The Dangerous World of Counterfeit Prescription Drugs

Counterfeit prescription pharmaceuticals are a growing trend, widely recognized as a public health risk and a serious concern to public health officials, private companies, and consumers.

In some countries, counterfeit prescription drugs comprise as much as 70 percent of the drug supply and have been responsible for thousands of deaths in some of the world’s most impoverished nations, according to the World Health Organization (WHO).

In most of the world’s developed countries, however, effective regulatory systems and market controls cause an extremely low proportion of counterfeit drugs, usually below 1 percent. Even so, patients in developed countries can be affected by counterfeit drugs, and deaths linked to them occur every year in the U.S. and Western Europe—and even more often in South America, Asia, and Africa.

Counterfeit pharmaceuticals are undoubtedly a billion-dollar industry, though some estimate it to be much larger. Peter Pitts, president of The Center for Medicine in the Public Interest and former FDA associate commissioner, estimates that in 2010, activities related to counterfeit drugs generated $75 billion, based on information obtained from government organizations. He expects it to grow by 20 percent annually in the coming years. If this estimate is correct, the counterfeit drug industry generates nearly as much cash as the world’s fourth-largest health care company by revenue, AmerisourceBergen, which has generated approximately $79 billion over the past 12 months.

In this CNBC.com special report, we take an in-depth look at the world of counterfeit pharmaceuticals, from the dangers they pose and where they’re made, to what is being done to combat them.

What Are Counterfeit Drugs?

Counterfeit pharmaceutical drugs are fraudulently produced or mislabeled medicines purchased by consumers who believe them to be legitimate. These drugs can cause a range of serious health concerns. Fake pills may look nearly identical to their genuine counterparts, but may be incorrectly formulated and produced in substandard conditions.

They are, by definition, not subject to the same regulatory scrutiny as legitimate medications. The drugs often have incorrect amounts of active ingredients, if those ingredients are present at all, and are illegal in developed countries.

Pharmaceuticals are also considered counterfeit if the genuine products are stolen or repurposed and “up-labeled” — a process in which pills of one dosage are placed in bottles listing higher dosages. For example, counterfeiters may use legitimate capsules with 10mg of active ingredient and sell them in bottles with labeled dosages of 40mg. Even individual components of pharmaceuticals can be counterfeit, requiring both companies and regulators to scrutinize suppliers to avoid illicit compounds entering legitimate facilities.

Both brand-name and generic pharmaceuticals are susceptible to counterfeiting, posing problems for any corporation producing legitimate drugs. According to a report by the WHO, in addition to pharmaceuticals, medical devices and medical-related products have also been counterfeited, including blood glucose test strips, contact lenses, surgical instruments, and even condoms.

Which Drugs Get Counterfeited?

An internationally recognized criminal market, the counterfeit drug industry is difficult to track, but several attempts have been made to understand the types of drugs affected.

In a 2008 report, the WHO’s International IMPACT used seizure information to estimate the proportion of counterfeiting done by category. The findings revealed that the most counterfeited drugs were in the genitourinary category (37 percent of law enforcement seizures), followed by anti-infectives (12 percent) and central nervous system drugs (12 percent). Genitourinary medicines include treatments for sexually transmitted infections and diseases, as well as sexual dysfunction and contraception. This category includes drugs such as the erectile dysfunction drug Viagra — believed by both companies and international organizations to be the world’s most counterfeited drug—as well as medications for HIV and AIDS. According to Pfizer, the maker of Viagra, the drug was the company’s most counterfeited product, accounting for approximately 57 percent of seizures of Pfizer products in 2010.

The Pharmaceutical Safety Institute (PSI) recently analyzed total seizures and found that in 2010, the most dramatic trend in counterfeiting took place in the “metabolism” category—up by 182 percent, a category that includes diabetic medical products such as Glyburide and even diabetes test strips. Tom Kubic, president and CEO of PSI, told CNBC.com that “with the global rise of diabetes, we see a concomitant interest of counterfeiters in making counterfeit versions of drugs needed to treat this condition.”

The WHO and other government groups have also tracked examples of counterfeit drugs and list examples from brand names such as Lipitor (cholesterol) and Zyprexa (anti-psychotic) to anti-diabetics, anti-obesity, and anti-malarial drugs. The FDA confirmed that counterfeit versions of legitimate drugs, including Ambien, Xanax, Lexapro, and Ativan, are available for Americans to purchase online. Although counterfeit drug production was originally concerned with lifestyle medications treating non-life threatening conditions, the industry has expanded to produce nearly every type of medicine.

Dangerous ingredients and deadly consequences

Ingredients Found in Counterfeit Drugs

The dangers of counterfeit drugs are two-fold. First, counterfeit drugs may contain an incorrect amount of active ingredient or no active ingredient at all. The public health risk for this type of counterfeit drug is significant, since users of these medications intend to treat an illness or a disease. By using counterfeit medicines, they may be going untreated. This can result in treatment failure, increased resistance to treatment, and even death, according to the WHO.

Some counterfeits have little or no active pharmaceutical substance — many contain innocuous ingredients, although nothing an individual would want to ingest when expecting medication. These ingredients have included chalk, flour, vitamins, talcum powder, or sugar, which, when taken with the expectation of having a pharmacological effect, can be fatal.

On the other hand, many more noxious ingredients have been found in counterfeit drugs. INTERPOL reports that rat poison has been found in fake medicines, while Patrick Ford, Pfizer’s head of global security for the Americas region, says substances such as floor wax have been found in seized counterfeit products. The FDA has reported cases in which consumers ingested tablets they believed to be Ambien or Xanax that, in reality, were counterfeit. These pills contained the anti-psychotic haloperidol; ingesting them resulted in the need for hospitalization.

However, as Pitts of the Center for Medicine in the Public Interest, points out, “It’s generally bad business to kill your consumer, and it’s not in the interest of counterfeiters to hurt you outright.” Counterfeiters are more likely to produce drugs containing inert substances, he says.

Nearly a third (32.1 percent) of reported counterfeits contained no active ingredient, according to an analysis done by the WHO in 2000. Another 20.2 percent had incorrect quantities of active ingredients; 21.4 percent contained the wrong ingredients; 15.6 percent had the correct ingredients, but fake packaging; 8.5 percent contained high levels of impurities; and 1 percent were copies of an original product.

Deadly and Dangerous Examples

Although some medications are more frequently counterfeited than others, any drug—from pain medication and antibiotics to lifestyle drugs and even animal medications—can be counterfeited. One of the most notable recent examples is the blood thinner Heparin, which in 2008 was found to have counterfeit active ingredients sourced from Changzhou SPL in China.

In this case, the active ingredient in Heparin was replaced with a cheaper counterfeit substitute, causing a range of adverse reactions and a nationwide series of recalls. Eventually, the counterfeits were suspected in as many as 81 deaths. Baxter, the company that sold the drug in the U.S., maintains that the number is far lower. As a result of the contamination, Baxter faced 740 lawsuits and eventually sold the division that produced the drug.

The Heparin situation is one of the rare examples of counterfeit substances making it into the legitimate U.S. pharmaceuticals system; most cases happen overseas. In 2005 and 2006, U.K. authorities discovered that thousands of packs of counterfeit Lipitor, a cholesterol drug, had entered the legitimate supply chain or had already been consumed by patients.

In 2009, anti-diabetic medicine that contained six times the normal dose of its active ingredient was found in China and cited in the deaths of two people, according to the WHO. In 2006, the agency also reported that more than 100 patients were killed in Panama by counterfeit glycerin contained in cough medicine. In parts of Africa, where counterfeits are estimated to account for 70 percent of the market, it is difficult to measure counterfeit-related deaths, although some estimate the number to be in the hundreds of thousands per year, mostly related to malaria and tuberculosis drugs.

Online pharmacies: Drugs without a prescription are likely too good to be true

Where Are They Purchased?

Protecting against counterfeit pharmaceuticals is relatively easy: Just avoid certain types of merchants. The major makers of fake medical products are unregulated online pharmacies, the most common method for these drugs to get into the hands of American consumers, according to drug companies, international organizations, and the FDA.

Most of these pharmacies offer lower-than-market-priced, physician-prescribed drugs, without

a prescription, for importation to the U.S. — a practice that is “almost always unlawful,” according to the U.S. Justice Department. “Google ‘without prescription’ and you’ll find hundreds, if not thousands, of Internet pharmacies,” says Andrew Jackson, head of corporate security at Novartis. “And the vast majority are not approved by the FDA, but appear to be Canadian in origin… They feature smiling medical professionals offering prescription-free pharmaceuticals... but you don’t have to dig too far to discover that the sites are not based in Canada at all.”

More illegal online pharmacies that sell to Americans give the appearance of being Canadian firms, because Canada is known for its safe and inexpensive pharmaceutical supply. Howard Zucker, former assistant director general of the World Health Organization and head of the International Medical Products Anti-Counterfeiting Taskforce (IMPACT), offers a rule of thumb: “If there’s no mailing address on the site, 50 percent of all those are fake companies and, odds are, their medicine is also fake.”

Are All Online Pharmacies Bad?

CNBC.com contacted several online pharmacies that offered to ship prescription drugs at low prices, many without a prescription or after simply filling out an online medical questionnaire. Although most wouldn’t comment, a representative from one U.K. and Canadian-based online pharmacy, BestCDS.info, maintained its products were legitimate, and said it required faxed prescriptions from consumers. The manager, who said his name was Carl, said customers were mainly concerned about whether they would receive their order and not whether the order was counterfeit. He noted that the controversy over counterfeit drugs was overhyped and was intended to “spoil” his business.

Carl also derided online pharmacies for selling “sugar pills” to consumers, a practice his website had been accused of, although he said that these accusations were without merit and his company had not sold any fake medications. According to Patrick Ford from Pfizer, however, genuine Viagra is sold to distributors for around $18 per tablet and “you’re not going to get it at a better price than that.” BestCDS sells 25mg tablets for between $1.09 to $2.49, and others such as TabsFast.com list 130mg tablets from 99 cents to $1.31 per pill. Sometimes online pharmacies list these tablets as “generic,” but in neither of these examples is that true. When contacted, both websites maintained their drugs are authentic.

The scope of the business behind these online pharmacies is difficult to measure, but rare insight into online pharmacies was recently brought to the public’s attention. In August 2011, the U.S. Department of Justice required Google to forfeit $500 million in revenue generated by online ads for prescription drug sales by Canadian online pharmacies. Although many large companies spend millions on advertising, when $500 million is spent by a network of independent retailers for search marketing, it is likely not a stretch to assume there is a lucrative business behind the scenes.

Despite all the controversy surrounding online pharmacies, there are legitimate ones considered safe; experts say they should not be confused with counterfeit sites. To distinguish between the two, the National Association of Boards of Pharmacy (NABP) developed the VIPPS accreditation program, which evaluates Internet pharmacy practice, including on-site surveys. “If you’re on a VIPPS site, it’ll be as close to a traditional pharmacy as you can get,” says Patrick Ford. You can identify VIPPS accredited websites here. At the time of this writing, there are only 29 online pharmacies holding VIPPS accreditation.

The economics and incentives behind counterfeit drugs

Why Counterfeit Drugs Are Made

Perhaps the best way to describe the motivation behind counterfeiting is offered by security chief Jackson of Novartis: “Pretend that you graduated from the ‘University of Crime’ and you are considering two career options. Which path you would follow? First, you can manufacture

and sell cocaine, and if you get caught, you may spend 20 years or more in jail. Your second option is to manufacture and sell counterfeit pharmaceuticals. If you get caught, in many jurisdictions, you’ll be sentenced to prison for two years and may be back on the street in six months.”

This analogy highlights a major problem: Despite creating a global health issue, pharmaceutical counterfeiters aren’t given the same attention as other criminals. “It’s a challenge to get governments to respond to what we see as a very pressing and important issue,” Jackson says. “It wouldn’t be too much of an exaggeration to assert that those criminals who engage in counterfeiting are almost engaging in premeditated murder. They know that people will get the drugs.”

The WHO also cites easy money as a main driver for counterfeiters. “Manufacturing costs are very low if no quality and safety standards are respected,” it says. A new survey from Consumer Reports found that with rising medical costs and a recessionary economy, U.S. consumers are taking more risks with their prescription medications. With high demand for pharmaceutical products, there is considerable opportunity for unregulated producers to attract customers on price alone.

An unfortunate consequence is that the therapeutic ingredient in a pharmaceutical is often the most expensive, leading counterfeiters to find replacements or to avoid using these substances at all. “When a drug ingredient depends on raw materials that are particularly expensive, criminals may have extra incentive to find a cheaper alternative to the expensive ingredient,” said Margaret Hamburg, commissioner of the FDA, in a speech last year. As a result, the FDA has ranked more than 1,000 active pharmaceutical ingredients according to their risk of economically motivated corruption. The list guides officials at the U.S. border to sample and test drugs that are susceptible to counterfeiting. The list was not made available to CNBC.com by the FDA.

Counterfeit drugs' connection to organized crime and express mail

How Do They Get Into the US?

Unlike other illicit substances smuggled into the U.S., counterfeit pharmaceuticals most often find their way into the country through more “common” means. According to U.S. Immigration and Customs Enforcement, the most frequent method for importing counterfeit pharmaceuticals is through express mail services, such as FedEx, UPS, the U.S. mail, and Chinese-based express mail services.

This method makes the task for enforcement more difficult, says William Ross, unit chief at ICE’s National Intellectual Property Rights Coordination Center. Express mail shipments make

detection more involved and the process more time-consuming, compared to items shipped in large containers, he says.

Of the 19,959 intellectual property rights seizures recorded by U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement in 2010, there were 433 seizures of counterfeit pharmaceuticals, with a domestic value of more than $5.6 million, although ICE maintains this value is far lower than the manufacturer’s suggested retail prices. However, international cooperation is also essential to combat counterfeit pharmaceuticals, says ICE. For example, in October 2010, ICE’s Homeland Security Investigations participated in Operation Pangea III, along with the World Customs Organization, INTERPOL, private pharmaceuticals companies, and others to conduct actions that led to the suspension of 297 websites and domain names that sold drugs to consumers without prescriptions. Internationally, over 11,000 packages were seized, containing move than 2.3 million counterfeit pills worth nearly $7 million. The operation led to 80 arrests around the globe.

Who Makes Counterfeit Drugs?

There have been numerous cases of counterfeit drug labs operating with complex international frameworks — experts often link the production of counterfeit pharmaceuticals to organized crime. In one case that led to an investigation and seizures, counterfeit drugs produced in China were transported by road to Hong Kong, sent by air to Dubai, passing through London Heathrow on the way to the Bahamas, where the organization kept a warehouse fulfillment center. From there, the drugs were sent to another organization in the U.K., which eventually sent the packages to the U.S. “This is not exactly a mom-and-pop operation,” says corporate security chief Jackson of Novartis, “it’s organized crime.”

Groups that have been associated with counterfeit drugs or online pharmacies include the Russian Mafia, the Chinese triads, the Japanese Yakuza, and the Neapolitan Camorra, among others, who also engage in a range of counterfeiting activities, according to the U.N.

The complex web of transactions for fake drugs can also follow paths that seem more legitimate, but are just as dangerous to public health. A feature on The New York Times website shows an example of counterfeit pharmacological products originating in China that eventually made it to Panama through a web of seemingly legitimate international transactions.

There have been instances of U.S. citizens producing counterfeit drugs, although the practice is less rampant than in other parts of the world because of the secure and well-regulated nature of the U.S. pharmaceutical system.

Examples of these activities include cases out of New York in which individuals were making over-the-counter products; FBI investigations followed individuals from New Jersey selling counterfeit prescription drugs made in India, a Canadian national selling counterfeit cancer medications in Phoenix; and a California man selling counterfeit Viagra from China.

What do the counterfeit drug labs look like?

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Illicit Drug Labs

Drug manufacturers in the U.S. are required to follow Good Manufacturing Practices (GMP)

under the Federal Food, Drug and Cosmetic Act, which goes a long way in ensuring the safety and reliability of prescription drugs in the country.

Industry experts believe most counterfeit medicines are produced in non-GMP conditions by uncontrolled or street laboratories. One of the companies directly combating these clandestine drug labs is Pfizer, which provided the images on this page. The images were taken during raids of known drug labs in coordination with local authorities. The photos were taken during a drug raid in China, and Pfizer provided a number of additional images to CNBC taken around the world. The conditions in these labs have been described by Pfizer as “deplorable,” citing mold on the walls and “dirt all over the place.”

Below are several examples, provided by Pfizer's global security team, examples of drug labs that have been raided by local enforcement officials. All photos are reproduced with permission.

What do counterfeit drugs look like?

What Do They Look Like?

One reason it is so difficult to detect counterfeit medicines is that they appear strikingly similar to the genuine products. In the photo to the left, authentic Lipitor tablets appear on the left,

while the counterfeit is on the right. Zucker, formerly of the WHO, is now a practicing physician and agrees it is often difficult for patients to recognize counterfeit pharmaceuticals by sight. “If the right authorities with the proper tools look at them closely, you’d be able to identify a counterfeit product, ” he says, “but if you didn’t have a genuine pill next to you, you wouldn’t really know.”

In some cases, however, “the differences are so apparent — different color, different shape, different taste or smell — that a patient may be able to easily spot a fake from a real drug,” according to Carmen Catizone, executive director of the NABP. “But in most of the cases, the actual product and packaging are so similar that even pharmacists who manage these medications all the time have difficulty distinguishing between the fake and real drugs.”

Are There Ways to Combat Counterfeits?

Howard Zucker, former assistant director general of the WHO and former head of IMPACT, says there are five areas that must be addressed in order to combat counterfeits:

• Drug companies must be able to use technology to counter fake medicines, and more innovation to stay ahead of the counterfeiters.
• Strong legislation is important — punishment for producing counterfeit drugs is a mere slap on the wrist.
• Officials must demonstrate that the proper authorities are enforcing these laws.
• International regulatory groups must develop standards to combat counterfeit medications.
• The public must be informed about the dangers of counterfeit drugs.

There is international disagreement even with what constitutes a counterfeit drug, however. In the West, the issue is wrapped up in public health and intellectual property rights; but some countries interpret Western concerns as an attempt to stifle their generic drug industries, and others see no distinction between counterfeit and substandard drugs.

What are companies doing to combat counterfeits, and what can you do?

What Companies Are Doing

Pharmaceutical companies are at the center of the effort against counterfeit drugs, with the largest American companies dedicating resources to contain the problem. Technologies such as Radio Frequency Identification (RFID), holographic labels, infrared inks, supply-chain tracking, digital serial number identification chromatography, and even chemical “fingerprints” are being employed as anti-counterfeiting measures, although with varying degrees of success.

Many companies have taken enforcement a step further, with security officials from major drug companies confirming that they actively build cases against counterfeiters in other countries and present them to local law enforcement. Pfizer confirms that it has hundreds of cases in different stages of development, and reports having confiscated 65 million tablets since 2004.

Jackson of Novartis says that “in many cases the industry does most of the work themselves, identifying companies who are involved and literally taking law enforcement by the hand.... doing classic investigative intelligence work at a high evidential standard.” This work has resulted in raids and seizure of high-valued property and assets purchased with profits from these illicit businesses.

The difficulty that many drug companies face is raising public awareness in a non-alarming way. Zucker, former assistant director general of the WHO and former head of IMPACT, says drug company CEOs initially were worried that sales could drop when the WHO’s IMPACT project began. Recently, Pfizer and the NABP launched a public awareness initiative to inform the public about counterfeit pharmaceuticals, which includes a website and a series of YouTube videos addressing the subject in detail.

What Can You Do to Protect Yourself?

Buy drugs only from trusted retailers and avoid non-regulated online pharmacies. Experts including Zucker, former assistant director general of the WHO and former head of IMPACT, encourage Americans traveling abroad to take their medications with them and avoid purchasing drugs abroad. “Try to keep your eyes open in developing countries,” he says.

One of the best things you can do, experts say, is to educate yourself about the drugs you take. Below you’ll find links and resources on the subject:

The World Health Organization:
General Information
Counterfeit SFFC Medications
International Medical Products Anti-Counterfeiting Taskforce (IMPACT)

The U.S. FDA:
Counterfeit Pharmaceuticals Information
Initiative to Combat Counterfeit Drugs
Report Suspicious Websites

Other Resources:
The National Association of Boards of Pharmacists (NABP)
VIPPS Online Pharmacy Accreditation