Pharmaceutical companies feeling potent effect of fakes
By David Greising and Bruce Japsen, Tribune staff reporters. Greising reported from Shanghai, Beijing and Hong Kong; Japsen reported from Groton, Conn., and New York
Published November 20, 2005
SHANGHAI — A store called The Ark carries every pill a person might need to pep up a love life.
One shiny silver box, labeled “Vyagra King,” guarantees its little blue pills will “last for 100 hours.” A red and blue box called “USA Vager 777″ promises “a perfect combination of passion and power.”
Owner Jiang Zhi Jun reserves a special case for what he insists is the real thing, Viagra. But this is China, where counterfeiting runs amok. So when a customer asks if the pills inside truly are authentic, Jiang insists they are, then modifies his guarantee.
“They’re 70 percent real,” Jiang says.
Well, not exactly. An independent lab test of pills bought from Jiang’s store revealed they contain 132 percent of the proper dose of Viagra’s active ingredient, sildenafil citrate.
Viagra typically would be effective for four hours. Some counterfeiters boost the dose to enhance the drug’s performance, which makes the fakes potentially dangerous for customers. And of course it’s bad news for Pfizer, the world’s largest pharmaceutical company and Viagra’s maker. The Ark in Shanghai is yet another dot on the map of the growing global problem of counterfeit drugs.
Counterfeit drugs are a $32billion-a-year headache for the pharmaceutical industry, according to a World Health Organization study. It’s getting worse and could reach $75 billion a year by 2010, according to one industry estimate.
Now the drug industry and governments on both sides of the Pacific Ocean are fighting back. Pfizer, Abbott Laboratories and other companies have hired former FBI investigators to lead their efforts. The U.S. government has assigned a patent and trademark specialist to its Beijing embassy. And China’s vice premier, Wu Yi, has launched a high-profile crackdown on counterfeiters.
Fake drugs seized
In August and September, Chinese and U.S. authorities arrested 12 people and seized $4.3million in fake drugs during an unusual joint sting. In Operation Cross Ocean, a tip from Pfizer and Eli Lilly & Co. led investigators to an operation that made Viagra’s active ingredient in central China, packaged fake pills in the port city of Tianjin, and shipped them to Washington state. Counterfeit Cialis and Lipitor also were found.
“Viagra opened the window to a counterfeit drug industry that existed and nobody knew about it,” said John Theriault, a veteran of the FBI who is Pfizer’s vice president of global security.
Globalization and the Internet have created a boom business for drug counterfeiters. The fakes range from near-perfect copies of actual drugs to capsules filled with baking soda, sugar or talcum powder. Working from hotbeds in China, India and other countries, makers of faux pharmaceuticals often use the Internet to pitch illicit products globally.
For years, the U.S. and China have dueled over China’s alleged indifference to intellectual property in everything from compact discs to DVDs to auto parts to drugs.
On pharmaceuticals, the U.S. and China are beginning to find common ground. Government officials see the drug issue as a ripe venue for cooperation, in part because the health risks hit home in both countries.
While counterfeit Viagra and other “lifestyle drugs” may do little harm, phony versions of drugs that treat life-threatening conditions can be deadly. Five elderly patients in Canada died last summer after buying allegedly counterfeit copies of the blood pressure drug Norvasc. The pharmacist who sold the pills was charged with illegal distribution of fake product, but an investigation failed to establish a direct link with the deaths.
A second obvious risk is to the drug firms’ bottom lines. To some critics, that threat is motivating the counterattack.
“The drug industry wants to make people scared about buying anything but patented drugs in the U.S.,” said Dr. Arnold Relman, former editor of the New England Journal of Medicine and a longtime drug industry critic who teaches at the Harvard Medical School.
Princeton University health-care economist Uwe Reinhardt offers a quantitative breakdown of the industry’s motivation: “Concern over quality is 30 percent and concern for economics is 70 percent.”
Whatever the mix of motives, counterfeiting is spreading from potency and diet drugs into remedies that are essential to the health of millions. In 2003, authorities in Asia seized 1.5million bogus versions of Norvasc, up from 4,000 tablets seized in 2002. In 2001 alone, 192,000 people died as a result of counterfeit drugs, according to a Temple University study.
Big drugmakers are employing aggressive steps to cut off counterfeiters at the source. That’s why Douglas Frazier, head of global protection for North Chicago-based Abbott, traveled to Hong Kong a few months ago to meet with the head of Abbott’s anti-counterfeiting operation in Asia.
Since taking charge of Abbott’s new effort to fight counterfeiting two years ago, Frazier has traveled to Asia, Europe and South America in search of fake drugs. He is leading efforts to fight counterfeiting with innovative packaging, high-technology holographs, color-shifting inks and even embedded computer chips that verify the authenticity of drugs.
But Frazier’s visit to Abbott’s Hong Kong field office shows the tough job ahead. He works his way through a binder of field reports as Michael McDonnell, a burly, buzz-cut former Naval Criminal Investigative Service officer, fills in the details. Most of the attention focuses on Abbott’s weight-loss drug Meridia, called Reductil in Asia.
Suspicious sellers
In one case, Abbott first tried to buy fake drugs from a California firm. When that failed, Abbott hired an investigator in the counterfeiting hub of Bangkok to buy from the target’s Shanghai office. But the target seemed suspicious and wouldn’t sell.
“We’ve been trying since January to make a buy,” says a frustrated McConnell.
Local authorities sometimes are not reliable. When Abbott helped orchestrate a simultaneous police raid of 10 counterfeiting plants in Thailand’s capital late last year, each one turned up no fake product. Frazier suspects a local snitch alerted the counterfeiters.
That has not stopped McDonnell from plotting another synchronized crackdown, this time on 30 pharmacies in Pakistan.
Sometimes arrests do no good because penalties are light. In Taiwan, the sale of counterfeit goods is little more than a misdemeanor. “So the penalty in Taiwan is a letter from some guy saying, `Don’t do it again’?” Frazier snorts. “That’s not going to help.”
And in mainland China? Abbott agents focus on Hong Kong because of its importance as an international port.
Frazier believes the company is eking out some progress in Hong Kong. In one buy a year ago, nearly a third of the pharmacies were selling counterfeit product. In a summer follow-up, detectives received fake pills in only two of 50 pharmacies.
Making progress sometimes requires taking physical risks. Abbott, Pfizer and most drug companies hire local private investigators who have the street smarts and language skills to be effective in the artful game of winning the confidence of counterfeiters while trying secretly to crack down on them.
Liu Dan Lin, a private detective based in Beijing, said counterfeiters in Guangdong province two years ago broke the leg and hand of one of his investigators who broke into a factory to obtain evidence.
“In some places, the police are willing to protect the counterfeit manufacturers,” said Liu, president of Northern Wolf Investigations. “The ability to crack down on factories is getting more and more complicated as they are getting more and more organized,” he added.
When investigators like McDonnell and Liu do track down counterfeit pills, the contraband winds up in places like Pfizer’s 2,000-square-foot laboratory at its sprawling global research facility in Groton, Conn.
On a late summer day, Pfizer forensic chemist John Thomas and three colleagues step into a secured cage to open heavily taped boxes and envelopes containing suspect versions of prized Pfizer pills: Viagra, Lipitor, Norvasc and the like.
Nearby, apparent fakes of Norvasc from the June bust in Canada sit waiting for tests. The pills are gray with smudged lettering, a dead giveaway because true Norvasc emerges bright white and untouched.
Thomas soon will put the first pill under a scanning machine, the Magna IR 560, that bombards it with infrared light so a lens can measure the chemical fingerprint. From there, more intense analysis, known as high-performance liquid chromatography, allows researchers to determine the contents.
But before the tests, Thomas snatches a magnifying glass and examines the color and design of the faux Pfizer drug. He marvels at the breadth of the alleged copyright violations.
“This guy got everything: authentic [drug], counterfeit and diverted” from another country to Canada, Thomas says.
Investigators are turning up so much counterfeit product that Pfizer has expanded its testing facilities. There’s one in Sandwich, England, another in Dalian, China.
Industry experts suggest that China is involved, one way or another, in more than 30 percent of the world’s fake drug trade.
To begin the crackdown, Vice Premier Wu last November launched a 12-month program dubbed Mountain Eagle that has featured high-profile busts of counterfeiters of drugs, DVDs, auto parts and other patented products. The crackdowns, and the publicity they have received in China’s government-controlled press, are signs of a shift in government policy, trade experts say. But the promise to act has come only in reaction to intense international pressure, and even then policing has been haphazard.
Commerce Secretary Carlos Gutierrez and U.S. Trade Representative Rob Portman raised the drug issue during trade talks in Beijing in July with Wu.
“We need to make a lot more progress,” Gutierrez said in an interview. “Ten percent of the medicines that people buy around the world are counterfeit, which means many of them are not safe.”
E. Allan Gabor, head of Pfizer’s China business, has seen China improve its commitment to intellectual-property rights during his three yeas in Beijing.
In January, a tip from one of Pfizer’s investigators to Wu’s Mountain Eagle enforcement staff led to the arrest and prosecution of politically connected executives in Yunan province. Total street value of the seized Viagra, Lipitor and Norvasc: $5million, Gabor said.
“This is a remarkable, remarkable achievement,” Gabor said. “For these guys to go after what is a relatively big fish is a big change.”
Even so, Pfizer’s experience in China shows that the counterfeit wars are not fought only in the streets. They’re fought in patent offices and courts too.
Sales of the world’s leading erectile dysfunction drug reached only $5 million in China last year–a small tally in a country of 1.2 billion people. In the U.S., Pfizer sold Viagra tablets valued at nearly $900 million, more than half the drug’s $1.7 billion in sales.
Why are China’s sales so small? In part, it’s because cut-rate counterfeits and imitators are so widespread. And in part it’s because Pfizer is caught in a battle for control of the trademark to its own product.
Last year, China’s State Intellectual Property Office overturned Pfizer’s patent for Viagra because it considered Pfizer’s description of the product to be too broad. Pfizer retains control of the patent while an appeal is pending. It is holding off building the Viagra brand while there is a risk Pfizer might lose its China patent.
To Mark Cohen, a former patent and trademark official who is the intellectual-property attache to the U.S. Embassy in Beijing, problems like Pfizer’s show why firms have so tough a time fighting fakes in China.
“Intellectual property is an intangible asset, which means that it is wholly dependent on the rule of law,” said Cohen, who speaks Chinese fluently and is working with Chinese authorities to raise their awareness of the counterfeiting problem. “What determines intellectual-property rights is a predictable, fair and transparent legal system. All three of these are problems in China.”
Tough as the going is, Pfizer’s Theriault takes heart from the arrests and seizures in Operation Cross Ocean.
Still, there is a long way to go. “Let’s be practical here,” he said. “It won’t get much better until China has its own intellectual property to protect.”
Posted by site admin, filed under Uncategorized. Date: December 27, 2005, 8:16 am | No Comments »
