Corporate Secrecy Spreads Pharmafakes

The suffering of millions could be eased by issuing public health warnings from available information that is currently kept confidential by the pharmaceutical industry,” reporter Robert Cockburn told the Global Forum on Pharmaceutical Anti-Counterfeiting.

The secrecy concerns the flood of pharmafakes that may comprise 50 percent of drugs in some developing countries and 10 percent worldwide. Some experts put the annual toll at 1 million dead and rising. 

But the real numbers are hidden. 

“Why does the [pharmaceutical] industry continue to shy away from developing the infrastructure needed to assess the size of the global problem?” asks Phar​ma​Man​u​fac​tur​ing​.com editor Agnes Shanley in a 2005 editorial. ​“The answer is simple: fears of bad publicity and impacts on stock prices.” 

The building blocks of that infrastructure exist in the separate and secret data banks each of the big pharmaceutical companies maintains on fakes and counterfeiting operations. But opening those records, they contend, threatens security and could create panic. Underlying that caution is a stone-cold business decision. According to Nicholas White, a Thailand-based doctor who has seen the casualties firsthand, ​“Their marketing people must have made the calculations that they are likely to make more profits by not publicizing than by publicizing.” 

Indeed, although most people know about Gucci knock-offs, few – even those whose lives depend on it – know that purportedly life-saving drugs may be useless at best, poison at worst. While BigPharma conceals ​“trade secrets,” impoverished people buy bogus diabetes, malaria and HIV treatments; hospitals drip contaminants into the veins of the desperately ill.

With counterfeits reaping an estimated $35 billion a year, drug manufacturers would seem to have a straightforward financial interest in exposing and stopping the illicit trade. But that interest clashes with another business consideration: reluctance to damage brand reputation and drive patients to rivals. ​“There is a serious conflict of interest within the pharmaceutical industry, concerned that making information on specific counterfeits public will reduce public confidence in the product and reduce sales,” Paul Newton, et al., wrote in U.K. medical journal The Lancet.

The number of times that companies have issued public alerts ​“is tiny compared with the racket’s size,” says Cockburn.

The closest thing to a centralized database is the Pharmaceutical Security Institute, a members-only trade group supported by almost $640,000 in dues and assessments (2004). PSI analyst Peter York describes the nonprofit as ​“central intelligence for counterfeit, diversion, and theft.” When PSI learns that a member companies’ drug has been faked, it strategizes with the affected manufacturer. Only when the company is not a member does PSI contact authorities directly. So if Novartis or GlaxoSmithKline or any other of PSI’s 23 paying members decides to delay reporting or to hush up a problem, PSI does not inform government agencies, law enforcement, or the public. York says he knows of no instance when a PSI member company withheld information from law enforcement ​“regarding a confirmed counterfeit medicine.”

PSI investigators’ ​“main concern is to progress the information,” said an industry insider who requested anonymity because he was not authorized to talk to media. ​“And if by releasing information you would hurt the investigation, investigators may recommend [keeping quiet]. PSI urges companies to work with local law enforcement, and it’s not its place to recommend action.”

Loath to share proprietary or commercially sensitive information, large companies typically rely on in-house security departments staffed by private investigators bound by confidentiality agreements.

“By using covert means, the industry avoids any assessment of its efforts and is accountable to no one,” writes Cockburn.

Pfizer spokesperson Bryant Haskins says his company always reports counterfeiting to authorities and promotes tagging all packaging with radiofrequency identification (RFID). ​“There is a huge illicit distribution network, especially in the third world, and companies can’t know everyone who claims to be distributing their products,” says Shanley, adding that ​“track and trace” technologies make it harder to mimic packaging and easier to identify fakes. 

While such technical fixes raise the cost to counterfeiters – who will inevitably counterfeit the anti-counterfeiting devices – they are largely irrelevant in the developing world, which faces the least oversight and the greatest need. The FDA, which begins mandating limited RFID this December, admits ​“there is no single ​‘magic bullet’ technology.”

Rather than depending on technical fixes, pharmaceutical companies must reduce the price of life-saving drugs to impoverished populations and cooperate with researchers, international law enforcement and each other to create an independent, open database, and to support a centralized, rapid-response system of mandatory reporting and public alerts.