Combating ‘Super-Agility’ of Counterfeiters in the Pharma Supply Chain

By Chip Meyers and Robin Hooker, UPS | June 2, 2015

Leveraging industry best practices to protect consumer safety

It can be said that imitation is the sincerest form of flattery, but ask any pharmaceutical executive about counterfeiting, and they would prefer that criminals keep their “flattery” to themselves. Counterfeit pharmaceutical drugs are a global problem that pose serious threats to public safety, and it is estimated to be a $75 billion illegal enterprise.1

A growing middle class and aging population has led to more healthcare consumption and a longer and more complex supply chain allowing greater potential for counterfeiters to strike.

Counterfeiters take many forms and are driven by high demand. Fake online pharmacies promising low-cost drugs without a prescription, under-regulated wholesalers or distributors and malevolent criminals taking advantage of consumer trust make up the counterfeit pharmaceutical landscape.

According to the World Health Organization, counterfeiters operate without the overhead costs of infrastructure, regulatory compliance and pricey active ingredients.2 In many cases, the fake drugs they manufacture have incorrect quantities, no active ingredients at all, or even malicious, harmful substances. As a consequence, counterfeit drugs, if uncontrolled, can destroy lives and public confidence in healthcare systems, suppliers and sellers of authentic drugs, the pharmaceutical industry and authorities.
Regulations are in place to help keep consumers safe and counterfeit drugs out of the supply chain. Those companies that leverage such track-and-trace compliance initiatives to meet broader business goals will be better positioned to enjoy long-term success regionally and abroad.

But no matter what, all parties in the pharmaceutical industry, including logistics providers, have a role to play in anti-counterfeiting measures and protecting the public.

The state of the industry
In the U.S., counterfeit issues in the pharma industry were brought to light during the war on illegal drugs in the 1980s, when the drug supply was open to foreign medicines. A lucrative illegal market flourished for counterfeiters with billions of dollars’ worth of opportunities. A notable example of this problem was women in large numbers taking birth control pills reported becoming pregnant. After thousands of complaints and subsequent investigations, it was discovered that many women were in fact taking foreign counterfeit pills.3

U.S. law enforcement enacted the Prescription Drug Marketing Act of 1987 to close off the supply chain to counterfeit drugs, but the pharmaceutical landscape has since changed dramatically. Today’s pharmaceutical supply chain is much more complex with changing distribution models such as direct-to-patient home healthcare, the rise in popularity of e-commerce, and emerging markets with harsh climates and limited infrastructure. Pharmaceuticals themselves are also changing. In fact, it is expected that by 2018, seven of the top 10 pharmaceutical drugs will be temperature-sensitive.4

To address these changes, the U.S. Congress enacted the Drug Supply Chain Security Act (DSCSA) in 2014. On the most basic level, the DSCSA calls for the establishment of an interoperable track-and-trace system where manufacturers would serialize their product, i.e. a unique numerical identifier. The legislation allows the serialization process to develop within 10 years, but once in place it should allow law enforcement to pinpoint where counterfeit product enters the supply chain with the goal of intercepting and prosecuting traffickers. As serialization progresses, new advancements such as increased adoption of mobile technologies by consumers will likely continue to be game-changers. In this environment, validation systems will need to be implemented, and they must be seamless.

Although anti-counterfeiting measures are being taken on a national level, there is still a long way to go globally. In India—the world’s largest manufacturer of generic drugs—adulterated drugs account for 25% of the drug supply. In Africa, 40% of the drugs are counterfeit. The opportunities for counterfeiters will only continue to rise with the increased globalization of healthcare.

Super-agile and super-risky
Professor Hau Lee at Stanford coined the term “super-agility” to describe the nimble ability of counterfeiters to react to market opportunities and capitalize on legitimate brand equity. The agility counterfeiters have to exploit the brand reputation of big pharmaceutical companies is real, fast-moving and has the inherent capability to be one step ahead.

Anywhere there is brand cachet and high product demand, counterfeit risks are high. Direct-to-patient advertising has made pharmaceuticals such as Humira and Abilify household names. It has also made consumers and practitioners better partners in fighting disease and chronic illness, but on the flip side, it gives counterfeiters more knowledge and opportunity to undermine consumer safety.

In today’s highly marketed pharmaceutical environment, consumers are inundated with information about drugs through broadcasted advertising and digital channels. In fact, by 2018, an estimated $2.2 billion will be spent on pharmaceutical and healthcare-related digital advertising in the U.S. alone.5 Counterfeiters are now leveraging increased brand recognition among consumers via media and the internet to bring fake products into the drug supply.

Recently, the FDA alerted practitioners that counterfeit Botox entered the U.S. market. The packaging is almost identical and doses appear to be the same. A key difference is that the manufacturing date is not printed on the outer carton. Manufacturers and practitioners can’t rely on the fact that counterfeiters won’t start packaging the same way. Distinguishing counterfeit drugs could become almost impossible without lab testing because of this super-agility.

Combating counterfeiting
In the 1960’s, Charles Hummel introduced the idea of the “tyranny of the urgent” to describe the tension between things that are urgent and things that are important—and far too often, the urgent wins. This concept can be applied to anti-counterfeiting. To succeed against counterfeiters, businesses must think big-picture and long-term. The firms that will be most effective will leverage anti-counterfeiting tactics to meet additional business objectives such as returns and recalls, inventory management and risk mitigation.

Consider these five anti-counterfeiting best practices:
  • Tap into knowledge partners. Healthcare companies are realizing they are not alone in the anti-counterfeiting battle. According to the most recent UPS Pain in the (Supply) Chain survey—which surveys healthcare logistics decision-makers globally on their top supply chain pain points and opportunities—65% of healthcare executives have used logistics and distribution partnerships to overcome challenges accessing global markets and new customer bases.6 Companies that embrace collaboration to implement better supply chain visibility measures and thwart counterfeiters can focus more on core business strategies.
  • Engage legislators. As a collective voice, third party logistics providers, wholesalers and manufacturers can accomplish a lot more. Through organizations like the Center for Safe Internet Pharmacies, the Pharmaceutical Technology Association, the Healthcare Distribution Management Association, Rx360 and Fight the Fakes, the industry can make legislators aware of pain points and concerns that need to be addressed. Firms must be more vocal about problems they are facing. There needs to be some transparency to share best practices and new models in order to enact real change. As a 3PL to the healthcare industry, UPS works to remove barriers and excess costs by getting involved with anti-counterfeiting measures. UPS engages legislative officials to impact policies and ensure there is a voice for what is important to our customers and the industry. UPS was also a champion of the Drug Supply Chain and Security Act.
  • Understand global compliance. Businesses with little understanding of regulatory laws across borders enable super-agile counterfeiters to reach markets more quickly and effectively. Only 12% of senior logistics executives polled by UPS reported they were satisfied with their companies’ performance in addressing the challenge of regulatory compliance.6 Firms adding in-house regulatory staff or plugging into regulatory experts have reported being more successful on this front.
  • Educate inwardly and outwardly. Educating all users of the supply chain, both internally and externally, is critical. Implementing an ongoing educational program that works across the industry and engages all stakeholders—policies and action committees, federal agencies, supply chain operations, law enforcement—needs to be solid and transparent. Ensuring that all parties understand emerging economies and the compliance environment, operate outside of silos and understand business goals will help chip away at this complex problem.
  • Stretch investments. Monetize the investment in compliance systems to hit other business goals such as recalls and expired pharma expenses. Companies that realize DSCSA has big data value for inventory management could plug into that data and create micro shifts that would move inventory away from existing channel partners within the supply chain and into areas where it will move more quickly. Expired pharmaceuticals is a huge revenue leakage that companies face.
Having the ability to monitor product down to the pill bottle level could allow a firm to move inventory in danger of expiring into the hands of their sales team, for example. They would have the ability to get the supply into the hands of parties interested in using it more quickly. Ultimately the business value would be running leaner inventory and less expired pharmaceutical products.

‘It’s a patient, not a package’
Mitigating risks in the pharmaceutical supply chain is essential, especially as new healthcare demands continue to grow globally. Companies should not underestimate the potential impacts of counterfeiters on their business and should ensure that their company hasn’t fallen into a state of complacency.

Collaboration is key. UPS’s mantra for healthcare shipments is, “It’s a patient, not a package,” and the DSCSA and drug makers embody the same principle. This means that each bottle of medication or syringe represents a person with specialized and important health needs.

Let’s stay invigorated and engaged as an industry to thwart the impacts of counterfeiters. Let’s make it difficult, painful and unprofitable for counterfeiters, and let’s do it for the patient on the other end. This is how we can all win the battle to keep our global healthcare supply chain safe. 

  1. Source: Fake pharmaceuticals are a $75 billion global industry, by Marketplace World
  2. Source: General Information on Counterfeit Drugs, World Health Organization
  3. Source: The Counterfeit Drug Problem, by Pharmaceutical Research and Manufacturers of America
  4. Source: World Preview 2013, Outlook to 2018: Returning to Growth, by EvaluatePharma
  5. Source: Healthcare and pharmaceutical industry digital advertising spending in the United States from 2011 to 2018, by Statista
  6. Source: UPS Pain in the (Supply) Chain survey, conducted by TNS

Chip Meyers is vice president of corporate public affairs for UPS.
Robin Hooker is director of healthcare marketing for UPS.