equipped with portable readers.
Although it is difficult to be certain, given a paucity of data and
other influences,91 it appears that the Meditag program has had at
least some positive effects. As of June 2007, RM 13.77 million ($4.05
million) in unregistered medicines and cosmetics had been seized,
up from RM 7.83 million ($2.3 million) for all of 2006 (including, in
the latter case, RM 5.8 million, worth $1.7 million, of unregistered
medicines).92 At least some countries have shown an interest in
adopting the Malaysian model. In August 2007, Nigeria’s NAFDAC
announced plans to introduce uniquely numbered holographic labels
to be used on all licensed medicines distributed in the country.93
 STOPPING THE FAKERS 57
Throughout the world, governments now realize the danger to
public health of substandard medicines—whether they are counter-
feits or just poor-quality products from legitimate companies—and
are more willing to take action. Countries that had grown infamous
for flooding the world with fakes now recognize the problems
caused by illegal production—damage to the health of the home
population and loss of reputation in the world markets—and are
working to shut it down. As has been demonstrated in Nigeria, the
will to take action is the most significant factor in maintaining a safe
drug supply.

Unilateral Private Action

The private sector has powerful incentives to stem the deluge of fakes
from illicit producers into international supply chains. Patent-holding
pharmaceutical companies find their reputations tarnished and their
profit margins pinched when fakes masquerading as their trade-
marked products are recalled or when consumers stop buying safe
products because they are not sure they are getting the real thing.

Independent Organizations. U.S. Pharmacopeia and its European

counterpart (European Pharmacopeia) are helping middle-income
and poor countries ensure the quality of their medicines. The USP
provides a handbook of basic requirements for a medicine regula-
tory agency, with step-by-step instructions for providing those serv-
ices, including the evaluation and registration of medicinal
products and the inspection and licensing of manufacturing prem-
ises, import and export agents, distributors, wholesalers, and retail
outlets.94
Also providing assistance is the Pharmaceutical Research and
Manufacturers of America (PhRMA)—the pharmaceutical industry’s
advocacy group—which has established a website to help educate
consumers on the dangers of counterfeit drugs.95 In Asia, the
Japan Pharmaceutical Manufacturers Association (JPMA) has
spearheaded efforts to improve quality-control training and identifi-
cation of counterfeits. It has donated to Laos and Cambodia
58 MAKING A KILLING

high-performance liquid chromatography systems to assess the

chemical makeup of pharmaceutical drugs and thereby identify
potential counterfeits. It has also conducted training in quality-
control measures for Asian regulatory personnel. In 2006, the
organization initiated the JPMA/Ministry of Health project in col-
laboration with the Cambodian Department of Drugs and Food,
designed to measure the effectiveness of various anticounterfeiting
programs. JPMA has also promoted the Counterfeit Drug Survey
Project, an international cooperative enterprise in Asia.96
Some individual drug companies have voluntarily initiated sam-
ple testing of drugs being imported into the United States to ensure
the security of the U.S. supply chain. The USP sets standards for
drug quality that it makes available to drug manufacturers, and pro-
vides a quality-testing service for firms that, by independently veri-
fying the quality of drugs and the integrity of the production
process, serves a valuable credentialing function for consumers at
both the manufacturing and wholesale levels. Producers who vol-
untarily agree to the USP’s testing are subjected to an initial audit
that checks for compliance with internationally accepted good man-
ufacturing practice guidelines,97 as well as a thorough documenta-
tion review and a battery of laboratory tests checking their drugs
for purity and potency. Firms that pass receive a USP Verified Mark
and are subject to biennial reviews.98
The Pharmaceutical Security Initiative (PSI), a consortium of
twenty-one manufacturers from several different countries, aggre-
gates data on counterfeit drugs from participating drug companies
and provides them with a broad picture of the counterfeit industry.
PSI also has an incident-based reporting system through which
pharmaceutical companies can report cases of counterfeit drugs
entering supply chains, thus keeping participating members abreast
of all relevant counterfeiting cases.
The Global Pharma Health Fund (GPHF) is a public-private part-
nership of the German government and pharmaceutical companies
that has developed an effective anticounterfeiting measure which
it calls a “minilab.” The minilab is a mobile device that health
providers can use to quickly and easily test the efficacy of over forty
 STOPPING THE FAKERS 59
types of the drugs they receive, including important antimalarials,
antibiotics, and ARVs. The GPHF sells its minilabs at relatively low
prices (averaging $6,000) to health providers around the world,99
but especially in Africa and Southeast Asia. As of July 2007, it had
sold over 240 minilabs in sixty-five countries.100

Pharmaceutical Companies. Individual pharmaceutical firms have

also taken steps to resist counterfeit drugs. Many have begun to
implement track-and-trace technology on their drugs to provide
an effective “e-pedigree” to distributors and consumers. Some have
experimented with using radio frequency identification (RFID)
technology to check the e-pedigrees of drug shipments, although,
in the United States, this is not yet required by the FDA.101
To help secure the complex, vulnerable global supply chain,
many drug companies have implemented their own security meas-
ures. Pfizer announced in December 2003 that all distributors in the
United States selling its products would have to purchase them
directly from the company or from selected wholesalers.102 In
September 2006, Pfizer announced that it would cease selling
drugs to eighteen wholesalers in the United Kingdom and instead
distribute drugs there only through UniChem.103 These moves are
attempts to cut down the size of the secondary wholesale market,
which includes sales among wholesalers.104
Other pharmaceutical firms will need to secure their own supply
chains and alert the public when they become aware of counterfeit
drugs. These companies already recall all affected drugs, and,
increasingly, they are financing investigations and raids against
counterfeiters worldwide. Companies cultivate relationships with
local consultants—well-connected people who can find out where
fake drugs are being produced and sold—who provide evidence to
local police, who then raid the sites identified. In India, for exam-
ple, Suresh Sati, who markets himself as “The Protector,” is a private
investigator who has carried out raids on behalf of many companies.
Still, it is important to note that such raids will only be successful
when they are backed by a regulatory commitment to prosecute
and punish counterfeiters. As discussed earlier in this section, the
60 MAKING A KILLING

reluctance of India’s Criminal Bureau of Investigations means that

raids by private companies in India have had only limited deter-
rence power.105

Pharmacists. Pharmacists have a lot to lose from poor-quality

drugs. Being trusted by one’s customers is important for retailers,
especially when the average consumer cannot ascertain whether the
product is genuine or fake, and the product’s quality can mean the
difference between life and death. Most pharmacists, especially in
the developed world, assume that the supply chain is secure, and
they rely on alerts from their suppliers or the FDA to inform
them otherwise.106 They also may be well-trained in spotting sub-
standard medicines (pills that appear degraded; packaging that
appears suspect or is the wrong color, size, or shape). But sometimes
even skilled practitioners depend on luck. Fake Viagra was once
unearthed by the FDA because the packaging was slightly larger
than it should have been—a discovery that was made when the
dispenser could not shut the desk drawer where he kept his
Viagra supplies.107
As the proliferation of fakes into even legitimate supply chains
increases, luck may not be enough. In the developing world,
where regulatory structures remain weak and supply chains cannot
always be easily secured, pharmacists represent an important front
line of defense.
Overall, private sector action, whether by independent organi-
zations, consortia of pharmaceutical companies, individual
companies, or pharmacists, provides an important, bottom-up
complement to government policy. By demonstrating a commit-
ment to the integrity of their own supply and distribution chains,
private companies and pharmacists instill trust in and promote
demand for high-quality products. By sharing information with
government regulatory agencies and enforcement agents, the pri-
vate sector can also improve the efficiency of the public sector in
combating the counterfeit trade.
 4

Policy Recommendations

Counterfeiters do not operate in a vacuum. Impelled by unscrupu-

lous criminals but enabled by weak regulatory structures and unin-
formed or unconcerned consumers, the counterfeit problem has
thrived under the prevailing policy framework. Although there are
no cure-all pills for the fake-drug disease, several policy changes can
create a new framework that will mitigate the problem instead of
enable it.

At the International Level

International aid agencies can effectively fight counterfeiting, often

by simply not contributing to its spread. As countries negotiate
trade deals among themselves, they should pursue free trade with-
out protectionist barriers, but with protection for intellectual prop-
erty. In Europe, the parallel-trading system ought to be reassessed in
light of the opportunities it affords counterfeiters. The following
steps will contribute to such efforts:

Donor agencies must ensure that they are not purchasing or

distributing substandard or counterfeit medicines. Many drugs
distributed in the developing world—especially those for
HIV/AIDS and malaria—are donated (or sold at bargain-basement
prices) by aid agencies, many of which have demonstrated little
regard for ensuring the quality of drugs they purchase and distrib-
ute. The Global Fund to Fight AIDS, Tuberculosis and Malaria, for
example, a procurement agency responsible for allocating about
$4.7 billion for health interventions consisting primarily of

61
62 MAKING A KILLING

essential drugs, has spent millions on medicines of uncertain qual-

ity. In one round of drug procurement, 56 percent of purchase
orders (five of nine) made by the Global Fund went to suppliers
approved neither by WHO nor another more stringent agency.1 In
its bid to encourage small producers in developing countries, the
Global Fund has included several untested copies of drugs on its
prequalification list that may or may not be bio-equivalent to their
branded counterparts; as of June 2007, only 7 percent of anti-
malarials on the Global Fund’s list had under-gone testing to
demonstrate bioequivalence to a branded original. On October 10,
2007, the Global Fund quietly removed twenty-two previously
approved antimalarial formulations from its compliance list.
Although the formulation of six of the remaining eight is still not
approved by a stringent regulatory agency—and only approved by
the historically unreliable WHO prequalification process—this is a
major step forward. But more needs to be done.2 In 2004, the
FDA offered free, fast-track bioequivalence testing for HIV/AIDS
antiretrovirals on WHO’s prequalification list after the list had
rightly been criticized for including eighteen anti-HIV drugs that
had not demonstrated bioequivalence. Today, the FDA might con-
sider doing something similar for the Global Fund and other aid
agencies engaging in unsound drug distribution practices.3
International organizations might consider setting up testing labo-
ratories for particular regions. This would enable the more efficient
testing of locally produced drugs.

Aid agencies should pair drug distribution with educational

initiatives on the proper use, storage, and prescription of
drugs, especially antimalarials. Distributors in the developing
world should be educated on the danger posed by counterfeits,
trained to identify fakes in the market, and equipped with tools to
facilitate such identification. Although sophisticated technology
may not be available or financially feasible in all places, relatively
inexpensive and easy-to-use tools, such as the GPHF minilab, could
be more broadly used.4
 POLICY RECOMMENDATIONS 63
At the National Level

National regulatory agencies can be powerful outlets for anticounter-

feiting reforms. They should insist on more streamlined and trans-
parent supply chains and adopt stricter licensure requirements for
middlemen between manufacturers and consumers. Such reforms
will be futile, however, unless the regulators are independent,
uncompromising, and courageous.

Developing countries should lower tariffs on imports and

embrace free trade with patent protection. By lowering tariffs on
imported lifesaving medicines, developing countries can cut prices
and offer greater access to medicines for their citizens.5 This is a dif-
ficult policy to embrace for any country suffering from a lack of con-
fidence in its economy. While some might argue that lowering tariffs
reduces an important source of government revenue—and thereby
government services, including in the health care sector—the empir-
ical record suggests the opposite.6 Indeed, developed countries still
cling to such protectionist policies to protect sectors of their
economies against foreign competition. However, taxes and tariffs do
little to increase government spending on health services; consumers
may see prices increase by up to 100 percent with no appreciable
impact on government health care spending.7 In fact, complex tariff
and tax structures create ready entry points for corruption, smug-
gling, and counterfeiting, stimulating “demand for cheaper fakes by
artificially driving up the price of legitimate drugs through taxes
and tariffs which further inflate the retail price of the drugs,” accord-
ing to the International Policy Network.8 India and Nigeria are apt
examples: Both levy extremely high tariff rates on imported drugs,
and both suffer from weak health infrastructures and insufficient
access to high-quality medicines. The high price and scarcity of
imported products, and the lack of regulation in the health-care
sector, create conditions under which distributors, retailers, and
consumers are willing to buy cut-price products. Inevitably, demand
for high-quality products will be reduced, which allows fake or
substandard products into the market.
64 MAKING A KILLING

High tariffs also discourage legitimate international suppliers from

doing business in poor countries. Drug exporters complain repeat-
edly that customs fees in Ethiopia—where less than 20 percent of the
population has access to medical care—are too high for drugs that
have only a limited market in the country, which forces companies to
consider not selling products that may not generate sufficient sales.
To make matters worse, strict documentation requirements and
demands for the payment of “small” fees—supposedly for customs
“support” services—are bound to make exporters wary. In cases in
which companies practice differential pricing, whereby drugs are sold
at a considerably smaller profit margin in developing countries than
in the developed world, tariff hassles may simply prompt drug com-
panies to move their business elsewhere.9
Many countries have been reluctant to eliminate tariffs because
they generate revenue from Western companies—a reliable source
compared to domestic companies. Some, notably India, Kenya,
Thailand, and Brazil, use tariffs to protect domestic drug industries,
while others, such as Vietnam, Tanzania, and Ethiopia, may maintain
tariffs to assist development of domestic pharmaceutical industries.
This makes little economic sense. While a few developing countries,
such as India and Brazil, have thriving local drug industries, most
lack the requisite pharmaceutical manufacturing capacity and are
dependent on imports or the benevolence of philanthropic organiza-
tions for their supplies. Protecting local industries from international
competition does not necessarily guarantee that sustainable compa-
nies will emerge to meet consumer demand internationally and gen-
erate long-run income.
In addition to lowering tariffs, countries should actively work to
secure intellectual property rights and protect patents. Although
pharmaceutical patents have been heavily criticized as an impedi-
ment to drug access in the developing world, they serve an important
role in guaranteeing long-term drug development. Researching a
drug involves high fixed costs and significant risk; in the United
States, research and development amounts to almost 20 percent of
the research-based pharmaceutical industry’s total global sales every
year.10 Patent protection coupled with differential pricing would
 POLICY RECOMMENDATIONS 65
strike the middle ground between promoting short-term access
and guaranteeing long-term supply. Countries that choose to disre-
gard patents may find their supply of front-line drugs compromised,
as demonstrated by drug manufacturer Abbott’s exodus from
Thailand.11
Protection of patents creates an environment in which legitimate
manufacturers have a reason to expose competitors whose products
are poorly formulated. By promoting innovation—not merely
off-branding—developing countries also may establish a sustainable
niche for themselves in pharmaceutical manufacturing. Two current
examples are the leading Indian drug firms, Ranbaxy and Cipla.
Ranbaxy is developing a new and patentable dosage form of Bayer’s
antibiotic Ciprobay (ciprofloxacin) before the patent expires, while
Cipla has developed a new-dosage form of AstraZeneca’s anti-ulcer
drug, Losec. At the same time, Indian drug companies are also devel-
oping new molecules.12
Developed countries can encourage the protection of intellectual
property rights by promoting only limited use of the compulsory
licenses under Trade Related Aspects of Intellectual Property
Agreements (TRIPS), part of the World Trade Organization’s Doha
negotiations. As amended in 2005, TRIPS allow member countries to
issue compulsory licenses enabling domestic industry or third parties
to manufacture drugs off-patent legally. Although designed to be used
only in cases of “national emergency or other circumstances of
extreme urgency,” generally pertaining to public health,13 TRIPS
exceptions have been overused. In January 2007, for example,
Thailand issued a compulsory license for Plavix, a blood-thinning
treatment to help prevent heart disease.14
To address such abuses, the U.S. Trade Representative can con-
sider acting under “special 301” provisions of the Trade Act of 1974,
placing countries on a “priority watch list” to call attention to their
disregard for intellectual property rights, as it did in 2007 with
Thailand.15 The priority watch list can be an effective tool in calling
attention to—and encouraging the correction of—a country’s viola-
tions of intellectual property rights. In 2006, for instance, the U.S.
Trade Representative announced it was removing the Philippines
66 MAKING A KILLING

from its priority watch list following improvements in the country’s

legislation and enforcement against counterfeit production.16
According to the director general of the Intellectual Property Office of
the Philippines, Adrian S. Cristobal Jr., the islands’ “end goal” is to
make further improvements, culminating in the removal of the coun-
try from the U.S. secondary watch list.17
If they fail to protect intellectual property rights, developing
countries may find themselves without a reliable supply of high-
quality, lifesaving drugs, as Western companies may choose simply to
cease distribution in a country that does not protect property rights.18

Western countries should reevaluate European Union parallel

trade. Some theorists have argued that parallel trade in pharma-
ceuticals is an effective form of arbitrage, leading to more efficient
market operation;19 others argue that it destroys efficient differen-
tial pricing and provides opportunities for counterfeiters to insert
fakes into the system.20 Parallel traders defend their system by
suggesting that they help identify fakes in the market. As Tomasz
Dzitko, president and CEO of Polish wholesaler Delpharma,
asserted in a presentation at a 2007 conference on parallel trade, it
is not unknown for parallel traders to detect defects in products
and report them to the manufacturers and regulatory authorities
concerned.21 A 2004 study by the London School of Economics
and Political Science, however, found that the vast majority of
benefits from parallel trade accrued directly to parallel importers,
with “zero, or at best marginal benefits to patients.”22 The study,
said author Panos Kanavos, prescribed “urgent further debate
before any additional legislation in support of parallel trade is
passed . . . There is no evidence of sustainable dynamic price com-
petition in destination countries, with no corresponding indirect
cost savings.”23 Similarly, in her review of drug prices and sales
from 1993 to 2004 in the European Union, economist Margaret
Kyle found that parallel importing had done little to reduce prices
of drugs, as pharmaceutical firms moved to differentiate their
products across countries through unique packaging and version
requirements.24
 POLICY RECOMMENDATIONS 67
In short, EU parallel trading certainly increases the possibility for
fake insertion, possibly increases the fake trade, and potentially
undermines economic efficiency. The United States should not
undertake any parallel trading (as has been suggested by various leg-
islators)25 without an independent analysis of the EU system. Given
the potential harms from parallel trading, the European Union might
want to rein it in.

Public and private actors should collaborate on appropriate

technology to create a transparent and verifiable chain of cus-
tody from the point of production to the point of sale. As rec-
ommended by the FDA’s Counterfeit Task Force (a group created in
2003 to offer advice to policymakers about the growing threat
posed by counterfeit and substandard drugs) and mandated in the
2007 Food and Drug Administration Amendments Act,26 pharma-
ceutical companies, wholesalers, and pharmacies should collabo-
rate to design and implement a nationwide serialization system
with track-and-trace technology for all drugs produced in the
United States.27
The “e-pedigree” has been piloted in several states (including
California, which requires that all drugs be included under the sys-
tem by January 2009), but it has not been adopted on a national
scale, which has made tracing drugs across state borders—and
across different credentialing systems and pedigree requirements—
prohibitive.28
Numerous technologies can ensure this e-pedigree is not com-
promised by counterfeiters. Radio frequency identification appears
especially promising. An RFID tag, applied to a shipment of
pharmaceuticals, can be read from several feet away using radio
waves. In the United States, RFID may prove especially helpful in
speeding the passage of drugs through customs, where thousands
of drug packages become backlogged every year. Such backlogs
can create perverse incentives for customs officials to push ship-
ments through, even if they suspect they may be counterfeit. They
have also enabled “return to sender” policies, in which suspected
counterfeit shipments are merely returned to the wholesaler, which
68 MAKING A KILLING

can then redistribute them back through the system.29 Several

private pharmaceutical companies have experimented with RFID
in their supply chains, but they are keeping tight-lipped about its
relative cost-effectiveness.30 More research must be conducted to
determine the best-suited and most cost-effective technologies for
tracking drug shipments.
In Europe, the European Medicines Agency should consider
instituting a bar code requirement for drugs that are parallel-traded.
In its most recent strategy report, the agency noted that while
“enforcement of medicines legislation is the competency of Member
States,” increased coordination among various national and interna-
tional bodies is essential—and lacking.31 A bar code system would
operate as a guardian of information, rather than an enforcement
agent, facilitating coordination among EU member states without
infringing on individual countries’ mandates.
Under this system, all drug packages would be required to
include a unique barcode on their original packaging, authenti-
cating when, where, and by whom the drug was produced.
Scanned at every border and—ideally—at every transaction
between wholesalers, this barcode could then be tracked by phar-
macies and law enforcement officials. In order to prevent the
swapping of barcodes among shipments (which might be done to
mask their origins), original packaging would, in all cases, need
to be retained, which is impossible under current parallel-trading
arrangements.

Governments should support a secure supply chain by taking

measures to ensure post-production drug safety. Securing
the supply chain includes making applications for drug whole-
saler licenses more rigorous and increasing penalties—and
enforcement power to impose these penalties—for counterfeiters.
Communication channels among enforcement agencies—which
in the United States are the FDA, the DEA, and customs—must
also be streamlined. While many developing countries lack the
regulatory structures and technical capacity for sophisticated
supply-chain management and post-production drug safety
 POLICY RECOMMENDATIONS 69
schemes, reforms of the FDA and other national drug authorities in
developed countries serve as models.
Particularly in developed countries, policymakers should work
to correct the worrisome asymmetry between the resources
expended to ensure the safety of a drug before it is approved for dis-
tribution and those used to guarantee its quality after it goes to mar-
ket. In the United States, before a drug is approved for the general
public, it must undergo a battery of tests coordinated by the FDA,
primarily under the auspices of the Office of New Drugs (OND).
The process is both long and expensive, perhaps as it should be.32
Once a product reaches the market, however, the resources avail-
able for ensuring its quality decrease dramatically. The Office of
Drug Safety (ODS), the primary office within the FDA charged with
evaluating and monitoring post-market drug safety, had expendi-
tures of $26.9 million in 2005, less than one-fourth the amount
allocated for the OND. The office had only 106 staff members,
compared to the OND’s 715, and it lacked independent decision-
making power.33 Not surprisingly, then, the FDA has had difficulty
monitoring the commitments it and its pharmaceutical partners have
made to conduct post-market studies designed to assess the ongoing
quality of drugs in the market. As of September 2006, 71 percent of
all post-market study commitments were still “pending.”34
Strengthening post-production drug safety will include equip-
ping customs agents and other law enforcement agencies with
tools to identify and confiscate fakes before they enter the coun-
try, tasks important—and practically applicable—in developed
and developing countries alike. As the Nigerian case discussed in
chapters 1 and 3 suggests, rigorous controls from the top can sig-
nificantly decrease the number of fakes able to penetrate a given
market. In developed countries with complex regulatory struc-
tures, strengthening postproduction safety also includes clarifying
and streamlining operations among the various agencies involved
with regulating the process at the state and federal levels.
According to Randall W. Lutter, acting associate commissioner for
policy and planning at the FDA, an increase in counterfeit-drug
seizures observed between 2003 and 2004 reflected not only
70 MAKING A KILLING

“increased awareness and vigilance at all levels of the drug distri-

bution chain” but also “increased referrals from and coordination
with other state and federal law enforcement agencies and com-
munication with drug manufacturers.”35
The application process for wholesalers should be made more
rigorous, especially for smaller wholesalers who operate in local
niches. In the United States, the FDA could oversee and guaran-
tee compliance with this process, with another body, perhaps
the independent National Association of Boards of Pharmacy
(NABP), providing certification protocols. While moving over-
sight and control from the state governments to the federal level
would be controversial, it might be warranted, given the interstate
trade in pharmaceuticals. Currently, differences in licensing sys-
tems among states complicate the federal government’s efforts to
monitor compliance.36 The effectiveness of the NABP’s Verified-
Accredited Wholesale Distributors (VAWD) program, for exam-
ple, in which wholesalers must undergo a compliance review,
licensure verification, inspection, background checks, and screen-
ing, has been hampered by the fact that it is voluntary in most
states. (Only Indiana requires that all drug wholesalers receive
VAWD certification.) To date, only 224 wholesalers are VAWD-
certified—less than 4 percent of the approximately 6,500 cur-
rently operating in the United States. States have also been slow
to implement the FDA’s 2005 recommendation to adopt NABP’s
Model Rules for the Licensure of Wholesale Distributors.37
In other countries, governments can work with the FDA
and WHO to ensure that their own drug, manufacturer, and dis-
tributor registration programs are rigorous. Each country can
quickly learn from these authorities to distinguish between the
most important processes, which they should introduce first, and
the less vital ones that can be delayed until staffing and budgets
are larger.
Finally, criminal penalties for counterfeiting should be
increased to a level equal to those for trafficking in illicit drugs.
With higher penalties, the so-called narcotics crossovers—
syndicates and traders that have entered the counterfeit-drug
 POLICY RECOMMENDATIONS 71
trade in recent years, impelled by high profits and comparatively
low penalties—will have fewer incentives to continue operations.
While they may simply reallocate some of their own resources
back to narcotics trafficking—presenting another problem for
policymakers—their impact on the health of unwitting con-
sumers will be mitigated.
Increasing penalties for counterfeiting while simultaneously
decreasing the total number of counterfeiters may have the unin-
tended effect of making those that remain more organized and
violent. Leaving fewer counterfeiters in the market will, however,
allow enforcement agents to be more focused.38 Evidence from
other countries suggests that fortified enforcement can significantly
decrease the number of counterfeit drugs in the market. In Nigeria,
for example, Dora Akunyili’s aggressive campaign to crack down on
fake drugs resulted in a push to arrest landlords of apartments
where fake drugs are stored, the conviction of more than fifty coun-
terfeiters, and the shutting down of Onitsha Bridge Head Market,
as discussed in chapter 3. As previously mentioned, WHO reported
in 2002 that 70 percent of drugs in Nigeria were fake or sub-
standard; by 2006, after Akunyili’s successes, that figure had fallen
to 16 percent.39

Policymakers should encourage self-regulation within the

supply chain by endorsing reputable, independent regulatory
organizations. Punitive measures are still only part of the solu-
tion to the problem of drug counterfeiting. Only increased moni-
toring activity by technically qualified laboratories, combined
with concerted policing and consumer and supply-chain vigi-
lance, will reduce criminal manufacturing and trafficking in fake
drugs.40
Since the FDA and other government agencies cannot be
omnipresent, they should encourage the credentialing work of
other reputable, independent regulatory organizations to help con-
sumers distinguish between online pharmacies from which it is safe
to buy and those that are unsafe, as the FDA is doing with some
Canadian online pharmacies. Building widespread legitimacy for
72 MAKING A KILLING

these organizations will leave market actors with no choice but to

adopt their services.

At the Business Level

Pharmaceutical companies must alert both the public and law

enforcement officials to the distribution of counterfeit versions of
their own drugs when they discover them. By fostering an environ-
ment of openness, pharmaceutical companies will help ensure a safe
drug supply and keep the trust of their customers.

When appropriate, pharmaceutical companies should bypass

small wholesalers and deal either directly with distributors or
with only one trusted wholesaler. Pfizer is one company that is
doing this.41 Care must be taken, however, to strike a balance
between preserving drug safety and promoting consumer-friendly
competition. Purchasing directly from almost all manufacturers will
likely add costs to the system—what James C. McAllister, editor of
Pharmacy Times, describes as a “definite step backwards in supply
chain management.”42
Pharmaceutical companies are also uniquely positioned to pro-
vide consultative assistance and the transfer of technology to
improve supply chains in low-income nations. They should be pre-
pared to do so for any country that unequivocally defends intellec-
tual property rights. They can only make investments for training
and other support in these countries, however, if they are able to
tier their prices appropriately. Currently, companies are looking to
withdraw investment from some locations because of lack of patent
protection and opposition to tiered pricing.43

At the Individual Level

Ultimately, each consumer is responsible for the medicines he

or she takes. Consumers should be educated to understand the
consequences—for their own health, for the health of the commu-
nity, and for future innovation in drug development—of
 POLICY RECOMMENDATIONS 73
purchasing drugs outside of the standard supply chain. Drug
companies and public agencies should work together to educate
the public, buttressing a last-resort defense against the spread of
fakes and making it possible for individuals to take charge of this
aspect of their health care.

The public and private sectors should work together to educate

individuals. Pharmacists and consumers at the point of sale are an
important front line of defense in the drug supply chain. Today,
many individuals are ignorant of the vast proliferation of, and dan-
ger posed by, counterfeit drugs; a 2006 poll commissioned by the
National Consumers League found that 37 percent of consumers in
the United States were completely unaware of the wholesale distri-
bution system and, by extension, the possibility that counterfeit
drugs might be inserted into the U.S. pharmaceutical supply
chain.44 Awareness remains low in many developing countries as
well. One survey conducted in Laos found that 62 percent of
customers believed “all drugs were of good quality.” In urban areas
8 percent of customers, and 96 percent of those in rural and remote
areas, said they had never heard that drugs could contain lower
amounts of active ingredients than were allowed.45 Even when
aware of potential counterfeits, consumers—especially those in
lower-income groups—may be tempted to go for what appear to be
harmless bargains. Commenting on the case of Marcia Bergeron, the
first person whose death was officially linked to counterfeit phar-
maceuticals purchased online, Marnie Mitchell of the British
Columbia Pharmacy Association recommended that the Canadian
government launch a public awareness campaign to warn people of
the potential dangers.46
Several steps can be taken to inform actors at the point of sale.
For Internet consumers, a validation system can be created, in
which pharmacies approved by the FDA, USP, or another reputable
body carry a unique tracked logo. Any website posting the logo
without permission could be spotted in a second and shut down by
legal authorities. Such a system would build on the voluntary
national Verified Internet Pharmacy Practice Sites (VIPPS) list
74 MAKING A KILLING

maintained by the NABP in the United States and the mandatory

Internet Pharmacy Logo system maintained by the Royal
Pharmaceutical Society of Great Britain (RPSGB). In the NABP sys-
tem, by paying a nominal fee and demonstrating compliance with
its state’s regulatory standards as well as NABP’s, a pharmacy can
display a linked VIPPS symbol on its website. To date, fifteen
pharmacies have successfully applied for and implemented the
VIPPS logo on their sites. The FDA might consider creating incen-
tives for membership in VIPPS, especially for small, independent
pharmacies.47 The RPSGB system, which is mandatory for all
pharmacies, features a logo with the online pharmacy’s unique
RPSGB membership number posted on the pharmacy’s site. The
logo links back to the RPSGB registration page, allowing customers
to verify its veracity.48
Pharmacists in developed countries can be equipped with the
latest anticounterfeiting and authentication technologies, and
through partnerships with pharmacists in the developing world,
they can facilitate the transfer of this technology. In some places,
text messages might be used to alert consumers of compromised
products. Security inks, invisible digital graphics and dots, surface
fingerprinting, and infrared invisible codes might also be used,
depending on cost-effectiveness.49
National governments and international organizations can pro-
mote “whistleblowing” by offering incentives to pharmacists,
traders, and even consumers to report information leading to
arrests or prosecutions of counterfeiters. A whistleblower hotline
might be established, hosted by a national government or a non-
governmental interested party such as U.S. Pharmacopeia.
 Conclusion

While data are limited, there is little doubt that counterfeit drugs
are an increasing problem globally, with hundreds of thousands
of people dying annually as a result. Fakes are made and used
primarily in locations where limited regulations allow illicit
businesses to flourish, notably India, China, and Russia. With
slightly better policing and product labeling in the West, counter-
feiting can be held at bay, limited on the whole to parallel trading
in Europe and to internet sales in the United States, where
drugs come mainly from Asia. Western governments, NGOs,
pharmaceutical companies, and international agencies can pro-
vide expertise on making top-down changes to legal systems and
policing, as well as media-driven education to all but the poorest
consumers. Western players can also help poor countries by
improving bottom-up measurement of the counterfeiting prob-
lem, and by training and equipping distributors to identify
fake drugs.
Even against a background of poverty and corruption, deter-
mined action by regulatory agencies can reduce drug counterfeit-
ing, as evidenced by the progress that has been made in Nigeria;
but the political will of sovereign nations must be exerted to make
such change possible. Trading partners have significant leverage
and can continue to press for reform on counterfeit manufacture
and trade, particularly in China and India. While high-profile
executions and new laws will not drastically reduce drug coun-
terfeiting, increased policing, improvements to customs, and the
education of traders can accomplish much. Some countries, espe-
cially in the African continent, will probably continue to need

75
76 MAKING A KILLING

financial assistance from the international community. Yet even

without such funds, resource-constrained countries can make
changes at the margin. By chipping away at the small things and
building a healthy policy framework, counterfeits can be
fought—one pill at a time.
 Notes

Introduction
1. Tim Phillips, Knockoff: The Deadly Trade in Counterfeit Goods (London:
Kogan Page, 2005), 7.
2. Old Bailey Proceedings Online, “Thomas Rogers, Anne Rogers,
Offences against the King: Coining, Miscellaneous: Perverting Justice, 15th
October, 1690,” Proceedings of the Old Bailey, reference no. t16901015–36,
www.hrionline.ac.uk/luceneweb/bailey/highlight.jsp?ref=t16901015-36
(accessed March 17, 2008).
3. Margaret Zierdt, “Path Breakers,” National Women’s History Project
(July 2007), http://www.nwhp.org/resourcecenter/pathbreakers.php
(accessed January 16, 2008).
4. U.S. Secret Service, Counterfeit Division, “History of Counterfeiting,”
www.treas.gov/usss/counterfeit.shtml (accessed March 17, 2008).
5. James N. Green and Peter Stallybrass, “Job Printing,” Benjamin
Franklin: Writer and Printer, Library Company of Philadelphia, 2006,
www.librarycompany.org/BFWriter/job.htm (accessed March 17, 2008).
6. World Health Organization, “Counterfeit Drugs: Guidelines for the
Development of Measures to Combat Counterfeit Drugs,” Document
Prepared by the Department of Essential Drugs and Other Medicines,
WHO, Geneva, Switzerland, 1999, http://whqlibdoc.who.int/hq/1999/
WHO_EDM_QSM_99.1.pdf (accessed March 20, 2008).
7. As early as the first century AD, Greek physician Dioscorides identi-
fied the danger of counterfeit medicines. Adrian Johns, “When authorship
met authenticity,” Nature 451 (February 27, 2008), 1058–59.
8. U.S. Pharmacopeia is the official standard-setting authority for all pre-
scription and over-the-counter medicines, dietary supplements, and other
health-care products manufactured and sold in the United States. USP sets
standards for the quality of these products that are recognized and used in
more than 130 countries and works with health-care providers to help them
achieve the standards. The independent, science-based public health organization
is funded through revenues from the sale of products and services that help

77
78 NOTES TO PAGES 3–6
ensure good pharmaceutical care, and its contributions to public health are
enhanced by the participation and oversight of volunteers representing the
pharmaceutical industry, health-care professions, academia, government,
insurers, and consumer organizations. See U.S. Pharmacopeia, “USP History,”
2007, www.usp.org/aboutUSP/history.html (accessed March 17, 2008). For
the definition of “formulary,” see Coalition Working Group, Principles of a
Sound Drug Formulary System, October 2000, www.usp.org/pdf/EN/patient
Safety/pSafetySndFormPrinc.pdf (March 17, 2008).
9. John Parry Griffin and John O’Grady, The Textbook of Pharmaceutical
Medicine (London: British Medical Journal Publishing Group, 2002), 568.
10. Jake Hooker, “Chinese Company Linked to Deaths Wasn’t Licensed,”
New York Times, May 9, 2007, http://www.nytimes.com/2007/05/09/world/
asia/09china.html (accessed March 27, 2008).
11. World Health Organization, “Counterfeit Medicines,” Fact Sheet 275,
November 14, 2006, www.who.int/mediacentre/factsheets/fs275/en/index.
html (accessed March 17, 2008).
12. Ibid.
13. World Health Organization, “General Information on Counterfeit
Medicines,” http://www.who.int/medicines/services/counterfeit/overview/en
(accessed January 11, 2008).
14. World Health Organization, Effective Drug Regulation: A Multicountry
Study (Geneva: World Health Organization, 2002), www.who.int/medicine
docs/index.fcgi?sid=fFYQnGxO9ee80ca700000000474dcd26&a=d&c=me
dicinedocs&d=Js2300e.6#Js2300e.6 (accessed March 19, 2008).
15. Good manufacturing practice (GMP) guidelines articulate baseline
standards for all aspects of pharmaceutical production, including starting
materials, premises and equipment, and staff training and hygiene. Under
WHO’s definition, GMP also includes documented proof that correct
procedures are consistently followed at each step in the manufacturing pro-
cess. Some countries, including the United States, have formulated
their own GMP requirements based on WHO requirements. See World Health
Organization, “GMP Questions and Answers,” www.who.int/medicines/areas/
quality_safety/quality_assurance/gmp/en (accessed March 17, 2008).
16. E. C. Consten, J. T. van der Meer, F. de Wolf, H. A. Heij, P. C. Henny,
and J. J. van Lanschot, “Risk of Iatrogenic Human Immunodeficiency Virus
Infection through Transfusion of Blood Tested by Inappropriately Stored or
Expired Rapid Antibody Assays in a Zambian Hospital,” Transfusion 37:9
(1997), 930–34, doi:10.1046/j.1537-2995.1997.37997454020.x (accessed
January 11, 2008). The assays had a sensitivity and specificity between 11
and 18 percent below their manufactured standard.
 NOTES TO PAGES 6–9 79
17. Roger Bate and Kathryn Boateng, “Bad Medicine in the Market,” AEI
Health Policy Outlook 8 (2007), www.aei.org/publication26368/ (accessed
March 17, 2008).
18. In these countries (and others), many producers obtain licenses for
export only, meaning that the drugs they produce may not be subject to
even weak domestic regulation.
19. Technical Committee on the Pharmaceutical Manufacturing Plan for
Africa, “First Meeting of the Technical Committee on the Pharmaceutical
Manufacturing Plan for Africa,” October 24–26, 2007, Addis Ababa,
Ethiopia, www.africa-union.org/root/au/Conferences/2007/october/sa/
Pharmaceutical/DOCS/REPORT.doc (accessed 20 December 2007).
20. Roger Bate, “Thai-ing Pharma Down,” Wall Street Journal Asia,
February 9, 2007, available at http://www.aei.org/publications/pubID.
25585/ pub_detail.asp (accessed March 27, 2008).

Chapter 1: Counterfeiting Today

1. Philip Alden, “Counterfeit Drug Problems, Deaths Kept Quiet by
FDA,” San Mateo Daily Journal, July 19, 2007, http://www.smdailyjournal.
com/article_preview.php?id=76561&eddate=06/19/2007 (accessed March
27, 2008).
2. Ronald W. Buzzeo, “Counterfeit Pharmaceuticals and the Public Health,”
Wall Street Journal, October 4, 2005.
3. European Union-EUROPA, “European Commission Seeks Mandate to
Negotiate Major New International Anti-Counterfeiting Pact,” Press Release
IP/07/1573, October 23, 2007, http://europa.eu/rapid/pressReleases
Action.do?reference=IP/07/1573 (accessed January 14, 2008).
4. With a market worth more than $12 billion a year, Lipitor is a tempt-
ing target for fakers. Alex Berenson, “Lipitor or Generic? Billion-Dollar Battle
Looms,” New York Times, October 15, 2005, http://www.nytimes.com/2005/
10/15/business/15statin.html (accessed March 17, 2008). High-value phar-
maceuticals may be especially susceptible to “uplabeling,” a counterfeiting
technique in which low-dosage pills of a given drug are packaged—and
passed off—as higher-dosage pills. Cancer medications such as Procrit
have been targeted for uplabeling in recent years. See Katherine Eban,
Dangerous Doses: How Counterfeiters are Contaminating America’s Drug Supply
(San Diego: Harcourt, 2005). Also see Nancy Shute, “Are Your Drugs Safe?
Shoddy and Fraudulent Pharmacy Products Pose a Growing Threat,”
October 5, 2007, http://health.usnews.com/articles/health/2007/10/05/
are-your-drugs-safe.html?PageNr=3 (accessed January 11, 2008).
80 NOTES TO PAGES 9–10
5. Ten million American diabetes patients use LifeScan’s OneTouch test
strips to test their blood sugar levels. When complaints were made to the
company in 2006 that the test strips were faulty, an investigation identified
counterfeits from China, approximately one million of which had been
sent to at least thirty-five states in the United States, as well as Canada,
Greece, India, Pakistan, the Philippines, Saudi Arabia, and Turkey.
Allan Dodds Frank and Lisa Rapaport, “Johnson & Johnson Tracks Down
Maker of Phony Diabetes Test,” Bloomberg News, August 16, 2007,
http://www.bloomberg.com/apps/news?pid=20601103&sid=a5XA7.yplw9
k&refer=news (accessed March 27, 2008).
6. Randall Lutter (testimony on pharmaceutical supply chain security,
Subcommittee on Criminal Justice, Drug Policy and Human Resources, U.S.
House of Representatives, July 11, 2006), http://www.hhs.gov/asl/testify/
t060711.html (accessed March 20, 2008).
7. BBC News, “Fake Obesity Drugs Are Discovered,” September 2, 2004,
http://news.bbc.co.uk/2/hi/health/3622400.stm (accessed March 27, 2008).
8. Anna Lewcock, “MHRA Launches New Action Plan to Combat UK
Counterfeit Hub,” in-Pharma, November 26, 2007, www.drugresearcher.
com/news/ng.asp?n=81623-mhra-counterfeit-drug-fakes-who (accessed
March 17, 2008).
9. BBC News, “Gang Guilty of Fake Viagra Scam,” September 17, 2007,
http://news.bbc.co.uk/2/hi/uk_news/6999160.stm (accessed March 27, 2008).
10. U.S. Government Accountability Office, “Report to the Chairman,
Permanent Subcommittee on Investigations, Committee on Governmental
Affairs, U.S. Senate: Internet Pharmacies: Some Pose Safety Risks for Con-
sumers” (June 2004), http://www.gao.gov/new.items/d04820.pdf (accessed
January 17, 2008).
11. The website was www.chinamerck.com. Personal communication
with the author, August 29, 2007.
12. U.S. Food and Drug Administration, “FDA Warns Consumers about
Counterfeit Drugs from Multiple Internet Sellers,” news release, May 1,
2007, www.fda.gov/bbs/topics/NEWS/2007/NEW01623.html (accessed
March 17, 2008).
13. Ibid.
14. U.S. Food and Drug Administration, “Authentic and Counterfeit
Contraceptive Patches,” www.fda.gov/bbs/topics/news/photos/contraceptive/
counterfeit.html (accessed March 17, 2008).
15. Amanda Spake, “Fake Drugs, Real Worries,” U.S. News & World
Report, September 12, 2004, http://health.usnews.com/usnews/health/
articles/040920/20internet.htm (accessed March 17, 2008).
 NOTES TO PAGES 10–14 81
16. Ibid.
17. U.S. Food and Drug Administration, “FDA Warns Consumers Not to Buy
or Use Prescription Drugs from Various Canadian Websites that Apparently
Sell Counterfeit Products,” news release, August 20, 2006, http://www.fda.
gov/bbs/topics/NEWS/2006/NEW01441.html (accessed March 17, 2008).
18. A counterfeit drug bust in Dubai in September 2007 revealed a
complex supply chain of fake drugs that ran from China through Hong
Kong, the United Arab Emirates, Britain, and the Bahamas, ultimately end-
ing up at an Internet pharmacy advertised as Canadian. Walt Bogdanich,
“Counterfeit Drugs’ Path Eased by Free Trade Zones,” New York Times,
December 17, 2007, http://www.nytimes.com/2007/12/17/world/middleeast/
17freezone.html (accessed March 27, 2008).
19. Randall W. Lutter (acting deputy commissioner for policy, Food and
Drug Administration), “Policy Implications of Importing Drugs into the
United States,” (testimony, Subcommittee on Interstate Commerce, Trade,
and Tourism Committee on Commerce, Science, and Transportation, U.S.
Senate, March 7, 2007), http://commerce.senate.gov/public/index.cfm?
FuseAction=Hearings.Testimony&Hearing_ID=1829&Witness_ID=6533
(accessed January 14, 2008).
20. U.S. Food and Drug Administration, “FDA Warns Consumers Not to
Buy or Use Prescription Drugs from Various Canadian Websites.”
21. Ibid.
22. Pharma Marketletter, “U.S. Counterfeit Drug Scam Used Internet
Spam,” October 3, 2006.
23. Medical News Today, “International Internet Drug Ring Shattered,”
April 24, 2005.
24. BBC News, “Gang Guilty of Fake Viagra Scam.”
25. The MHRA noted changes in the types of medicines being faked, as
well as an overall doubling of cases from 2001 through 2006. Lyndsay
Moss, “Counterfeit Drug Cases Double as Gangs Target NHS Supply Chain,”
Scotsman, January 3, 2007.
26. Spake, “Fake Drugs, Real Worries.”
27. Sunday Times (London), “Factory for Fake Prescription Drugs,”
September 23, 2007, http://www.timesonline.co.uk/tol/news/uk/health/
article2511583.ece (accessed March 27, 2008).
28. World Health Organization, “General Information on Counterfeit
Medicines,” www.who.int/medicines/services/counterfeit/overview/en/
index.html (accessed March 17, 2008).
29. Julian Morris and Philip Stevens, Counterfeit Medicines in Less Developed
Countries: Problems and Solutions (London: International Policy Network and
82 NOTES TO PAGES 14–19
Campaign for Fighting Diseases, May 2006), http://www.fightingdiseases.
org/pdf/IPN_Counterfeits.pdf (accessed March 17, 2008).
30. Wyatt Yankus, Counterfeit Drugs: Coming to a Pharmacy Near You
(American Council on Science and Health, 2006): 1, available at
www.acsh.org/publications/pubID.1379/pub_detail.asp (accessed March
20, 2008).
31. Sania Nishtar, “Pharmaceuticals—Strategic Considerations in Health
Reforms in Pakistan,” Journal of the Pakistan Medical Association 56, no.12,
supp. 4 (December 2006): 100–11.
32. Paul N. Newton, Nicholas J. White, Jan A. Rozendaal, and Michael D.
Green, “Murder by Fake Drugs: Time for International Action,” British
Medical Journal 324 (April 6, 2002): 800–801.
33. Krystn Alter Hall, Paul N. Newton, Michael D. Green, Marleen De Veij,
Peter Vandenabeele, David Pizzanelli, Mayfong Mayxay, Arjen Dondorp,
and Facundo M. Fernandez, “Characterization of Counterfeit Artesunate
Antimalarial Tablets from Southeast Asia,” American Journal of Tropical
Medicine and Hygiene 75, no. 5 (2006): 804–11.
34. Ibid.
35. Chloroquine remains one of the most widely used first-line antimalari-
als, even though the parasite has developed resistance to the drug in many
areas of Africa due to widespread misuse. Nancy Blum, “Quality Control
Approaches for Essential Medicines,” World Bank conference, Washington,
D.C., March 10, 2005, http://siteresources.worldbank.org/INTAFRREGTOP
HIVAIDS/Resources/gibd.htm (accessed March 17, 2008). See also Charles
Maponga and Clive Ondari, The Quality of Antimalarials: A Study in Selected
African Countries, World Health Organization, 2003, http://whqlibdoc.
who.int/hq/2003/WHO_EDM_PAR_2003.4.pdf (accessed March 17,
2008).
36. Roger Bate, “Fake!” American, September/October 2007, http://american.
com/archive/2007/september-october-magazine-contents/counterfeits-kill
(accessed March 17, 2008).
37. Reuters, “Government Inaction Spurs Consumption of Counterfeit
Drugs,” February 20, 2008, http://www.alertnet.org/thenews/newsdesk/
IRIN/63414f02b64fb2d5616a935dc9b3145c.htm (accessed March 27,
2008).
38. Roger Bate and Kathryn Boateng, “Medicinal Malpractice,” AEI Health
Policy Outlook 10 (December 2006), www.aei.org/publication25276 (accessed
March 17, 2008).
39. Voice of America, “Counterfeit Drug Sales in Africa Strong, Threaten
Public Health,” October 22, 2007.
 NOTES TO PAGES 19–21 83
40. P. S. Sow, T. S. N. Gueye, E. Sy, L. Toure, C. Ba, and M. Badiane,
“Drugs in the Parallel Market for the Treatment of Urethral Discharge in
Dakar: Epidemiological Investigation Physiochemical Tests,” International
Journal of Infectious Diseases 6, no. 2 (2002): 108–12.
41. Maria Christina Gaudiano, Anna Di Maggio, Emilia Cocchieri,
Eleonora Antoniella, Paola Bertocchi, Stefano Alimonti, and Luisa Valvo,
“Medicines Informal Market in Congo, Burundi and Angola: Counterfeit
and Sub-Standard Antimalarials,” Malaria Journal 6, no. 22 (February 22,
2007), www.malariajournal.com/content/6/1/22 (accessed March 17, 2008).
42. Joyce Primo-Carpenter and Milissa McGinnis, “Matrix of Drug Quality
Reports in USAID-Assisted Countries” (U.S. Pharmacopeia, October 15,
2007), www.usp.org/pdf/EN/dqi/ghcDrugQualityMatrix (accessed March
17, 2008). Substandard drugs may pose as great a problem for Africans as
fakes—and certainly greater problems for populations as a whole as resist-
ance builds—but the evidence has yet to be fully collected and analyzed.
43. World Health Organization, International Medical Products Anti-
Counterfeiting Taskforce (IMPACT), “Counterfeit Medicines: An Update On
Estimates,” November 15, 2006, www.who.int/medicines/services/counter-
feit/impact/TheNewEstimatesCounterfeit.pdf (accessed March 17, 2008).
44. Ibid.
45. Acho Orabuchi, “Dangers of Drug Counterfeiting,” Leadership (Abuja,
Nigeria), October 25, 2007, http://allafrica.com/stories/200710250091.
html (accessed March 27, 2008).
46. The author is aware that these “similares” stores are increasingly seen
in Argentina, Peru, and Mexico, and perhaps elsewhere. No comprehensive
study of drug quality has been undertaken of them.
47. Matías Loewy, “Deadly Imitations,” Perspectives in Health 11, no. 1
(2007), www.paho.org/English/DD/PIN/Number23_article3.htm (accessed
March 17, 2008).
48. Ibid.
49. Tom Parfitt, “Russia Cracks Down on Counterfeit Drugs,” Lancet 368,
no. 9546 (2006):1481–82.
50. Ibid.
51. The Coalition for Intellectual Property Rights is a public-private part-
nership dedicated to advancing intellectual property rights protection,
enforcement, and reform in the Commonwealth of Independent States and
the Baltic states. Andrew E. Kramer, “Russia’s New Specialty: Fake
Pharmaceuticals: Copies Range from Crude to Exquisite,” International
Herald Tribune, September 5, 2006, http://www.iht.com/articles/2006/09/05/
business/drug.php (accessed March 17, 2008).
84 NOTES TO PAGES 21–24
52. Ibid.
53. Parfitt, “Russia Cracks Down.”
54. Ibid.
55. Ibid.
56. Ibid.
57. Personal communication with several intellectual property investiga-
tors, including Vijay Karan (former chief of police, New Delhi, India),
January 16 and 17, 2008.
58. European Commission Taxation and Customs Union, “Summary of
Community Customs Activities on Counterfeit and Piracy,” 2006,
http://ec.europa.eu/taxation_customs/resources/documents/customs/
customs_controls/counterfeit_piracy/statistics/counterf_comm_2006_en.pdf
(accessed March 28, 2008).
59. Marc Kaufman, “FDA Scrutiny Scant in India, China as Drugs Pour
into U.S.,” Washington Post, June 17, 2007, A1, http://www.washingtonpost.
com/wp-dyn/content/article/2007/06/16/AR2007061601295. html (accessed
March 27, 2008).
60. As an opinion piece in the Wall Street Journal notes, penetration of coun-
terfeit products such as adulterated Chinese toothpaste are exceedingly rare in
the United States precisely because “companies have every incentive to police
themselves.” Think of Mattel and its “toy import nightmare,” for example. Wall
Street Journal, “The Real FDA Scandal,” February 6, 2008, A18.
61. IMPACT, which will be discussed in greater detail in chapter 3, is a
voluntary WHO program which all 193 member states have joined. It aims
to eliminate the production, trading, and selling of fake medicines.
62. Personal communication with Karan; Suresh Sati, a consultant who
investigates abuses of intellectual property rights on behalf of private com-
panies; and Dr. Uday Shankar (pharmacist at the Indian Government
Hospital), January 16 and 17, 2008.
63. Government of India, Ministry of Health, “A Report of the Expert
Committee on ‘A Comprehensive Examination of Drug Regulatory Issues,
Including the Problem of Spurious Drugs,’” November 2003,
http://cdsco.nic.in/html/Final%20Report%20mashelkar.pdf (accessed
February 29, 2008). Based on samples tested by the state authorities
between 1995 and 2003, the extent of substandard drugs varied from 8.19
to 10.64 percent. The extent of spurious drugs varied between 0.24 and
0.47 percent. Industry and police sources say this number is too low, how-
ever, and place the number of spurious drugs between 10 and 20 percent.
64. World Health Organization, “Counterfeit Medicines”; and World
Health Organization, IMPACT, “Counterfeit Medicines: An Update On
 NOTES TO PAGES 24–27 85
Estimates.” Sources for both reports were industry bodies, which must be
presumed to know their own markets. While they have an incentive to wax
overly rosy about the quality of their markets, they do point to the scale of
the problem. Note, however, that the period over which illegal drugs in
India has grown is not given, rendering the information of limited value. The
Chinese data are limited to estimates of drugs sold in pharmacies; informal
markets remain murky. Moreover, these figures, which point to the scale of
the problem, are not likely to represent its true scope because they only
address domestic counterfeit penetration. Most illegal drugs in Nigeria, for
example, are imported from China and India.
65. Hall et al., “Characterization of Counterfeit Artesunate Antimalarial
Tablets from Southeast Asia.”

Chapter 2: How and Why Does Counterfeiting Occur?

1. Rajendrani Mukhopadhyay, “The Hunt for Counterfeit Medicine,”
Analytical Chemistry 79, no. 7 (2007): 2623–37. Researchers have recently
discovered that counterfeiters now include tiny amounts of the active ingre-
dient in response to the introduction of basic colorimetric testing done to
check for counterfeits.
2. Roger Bate, “Thailand and the Drug Patent Wars,” AEI Health Policy
Outlook 5 (April 2007), www.aei.org/publication25890 (accessed March 17,
2008).
3. Anupama Sukhlecha, “Counterfeit and Substandard Quality of
Drugs: The Need for an Effective and Stringent Regulatory Control in India
and Other Developing Countries,” letter, Indian Journal of Pharmacology 39,
no. 4 (August 2007): 206–7.
4. Maureen Lewis, “Governance and Corruption in Public Health Care
Systems,” Working Paper 78, Center for Global Development, Washington,
D.C., January 2006, www.cgdev.org/files/5967_file_WP_78.pdf (accessed
March 17, 2008).
5. Ibid.
6. Monica Das Gupta, Varun Gauri, and Stuti Khemani, “Decentralized
Delivery of Primary Health Services in Nigeria: Survey Evidence from the
States of Lagos and Kogi” (World Bank, 2004).
7. Maureen Lewis, “Governance and Corruption in Public Health Care
Systems.”
8. Barbara McPake, Delius Asiimwe, Francis Mwesigye, Mathias
Ofumbib, Lisbeth Ortenbladd, Pieter Stree, and Asaph Turinde, “Informal
Economic Activities of Public Health Workers in Uganda: Implications for
86 NOTES TO PAGES 27–31
Quality and Accessibility of Care,” Social Science and Medicine 49 (1999):
849–65.
9. Rafael Di Tella and William D. Savedoff, eds., Diagnosis Corruption:
Fraud in Latin America’s Public Hospitals (Washington, D.C.: Inter-American
Development Bank, 2001), 15.
10. G8 Group, “Fight Against Infectious Diseases” (summit statement, St.
Petersburg, Russia, July 16, 2006), http://en.g8russia.ru/docs/10.html
(accessed March 17, 2008).
11. Katherine Eban, Dangerous Doses: How Counterfeiters are Contaminating
America’s Drug Supply (San Diego: Harcourt, 2005), 89–92.
12. Ibid.
13. George E. Jordan, “Fake Medicine, Real Problem,” Star-Ledger,
October 22, 2007.
14. Eban, Dangerous Doses. Pharmaceutical company insiders have
expressed similar sentiments in personal communication with the author.
15. Ibid.
16. Gilbert M. Gaul and Mary Pat Flaherty, “U.S. Prescription Drug System
Under Attack,” Washington Post, October 19, 2003, A1, http://www.wash-
ingtonpost.com/ac2/wp-dyn/A44908-2003Oct18 (accessed March 27,
2008).
17. Ibid.
18. Eban, Dangerous Doses, 92.
19. Ibid. This was confirmed by an FDA official, who asked not to be
quoted by name: “Frankly, there are sometimes bigger fish to fry.” Personal
communication with the author, September 12, 2007.
20. Eban, Dangerous Doses.
21. Ibid., 20.
22. Anonymous FDA official, September 12, 2007.
23. U.S. Government Accountability Office, Drug Safety: Preliminary
Findings Suggest Weaknesses in FDA’s Program for Inspecting Foreign Drug
Manufacturers (congressional testimony, Subcommittee on Oversight and
Investigations, Committee on Energy and Commerce, U.S. House of Repre-
sentatives, November 1, 2007), www.gao.gov/new.items/d08224t.pdf
(accessed March 17, 2008); and MQN Weekly Bulletin, “Lawmakers Debate
Import Safety, How to Stop Counterfeit Drugs,” October 5, 2007,
http://www.fdanews.com/newsletter/article?articleId=99407&issueId=10820
(accessed March 17, 2008).
24. National Consumers League, “Counterfeit Drugs Survey,” July 20,
2004, www.nclnet.org/pressroom/fakedrugsreport.htm (accessed March
17, 2008).
 NOTES TO PAGES 32–35 87
25. Roger Bate and Kathryn Boateng, “Drug Pricing and Its Discontents,”
AEI Health Policy Outlook 9 (August 2007), www.aei.org/publication26622
(accessed March 17, 2008).
26. Pharma Marketletter, “Fake Parallel Trade Drugs Hit UK, Product
Recalls Issued by the MHRA,” May 29, 2007.
27. Pharma Marketletter, “Warning about Continued Dangers of
Counterfeit Prescription Drugs from NABP,” January 12, 2007.
28. BBC News, “Fake Medicines ‘A Growing Menace,’” November 22,
2006, http://news.bbc.co.uk/2/hi/health/6166324.stm (accessed March 27,
2008).
29. Les Echos (France), “Increase in Counterfeit Goods Seized in France,”
March 22, 2005.
30. “Counterfeit Medicines Pass through Finland to World Markets,”
Helsingin Sanomat, June 14, 2007, http://www.hs.fi/english/article/
Counterfeit+medicines+pass+through+Finland+to+world+markets/11352
28018377 (accessed March 21, 2008).
31. Estimate as of July 2007. Central Intelligence Agency, World Fact Book,
“Finland,” December 6, 2007, https://www.cia.gov/library/publications/the-
world-factbook/geos/fi.html (accessed March 20, 2008).
32. Helsingin Sanomat, “Counterfeit Medicines Pass Through Finland to
World Markets.”
33. Luc De Wulf and Jose B. Sokol, eds., Customs Modernization Handbook
(Washington, D.C.: World Bank, 2005).
34. Roger Bate, Richard Tren, Lorraine Mooney, and Kathryn Boateng,
“Tariffs, Corruption and Other Impediments to Medicinal Access in
Developing Countries: Field Evidence,” Working Paper 130, American
Enterprise Institute, August 4, 2006, www.aei.org/publication24749
(accessed March 17, 2008).
35. Ibid.
36. Ibid.
37. Karina Rollins, ed., The Index of Global Philanthropy 2006 (Washing-
ton, D.C.: Hudson Institute, 2006).
38. Gilbert Cruz, “Filling Holes in the Food Supply,” Time, July 18, 2007,
http://www.time.com/time/health/article/0,8599,1644705,00.html (accessed
March 27, 2008). Representative Jay Inslee (D-Wash.) commented on the
growing concern in the United States over Chinese food exports: “Who Needs
al Qaeda When You Have Got E. Coli?” While the content of Inslee’s response
may be extreme, its tone is not atypical. Indeed, there have been many warn-
ings about the dangers of Chinese exports, including some that exaggerated
the threat posed to consumers. In May 2007, the editor of The Consumerist, a
88 NOTES TO PAGES 35–37
leading consumer-advocacy blog, warned consumers of a “Chinese Poison
Train . . . lurking on a container ship headed our way.” (http://con-
sumerist.com/consumer/diethylene-glycol/chinese-poison-train-defeats-fda-
the-prequel-269627.php, accessed March 20, 2008). In a similar fashion,
WorldNetDaily alluded to insidious intent from the East Asian giant, entitling
one of its articles with the provocative question, “Is China Trying to Poison
Americans and Their Pets?” http://www.wnd.com/news/article.asp?ARTI-
CLE_ID=55892 (accessed March 17, 2008). See also Jeff Yang, “A Taste of
Racism in the Chinese Food Scare,” Washington Post, July 15, 2007, B2.
39. Wyatt Yankus, Counterfeit Drugs: Coming to a Pharmacy Near You (American
Council on Science and Health, 2006), available at www.acsh.org/publications/
pubID.1379/pub_detail.asp, page 2 (accessed March 21, 2008).
40. Ibid.
41. Victoria Colliver, “Bogus Drugs a Growing Threat,” San Francisco
Chronicle, August 3, 2003, A1, http://www.sfgate.com/cgi-bin/article.cgi?file
=/c/a/2003/08/03/FAKEDRUGS.TMP&type=health (accessed March 27, 2008).
42. Kerry Capell, Suzanne Timmons, Jonathan Wheatley, and Heidi
Dawley, “What’s In That Pill?” BusinessWeek, June 18, 2001, http://www.
businessweek.com/magazine/content/01_25/b3737076.htm (accessed
March 27, 2008).
43. Ibid.
44. Randy Barnett, “Fighting Crime without Punishment,” in The Structure
of Liberty: Justice and the Rule of Law (Oxford: Oxford University Press,
2004), chapter 11.
45. Barnett, “Fighting Crime Without Punishment.”
46. Randy Barnett, personal communication with author, October 2004.
See also ibid.
47. Robert Pear, “U.S. Health Chief, Stepping Down, Issues Warning,”
New York Times, December 4, 2004, http://www.nytimes.com/2004/12/04/
politics/04health.html (accessed March 27, 2008).
48. Bryan A. Liang, “Safety of Drug Supply: Tougher Laws Needed to Stem
Counterfeit Drug Rings,” Daily Transcript (San Diego), May 4, 2006, www.
sddt.com/News/article.cfm?SourceCode=20060503crd (accessed June 7, 2007).
49. U.S. Chamber of Commerce, National Chamber Foundation, “Anti-
Counterfeiting and Piracy Update,” May 2006, http://www.uschamber.com/NR/
rdonlyres/evv2revsokapuvbwv7felwdebvub477qfaixdkj62grs452brdiupukcq27p
vczholyq3ykzsdtdzzhcyuvu35asv7h/MicrosoftWordOutrageoftheMonthFunding
TerrorismMay2006.pdf (accessed January 28, 2008).
50. Liza Gibson, “Drug Regulators Study Global Treaty to Tackle
Counterfeit Drugs,” British Medical Journal 328:7438 (February 28, 2004):
 NOTES TO PAGES 37–41 89
486, also available at http://www.bmj.com/cgi/content/full/328/7438/486-c
(accessed January 28, 2008).
51. Armina Ligaya, “Counterfeit Drugs Caused Woman’s Death, Coroner
Concludes,” Globe and Mail, July 6, 2007, http://www.buysafedrugs.info/
Reports/Counterfeit_Drugs_Caused_Womans_Death.html (accessed March
27, 2008).
52. Roger Bate, “On the Trail of a Cure: Reality and Rhetoric on Treating
Malaria,” AEI Health Policy Outlook 4 (March 2007), www.aei.org/publication
25834 (accessed March 17, 2008).

Chapter 3: Stopping the Fakers

1. World Health Organization, Declaration of Rome (WHO International
Conference on Combating Counterfeit Medicines, Rome, February 18,
2006), http://www.who.int/medicines/services/counterfeit/RomeDeclaration.pdf
(accessed March 17, 2008).
2. IMPACT includes the following organizations: Interpol, the Organisation
for Economic Co-operation and Development, the World Customs
Organization, the World Intellectual Property Organization, the World Trade
Organization, the International Federation of Pharmaceutical and
Manufacturers’ Associations, the International Generic Pharmaceuticals
Alliance, the World Self-Medication Industry, the Asociación Latino-
americana de Industrias Farmacéuticas, the World Bank, the European
Commission, the Council of Europe, the Commonwealth Secretariat, the
Association of Southeast Asian Nations Secretariat, the International Federation
of Pharmaceutical Wholesalers, the European Association of Pharmaceutical
Full-line Wholesalers, the International Pharmaceutical Federation, the
International Council of Nurses, the World Medical Association, and
Pharmaciens Sans Frontières (Pharmacists Without Borders). World Health
Organization, International Medical Products Anti-Counterfeiting Taskforce
(IMPACT), “Frequently Asked Questions,” http://www.who.int/impact/
impact_q-a/en/index.html (accessed March 17, 2008).
3. Agence France-Presse, “Interpol to Fight Sale of Fake Medicines in Africa,”
November 11, 2007, http://www.aegis.com/NEWS/AFP/2007/AF071114.html
(accessed March 27, 2008).
4. World Health Organization, Declaration of Rome.
5. World Health Organization, “Report of the Commission on
Intellectual Property Rights, Innovation, and Public Health,” 2006,
http://www.who.int/intellectualproperty/documents/thereport/ENPublicHe
althReport.pdf (accessed March 20, 2008), 15.
90 NOTES TO PAGES 42–44
6. Paul D’Eramo, “Japan’s Pharmaceutical Affairs Law (PAL):
Opportunities and Challenges,” http://www.ispe.org/cs/root/regulatory_
resources/regulatory_review_article_archives/february_2007_japans_
pharmaceutical_affairs_law_pal_opportunities_and_challenges (accessed
March 17, 2008).
7. Japan, Ministry of Health, Labour and Welfare, Pharmaceutical and
Food Safety Bureau, Compliance and Narcotics Division, “Importing or
Bringing Medication into Japan for Personal Use,” April 1, 2004,
http://www.mhlw.go.jp/english/topics/import/index.html (accessed Febru-
ary 8, 2008).
8. Japan, Ministry of Health, Labour and Welfare, Pharmaceuticals and
Medical Safety Bureau, “The Pharmaceutical Affairs Law,” http://www5.cao.
go.jp/otodb/english/houseido/hou/lh_02070.html (accessed March 17, 2008).
9. D’Eramo, “Japan’s Pharmaceutical Affairs Law.”
10. U.S. International Trade Commission, Medical Devices and Equipment:
Competitive Conditions Affecting U.S. Trade in Japan and Other Principal
Foreign Markets, March 2007, http://hotdocs.usitc.gov/ docs/Pubs/332/Pub
3909.pdf (accessed February 8, 2008).
11. Ilisa B.G. Bernstein, “Impact of the PDMA on the Pharmaceutical
Supply Chain,” NACDS/HDMA RFID Adoption Summit, U.S. FDA,
November 13, 2006, www.fda.gov/oc/initiatives/counterfeit/hdmanadcs
1113_files/textmostly/slide3.html (accessed March 17, 2008).
12. Amanda Spake, “Fake Drugs, Real Worries,” U.S. News & World
Report, September 12, 2004, http://health.usnews.com/usnews/health/
articles/040920/20internet.htm (accessed March 17, 2008).
13. David Hess, “Rising Tide of Legitimate Drug Imports Threatens FDA’s
Ability to Ensure Safety,” Congress Daily AM, June 5, 2007.
14. U.S. Food and Drug Administration, Combating Counterfeit Drugs: A Report
of the Food and Drug Administration Annual Update, May 18, 2005,
http://www.fda.gov/oc/initiatives/counterfeit/report02_04.html (March 17, 2008).
15. Economic Times (India), “U.S. wants FDA inspectors stationed in
India,” March 19, 2008, http://timesofindia.indiatimes.com/USA/US_wants
_FDA_inspectors_stationed_in_India/articleshow/2880547.cms (accessed
March 27, 2008).
16. Committee on Energy and Commerce, “Committee Panel to Hold
Hearings on Heparin Failures,” news release, U.S. House of Representatives,
March 19, 2008, http://energycommerce.house.gov/Press_110/110nr187.
shtml (accessed March 27, 2008).
17. See discussion of parallel trading on pages 31–33 in chapter 2, “How
and Why Does Counterfeiting Occur?”
 NOTES TO PAGES 44–47 91
18. World Intellectual Property Organization, “Danish Experience on
Anticounterfeiting Training and Awareness Raising Activities,” www.wipo.
int/edocs/mdocs/enforcement/en/wipo_ace_3/wipo_ace_3_www_61112.pdf
(accessed March 17, 2008).
19. Partnership for Safe Medicines, “Counterfeit Drugs in Europe Fact
Sheet,” 2005, www.safemedicines.org/resources/europe.pdf (accessed
March 17, 2008).
20. Between 1956 and 1962, thalidomide was prescribed and sold to
pregnant women to combat morning sickness and help them sleep. Ten
thousand children were born with severe malformity before the teratogenic
properties of the drug were discovered.
21. Graham Satchwell, A Sick Business: Counterfeit Medicines and Organized
Crime (London: Stockholm Network, 2004), 26–27.
22. World Health Organization, Effective Drug Regulation: A Multi-
country Study (Geneva: World Health Organization, 2002), www.who.int/
medicinedocs/index.fcgi?sid=fFYQnGxO9ee80ca700000000474
dcd26&a=d&c=medicinedocs&d=Js2300e.6#Js2300e.6 (accessed March 19,
2008).
23. Roger Bate, “Thailand and the Drug Patent Wars,” AEI Health Policy
Outlook 5 (April 2007), www.aei.org/publication25890 (accessed March 17,
2008).
24. For discussion of data collection difficulties, particularly a lack of reli-
able statistics, see pages 19–20 in chapter 1, “Counterfeiting Today.”
25. Joyce Primo-Carpenter and Milissa McGinnis, “Matrix of Drug Quality
Reports in USAID-Assisted Countries” U.S. Pharmacopeia, October 15,
2007, www.usp.org/pdf/EN/dqi/ghcDrugQualityMatrix (accessed March
17, 2008).
26. Wyatt Yankus, Counterfeit Drugs: Coming to a Pharmacy Near You
(American Council on Science and Health, 2006), 3, complete study avail-
able at www.acsh.org/publications/pubID.1379/pub_detail.asp (accessed
March 21, 2008).
27. See discussion in chapter 1, note 63.
28. Primo-Carpenter and McGinnis, “Matrix of Drug Quality Reports in
USAID-Assisted Countries.”
29. World Health Organization, IMPACT, “Counterfeit Medicines: An
Update on Estimates,” November 15, 2006, www.who.int/medicines/
services/counterfeit/impact/TheNewEstimatesCounterfeit.pdf.
30. Ibid.
31. Dora Akunyili, “IMPACT—A New Force in Global Anticounterfeiting”
(presentation, Third Global Forum on Pharmaceutical Anti-Counterfeiting,
92 NOTES TO PAGES 47–49
Prague, Czech Republic, March 15, 2007); Primo-Carpenter and McGinnis,
“Matrix of Drug Quality Reports in USAID-Assisted Countries.”
32. Nigeria officially blacklisted nineteen different Indian and Chinese
companies from exporting drugs into the country because of their con-
firmed counterfeiting practices. Dora Akunyili, “Counterfeit and
Substandard Drugs, Nigeria’s Experience: Implications, Challenges, Actions
and Recommendations” (presentation, World Bank, Washington, D.C.,
March 11, 2005), http://siteresources.worldbank.org/INTAFRREG-
TOPHIVAIDS/Resources/717089-1113520923653/Dora_Akunyili-Good_
Intentions-Bad_Drugs-MAR_10_05.doc (accessed March 17, 2008).
33. Dora Akunyili, “Tackling the Scourge of Counterfeit Drugs in Nigeria”
(keynote speech, Twelfth Annual Convention and Scientific Assembly,
Association of Nigerian Physicians in the Americas, New Brunswick, N.J.,
July 5–9, 2006), http://www.anpa.org/newsdetailsa.php?start1=5 (accessed
March 21, 2008).
34. Akunyili, “Counterfeit and Substandard Drugs, Nigeria’s Experience.”
35. Akunyili, “Tackling the Scourge.”
36. U.S. Pharmacopeia, “Ensuring the Quality of Medicines in Low-
Income Countries: An Operational Guide, Draft for Field Testing,” U.S.
Agency for International Development (September 2005), 38, also
available at http://www.usp.org/pdf/EN/dqi/ensuringQualityOperational
Guide.pdf (accessed March 27, 2008).
37. Sauwakon Ratanawijitrasin and Eshetu Wondemagegnehu, “Effective
Drug Regulation: A Multicountry Study” (World Health Organization,
2002), http://www.who.int/medicinedocs/collect/medicinedocs/pdf/s2300e/
s2300e.pdf (accessed March 17, 2008).
38. Ibid., 25.
39. Ibid.
40. Barry Bearak, “Zimbabwe: Inflation Surges to Official 66,000%,”
New York Times, February 15, 2008, http://www.nytimes.com/2008/02/15/
world/africa/15briefs-inflation.html?ex=1360731600&en=bd7578
947022d10f&ei=5088&partner=rssnyt&emc=rss (accessed March 27, 2008).
41. Financial Gazette (Harare), “Fake ARVs Flood Country,” July 26, 2007,
http://allafrica.com/stories/200707260858.html (accessed February 25,
2008).
42. Ratanawijitrasin and Wondemagegnehu, “Effective Drug Regulation.”
43. Financial Gazette (Harare), “Fake ARVs Flood Country.”
44. Dagi Kimani, “Illegally Imported, Fake Drugs Flood Kenya,” East
African, May 10, 2004, http://www.nationaudio.com/News/EastAfrican/
current/Features/PartII100520043.html (accessed February 29, 2008).
 NOTES TO PAGES 49–50 93
45. Dauti Kahura, “Finding Remedy for Drugs Industry,” Standard
(Kenya), October 10, 2005, http://216.180.252.4/archives/index.php?mnu
=details&id=30237&catid=176 (accessed February 29, 2008).
46. Ibid.
47. Euromonitor International, OTC Healthcare in Kenya, executive sum-
mary, August 2006, http://www.euromonitor.com/OTC_Healthcare_in_
Kenya#exec (accessed February 29, 2008).
48. Kui Kinyanjui, “Counterfeit Drugs Expose Consumers to an Escalation
in Health Conditions,” Business Daily (Kenya), February 15, 2008,
http://www.bdafrica.com/index.php?option=com_content&task=view&id=
5901&Itemid=5822 (accessed March 3, 2008).
49. World Health Organization, International Medical Products Anti-
Counterfeiting Taskforce (IMPACT), “Counterfeit Medicines: An Update on
Estimates.”
50. Kahura, “Finding Remedy for Drugs Industry,” and Dauti Kahura,
“Weak Medicine,” Standard (Kenya), August 17, 2005, http://216.180.252.4/
archives/index.php?mnu=details&id=27417&catid=77 (accessed March
17, 2008).
51. Kahura, “Weak Medicine.”
52. For more information about the work of PAHO, PANDRH, and the
Pharmaceutical Forum of the Americas, see PAHO’s resources in Pan
American Health Organization, “Drug Safety,” http://www.paho.org/
Project.asp?SEL=TP&LNG=ENG&ID=176 (accessed March 17, 2008).
53. Pan American Health Organization, “Pan American Network for Drug
Regulatory Harmonization (Norms and Regulations),” http://www.paho.org/
english/ad/ths/ev/norms-pandrh.pdf (accessed March 17, 2008).
54. World Health Organization, “Medicines Regulation,” in The World
Medicines Situation, 2004, chapter 9, http://www.searo.who.int/LinkFiles/
Reports_World_Medicines_Situation.pdf (accessed March 17, 2008).
55. See DIGEMID website, http://www.digemid.minsa.gob.pe (accessed
March 3, 2008).
56. World Health Organization, International Medical Products Anti-
Counterfeiting Taskforce (IMPACT), “Counterfeit Medicines: An Update on
Estimates.”
57. Ratanawijitrasin and Wondemagegnehu, “Effective Drug Regulation,”
42.
58. Dennis E. Baker, associate commissioner for regulatory affairs,
FDA, “Testimony on Counterfeit Bulk Drugs,” House Subcommittee on
Oversight and Investigations, Committee on Commerce, June 8, 2000,
http://www.hhs.gov/asl/testify/t000608a.html (accessed March 28, 2008).
94 NOTES TO PAGES 50–53
59. WIPO Magazine, “Global Congress on Combating Counterfeiting and
Piracy: The First Three Years,” January 2007, http://www.wipo.int/
wipo_magazine/en/2007/01/article_0002.html (accessed March 17, 2008).
60. Tom Parfitt, “Russia Cracks Down on Counterfeit Drugs,” Lancet 368,
no. 9546 (2006):1481–82.
61. Ibid.
62. Ibid.
63. Hepeng Jia, “Disgraced Drug Chief Sentenced to Death,” Chemistry
World, May 30, 2007, www.rsc.org/chemistryworld/News/2007/May/
30050701.asp (accessed March 17, 2008).
64. Organisation for Economic Co-operation and Development, The
Economic Impact of Counterfeiting and Piracy Summary, executive summary,
June 4, 2007, www.oecd.org/dataoecd/11/38/38704571.pdf (accessed
March 17, 2008). A 2007 econometric analysis by the OECD found that
while counterfeiting and piracy had no effect on the volume of international
trade, it did tend to alter the type of goods exported and imported.
Economies with relatively high counterfeiting and piracy rates tended to
export lower shares of products for which health and safety concerns
were high.
65. Ibid.
66. Reuters, “China to Extend ‘Arduous’ Drug Industry Clean-Up,”
December 4, 2007, http://www.reuters.com/article/worldNews/idUSPEK
37076320071203 (accessed March 27, 2008).
67. CBS News, “China: Drug Safety Drive Showing Results,” December 4,
2007, http://www.cbsnews.com/stories/2007/12/03/health/main3568091.
shtml (accessed March 27, 2008).
68. Audra Ang, “Chinese Arrest 774 in Product Crackdown Attempt to
Calm Importers’ Fears,” Washington Post, October 30, 2007, D1,
http://www.washingtonpost.com/wp-dyn/content/article/2007/10/29/
AR2007102900963.html (accessed March 27, 2008).
69.U.S. Trade Representative, 2007 Special 301 Report, 2007, www.ustr.
gov/assets/Document_Library/Reports_Publications/2007/2007_Special_30
1_Review/asset_upload_file230_11122.pdf (March 17, 2008).
70. Xinhua, “China to Impose Stiff Penalty on Fake Drug Makers, Dealers,”
November 29, 2007.
71. David Blumenthal and William Hsiao, “Privatization and Its
Discontents: The Evolving Chinese System,” New England Journal of Medicine
353, no. 11 (September 15, 2005): 1165–70.
72. Nicholas Zamiska, “U.S. Opens the Door to Chinese Pills: Approval of
AIDS Medicine for 2012 Seen as First Shot in Generic Fight with India,”
 NOTES TO PAGE 53 95
Wall Street Journal, October 9, 2007, http://online.wsj.com/public/article_
print/SB119187230072652477.html (accessed March 27, 2008).
73. Some officials, like Valerio Reggi, the World Health Organization’s
coordinator for medicines regulatory support, have suggested that the size
of the counterfeit and substandard drug market in many industrializing
countries, including India, may be exaggerated. C. H. Unnikrishnan,
“World Health Organization Says Willing to Help in Fake Drugs Study,”
Mint (India), August 27, 2007, http://www.livemint.com/2007/08/
25002014/World-Health-Organization-says.html (accessed March 27,
2008).
74. According to a nationwide survey released by the World Health
Organization’s Regional Office for South East Asia in May 2007, counterfeit
drugs accounted for approximately 3 percent of all drugs assessed. But prob-
lems in survey design, including focus on “retail outlets near railway sta-
tion/bus stands” and a lack of sample anonymity (many sellers suspected the
researchers posing as customers were from a drug regulatory agency, an
NGO, or were students interested in studying the quality of medicines), sug-
gest that this number may be too low. Prafull D. Sheth, M. V. Siva Prasada
Reddy, Brijesh Regal, Madhulika Laushal, Kaustav Sen, D. B. A. Narayana,
“Extent of Spurious (Counterfeit) Medicines in India” (South East Asian FIP-
WHO Forum of Pharmaceutical Associations, New Delhi, India, May 31,
2007). A different survey by the Associated Chambers of Commerce and
Industry of India found that counterfeit drug sales in the National Capital
Region of the country accounted for 20–25 percent of the total medicines
sold in the region. The percentage of counterfeits in less well-regulated
regions may have been even greater. P. B. Jayakumar, “Asian Nations Unite
against Spurious Drugs Trade,” Business Standard, February 12, 2008,
http://www.business-standard.com/common/news_article.php?leftnm=
blife&bKeyFlag=BO&autono=313403 (accessed March 17, 2008).
75. India, Ministry of Health, A Report of the Expert Committee on “A
Comprehensive Examination of Drug Regulatory Issues, Including the Problem of
Spurious Drugs,” November 2003, http://cdsco.nic.in/html/ Final%20
Report%20mashelkar.pdf (accessed February 29, 2008).
76. Where the NDPS Act is not enforced, two other parts of the Indian
Penal Code can be used: section 120B, which addresses “punishment of
criminal conspiracy,” and section 420, which addresses confidence trick-
sters with “punishment for cheating and dishonestly inducing delivery of
property.” However, there appears to be a reluctance on the part of the
Criminal Bureau of Investigations and even the local police to use these parts
of the Intellectual Property Code. Few convictions have resulted.
96 NOTES TO PAGES 54–55
77. In one raid, the CBI urged private intellectual property investigators to
gather evidence on premises where Norphine (a morphine derivate injec-
tion) was being faked. When one company was raided, yielding R10m
($250,000) worth of drugs but not including Norphine, the CBI could not
follow up the case. Vijay Karan (former chief of police, New Delhi, India),
personal communication with the author, January 16 and 17, 2008.
78. IndiaLaws, “Narcotic Drugs and Psychotropic Substances
(Amendment) Rules,” 2007, http://www.indialaws.info/updates/actsrule.
aspx (accessed February 28, 2008).
79. Bangkok Post, “Editorial: The Scourge of Fake Medicine,” February 9,
2008, http://www.bangkokpost.com/090208_News/09Feb2008_news15.
php (accessed March 17, 2008).
80. India, Ministry of Health and Family Welfare, Report of the Expert
Committee.
81. Rajesh Jumar Singh, “Fake Drug Racket in Government Hospitals,”
Hindustan Times, July 28, 2007.
82. Theo Smart, “Revisions to India’s Patent Law Could Affect Future
Supply of Affordable Generic Antiretrovirals,” NAM Aidsmap News, March
30, 2005, www.aidsmap.com/en/news/b37b595e-09b6-4499-a93e-
9766c0f21ae8.asp?hp=1 (accessed March 17, 2008).
83. D. Roy, “Problem of Spurious/Counterfeit Drugs” (presentation,
Central Drugs Standard Control Organization, Ministry of Health and
Family Welfare, New Delhi, from the Ministry of Health, Government of
India), http://mednet3.who.int/cft/PRESENTATIONS/India (accessed
February, 2008).
84. Unnikrishnan, “World Health Organization Says Willing to Help in
Fake Drugs Study.” According to India Health News, the government plans
to hire 600 employees, preferably pharmacy graduates, on contract for the
project. The employees will be distributed across India’s 8,500 talukas
(counties) and collect samples from medical stores. India Health News,
“Health Ministry Set to Launch Campaign against Counterfeit Drugs in
February,” January 9, 2008.
85. Hindustan Times, “Man Sentenced to 15 Years in Jail for Selling Fake
Drugs,” January 14, 2008, http://www.hindustantimes.com/StoryPage/Story
Page.aspx?id=e6be5aac-f3cd-4f66-8634-80aad5891fec&&Headline=
Man+gets+15+yrs+for+selling+fake+drugs (accessed February 8, 2008).
86. Wall Street Journal LiveMint, “Central Drug Authority to Be on Lines of
U.S. FDA: Ramadoss,” January 8, 2008, http://www.livemint.com/2008/01/
08115218/Central-Drug-Authority-to-be-o.html (accessed January 22,
2008); The Hindu, “India, U.S. to Set Up Food and Drug Authority,” January
 NOTES TO PAGES 55–56 97
8, 2008, http://www.hindu.com/2008/01/08/stories/2008010856241300.
htm (accessed January 22, 2008).
87. Paul N. Newton, Rose McGready, Facundo Fernandez, Michael D.
Green, Manuela Sunjio, Carinne Bruneton, Souly Phanouvong, Pascal
Millet, Christopher J. M. Whitty, Ambrose O. Talisuna, Stephane Proux, Eva
Maria Christophel, Grace Malenga, Pratap Singhasivanon, Kalifa Bojang,
Harparkash Kaur, Kevin Palmer, Nicholas P. J. Day, Brian M. Greenwood,
François Nosten, Nicholas J. White, “Manslaughter by Fake Artesunate
in Asia—Will Africa Be Next?” PLoS Medicine 3, no. 6 (June 13, 2006),
http://medicine.plosjournals.org/perlserv/?request=get-document&doi=
10.1371/journal. pmed.0030197 (accessed March 30, 2008).
88. Ibid.
89. For more discussion of the Global ACT Subsidy, see K. J. Arrow, C. B.
Panosian, and H. Gelband, Saving Lives, Buying Time—Economics of Malaria
Drugs in an Age of Resistance (Washington, D.C.: Institute of Medicine,
National Academies Press, 2004). For discussion of its benefits and short-
comings, see Roger Bate, “Funding Isn’t Everything,” American Online,
February 28, 2008, available at http://www.american.com/archive/2008/
february-02-08/funding-isn2019t-everything (accessed March 21, 2008).
90. Primo-Carpenter and McGinnis, “Matrix of Drug Quality Reports in
USAID-Assisted Countries.”
91. One possible explanation for the ostensible decrease in counterfeiting
is the ministry’s 2006 announcement that it would amend the Control of
Drugs and Cosmetics Regulation of 1984 to make it an offense to possess
counterfeit products. Under the existing regulation, individuals selling
counterfeit drugs risk being fined up to RM 25,000 ($7,800 U.S.) or jailed
for up to three years, and companies face a maximum fine of RM 50,000
($15,600 U.S.) or three years in jail or both. New Straits Times (Malaysia),
“Fighting Fakes with New Hologram Labels,” December 17, 2006, available
with subscription at http://archives.emedia.com.my/bin/main.exe?state=
ei90qc.1.1&f=archtoc&p_toc=archtoc&p_search=search&p_help=s_help
&a_search=Search&p_s_ALL=Fighting+Fakes+with+New+Hologram+Lab
els&p_op_ALL=AND&p_plural=no&p_s_PU=&fdy=2006&tdy=2007&fd
m=12&tdm=12&fdd=1&tdd=1&p_L=25&p_SortBy1=DA&p_Ascend1=
NO (accessed March 27, 2008).
92. V. Vasudevan, Anis Ibrahim, and Eileen Ng, “Keeping Tabs on Medical
Products,” New Straits Times (Malaysia), September 11, 2007.
93. Holography News, “Nigeria Looks to Serialised Holograms,” August 1, 2007.
94. U.S. Pharmacopeia, Ensuring the Quality of Medicines in Low-Income
Countries.
98 NOTES TO PAGES 57–62
95. The website is at www.buysafedrugs.info (accessed March 17, 2008).
96. Japan Pharmaceutical Manufacturers Association, “International
Cooperation Activities,” http://www.jpma.or.jp/english/prof/international.
html (accessed March 17, 2008), and Japan Pharmaceutical Manufacturers
Association, “Panel Discussion at the Scientific Meeting of the Federation of
Asian Pharmaceutical Associations,” June 18, 2007, http://www.jpma.or.jp/
english/topics/070614.html (accessed March 17, 2008).
97. See note 15 of the introduction.
98. U.S. Pharmacopeia, “About USP—An Overview,” www.usp.org/
aboutUSP.
99. Rajendrani Mukhopadhyay, “The Hunt for Counterfeit Medicine,”
Analytical Chemistry 79, no. 7 (2007): 2623–37.
100. More information about the minilab is available at www.gphf.org/
web/en/minilab/index.htm.
101. See chapter 4 for more on track-and-trace technology and RFID.
102. New York Times, “Company News: Pfizer Adds Rules Aimed at
Stopping Counterfeit Drugs,” December 20, 2003, http://query.nytimes.
com/gst/fullpage.html?res=9C06E7DE123FF933A15751C1A9659C8B63
&fta=y (accessed March 27, 2008).
103. Nigel Hawkes, “Drug Giant Will Sell Direct to Beat the Counterfeiters,”
Times (London), September 28, 2006, http://www.timesonline.co.uk/
tol/news/uk/health/article652462.ece (accessed March 27, 2008).
104. See the section “Complex Supply Chains Encourage Fakes” in chap-
ter 2.
105. Karan, January 2008.
106. Marci Bough (director of regulatory affairs, American Pharmacies
Association), personal communication with the author, October 17, 2007.
107. Scott Gottlieb (former deputy commissioner for medical and scientific
affairs, U.S. Food and Drug Administration), personal communication with
the author, November 5, 2007.

Chapter 4: Policy Recommendations

1. Roger Bate, “New Malaria Drugs to Be Approved, But Do They Work
and Are They Safe?” TCS Daily, September 5, 2007, www.aei.org/publica-
tion26752 (accessed March 17, 2008).
2. Roger Bate, “Malaria: Poor Drugs for the Poor,” CFD Bulletin, June 21,
2007, www.aei.org/publication26383 (accessed March 17, 2008).
3. Ibid.
4. For a more extensive discussion of the GPHF minilab, see chapter 3.
 NOTES TO PAGES 63–66 99
5. See chapter 2, note 34.
6. Roger Bate and Kathryn Boateng, “Medicinal Malpractice,” AEI Health
Policy Outlook 10 (December 2006), www.aei.org/publication25276
(accessed March 17, 2008).
7. Roger Bate, Richard Tren, and Jasson Urbach, Still Taxed to Death: An
Analysis of Taxes and Tariffs on Medicines, Vaccines and Medical Devices,
Related Publication 05-04, AEI-Brookings Joint Center for Regulatory
Studies, Washington, D.C., April 2005, www.aei-brookings.org/publica-
tions/ abstract.php?pid=930 (accessed March 17, 2008).
8. International Policy Network, Civil Society Report on Intellectual
Property, Innovation and Health, 2006, www.policynetwork.net/main/
content.php?content_id=47 (accessed March 17, 2008).
9. Roger Bate and Kathryn Boateng, “Drug Pricing and Its Discontents,”
AEI Health Policy Outlook 9 (August 2007), www.aei.org/publication26622
(accessed March 17, 2008).
10. Tufts Center for the Study of Drug Development, “Tufts Center for the
Study of Drug Development Pegs Cost of a New Prescription Medicine at
$802 Million,” press release, November 30, 2001, http://csdd.tufts.edu/
NewsEvents/RecentNews.asp?newsid=6 (accessed March 17, 2008).
11. Roger Bate, “Thailand and the Drug Patent Wars,” AEI Health Policy
Outlook 5 (April 2007), www.aei.org/publication25890 (accessed March 17,
2008). In spring 2007, Abbott announced that it would not launch any of
its new medicines in Thailand after the country issued compulsory licenses
for several frontline drugs.
12. Jayanthi Iyengar, “A Bitter Pill for Indian Drug Industry,” Asia Times
(Hong Kong), December 21, 2002, http://www.atimes.com/atimes/South_
Asia/DL21Df02.html (accessed March 27, 2008).
13. World Trade Organization, “Amendment to the TRIPS Agreement,”
December 8, 2005, www.wto.org/english/tratop_e/trips_e/wtl641_e.htm
(accessed March 17, 2008). According to WTO law, 101 WTO members (or
two-thirds of the organization’s total membership) must sign the amend-
ment for it to come into official force. As of February 2008, only fourteen
countries had done so.
14. Bate, “Thailand and the Drug Patent Wars.”
15. U.S. Trade Representative, 2007 Special 301 Report, 2007,
www.ustr.gov/assets/Document_Library/Reports_Publications/2007/2007_
Special_301_Review/asset_upload_file230_11122.pdf (March 17, 2008).
16. U.S. Department of State, “Philippines Improved Intellectual Property
Protection, U.S. Says,” press release, February 16, 2006, http://usinfo.state.gov/
ei/Archive/2006/Feb/16-97537.html (accessed March 17, 2008).
100 NOTES TO PAGES 66–68
17. Davao Today (Philippines), “US Trade Report Puts Philippines on
‘Lower Level Watch List,’” May 2, 2007.
18. Roger Bate, “An Exit Strategy for Big Pharma,” American, Novem-
ber 27, 2007, www.american.com/archive/2007/november-11-07/an-
exit-strategy-for-big-pharma (accessed March 17, 2008).
19. See chapter 2, note 25. Also, Kevin Outterson, “Pharmaceutical
Arbitrage: Balancing Access and Innovation in International Prescription Drug
Markets,” Yale Journal of Health Policy, Law, and Ethics 5, no. 1 (2005).
20. Daniel Gilman, “Oy Canada! Trade’s Non-Solution to ‘The Problem’ of
U.S. Drug Prices,” American Journal of Law and Medicine 32 (2006): 247–77.
21. Elvira Draga, “Is Europe Any Closer to a Harmonized P&R Market?”
Global Insight, November 2, 2007.
22. Panos Kanavos, “The Economic Impact of Pharmaceutical Parallel
Trade in Europe,” FDA oral testimony on drug re-importation, April 14,
2004, www.hhs.gov/importtaskforce/session3/presentations/Kanavos.ppt
(accessed March 21, 2008).
23. London School of Economics, “EU Pharmaceutical Parallel Trade—
Benefits to Patients?” press release, January 27, 2004, www.lse.ac.uk/collec-
tions/pressAndInformationOffice/newsAndEvents/archives/2004/EU_
pharmaceutical_paralleltrade_update.htm. Full report available at Panos
Kanavos and Joan Costa-Font, “Pharmaceutical parallel trade in Europe:
stakeholder and competition effects,” Economic Policy (October 2005):
751–98, available at http://www.lse.ac.uk/collections/pressAndInformation
Office/PDF/KanavosHealth.pdf (accessed March 21, 2008).
24. Margaret Kyle, “Strategic Responses to Parallel Trade,” Working Paper
12968 (Cambridge, MA: National Bureau of Economic Research, March
2007), www.nber.org/papers/w12968.
25. Pharmaceutical Market Access and Drug Safety Act of 2007, S.242,
110th Cong., 1st session.
26. Bert Moore, “RFID, Bar Codes and Pharmaceutical Authenticity,” AIM
Global, June 7, 2007.
27. U.S. Food and Drug Administration, “Counterfeit Drug Task Force
Report: 2006 Update,” www.fda.gov/oc/initiatives/counterfeit/report6_
06.html (accessed March 17, 2008).
28. Moore, “RFID, Bar Codes and Pharmaceutical Authenticity.”
29. Representative Steve Buyer, House Committee on Energy and
Commerce, Subcommittee on Health, hearing on HR 3610 (Food and Drug
Safety Import Act), 110th Cong., 1st session, 2007, http://energycommerce.
house.gov/cmte_mtgs/110-he-hrg.092607.Food.Drug.Import.shtml
(accessed March 17, 2008).
 NOTES TO PAGES 68–71 101
30. Ibid.; and Rajendrani Mukhopadhyay, “The Hunt for Counterfeit
Medicine,” Analytical Chemistry 79, no. 7 (2007): 2623–37.
31. EU Heads of Medicines Agencies, “Inspection, Laboratory Control,
and Enforcement,” Chapter 7 in Heads of Medicines Agencies Strategy
for the European Medicines Regulatory Network, available at http://www.
hma.eu/74.html (accessed March 21, 2008).
32. The FDA’s Center for Drug Evaluation and Research estimates that the
process takes an average of eight and a half years; the pharmaceutical industry
places the number higher, at twelve years. Alliance Pharmaceutical Corp.,
“Phases of Product Development,” www.allp.com/drug_dev.htm (accessed
March 17, 2008). Expenditures for OND were $110.6 million in 2005. U.S.
Government Accountability Office, Drug Safety: Improvement Needed in FDA’s
Postmarket Decision-making and Oversight Process, GAO-06-402, March 2006,
www.gao.gov/new.items/d06402.pdf (accessed March 17, 2008).
33. Ibid. The ODS’s task is further complicated by the fact that responsibility
for postmarket drug safety is shared among several FDA agencies, often with
overlapping or vaguely defined duties, including the Counterfeit Drug Task
Force, the Office of Compliance, the Office of Regulatory Affairs, the OND, and
the ODS. Unaccompanied by a clear chain of command, the proliferation of
agencies with some responsibility for regulating drugs in the market has led to
a lack of accountability. Senator Charles Grassley (R-Iowa), speaking on S 1082
(Food and Drug Administration Revitalization Act) and HR 2900 (Food and
Drug Administration Amendments Act of 2007), on July 26, 2007, to the full
Senate, 110th Cong., 1st session, Congressional Record 153: S.10136.
34. U.S. Food and Drug Administration, “Notice of Public Meeting,”
2007N-0005, January 16, 2007, www.fda.gov/OHRMS/DOCKETS/
98fr/07n-0005-nm00001.pdf (accessed March 17, 2008).
35. Randall W. Lutter (congressional testimony, Subcommittee on Criminal
Justice, Drug Policy, and Human Resources, Committee on Government Reform,
U.S. House of Representatives, November 1, 2005).
36. Ibid.
37. National Association of Boards of Pharmacy, “Model Rules for the
Licensure of Wholesale Distributors,” June 19, 2006, www.nabp.net/
ftpfiles/NABP01/WholesalerModelRules.pdf (accessed March 17, 2008).
38. Mark Thornton, The Economics of Prohibition (Salt Lake City: University
of Utah Press, 1991); and Michael ’t Sas-Rolfes, Rhinos: Conservation
Economics and Trade-Offs (London: IEA Press, 1995).
39. Roger Bate, “Fake!” American, September/October 2007, http://american.
com/archive/2007/september-october-magazine-contents/counterfeits-kill (accessed
March 17, 2008).
102 NOTES TO PAGES 71–74
40. Roger Bate and Kathryn Boateng, “Bad Medicine in the Market,” AEI
Health Policy Outlook 8 (2007), www.aei.org/publication26368 (accessed
March 17, 2008).
41. See chapter 3, note 11.
42. James C. McAllister III, “Counterfeit Drugs and the ‘Secondary
Market,’” Pharmacy Times, 2003.
43. Bate, “An Exit Strategy for Big Pharma.”
44. See chapter 2, note 25.
45. Lamphone Syhakhang, Solveig Freudenthal, Goran Tomson, and Rolf
Wahlstrom, “Knowledge and Perceptions of Drug Quality among Drug
Sellers and Consumers in Lao PDR,” Health Policy and Planning 19, no. 6
(2004): 391–401.
46. Armina Ligaya, “Counterfeit Drugs Caused Woman’s Death, Coroner
Concludes,” Globe and Mail, July 6, 2007. Also discussed in chapter 2, “How
and Why Does Counterfeiting Occur?”
47. See the NABP’s VIPPS website at http://www.nabp.net/index.html?
target=/vipps/intro.asp&.
48. Royal Pharmaceutical Society of Great Britain, “News Release: Millions
Risk Health Buying Drugs Online,” January 10, 2008, http://www.rpsgb.org/
pdfs/pr080110.pdf (accessed March 27, 2008).
49. World Health Organization, International Medical Products Anti-
Counterfeiting Taskforce, “Meeting Conclusions” (IMPACT Technology Sub-
Group Meeting, Prague, March 13, 2007), www.who.int/impact/activities/
IMPACTmeeting_conclusions.pdf (accessed March 17, 2008).
 About the Author

Roger Bate is a resident fellow at the American Enterprise Institute.

He researches aid policy in Africa and the developing world, evaluat-
ing the performance and effectiveness of the United States Agency for
International Development, the World Bank, the Millennium
Challenge Corporation, NGOs, and other aid organizations and
development policy initiatives. He writes extensively on topics such
as endemic diseases in developing countries (malaria, HIV/AIDS);
access and innovation in pharmaceuticals; taxes and tariffs; water
policy; and international health agreements. Mr. Bate’s writings have
appeared in the Lancet, the British Medical Journal, the Journal of the
Royal Society of Medicine, the Wall Street Journal, and the Financial
Times, among other pubications. In the process of writing Making a
Killing, Mr. Bate conducted extensive research in India and numerous
African countries.

103
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