When Pang Jianli walked into a Beijing pharmacy to buy medicine for his flu-stricken son, he was greeted by an overwhelming display of boxes and bottles emblazoned with promises of miraculous cures. "Unlike shopping in supermarkets, where I buy the brands I know and I know the brands I buy, buying drugs is different; the brands you know may not be what they claim to be," the 38-year-old father told the China Daily.

 

China, the world’s largest counterfeiter, is also the fifth-largest pharmaceutical market, worth US$24 billion in 2006, and predicted by Boston Consulting Group to become the largest by 2010 thanks to an aging population of 1.3 billion. Counterfeit medicine continues to put a heavy economic and human toll on Chinese society.

 

China's poorly regulated medical market has been called a new "Wild West" by the local media for untested drugs offered by fly-by-night firms. China's State Food and Drug Administration (SFDA) counted 329,613 cases of the distribution of unlicensed drugs and medical products in 2007.

 

Fakes from China pose a real risk for the global community. The EU experienced a 1000-percent increase in seizures of counterfeit prescription drugs between 1998 and 2004. A report in 2006 by The Kaiser Family Foundation also revealed that fake malaria drugs produced in China are surfacing in Africa, where the disease claims 1 million lives annually and up to 40 percent of medicines are not authentic. 

 

Industry leaders, such as Johnson & Johnson, Pfizer and GlaxoSmithkline, are losing the intellectual property battle. Similar to other capital-intensive industries like software, where Western firms traditionally enjoyed a comparative advantage, Big Pharma is losing billions of dollars in potential revenue and profitability.

 

Back in 2005, President Bush’s 'piracy tsar' Chris Israel said US companies are losing the equivalent of US$250 billion a year to theft of intellectual property. This, Israel claims, translates into 750,000 jobs — a number impossible for any government to ignore.

 

Getting the Marketing Strategy Right  

 

In a recent article in the Wall Street Journal, Dr. Penny Chaudhry and Dr. Stephan Stumpf, both professors at the Villanova School of Business, say if companies want to cut into sales of counterfeit products, they need to understand why consumers buy them in the first place. Companies are rolling out massive campaigns to get people to stop buying fakes. They argue the messages they use are often off the mark. They argue:

Companies should hammer home the idea that fake drugs are not generics—a common misperception—but dangerous lookalikes that can kill. For instance, one recent report says that pirates in countries such as China and India have used chalk, dust and contaminated water to make counterfeit drugs.

 

And fakes are not a real bargain.

 

What's more, many consumers think that counterfeit drugs help poor people by offering them a bargain. So, drug companies should stress that fakes end up hurting people by giving them potentially ineffective or dangerous treatments and many consumers unknowingly obtain counterfeit drugs.

 

They conclude:

 

For these messages to have teeth, companies must push for tougher, more effective policing of both the legitimate and illicit supply chain, and sharper penalties. They must also come up with speed bumps that make it harder for crooks to copy their goods. For example, the Food and Drug Administration advocates the E-Pedigree system for prescription drugs, which documents each prior sale, purchase or trade of the drug to protect U.S. consumers from counterfeit pharmaceuticals.


According to some analysts in the U.S., hope may be on the technological horizon. As I explained in a 2006 coverstory for Insight, a publication from the American Chamber of Commerce in Shanghai, many pharmaceutical firms have adopted a Radio Frequency Identification (RFID) technology that may help limit commercial damage and save lives. In its Counterfeit Drug Task Force Report in 2006, the US Food and Drug Administration strongly encouraged the use of RFID technology. 

 

Conclusion

Dr. Chaudhry and Dr. Stumpf note that the World Health Organization has estimated that counterfeit drug sales will reach $75 billion world-wide in 2010, up more than 90% from 2005. (The Wall Street Journal article notes the WHO defines counterfeit medicines in a number of ways: products with the correct ingredients but fake packaging; products with incorrect ingredients; products lacking sufficient active ingredients, or having no active ingredients at all.)

The simple truth is that intellectual property owners will never start winning the war against fakes until more people around the world realize they harm the pose to our individual health and happiness. Theft has always been part of the human condition. Regrettably, intellectual piracy is a problem that will never be completely solved.