Price differentiation can encourage counterfeiting

FDA reevaluating approach to fake drugs

Hospitals using legitimate sources may rarely encounter counterfeit drugs — but this may change because of the product price differentiation in foreign countries, says one expert.

"The larger the differentiation, the more opportunity there is to counterfeit because the product will be diverted back to this country," says Marv Shepherd, PhD, director of the Center for Pharma-coeconomic Studies, College of Pharmacy, Univer-sity of Texas, Austin. Some of the drugs already counterfeited include epoetin alfa (Epogen), filgrastim (Neupogen), and somatropin (Serostim).

According to the Federal Food, Drug and Cosmetic Act [21 USC Sec. 321(g)], the term "counterfeit drugs" means a drug which, or the container or labeling of which, without authorization, bears the trademark, trade name, or other identifying mark, imprint, or device, or any likeness thereof, of a drug manufacturer, processor, packer, or distributor other than the person or persons who in fact manufactured, processed, packed, or distributed such drug and which thereby falsely purports or is represented to be the product of, or to have been packed or distributed by, such other drug manufacturer, processor, packer, or distributor.

Counterfeiters can make a counterfeit drug and then sell it directly, Shepherd says. Or they can divert a good product off the market. "Drug diversion has been documented. It’s so hard to trace."

He gives an example of how drug diversion works. "I send a million units to South Africa of a drug. They are paying 30 cents a tablet. In this country, the cost is $30 a tablet."

Counterfeiters in South Africa steal the drug and divert it back to this country. "When that happens, they will sell it in the United States — to some wholesaler, retail chain, or hospital system. They may sell it for $10 a tablet."

Meanwhile in South Africa, half the supply is now gone. The supply, however, must meet the requirements of the country. The counterfeiters then dilute the original product. It goes to the next handler of the product within South Africa, and the cycle continues. "They do the same thing. Now you have counterfeit product being introduced again." For hospitals that use legitimate buyers, however, counterfeiters are still not a big problem. "They have been estimated at 5% or less [in the United States]," Shepherd says.

The U.S. Food and Drug Administration (FDA) is taking a new approach to the problem of drug counterfeiting, says Benjamin L. England, Esq., regulatory counsel to the Associate Commissioner for Regulatory Affairs.

During June 2000 hearings on the subject, FDA was asked to work more closely with the drug industry in combating counterfeits and to look at ways to assist in authenticating drug products.

After the hearings, the agency reestablished the Counterfeit Drug Working Group, which England had chaired for a number of years. He began talking with representatives of the drug industry as well as representatives in the applied technology industry. "I discovered there was a fair amount of research that has gone into anti-counterfeiting solutions — technology and system design. A lot of brand-protection money was getting poured into [research and development] after the advent of the Internet because many companies, drug industry or not, were getting complaints about their products from markets where they don’t sell their products. When they would look at the product in those markets, they would find that the product was counterfeit." The applied technology industry responded and made substantial gains in the area of brand protection.

England and other representatives of the working group concluded that it would make sense for them to put together joint agency/industry working groups. "It would allow us to work more closely with the drug industry with regard to the issue on a more formal basis. Secondly, it would allow us to look at the various options as to how a drug manufacturer or an importer may be able to protect themselves from the risks that counterfeits may pose to the market — and to learn this technology together," England says.

The working groups would look at all the concepts that assist in identifying where a commodity is at any given time and who has access to it, not just at technology applied to a product, he continues. These other concepts include track and trace systems and distribution control.

After the terrorist attacks of Sept. 11, the primary group’s focus began to expand into the food arena, as well. The group, therefore, decided to develop at least two working groups, one for foods and one for drugs. "The drug would be at least human and vets, and it may be biologics. We may also break out biologics into a third group."

It didn’t take long for the counterfeiting question to get connected to terrorism. Terrorists could tamper with drugs in several ways: infiltrate the manufacturing facility, tamper the product while it is in commerce, or knock it off and introduce it downstream, England says.

Since the Sept. 11 attacks, the general direction of the agency with regard to import programs is being reevaluated, England says. "The counterfeiting is a subset of product security, and product security is a subset of product safety overall. It is an integrated approach."