Can Combating the Counterfeiters Hurt Pharma Too?

Jun 08, 2010
By Pharmaceutical Executive
Until recently, the European pharmaceutical industry's narrative on counterfeit medicines was fairly simple. Tighter controls on counterfeit products would eliminate unfair competition, reduce patient risk, and help protect the image of legitimate manufacturers. The unspoken additional attraction — that tough controls on the supply chain might also limit the scope for parallel importing — was also a factor in industry's support for a crackdown, although decency tended to keep it in the background.

 The arguments have become increasingly tangled as the debate in Europe has progressed. The earlier prospects of what looked like a win-win-win scenario for drug manufacturers have dimmed progressively.

 For a start, alarm is growing at the likely costs of introducing genuinely effective measures, such as safety features on packs and comprehensive individual product tracking mechanisms. Big brand name manufacturers are also uncomfortable that the European Union rules now under discussion are focusing principally on their products — high-priced, widely-prescribed medicines with a perceived high risk of being counterfeited. By contrast, generics and non-prescription medicines look like they will be let off the hook — leaving Big Pharma saddled with most of the obligations, and consequently most of the costs. Not exactly the scenario that had been envisaged at the outset.

Worse, the hopes that the new EU rules would ban repackaging (and therefore squeeze a lot of parallel traders out of the game) have evaporated almost entirely. The negative consequences for parallel importers of such a prohibition have united health economists and advocates of free movement of goods behind the parallel traders. So secret hopes look as if they will result in no secret satisfaction.

 The way the EU debate has widened is also bringing new adverse side effects for legitimate manufacturers. When the discussions got seriously underway in the EU, the very terminology of the draft law was rapidly expanded from the limited field of 'counterfeit' to the broader field of 'falsified' products. This was largely in response to consumer and health authority concerns that medicines might be substandard without being counterfeit — if, for instance, their active ingredient content was deficient, by accident just as much as by design. Since huge quantities of active ingredients used by EU manufacturers come from abroad — particularly from Asia — there is growing pressure for the new rules to include rigorous controls and monitoring. If, as now seems likely, this leads to new self-regulatory controls, and a more extensive inspection regime, it is the industry that will end up footing the bill.

 The latest twist is the further broadening of the debate into an attack on Big Pharma's alleged abuse of intellectual property law to stifle legitimate trade in generics by invoking suspicions of counterfeiting. A wave of resentment has been generated by what many health activists see as industry exploitation of legal loopholes to cramp competitors. There have been some notorious cases — such as the detention by Dutch customs officials of large consignments of drugs from India to Latin America while in transit in Dutch ports. There have been fears that powerful interests in the developed world are subverting international trade negotiations to lean on weaker players in the developing world — as demonstrated by recent headlines over the Anti-Counterfeiting Trade Agreement or the EU trade talks with Latin America.

 At the same time, concerns have grown among industry critics that Big Pharma is in an unholy alliance with health authorities in the IMPACT group (International Medical Products Anti-Counterfeiting Taskforce), set up by the WHO in 2006 with the best intentions of "responding to the growing public health crisis of counterfeit drugs."

IMPACT's membership consists of what WHO calls "all the major anti-counterfeiting players, including: international organizations, non-governmental organizations, enforcement agencies, pharmaceutical manufacturers associations and drug and regulatory authorities." But health activists are convinced it is up to no good.

So at the World Health Assembly during May, the little guys stood up to the big guys during a debate on counterfeit medical products, and hammered home a message that too much focus on fighting counterfeits may suit rich drug producers, but doesn't help poor patients. "The conflation of IP enforcement with public health objectives, such as quality and safety of medicines, undermines access to medicines," as Health Action International expressed it."

The little guys in question included not only health activists, but many southern hemisphere countries, including Brazil, Ecuador, Venezuela, India, Thailand and Kenya. They criticized the continued preference for the 'counterfeits' discourse over drug regulatory issues of quality, safety, efficacy.

They questioned WHO's continued involvement in IMPACT. And they said it was inappropriate for WHO to be engaged in the intellectual property enforcement agenda. As a result, WHA decided to establish a working group which will look at substandard, spurious, falsely labelled, falsified, and counterfeit medical products, but will be open to all WHO member states, and will reassess the WHO's partnership with IMPACT.

 Before the summer, the EU should conclude its discussions of its proposed anti-counterfeiting rules. The outcome will probably mean more costs for Big Pharma in Europe, in terms of processes and materials. But that may be only part of the price: the drug industry as a whole is being put on the back foot in its defence of intellectual property rights too — where any weakening could ultimately prove more damaging than any amount of bogus Viagra on the web.