Fakers' Favorite Drugs

In 2006, the most popular targets for counterfeiters were Pfizer's blockbuster drug Viagra (sildenafil citrate), Eli Lilly's Cialis (tadalafil) and Bayer's Levitra (vardenafil) - all products for the treatment of erectile dysfunction.

Preliminary laboratory analyses by the US FDA on various drugs purchased via the internet have found counterfeits of: Lipitor (atorvastatin calcium); Diovan (valsartan); Actonel (risedronate sodium); Nexium (esomeprazole magnesium); Hyzaar (losartan potassium-hydrochlorothiazide); Zetia (ezetimibe); Crestor (rosuvastatin calcium); Celebrex (celecoxib); Arimidex (anastrozole) and Propecia (finasteride).

Add to this internationally the widespread counterfeiting of many anti-malarial, AIDS retroviral, and anti-TB drugs.

Now even the raw materials are under attack. The Synthetic Organic Chemical Manufacturers Association (SOCMA) of the US and the European Fine Chemicals Group (EFCG) banded together to demand increased regulatory inspections of foreign facilities manufacturing active pharmaceutical ingredients (APIs).

"Made in China" ... but made of what?

There's been a recent explosion in news about fake products manufactured in China - some exported, and many sold domestically. Not flimsy golf clubs or shoddy Olympic 2008 T-Shirts, but potentially fatal fakes:

• Fake plasma used in hospitals that contained no protein
• Fake Toothpaste: Colgate-Palmolive said counterfeit "Colgate" toothpaste that may contain a toxic chemical had been found in discount stores in four U.S. states.
• Petfood that contained Chinese wheat gluten contaminated with melamine is responsible for more than 100 pet deaths amongst nearly 500 cases of kidney failure

When Good Food Goes Bad - redux

We blogged a while ago about the problem of food traceability, particularly for fresh produce that is 'field packed' (like berries, tomatoes). Today we launched HarvestMark - an easy way for anyone to trace produce.

Consumers Look for Safe Food Amidst Expanding Recalls

Ironically, on the same day, the recall of suspected contaminated beef expanded dramatically.

How Good Are the Counterfeiters, Really?

This recent article in BusinessWeek contains a lot of data we've blogged about here already - but leads with an intriguing sub-headline: "Faced with a tidal wave of counterfeit goods, companies are turning to secretive sci-fi technology. But crooks catch on fast". This raises a good question: how quickly do counterfeiters really copy or beat new technologies?

"The half-life of a security system is a year or six months before someone is nipping at your heels," says the director of business development for JDS Uniphase Corp.'s Flex Products Group (which makes color shifting inks, such as those used in banknotes) in this article. Doesn't it seem like the security industry is doing itself a dis-service by making sweeping statements about how vulnerable solutions are. Where's the data?

The answer is: no-one really knows. But where there's evidence, it's not overwhelming that the counterfeiters are that good. The best public example is the multiple iterations of fake holograms on counterfeit Guilin artesunate ... they are somewhat convincing, but by no means perfect. The trained eye can spot them. We've seen a lot of fake holograms, and when compared to the original, it's usually possible to spot the fake. The latest holograms with advanced features - such as those from Kurz or DuPont - have yet to be copied at all convincingly. Nanotechnology is certainly extremely hard to fake .(but it's also impossible to check for ordinary users). The point is ... it doesn't have to be perfect to fool most ordinary consumers, only good enough.

The BusinessWeek article rightly makes a lot out of the emergence of unique, encrypted codes, such as those proposed by AstraZeneca for Nexium. These have the advantage of being unique at the unit level, and databases can easily determine whether a code has been copied and read before. However, it pays to be precise when talking about them. While the article quotes AstraZeneca's director of product security as saying: "We believe [the numbers] cannot be copied," this is either a misquote or misleading. The numbers themselves are trivial to copy ... what cannot be done is (one hopes) generate valid numbers without having to collect and copy thousands of valid numbers. By combining codes with other features on the packaging - AstraZeneca should be able to deter, diminish and measure counterfeiting.

The appearance of unique codes on products is a very good thing... as long as they are thoughtfully deployed and very securely generated. There are already too many broad-brush statements made about the size of the counterfeiting problem which is understandable given the paucity of data collection; however, the industry should strive for more accuracy when talking about the strength (or weakness) of countermeasures.

This is NOT Donald and Minnie

Some counterfeit efforts are so egregious that they beggar belief. This state-run amusement park in China was billed as being "closer than Disneyland". Too close, it turned out, in terms of IP similarity. When challenged on the unlicensed use of Disney characters, park officials claimed that this was not, in fact, Minnie Mouse ... but a cat with very large ears. Right.

After a visit from Disney lawyers, the park began to remove and demolish the most offending items... such as the statue of a dark-haired woman surrounded by 7 short men carrying pick-axes ...

Lying About the Size
We have heard of counterfeit condoms before - often being made from substandard materials and leading to health risks. But this is the first time we'd heard of the fake condoms claiming to be larger than they really were. Counterfeit Trojan Magnums, an extra-large brand of condoms, were smaller than the actual brand. They were also wrapped in plastic, rather than the authentic foil.

Putting Some Teeth into Anti-counterfeiting Law
Congress is considering a new law that imposes stiffer fines and sentencing on counterfeiters - particularly if the fake product potentially causes harm to life. The lack of teeth in US law to punish counterfeiting has been a thorn in the side of brand owners - who recognize there is very little consequence to getting caught for the crime.

They Canna Handle the Stress Capt'n ...

A recent news report highlighted the danger from counterfeit bearings. Bearings are often used in safety critical situations, and operate under high stresses and loads. Companies such as SKF, Timken and NSK manufacture their bearings with specialty materials and to tight tolerances ... suffice it to say that the counterfeiters don't bother.

Formula 1 driver Mika Häkkinen had to retire early from the San Marino Grand Prix in 1998, when he was leading the race. The reason was found to be a counterfeit ball bearing that did not survive the stresses of the race. "Häkkinen was lucky that things didn’t turn out worse," Schulz says. "He climbed out of the car unhurt."

The German tool manufacturing trade body estimates that each year 3,500 industrial accidents are caused in Germany alone by fake products.

Getting into the Popular Psyche

In the last few years, the number of articles on counterfeiting in the popular press has seemed to be increasing dramatically (although I haven't measured it). Whether this reflects an increase in counterfeiting activity, or simply an increased awareness of the problem is debatable... but here's a short summary of recent newsworthy items getting air time in widely read media:

• Harpers Bazaar has launched a website to highlight and engage luxury goods buyers in the fight against fakes. They've even launched a competition to design a T-Shirt to vent your concern - click here to enter!
• The New York Times ran a chlling front page article (and 2 page inside spread) on the trail of counterfeit glycerine that's responsible for hundreds of deaths in Panama.
• The UK's New Scientist magazine ran an article (sorry - it's subscription only) on the wide ranging problem of fakes, and some (very scientific) technological solutions. As we have often observed in this blog, several of these required sophisticated lab equipment to authenticate.
• The UK's Independent newspaper ran a scathing article on counterfeit drugs, accusing major drug companies of "turning a blind eye" to the problem in Africa. The WHO held a conference recently in Prague to begin to address the problem and search for solutions. The conference was attended by representatives from several drug manufacturers and Ministries of Health from a range of countries. The WHO estimates that 200,000 of the one million malaria deaths every year would be prevented if all the drugs taken were genuine.
• May's IndustryWeek ran a front page article on the scourge of counterfeits. It included some interesting new data points (always hard to find): Bendix estimated violations of IPR cost an estimated $10 million to $20 million per year in its valves portfolio alone. Worse than the direct revenue loss of course is the potential brand damage and liability from the risks associated with inferior-quality counterfeit parts range from premature wear all the way to catastrophic brake failure.
• In this April article in Forbes, Zippo estimated it had lost a whopping one third of its business to counterfeits, and was having to downsize its US operations as a direct result. Even worse, Eastman Machine, in Buffalo, New York, saw its production moved to China without ever leaving home. A manufacturer branding itself "Westman" reverse-engineered Eastman's $2,000 fabric-cutting machines, even using the same model numbers and paint colors. Eastman has lost more than half its sales and laid off nearly two-thirds of its workforce.
• And just this week, the US Senate voted to preserve current restrictions on importing prescription drugs ... in part because of fears of a flood of counterfeits.

... so, are consumers starting to ask themselves "is this product fake? how can I tell?".

When GOOD Food Goes BAD

There's been a flurry of food contamination recently - raising the important question: how can consumers easily, and instantly, tell if the food they have is safe?

• Botulism in baby food
• E.coli in mushrooms
• E.coli in Taco Bell's lettuce
• E.coli in spinach
• Salmonella in peanut butter

The answer is partly improved manufacturing practices, and partly better traceability. By allowing the consumer to instantly tell whether their food is part of a recall - and to more quickly gather data from suspected products - food manufacturers can increase customer confidence, hasten recalls, and limit the scope of any recall.

We are entering an era analogous to the post-Tylenol scare; when tamper-evident packaging became de rigeur. Perhaps it is time for unit-level traceability to become expected - even demanded - by consumers?

The technology is available today to do it.

Counterfeit Semiconductors

It is well-known that counterfeit semiconductors are causing expense for both OEMs and CMs (contract manufacturers) who have to separate the good from the fraudulent. Often these parts are indistiguishable from the real thing, and will either not function, function poorly, or fail prematurely. This can leave someone facing a slew of expensive warranty claims. The recent requirement to meet RoHS compliance has encouraged bogus claims from cheaper, non-compliant parts. Even the military establishment is not immune. This article by John O'Boyle highlights how and why counterfeit parts are showing up in Iraq. Bogus chips enter the market in several ways, chip executives say. For example, obsolete or defective parts that are scheduled for destruction never actually reach the scrap heap: Second- and third -parties that are supposed to scrap the components may certify that they have been destroyed but instead sell them on the open market. Sometimes old chips are pulled off printed circuit boards, re-marked and sold as new. Analog Devices found out about one chip a counterfeiter had reverse-engineered and sold as an ADI part.

The usual advice to buyers is still "caveat emptor" - if the price from a broker looks too good to be true, it probably is.

There are several sites (1, 2, 3) that list counterfeits as they find them - but clearly, there's no simple way for buyers to check yet. The SIA recently launched an anti-counterfeit task force, which included leaders from the semiconductor manufacturer and distributor industries (inlcuding Intel, TI, Analog Devices, Rochester Electronics).

But perhaps the most novel way to raise awareness I've seen to date, is Rochester's short animation - in which Captain Rochester hunts down and replaces counterfeit components. We live in hope!

Nano No-No

Joining the YottaMark Hall of Shame this holiday season, is this knock-off of the iconic iPod Nano. For those who still think fakes are a problem for 'other' countries ... this was on sale in a store in Philadelphia Airport.

Fake Economy

This week's BusinessWeek included an expose of the ongoing problem of counterfeit drugs entering the US via Internet Pharmacies. As we have noted before, it is practically impossible to distinguish real from fake:

Recently security officials at AstraZeneca put fake and genuine versions of its $4.6 billion-a-year heartburn medicine Nexium on the desk of CEO David Brennan. They looked exactly the same, he says. "This is a very serious problem that is accelerating," Brennan adds.

In addition to contaminated and non-efficacious drugs, the article recounted how fakes can also contain too much active ingredient - with disasterous results. This recent article from Law.com provides a great summary of the problems of tackling counterfeit drugs - and some startling new estimates: 200-300,000 Chinese die a year from counterfeit drugs.

Nevertheless, entire local economies in China may rely on counterfeits: Ohio State law professor Daniel Chow, a counterfeiting specialist, points to the market in Yiwu, a city of 650,000 south of Shanghai. More than 30,000 wholesale distributors sell more than 40,000 different kinds of products in the Yiwu market, 80 to 90 percent of which are counterfeit. Chow estimates there are hundreds of towns like Yiwu and millions, if not tens of millions, of Chinese who depend on counterfeit goods for their economic livelihood.

The Mobile Phone as an Authentication Device

Purveyors of brand security technology have often resorted to proprietary scanning devices for checking the authenticity of products. For example: laser pens to make taggants fluoresce or cumbersome scanners with private keys to read barcodes. This is fine for a dedicated security force looking for one type of product - but limits how many people can authenticate products. Some vendors have modified camera phones with lenses or filters - but this doesn't make them any more widely useful than a proprietary scanner. Now, camera phones are emerging as a feasible technique for reading barcodes - and we see some promising trends that should encourage more mobile phone manufacturers and carriers to adopt this technology. This will have a dramatic impact on the ability to use a mobile phone to verify products.

Microsoft recently announced it will support QR codes on its Windows Mobile devices. The beta site is down - but watch this space for updates. QR codes are very widely used in Japan - and look like they will take off in China too.

Nokia also recently announced that the US version of the N93 will be able to read QR codes. This will be the first US cell phone shipped with this capability.

There are multiple startups (incl: Semacode, Kaywa, Shotcode, qode, quickmark) offering downloads for mobile phones to read both open-standard (datamatrix, QR) and proprietary (shotcode) symbologies - and it remains to be seen how the US and European markets will play out. All of these, however, require a Symbian or Java phone - which are seldom found in the US.

YottaMark launched its mobile phone authentication service in the summer of 2006.

Who's Willing to Talk About Fakes?


The U.S. Chamber of Commerce and Accenture teamed up to write up real world case studies of companies who are actively tackling fakes - and who are willing to talk about it. The interim version of this tool kit contains four of these case studies (New Balance, Merck, and Bendix).


There are some enlightening examples contained in these cases:

• Manufacturing codes are attached to legitimate Bendix parts; but these are easily duplicated by counterfeiters. Moreover, makers of fake products can always claim that codes are "their own." This clearly makes the case for a 'trusted' source for authenticating codes on products - and making them impossible to guess.
• New Balance supplies its factories with difficult-to-copy labels with an embedded code. Because labels must be attached to every shoe, this is an effective way to control production integrity and spot fakes or unauthorized overruns. In the near future, New Balance may also assign a unique number to every item—making it possible to determine where and when every article was made.

A final version of the tool kit, with eleven case studies is due out in November 2006.

The Chamber of Commerce has also launched a nicely produced website.

Good Morning America – your fakes are here.

Those of us in the industry have know of the dangers of counterfeit goods for some time ... now consumers are being reminded by mainstream news. This week, Good Morning America aired a report by ABC News on the dangers of counterfeits – illustrated with a few examples of “frightening” or even fatal consequences to consumers who buy counterfeit goods. Whether it is fake prescription drugs, shampoo, extension cords or car parts, counterfeit items are affecting people everywhere.

Consumers were – as usual - advised to “get to know what a ‘real’ product looks like” and buy from reputable retailers. We think it’s impractical to expect consumers to be experts on packaging. Sadly, that's about the only way today until brand owners adopt an easier to use solution.

Other news this week ...

FDA Orders Recall of Fake Test Strips. The counterfeit test strips could potentially could false high or low blood glucose values. The FDA says it does not know how many of the counterfeit strips are out on the market. LifeScan, who makes the genuine test strips, say they do not know either. More information can be found at www.GenuineOneTouch.com or call LifeScan at (866) 621-4855.

More Con than Condom. Bogus Durex condoms look identical to genuine Durex packs. The only difference is an outdated code number printed on the bottom. The firm had no idea about how the fakes had appeared in shops and has now taken out ads in national newspapers to warn customers.

In the first six months this year, counterfeit and pirated goods valued at $699.3 million were discovered in 760 incidents in 69 countries, according to statistics compiled by Gieschen Consultancy, a Canadian company that tracks counterfeit merchandise globally.

Fighting fake drugs ... without a dose of RFID

EU Eschews Track-and-Trace

Interestingly, the European Parliament and the EMEA has not gone as far as its American counterpart, the US Food and Drug Administration (FDA), which has urged the drug industry to move towards electronic pedigree, such as RFID. The MEP’s want awareness campaigns, rather than high tech to fight drug counterfeiting.

WHO planning IMPACT

The WHO recently announced its IMPACT program (International Medical Products Anti-Counterfeiting Taskforce). It too will include public education, as well anti-counterfeiting technology; harmonising legislation; tougher enforcement; and strengthening regulatory agencies. One option IMPACT will pursue is to give each packet of drugs a code number that can only be read when the seal is broken. The precise details are secret for now, but will be revealed in Bonn in November.

Coding Drugs Actually Works

Thanks to concerted efforts of the National Agency for Food and Drug Administration and Control, the level of counterfeit drugs in Nigeria has dropped from a staggering average of 41 per cent in 2001 to 16.7 per cent this year.

http://allafrica.com/stories/200609190389.html

Pfizer’s going direct

In order to circumvent some of the supply chain weaknesses caused by distributors, Pfizer is shipping some drugs direct to the pharmacy now in the UK, according to a report in yesterday's Time's newspaper.

Three times in the past year, fake versions of Pfizer’s heart drug Lipitor found their way into the NHS supply chain. When a drug is counterfeited, the entire batch bearing the same lot number has to be recalled.

Auctioneer, Heal Thyself!

It's not easy being the world's largest flea-market. Just like their trestle-table and tarp brethren, eBay suffers from sellers hawking fakes. eBay has come under attack several times recently from companies (such as Tiffany's) and trade groups (such as the French Luxury Manufacturers), upset at the fact that eBay makes a commission on the sale of counterfeit goods. The law is murky grey here - after all, are newspapers liable for the goods sold in their classifieds? eBay provides brand owners tools (called VeRO) to shut down suspicious auctions. "Not enough", say the brand owners, who want more proactive measures.

Leather goods maker Louis Vuitton, a unit of LVMH, the world's largest luxury goods group, last year found 235,000 examples of counterfeit articles on 340 eBay pages. In one case, it tracked more than 100 copies of the same article being sold within one hour, said Jamet, who is also a senior executive at LVMH.

In 2004, Tiffany secretly purchased about 200 items from eBay in its investigation of how the company was dealing with the thousands of pieces of counterfeit Tiffany jewelry. The jeweler found that three out of four pieces were fakes.

But is it feasible that eBay (or Yahoo, or classifieds for that matter) can authenticate the 60 million products that their members sell on their sites? Then there's alibaba.com, a positive Alladin's cave of products.

As eBay and other online auctions grow, a better method for easily authenticating products is required - certainly if buyers are to trust these sites.

More Reasons to Whine

Last week the Wall Street Journal published an in-depth article on the problem of fake wine. We've discussed this persistent problem previously (for example fake Canadian Icewine). What's extraordinary is how little manufacturers have done to protect their products. There are no security features - and all the discernable characteristics (label, bottle, foil capsule) are easy to counterfeit.

"Counterfeiting is always on the rise," says Giuseppe Fugaro, head of the Ministry of Agriculture's antifraud unit in Naples. Last month, he pulled 15,000 bottles of fake Falanghina, an appellation of white wine produced around Naples, from Italian store shelves. In 2005, he rounded up more than 6.6 million bottles of bogus Falanghina in Italy.”

“In Italy, the fakes that have turned up in recent years have forced producers of top appellations such as Chianti Classico to rack up more than $1 million in legal fees fighting fraud at home and abroad.”

“Winemakers acknowledge that no vineyard is safe. French winemaker Baron Philippe de Rothschild SA says its growth in China came to a halt a decade ago because of counterfeiters there.”

Some manufacturers are talking about embedding RF devices behind the label ... not that this is much help to the average quaffer, of course.

The New Tylenol Scare? Explosives disguised as cosmetics and sports drinks

Following the foiled plot to blow up planes leaving the UK, manufacturers of cosmetics and beverages are facing a new and unexpected threat: use of their packaging to conceal explosives. Airports have responded by not only banning liquids and gels - but also creating 'sterile' zones beyond security. The question, of course, is: how can one tell that the products haven't been tampered with? Most foods and beverages have tamper-evident packaging - but many liquid products do not. Most concerning was the revelation that one of the plotters worked at the airport. A new level of product integrity is required: the ability to determine with high confidence that a product has not been maliciously tampered with.