Nov. 18 (Bloomberg) -- China jailed eight
sex-pill makers and raided more than 1,400 drug dens this month as the government
stepped up its fight to control an estimated $3 billion of fake drugs in the
world’s fastest-growing pharmaceuticals market.
China criminalized the manufacture of
counterfeit medicines this year and raised maximum penalties to the death
sentence to try to contain illegal production in a market that researcher IMS
Health estimates will swell 17 percent to $48 billion in the next year. Sales
of counterfeits in the country have grown at about 15 percent annually, with
about $1.2 billion exported, according to a United Nations report.
Online sales and a growing health-conscious
middle class, coupled with the government’s desire to consolidate the industry,
is creating “the perfect storm” of fake drugs as some smaller producers turn to
unlicensed copies to stay in business, said Kent Kedl, Greater China managing
director at Control Risks. Producers including Pfizer Inc. say the illegal
sales cost the industry lost revenue and can be dangerous, damaging the
reputation of authentic medicines.
“It’s like a game of Whac-a-Mole -- you knock
one problem down and bam! Another one pops up,” said Kedl, whose London- based
firm gives advice on political and business risks to almost 8 out of 10 Fortune
500 companies.
‘Horrific
Crimes’
Less than 1 percent of medicines in developed
markets and as much as 30 percent or more in developing countries are fake, the
World Health Organization estimates. China and India are likely the biggest
suppliers of the counterfeits, which cause 700,000 deaths a year among malaria
and tuberculosis sufferers alone, according to the Washington-based
International Policy Network.
“It’s one of the most horrific crimes there
is, because you’re playing on people’s illness,” said Scott Davis, 53, a former
U.S. customs official who heads security in Asia Pacific for Pfizer, the
world’s biggest drugmaker.
About 40 percent of China’s estimated 20
billion yuan ($3 billion) sales of counterfeit medicines, health-care products
and medical equipment last year were exported, according to the 2010 report by
the UN’s Office on Drugs and Crime.
Countering the fakes is a priority for both
the U.S. and China, said Chris Hickey, China-based country director for the
U.S. Food and Drug Administration, which opened its first overseas office in
Beijing in 2008. The biggest problems the U.S. encounters with fake drugs
relate to purported pills for erectile-dysfunction, diet and mental illness,
FDA Head of Inspection Dara Corrigan said in a Nov. 3 telephone interview
during her first visit to China.
Fake
Viagra
High on the list is Viagra, Pfizer’s treatment
for impotence. The blue diamond-shaped pills accounted for 2.8 percent, or $1.9
billion, of the New York-based company’s revenue last year, according to data
compiled by Bloomberg. Counterfeits of Pfizer medicines have been found in 101
countries, said Davis, who listed China, India and Pakistan as known sources of
fake drugs.
Pfizer investigators working with police have
found drugs with no active pharmaceutical ingredients, or too much, Davis said,
in an interview in Hong Kong. Some contained amphetamines, also known as
“speed,” or hazardous chemicals.
“They’ll mix anything,” he said. “If they need
to get the color right, they’ll take inkjet cartridges and break them open.
We’ve seen boric acid, brick dust and road paint.”
16,000
Police
Chinese authorities are fighting back. A
16,000-strong team of police arrested more than 1,770 suspects in 29 areas,
seizing an estimated 2 billion yuan worth of counterfeit drugs and packaging
materials, the Ministry of Public Security said yesterday. In raids earlier
this month, police seized over 65 million pills, some containing iron powder,
starch and animal feed.
Under laws amended in February, making fake
medicines is now a crime. Authorities previously had to show that products were
harmful to human health. Suppliers can be arrested for carrying any quantity
after the limit on fines was removed, and those convicted face as much as life
in prison or execution.
“Chinese authorities seem to have recognized
the need for intensive enforcement over the longer haul,” said Joseph Simone,
vice-chair of the China Task Force at the Washington-based non- profit
organization International AntiCounterfeiting Coalition. “I felt like I’ve been
given a Christmas present.”
The clampdown may take years to control the
illegal sales because of the need to coordinate different provincial agencies
and the difficulty in tracking supply chains, say drugmakers and health
officials.
‘Long
Fight’
“Every stakeholder in the battle against
counterfeit drugs understands this will be a long fight,” said Sam Zhou, head
of Asia security at Sanofi, France’s biggest drugmaker. “We’re pleased to see
the issue being taken more seriously.”
There are still regions where the
investigation of copyright piracy and counterfeiting remain inadequate, the
State Council, China’s cabinet, said on its Web site after an executive meeting
chaired by Premier Wen Jiabao on Nov. 9.
The Ministry of Public Security didn’t
immediately respond to faxed questions on how far the clampdown is expected to
reduce counterfeiting in the country.
“Addressing this issue requires incredible
coordination between provinces and ministries,” said Amy Wendholt, who heads
the Greater China pharmaceutical practice for public affairs consultancy APCO
Worldwide. “A drug may be produced in Jiangsu and sold in Guangzhou. Creating
that cross-provincial coordination is difficult.”
Life
Sentence
China’s clampdown follows a similar move by India.
One in five strips of medicines sold there is a fake, a WHO taskforce reported
in 2006, citing local pharmaceutical companies. The South Asian country
tightened laws in 2009, raising the maximum penalty for producers to life
imprisonment.
Tougher regulation and criminal penalties
don’t address the root causes of counterfeiting, the International Policy
Network said in its report. Counterfeiters exploit corrupt legal systems, so
additional rules only increase corruption, the free-trade lobby group said.
China’s authorities are also fighting
corruption, including handing a suspended death sentence to Wu Jianwen, a
former president of Shanghai Pharmaceutical Group Ltd. Wu was convicted of
accepting bribes and embezzling public funds, involving more than 50 million
yuan.
China’s tougher regulations reflect the
dangers of fake medicines compared with other counterfeit issues in the
country, said David Twinberrow, Shanghai-based vice president of strategy and
market development at Norwalk, Connecticut-based IMS.
“Copying software, T-shirts or DVDs is an
intellectual property issue,” he said. “It is something else entirely when
vulnerable people get sick or die because of fake medicines.”
--Natasha Khan, Daryl Loo. Editors: Adam
Majendie, Jason Gale
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