The Moscow Times

April 26, 2002
Page 5

Fake Drugs Called a $250M Business

By Alla Startseva, Staff Writer

The real Baralgin medicine, right, beside a box of similarly packaged Bralangin.

More than one in every 10 pharmaceutical products sold in Russia is counterfeit, costing legitimate manufacturers at least $250 million a year in lost sales, industry officials said Thursday.

Urging President Vladimir Putin to take quick action, they warned that counterfeits accounted for 12 percent of the market for prescription drugs, over-the-counter medicines, vitamins and other pharmaceutical products and that the share could leap to 25 percent within two years.

"The problem has every potential to become a crisis in the country," said Robert Rosen, executive director of the Association of International Pharmaceutical Manufacturers. "Putin should recognize this problem at last. Without strong political will, we can not resist it effectively."

AIPM and the Coalition of Intellectual Property Rights released a survey of leading foreign and domestic pharmaceutical companies Thursday that put $250 million as the conservative estimate of how much was being lost to counterfeits every year. At the rate counterfeits are flooding the market, that amount could double within two years, the survey found.

Previous government and industry estimates had suggested that counterfeit drugs accounted for much smaller market share than the 12 percent cited in the survey. Vladislav Kuznetsov of the Interior Ministry said in October that fakes had a share of 2.7 percent to 7 percent.

"Unfortunately, the survey confirms what we have suspected for quite some time," Rosen said.

Officials said there are four types of forged drugs circulating in Russia: those containing completely different ingredients than promised, or so-called dummy pills; those containing ingredients of inferior quality; those containing a different active ingredient; and, most commonly, pharmaceuticals packaged to look like those of well-known producers.

The survey discovered that most counterfeit products sold in Russia are produced domestically. Imports came mainly from India, Bulgaria, Ukraine and Kazakhstan.

The study, conducted by GLS Research and PBN, surveyed 53 foreign and domestic pharmaceutical companies. Participants represented more than 55 percent of Russia's pharmaceutical market, including 25 percent of domestic medicines and 70 percent of imports.

More than half of the foreign and local producers reported that at least one of their products was currently being counterfeited. The list of fake drugs includes antibiotics, gastro-intestinal medications, cardiovascular and central nervous system medicines, pain relievers and antihistamines.

"The bottom line is a single bad counterfeit or 'look-alike' medicine can result in a very bad outcome for a Russian family, child or senior," Rosen said. "And that's simply one too many for an industry dedicated to saving lives, eradicating disease and lessening the pain and suffering of the sick."

The sale of counterfeits -- from medicines and films to music and software -- has flourished in Russia over the past decade. Intellectual property rights experts have put the cost of fakes to copyright owners at more than $1 billion a year. The government began tackling the issue in earnest two years ago as it mounted a bid for membership in the World Trade Organization.

Companies polled in the pharmaceutical survey ranked counterfeits and look-alike products as the No. 4 challenge to doing business in Russia. The top three are value-added tax, government corruption and bureaucracy, respectively.

Industry executives said barriers in fighting counterfeits included inadequate enforcement of intellectual property rights laws, a lack of penalties for violations, weak political will, corruption and the lobbying power of domestic counterfeit producers.

"No one believes the issue is a priority among political leadership," said Peter Necarsulmer, president and CEO of the Coalition for Intellectual Property Rights. Counterfeit products are not even defined in Russian law, he said.

Industry officials complained that even when a counterfeiting company is investigated and found guilty, police cannot by law destroy the fake drugs. The impounded medicines sometimes later turn up on the open market.

"The industry's message is loud and clear," Rosen said. "The Russian government must pass and enforce laws where the penalties for counterfeit medicine equal the seriousness of this insidious crime."

Yevgeny Myazin, co-chairman of the Union for the Protection of Consumers' Rights, said that amendments have been drawn up to counter fakes but they have been waiting in the State Duma for approval since last year.

The survey asked executives to rate several government agencies and authorities on their effectiveness. None were viewed as being effective. The Health Ministry's department for control of pharmaceuticals and medical equipment received the highest ranking, while the Duma received the lowest. "At the same time, the survey found that most pharmaceutical companies are doing too little to protect their own intellectual property rights," Necarsulmer said.

What's needed, he said, is consumer education. Consumers should be allowed to compare the legitimate product with the fake.

"Why are foreign producers raising this problem only now when the problem has grown to such proportions?" Myazin said. "The reason is many producers didn't want to frighten consumers away from buying legitimate products."