The $4 Billion Cyber Fraud - Pharmaceutical Executive

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The $4 Billion Cyber Fraud
Consumers and pharma, beware: The Internet's many "pharmacies" hawking counterfeit brand-name drugs can be very hazardous to your health


Pharmaceutical Executive


The proof is in the metrics. Last June, MarkMonitor sifted through 60 million e-mail messages and billions of Web pages to get a handle on how six major brand-name drugs were being touted and sold on the Internet. In the process, it found nearly 3,200 online pharmacies selling those drugs, according to the Summer 2007 MarkMonitorBrandjacking Index. But only four—count 'em—of these e-stores carried the respected Verified Internet Pharmacy Practice Site (VIPPS) accreditation.


Frederick Felman
There is no mystery behind the pharmacies' motivation. This year, pharmaceutical sales hit $305 billion in the United States and $609 billion worldwide, according to estimates by IDC's Health Industry Insights. Clearly, there is big money to be made in trading on someone else's good brand. What the buyers actually get for their money, however, is anybody's guess.

Many of the proprietors of these pharmacies appear to know what they're doing when it comes to sales and promotion. They employ classic direct-marketing techniques to lure visitors to their sites, even using some 110,000 landing sites—Web pages intended to convert Web surfers into customers—to test their pitches for different demographic audiences. While the daily average number of landing sites was 6,000, on some days the number spiked to 11,000.

The brands picked for the survey were household names advertised on national TV. Half were garnered from Drug.com's/ top-selling brands for 2006, and half from the most-searched drug brands online in June. While they cannot be named here, they are big, important brands, developed and marketed by big, important companies. And now other organizations want to profit from them.

Big Numbers Mean Big Trouble

Unquestionably, many of these sites promote fake, stolen, diluted, or gray-market drugs. But the quality of some of the Web presences is such that even an expert would be hard-pressed to tell that they are spurious.

When it comes to the actual sale of these "branded drugs," things get even scarier. Less than 10 percent of the 3,160 online pharmacies required any prescription to move what are supposed to be prescription-only medications. Many marketers touted a no-prescription policy in their pitches.

More than half—59 percent—of the online pharmacies are hosted in the United States; the United Kingdom came in second, at 18 percent. Some of these marketplaces must be bustling. A third of the pharmacies generated enough traffic to garner Alexa ratings. (Alexa is a service that computes Web traffic statistics by analyzing usage of millions of users who run the Alexa toolbar and is a widely accepted measure of Web site popularity.)

Using this publicly available information, MarkMonitor was able to make some well-informed estimates about the amount of business flowing through these pharmacies. It put the figure of daily visitors at 32,000. In the aggregate, MarkMonitor estimated that 32 million people hit these Alexa-ranked sites daily during the four-week period in question.

To estimate a dollar amount of sales, MarkMonitor assumed that 0.5 percent of the online shoppers ended up buying something. It then assumed an average purchase price of $70. That would put annual sales at $4 billion a year.

Enter at Your Own Risk

It is clear from those figures that both corporate profits and brand equity are at stake here. But there is a serious—and growing—public-health risk as well. With pills selling online for a tiny fraction of their retail price, it is likely that they are not genuine—and the ramifications of that can be dire.


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