Counterfeit Medicines Rise to 12 Percent of Total Russian Market; Cost to Pharmaceutical Manufacturers Totals $250 Million Annually
Industry Calls for Tough Prison and Financial Punishments to Fit the Seriousness of Counterfeiting Crimes
Moscow, Russia - More than one out of every 10 prescription drugs, over the counter medicines, vitamins and other pharmaceutical products currently bought and consumed by Russians could be dangerous counterfeits, according to a new survey of the largest foreign and domestic pharmaceutical companies working in the market.
The independent survey found that counterfeit medicines total 12 percent of the Russian marketplace, much higher than previous Russian government and industry estimates, and cost pharmaceutical companies more than $250,000,000 annually, including lost sales and increased enforcement expenses.
The survey was conducted for the Association of International Pharmaceutical Manufacturers (AIPM) and the Coalition for Intellectual Property Rights (CIPR) with executives from 53 foreign and domestic pharmaceutical companies. Companies participating in the survey represent more than 55 percent of Russia's entire pharmaceutical marketplace, including 25 percent of locally produced medicines and 70 percent of all imported drugs. The survey found that opinions expressed by Russian and foreign pharmaceutical companies were the same.
The PBN Company, a leading strategic communications firm in Russia, and GLS Research, a professional public opinion firm with extensive experience in the region, conducted the survey for AIPM and CIPR between 20 March and 15 April 2002.
The survey's finding that counterfeits comprise 12 percent of all medicines is two-to-four times higher than the previous industry and RF government figures. Last October, Vladislav Kuznetsov, Deputy Chief of the Main Anti-Economic Crime Directorate of the RF Ministry of Internal Affairs, estimated that counterfeit pharmaceutical products ranged between 2.7-to-7 percent of the total Russian marketplace.
"Unfortunately, this survey confirms what we have suspected for quite some time," said Robert Rosen, AIPM's Executive Director. "Counterfeit medicines are an entrenched and growing problem that threaten the health of Russian consumers, while robbing the coffers of both government and industry."
More than half of the foreign and domestic pharmaceutical companies report at least one of their products is currently the victim of counterfeiting, a strong indicator of the depth of Russia's pharmaceutical counterfeit problem. The list of counterfeits includes widely prescribed medicines and life saving drugs, including antibiotics, gastro-intestinal medications, endocrinology treatments, cardio-vascular and central nervous system treatments, pain relievers, and antihistamines, among others.
"While the counterfeiting of medicine is not yet at epidemic proportions, it is a problem that is growing exponentially and needs immediate attention before it becomes a crisis," said Rosen. "The bottom line is that a single bad counterfeit or look-alike medicine can result in a very dire outcome for a Russian family, child or senior. 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."
Almost nine of 10 pharmaceutical industry executives predict that the problem will get worse before it gets better. Eighty-seven (87) percent said that both counterfeits and "look-alike" products will be a serious threat in the coming year while only 13 percent disagreed or did not state an opinion.
Counterfeits Ranked as a Top Industry Concern
Pharmaceutical companies ranked counterfeits and "look-alike" products as one of the top challenges confronting the successful operation of pharmaceutical businesses in Russia. Counterfeits ranked only behind the recently imposed 10% VAT on medicines, government corruption and government bureaucracy as the top issues challenging the industry. More than one third of the survey respondents ranked counterfeit medicines as the single most important problem their companies confront.
Industry executives cited inadequate enforcement of intellectual property laws, the lack of tough penalties for intellectual property violations, a lack of political will on the part of the Russian Federation, and the political influence of domestic counterfeit producers as the main obstacles to successful anti-counterfeiting efforts in Russia. Many drug industry executives also cited corruption as a key obstacle.
The survey discovered that the majority of counterfeit products sold in Russia are produced within the country. Only six (6) percent of respondents said that counterfeits are primarily imported while 44 percent said counterfeit production occurs mostly in Russia. Another 22 percent said counterfeits are produced both inside the country and imported from abroad. Countries identified most often as sources of imported counterfeits include India, Bulgaria, Ukraine and Kazakhstan.
Survey respondents were particularly supportive of recent legislative amendments proposed by the Ministry of Health, State Duma Deputy Petr Shelisch, AIPM, CIPR and the Russian Union of Consumers to strengthen penalties for counterfeiters. These provisions include a six-year prison term for counterfeiters, mandatory physical destruction of counterfeit medicines, increased fines for the storage and distribution of counterfeit medicine, and the inclusion of a broad definition of counterfeiting in the RF Law on Trademarks, Service Marks and Appellations of Origin.
"The message from both Russian and international drug makers is loud and clear," said Robert Rosen. "The Russian government must pass and enforce laws where the penalties for counterfeit medicine equal the seriousness of this insidious crime."
Russian Authorities Seen as Ineffective in IP Enforcement
The survey asked executives to rate a number of Russian Government authorities on their effectiveness in fighting counterfeiting. Not a single Russian agency or authority was viewed as being particularly effective in fighting counterfeiting and none received the survey's medium score of 3.00 on a 5.00 scale. The Department of State Control of Pharmaceuticals and Medical Equipment received the highest ranking of 2.69, and the State Duma received the lowest ranking of 1.56.
"At the same time, the survey found that most pharmaceutical companies are doing too little to protect their own intellectual property rights," said Peter Necarsulmer, President of CIPR. "While there is no excuse for a company's inaction in protecting its intellectual property rights, the survey results underscore AIPM's and CIPR's view that neither industry nor government alone can solve this $250-million problem.
"The only effective response is intensive cooperation among industry, government, the medical community and leading consumer organizations to combat the growth of counterfeits, look-alikes and other fake pharmaceutical products," Necarsulmer added. He also called for "aggressive consumer education programs as essential to the solution to this dangerous problem."
Companies appear especially hesitant to pursue courses of action involving the Russian government or court system. The most common action taken by industry was simply registering trademarks with Rospatent, with 58 percent of the executives surveyed saying they had registered a product in the past 12 months.
Excessively complicated mechanisms and lack of intergovernmental cooperation on the state level are additional barriers preventing private companies from reporting cases of fake drugs, according to Necarsulmer and Rosen. Today, a wide range of governmental institutions are involved in IP enforcement for pharmaceuticals and other consumer goods, and the survey clearly suggests that industry does not fully understand their various functions.
Rosen noted that the recent establishment of the Pharmaceutical Inspection Service of the Ministry of Health is generally seen as a positive move by both Russian and international producers. "However, much effort is needed to define clearly the Pharmaceutical Inspection's specific responsibilities, especially its critical duties in combating counterfeits. At the same time, both the industry and other enforcement bodies, such as the State Customs Committee, must be vigilant to ensure the new Inspection Service's programs do not create other costly problems," said Rosen.
The pharmaceutical companies saw only two organizations -AIPM and CIPR - as effective in stemming the tide of counterfeits in Russia. No other association or intergovernmental organization at either the regional or international level was ranked as being effective on this problem.
AIPM is a non-profit organization of 50 of the world's largest pharmaceutical and medical equipment manufacturers doing business in the Russian Federation. AIPM is also a member of CIPR, which is the only organization in the region solely dedicated to forming public-private partnerships to solve the problems of patent violations, trademark infringements and counterfeits.
To obtain a free copy of the full survey and to learn more about CIPR and AIPM, please visit www.cipr.org and www.aipm.org.
