Counterfeiting: bad medicine

Two different news reports recently presented two very different sides of the counterfeiting story. CNN recently did a piece about counterfeits in China, with a particular emphasis on Beats, a brand of headphones owned by rapper Dr Dre. The report stated that headphones that will set you back $400 in the West can be picked up for a mere $70 in China. It stated how a recent joint operation involving US and Chinese officials netted 243,000 counterfeit goods, including Beats and major brands such as Apple and Microsoft. The report went on to discuss some of the tricks used by counterfeiters to avoid detection, such as double packaging of goods, first in the counterfeit packaging that the product will be sold in and then in different packaging which is removed when the goods reach their destination.

The second report was in Business Day and dealt with the issue of counterfeit medicines. The report gave an insight into the problem of counterfeit drugs, which has become so serious that major pharmaceutical companies have teamed up with Interpol to establish a programme aimed at training law enforcement officers to identify fake prescription drugs.

The report stated how police in Southern Africa, led by Interpol, seized around 100 tons of counterfeit medicines and arrested 180 people in one week. It told how the global trade in counterfeit drugs is valued at over R1 billion annually and observed that Africa is particularly targeted by the syndicates which run this trade. An Interpol spokesperson commented: "Africa is terrible. It is very exposed to this deadly problem because there are problems with integrating medical supply chains into countries’ health systems." She went on to say that the syndicates can produce "exact replicas" of legitimate drugs: "Their intelligence networks are incredible. They know exactly what medicines are required, what regions are affected by what disease, about new emerging drugs and they act on this."

The Business Day report also discussed how the trade in fake medicines flourishes on the Internet, and how Operation Pangea 6 had netted around 100 milion pills valued at $37 million in June 2013. The spokesperson added this chilling fact: "Eighty per cent of so-called medicines sold over the Internet are counterfeit."

All counterfeiting is bad news, but when it comes to medicines it is a particular worry. To clarify, counterfeit medicines are not the same as generics: a generic is legal and involves the sale of a medicine that is equivalent to the original (whose patent has expired) and is sold under a different name. On the other hand, a counterfeit is illegal and involves the sale of a medicine that is at best ineffectual, often harmful and sold under the same name (and in the same packaging) as the original. A generic does not confuse, but a counterfeit causes deception.

South Africa has specific counterfeiting legislation, the Counterfeit Goods Act (37/1997). This legislation creates no IP rights – these are created by other statutes such as the Trademarks Act and the Copyright Act – but does create procedural devices for acting against counterfeiters. For example, the act enables brand owners to request the police or customs authorities to raid premises or storage containers and seize counterfeit goods that are being imported into or stored in South Africa. These raids and seizures are then followed with civil or criminal proceedings. The act is not limited to the "exact replicas" referred to by the Interpol spokesperson, but also extends to goods that are "substantially identical" to the original and are "calculated to be confused".

The act has proved a useful tool for brand owners whose goods are targeted by counterfeiters. However, in order for things to work quickly and smoothly, the brand owner must put in a considerable amount of work. For example, in order to be able to move quickly, a brand owner must:

• have ready access to the records of its IP rights;
• be able to provide the authorities with:
  • a statement explaining why the goods are believed to be counterfeit; and
  • security in case it transpires that the goods are not counterfeit and the importer or seller makes a claim; and
• have good relationships with the authorities so that it knows exactly who to deal with.

In short, it needs a comprehensive anti-counterfeiting strategy.