What's in That Pill?

In Latin America, fake drugs are as lucrative as cocaine

In mid-May, investigators from Colombia's National Institute for the Supervision of Medications & Foods (Invima) discovered a thriving drug operation in Bosa, a poor neighborhood of Bogotá. But instead of cocaine or heroin, investigators found something else. Workers inside a trio of tiny dilapidated houses were cranking out more than 20,000 counterfeit tablets daily of flu drug Dristan, a generic aspirin known as Dolex, and Ponstan 500, a popular painkiller made by U.S. drug giant Pfizer Inc.

"The drugs were produced in filthy conditions," says Invima General Director Dr. Miguel Rueda. Invima says the pills contained boric acid, cement, floor wax, talcum powder, and yellow paint with high levels of lead, all used to replicate the genuine medications' appearance.

In Colombia and elsewhere in Latin America, counterfeiting of over-the- counter and prescription medicines is big business. So big, in fact, that major pharmaceutical makers in Europe and the U.S. are sounding the alarm about counterfeit drugs getting into consumer outlets throughout Latin America and even abroad. "The scourge of counterfeit medicines is spreading rapidly across the globe, and it would be a mistake to think any country is immune to it," says Jim Christian, head of corporate security for Basel-based drugmaker Novartis. The result is a serious loss of revenue for all global drugmakers. Worse, some consumers have gotten very sick--and even died--because of the conditions these drugs are produced in or the unsafe ingredients used in their manufacture.

Hearings this month in Washington will shed some light on this fast-growing industry. Counterfeits range from copies that have the same efficacy as the original to those with few or no active ingredients to those made of harmful substances, such as the pills found in Bosa. All drugs are being counterfeited, from ibuprofen to life-saving cancer and AIDS treatments. The counterfeits also stand apart from prescription drugs made correctly, under safe conditions, by reputable drug manufacturers in India, Argentina, and elsewhere that choose not to honor traditional patents but don't mislabel their product, either.

Counterfeits, in contrast, spring from a fast-growing cottage industry that deliberately peddles its wares as the real thing. Fakes can be produced for less than a penny a pill and sold for around 30 cents. They are bought by distributors at discounts of up to 80% off what legitimate manufacturers charge. The knockoffs are purchased by unsuspecting pharmacies, hospitals, and government health agencies, which pass them on to consumers.

Shops like the ones in Bosa have been active. In the past 18 months, Invima has confiscated more than 18 tons of adulterated, relabeled, stolen, contraband, and counterfeit drugs. Rueda estimates that 10% of the $1.2 billion worth of drugs sold in Colombia every year are in the above categories. Global drugmakers suspect the share is closer to 30%. "Counterfeiting is a very big problem here," says Rueda, who has gotten so many death threats he needs a bodyguard.

FOR EXPORT. Some of the drugs may end up in the export market. Last year, Invima confiscated 6 million doses of knockoff Voltaren, a Novartis anti-arthritic, from clandestine labs. The amount was far more than the Colombian market consumes annually, says Christian, who suspects the drugs were slated for export elsewhere in the region. Counterfeiters simply filled the vials with colored water to resemble Voltaren. Authorities suspect distributors are mixing counterfeits with genuine, expired, and stolen shipments of drugs.

How bad is the problem worldwide? The International Federation of Pharmaceutical Manufacturers Assns. (IFPMA) in Geneva conservatively estimates that 2% of the $327 billion worth of drugs sold each year are counterfeit, or about $6 billlion worth. But some representatives of the world's biggest drug companies believe that $19 billion worth of counterfeits are sold annually. Of that, the vast majority are produced and sold in developing countries, such as Nigeria, Mexico, Ecuador, and Haiti. There, demand for cheap drugs is strong, profit margins are high--often as much as 3000%--and penalties for manufacture and distribution are weak. In some African and Latin American countries, as much as 60% of the drugs sold are counterfeit. In Argentina between 1999 and 2000, for instance, seven tons of some 49 different types of counterfeit medicines were seized.

Ironically, the progress Latin American authorities have made in the two-decade war against cocaine and heroin cartels is partly responsible for the surge in counterfeit medicines. As governments have cracked down on the narcotics trade, organized crime has moved into the almost as lucrative and much less risky manufacture and distribution of counterfeit medicines. "If you get caught with a pound of cocaine, you can expect to do serious time. But if you are found with counterfeit medicines, you might do only six months," says Christian. The bust in Bosa, for instance, resulted in 10 arrests, but all were free on bail a few days later.

The cross-border trade in knockoffs is also reaching global proportions. Colombia's Invima has discovered counterfeits from Indian and Cuban manufacturers, though it cannot say if the drugs were altered in Bogotá or abroad. They were "very bad quality and very dangerous medications," says Rueda. A shipment from India of potassium chloride, a drug used to speed up heart rates, contained glass and fungus.

THE U.S., TOO. The globalization of the knockoff trade frightens investigators. "How can we expect to keep those products outside the U.S., Europe, and Japan?" says Harvey E. Bale, director general of the IFPMA. The World Health Organization thinks 8% of the bulk drugs imported into the U.S. are counterfeit, unapproved, or substandard. In late May, three different counterfeit drugs--two hormone treatments and one cancer medicine--were discovered for sale in eight U.S. states.

One way to stem this tide is better regulation in emerging markets. Colombia is stepping up its enforcement, and in July it will stiffen jail sentences for counterfeiters. But critics say penalties are still too weak. Brazil has gone further in the wake of several deaths triggered by counterfeit drugs administered to prostate-cancer patients. The country now has legislation that makes counterfeiting of drugs a crime on the level of kidnapping and terrorism, punishable by 10 to 15 years in jail and a fine. And it has a new government arm, the National Agency for Sanitary Control, that monitors the safety and quality of medicines. These are steps in the right direction. But as long as the world's poor need cheap medications and regulators fail to monitor the markets, counterfeit drugs will flourish.

By Kerry Capell in London and Suzanne Timmons in Bogotá, with Jonathan Wheatley in São Paulo and Heidi Dawley in London

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