At the Cost of Life: The Counterfeit Pharmaceuticals Industry

Out of all the fraudulent goods that circulate the world amongst their legitimate counterparts, the counterfeit pharmaceuticals market is one of the largest sectors. Counterfeit pharmaceuticals is a booming business, with multiple sources pointing between an estimated $200-$300 billion dollar revenue. Worse, the stakes behind counterfeiting pharmaceuticals are higher than fake handbags – people around the world depend on medication for their livelihood.

The World Health Organization has a broad definition of what constitutes a counterfeit drug – any drug that has been deliberately or fraudulently mislabeled with respect to identity or source. The term ‘counterfeit pharmaceuticals’ is an umbrella that encompasses everything from changing things like date of expiration on packaging to altering the raw materials to removing the active ingredients from the medication.

Counterfeit medications make up roughly 10% of pharmaceuticals on a global scale, but it’s important to note that this isn’t an even spread throughout each country in the world. Developing countries face fraudulent pharmaceuticals on a wider scale than you might find in first world countries that have more regulations.

But even in those areas there are plenty of opportunities for criminals to take advantage of the system. Counterfeit pharma is an attractive industry to criminals – especially those with organized crime connections – as it can generate enough revenue to rival trafficking things like heroin. This is because they can charge near market prices for big ticket medicines like cancer treatments and insulin, which makes it easier to mass produce knockoffs for a substantial profit.

All drugs must undergo clinical trials to test their efficiency, quality, and potential side effects before they can be marketed to the public. These measures function as a safety valve to protect consumers. However, these regulations are not observed by the manufacturers of counterfeit products. Instead, they use substandard products, leave out active ingredients, or otherwise tamper with the components. The end result can range from ineffective treatment to severe health problems or death.

The way pharmaceuticals move through the supply chain can leave them vulnerable. There’s typically three major phases of it – manufacturing, distributing, and retailers.

Usually the chemical compounds that compose the active ingredients of a drug are manufactured in places like China or India due to the relatively low cost of raw materials in those regions. Indeed, India itself is home to more than fifteen thousand illicit drug factories, which are estimated to supply approximately 75% of the world’s counterfeit drugs. Continuing the manufacturing process, those chemical compounds are made into their respective forms – whether that’s capsules, injections, creams, etc. – either in the country of origin or in USA/Europe.

The drugs are then shipped in large quantities to packing facilities, where they are prepared for the distribution phase. This part is particularly vulnerable, as this is an area where criminals can deposit convincing fakes to be combined with the legitimate drugs.

That said, counterfeiting can occur outside the distribution chain as well because of internet and mail order markets, street vendors, etc. This is especially common in areas where medicine can be hard to acquire – counterfeit pharmaceuticals are a big problem in the developing world. Some pharmacists in these developing regions are compelled to buy from the cheapest – but not necessarily the safest – suppliers in order to compete with the street market.

Things such as lotions, creams, and oils are often counterfeited as they are relatively easy to make and then sold by illegitimate suppliers. Production of these goods is generally less regulated than pills or injections because knockoff ointments are most likely going to be less potentially damaging than their oral counterparts. That said, there were a significant portion of counterfeit injectables found amongst the legitimate pharmaceutical supply chain, which tend to cost more and can have deadly effects. Overall, though, anything that is profitable is at risk to be counterfeited – things that range from treatments for AIDS to Cancer to Diabetes to antibiotics and more. Theoretically, every patient is at risk – thus counterfeit pharmaceuticals are a problem that should concern everyone.

The human toll is enormous, as a study by the World Health Organization calculated that up to 72,000 deaths from childhood pneumonia could have been attributed to the use of antibiotics that had reduced activity, and that number climbs to 169,000 if the drugs had no active ingredients at all. These low quality drugs also add to the danger of antibiotic resistance, which threatens to undermine the power of these life-saving medicines in the future.

Three international security organizations including Interpol, the Institute of Security Studies, and the Global Initiative against Transnational Organized Crime have called for an overhaul of the regulatory, enforcement, and education systems for medical supply chains in Africa specifically. This is in order to reduce the spread of counterfeit pharmaceuticals across the continent. The three organizations commissioned a study called “The rise of counterfeit pharmaceuticals in Africa” under a bigger project funded by the European Union that is dedicated to Enhancing Africa’s Response to Transnational Organized Crime (ENACT). Findings from the study suggested that counterfeit pharmaceuticals accounted for nearly 30% of drugs on the market in Africa.

In order to address the proliferation of fraudulent pharmaceuticals, anti-counterfeiting measures have been rising up around the world. For example the U.S. Drug Supply Chain Security Act requires pharmaceutical companies to add serial numbers to all packages over the next few years, which should help in tracking the movement of the medications through the supply chain. Several non-profits have been founded to combat the issue as well. Overall, however, finding a solution to this issue is going to be something that requires sustained commitment not only on a national level but on an international plane between health organizations, law enforcement, healthcare stakeholders, and the pharmaceutical industry as a whole.

This article was written by Kristina Weber of Centry Global. For more content like this, subscribe to our blog for bi-weekly articles related to the security industry and follow us on Twitter with our new handle @CentryGlobal!