IP Strategies to Combat Distribution of Counterfeit Drugs

Counterfeit products are no longer restricted to Gucci purses and Rolex watches. The pharmaceutical business has seen an alarming rise in the number of counterfeit products entering traditional distribution and supply chains. As a result, consumers can unknowingly purchase counterfeit pharmaceuticals from their local pharmacy and receive little or no therapeutic benefit, or worse, die as a result of ingesting counterfeit products.

Pharmaceuticals are subject to counterfeiting in a number of ways. A counterfeit product may contain no active ingredient or a wrong one, or it might even contain random mixtures of harmful toxic substances or components (1). All types and brands of drugs have been counterfeited. Copied drugs are manufactured to look like branded products to trade off the product integrity, safety, and efficacy of the original brand.

Branded Drugs Are Particularly Vulnerable: Although counterfeits have infiltrated all aspects of the pharmaceutical industry, brand-name drugs are especially vulnerable because their market potential and profit margins are often significant (2). The small size of pharmaceutical products make them relatively easy to copy, difficult to identify, and easy to transport across borders. Lifestyle drugs, anticancer medicines, antibiotics, hypertension and cholesterol-lowering drugs, hormones, steroids, and pain-killers all have been counterfeited (3).

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In 2003, for example, 200,000 bottles purported to be of a wellknown cholesterol-lowering drug (one of the world’s best-selling medicines) were recalled when they were discovered to be counterfeits (4). Although biotech drugs do not yet appear to be the main target of counterfeiters, they are not immune (5). As early as 2001, Amgen and Ortho Biotech reported that counterfeit vials of anemia-treating drugs had infiltrated the market. The counterfeited drug was reported to contain 20 times less active ingredient than expected (6). Somatotropin marketed by Genentech and Serono (now Merck Serono) also has been counterfeited (5).

Global Impact and Economic Injury

Although counterfeit medicines have been distributed globally, Asia (specifically China) is reported to be the largest source economy for counterfeited products. In addition to the transnational nature of the problem, counterfeit drugs make up a surprising percentage of all medicines on the market today.

It has been reported that up to 10% of the world’s pharmaceutical may be counterfeit (2). According to the US Food and Drug Administration, the number of reported cases of counterfeited drugs rose from nine cases in 1997 to 58 cases in 2005 (7). In 2006, the Wall Street Journal reported the number of fake drugs may be as high as 50% in parts of Eastern Europe, Africa, and Asia (8). However, the World Health Organization estimates the number of fakes in these regions between 10% and 30% (2). It is estimated that over 50% of drugs purchased over the internet are fake (2).

A recent report on the economic impact of counterfeiting notes that in general, counterfeit products have been intercepted from close to 150 source economies (2). Fake medicines are estimated to be a US$32 billion global business (9). In July of 2007, for instance, Dubai customs confiscated 556,000 pills purporting to be Plavix tablets and having an estimated value of about US$1.36 million. Laboratory tests proved that the composition of the counterfeits was completely different from the approved product sold by Sanofi-Aventis (10).

Adding to the economic impact, counterfeiting erodes the return on investment that fuels pharmaceutical innovation and growth, especially in developed countries that rely on knowledge, technology, and intangible assets to support their economic growth and development (10). Through the development of new products, innovation has long been recognized as a driver of economic growth. Without confidence that the resources invested in innovation can be adequately protected, investors may be less likely to fund research supporting the development of new products. That risk of losing economic investment as a result of counterfeit products is particularly pronounced in the pharmaceutical sector because of its sizable differential between the high cost of research and development and the low cost associated with producing counterfeited products (11). Counterfeiting can therefore directly affect the local economies of developed countries by undermining investment in innovative research and development.

Diversion of economic and professional resources to prevent and monitor counterfeiting also undermines economic investment. Manufacturers must continuously investigate and monitor their manufacturing and distribution chains. Anticounterfeiting packaging and track–trace systems need to be developed and continuously modified to keep ahead of counterfeiters. Expenditure of legal resources to protect, monitor, and prosecute infringers of intellectual property will reduce profits and/or raise the already high cost of pharmaceutical development and commercialization.

Intellectual Property Protection

A number of international government initiatives have been established to combat the growing problem of counterfeits. WHO and the U.S. Food and Drug Administration have specific programs to make it more difficult to manufacture and distribute counterfeit pharmaceuticals (12).

Criminal actions by government entities also help impede counterfeiting and can provide a powerful deterrent. For example, on 31 August 2007, Johnson & Johnson announced that a Shanghai Court fined and sentenced Su Zhiyong, a Chinese businessman, to 3.5 years in prison for selling about a million counterfeit OneTouch test trips (8). The genuine product is manufactured by LifeScan, Inc., a unit of Johnson & Johnson. Those counterfeit strips were found in 35 US states as well as Canada, Greece, India, Pakistan, the Philippines, Saudi Arabia, and Turkey.

Such governmental efforts reduce the public health threat of counterfeit drugs, but they cannot provide economic redress to those whose products are being copied. Enforcement of privately held intellectual property rights can, however, address economic harm while at the same time removing copies from the market.

Proactive procurement of intellectual property (IP) is the first step toward seeking private redress for economic harm. Patents, trademarks, and copyrights — collectively referred to as IP — vary in their scope, duration, geographical reach, and in the investment of time and money required to obtain and enforce them (13). It is useful at the outset for businesses to assess which form of protection is appropriate for a given product and anticipate how illicit copying of that product and/or its packaging may occur. Important considerations in the initial assessment include the type of product, the nature of likely copying, the geographical scope of intended legitimate distribution, and the duration of the exclusivity period needed to protect against copiers.

Patents: A patent allows its owner to exclude third parties from making, using, importing, selling, or offering for sale products or methods of manu
facture or use covered by it for a finite period of time, typically no more than 20 years from the date of initial patent filing. Patent protection is obtained country by country. It is used to prevent others from manufacturing and/or selling exact and close copies of the patented technology in a specific geographical area without the consent of the patent holder.

Pharmaceutical patents are usually considered the first line of defense in protecting this type of intellectual capital because they can prevent others from manufacturing, using, selling, and/or importing products with the same or equivalent active ingredients and/or formulations. However, as compared with other IP, patent rights are expensive to enforce. A final, enforceable judgment may not be obtained until years after a lawsuit is filed. Patent holders must prove in civil litigation that an alleged copier is making or selling a product that is described in the patent. This requires a detailed review of the patent document and correspondence with the relevant patent office. Frequently, technical experts are retained to opine on technical terminology and the meaning of phrases or terms during that phase of such lawsuits.

Only after that initial review is an allegedly infringing technology compared to the property right defined during the initial phase of the proceeding. So a patent can prevent others only from manufacturing, using, selling, or importing products that are exact or close copies of patented technology. Rarely, however, are counterfeit medicines such close copies of the original. They seldom contain the same or the same amounts of a genuine, patented formulation. Therefore, a patent does not prevent the making or selling of look-alike counterfeit drugs that do not contain the same or similar active compound or formulation.

In addition, a patent is granted to “innovators” alone. So manufacturers of generic drugs, frequently manufactured after brand-name drugs have gone off-patent, cannot use patents to prevent distribution of counterfeited generics.

Copyrights prevent others from copying and claiming authorship of original works. Copyright protection is granted to original works of authorship that have been fixed in a tangible form of expression. Works of authorship include literary, musical, dramatic, pictorial, graphic, sculptural, cinematic, and architectural works. Titles, names, and short phrases are generally not copyrightable. Ownership of a copyright is secured from the moment of creation, and such work need not ever be published.

Similar to patent protection, copyright protection is available country by country only. It requires a registration process to enforce the right against third parties. In terms of securing protection from counterfeiters, copyrights on package inserts may be useful, but they are of limited effectiveness in preventing copies from reaching the public or providing redress for economic harm.

Trademarks seek to prevent exactly what counterfeiters seek to obtain: the economic benefit and investment in product integrity of a manufacturer. A strong trademark is the most valuable type of intellectual property that can be used to combat counterfeiting. Similar to patents, trademarks are enforceable country by country, so this type of protection must be obtained in each country where a product is made or distributed. Unlike patents, some countries recognize a trademark right without a formal application and review process, although other procedural requirements typically must be met in demonstrating proof of sale of a product within the relevant jurisdiction. Also by contrast with patents, trademarks are not limited in time but can extend as long as they are used in commerce in connection with a product.

Trademarks are used to identify the source of goods or services. Words, names, numbers, symbols, devices, designs, sounds, and colors that function as brands to distinguish the source of goods and their packaging may be registered as trademarks. Even the colors and shapes of pills may be trademarked. Unlike patents, trademarks cannot be obtained on the process of making a product or medicine. They do not protect the innovation of the underlying product. However, trademarks are available to generic manufacturers who identify their products with unique logos or other identifying marks.

Misappropriated trademarks can mislead consumers by copying the unique name, logo, packaging, shape, and/or color used by the manufacturer of a genuine product or packaging. The intention of a counterfeiter is to confuse consumers as to the actual source (and quality) of a product. Therefore, all unique aspects of the product and packaging should be considered as worthy of trademark protection, and a company’s trademarks should be applied as frequently as possible (e.g., on the product itself, if possible, and on both inner and outer packaging). All modifications of a label, such as the product logo or other unique identifying descriptive marks, should be protected in the language of the country where a product is to be sold.

Obtaining and enforcing trademark rights are typically less costly than for patents, and a final enforceable judgment is usually obtained faster than in a patent infringement action. Indeed, evaluation of whether a trademark is likely to be infringed can be limited to a visual inspection rather than a complicated analysis of patented technology. Most significantly, however, in many countries trademark owners can have counterfeit goods and accompanying documents — and even sometimes manufacturing equipment — immediately seized at the outset of a lawsuit. Such powerful preliminary remedies are generally unavailable in patent lawsuits, and they can lead to swift resolution of counterfeiting action.

Preventive Power

The rise of counterfeit medicines is a threat to public health as well as the economic investment made by both innovators and generic manufacturers in the pharmaceutical industry. All manufactures of medicines can limit their economic harm by proactively assessing their products and available IP options and anticipating counterfeit designs and products. After an initial assessment, appropriate IP protection can be pursued in the relevant markets and countries. Although patents — and to a lesser extent copyrights — can be useful in combating counterfeiting and addressing economic harm, a strong trademark is the best IP tool for combating drug counterfeiting.

REFERENCES

1.) CDER 2006. FDA Consumer Education: Counterfeit Medicine, US Food and Drug Administration, Rockville.

2.) Bagozzi, D. 2006. Fact Sheet No. 275: Counterfeit Medicines, World Health Organization, Geneva.

3.) 2007. Executive Summary: The Economic Impact of Counterfeiting and Piracy, Organization for Economic Development, Paris.

4.) 2003. FDA Alerts Consumers and Health Professionals to Recall of Counterfeit Lipitor, US Food and Drug Administration, Rockville.

5.) Sheridan, C. 2007. Bad Medicine. Nature Biotechnol. 25:707-709.

6.) 2005.Combating Counterfeit Drugs: A Report of the Food and Drug Administration Annual Update, US FDA, Rockville.

7.) Hughes, N. 2006. Fighting Fakes: How Can Drug Makers Stem the Tide of Counterfeit Medicines. Wall Street Journ
al Europe.

8.) Fox, JL. 2001. Fake Biotech Drugs Raise Concerns. Nature Biotechnol. 19:603.

9.) Amgen, Ortho Biotech 2002. FDA Warn That Counterfeit Anemia Treatment Drugs Being Sold in US. Transplant News.

10.) Frank, AD, and L. Rapaport. 2007.China Counterfeit Diabetes Tests Tracked By J&J (Update 1) Bloomberg.com.

11.) 2007. Dubai Customs Confiscates Counterfeit Medicine Worth AED 5 Million, United Arab Emirates.

12.) 2007. Main Findings: Moving Up The Value Chain — Staying Competitive in the Global Economy, Organization for Economic Development, Paris.

13.) IMPACT: International Medical Products Anti-Counterfeiting Taskforce 2006.Counterfeit Medicines: An Update on Estimates, World Health Organization, Geneva.

14.) 2004. Combating Counterfeit Drugs: A Report of the Food and Drug Administration, US FDA, Rockville.

15.) Medd, K, and A. Konski. 2003. Workplace Programs to Protect Trade Secrets. Nature Biotechnol. 21:201-203.