By Jayanthi Iyengar
A patient is prescribed fast-acting netromycin injections, an antibiotic useful in treating infections. Netromycin is manufactured in India by Fulford India Ltd, a wholly-owned subsidiary of US drug major Schering-Plough. The drug is expensive by Indian standards, costing the equivalent of US$7 per vial. The doctor administers the dose but the patient does not show recovery. The doctor is puzzled. The patient loses faith, and shifts his custom to another.
It is only subsequent reports of 10,000 vials of netromycin worth $70,000 being seized from Jagatpuri, one of New Delhi's many industrial slums, that sets alarm bells ringing. The seizure shows that counterfeiters have reached new levels of sophistication. They no longer stop at merely copying the blister packs or superimposing the holograms of well-known brands on their fake products. They also seem to be investing heavily in equipment necessary for mass-manufacture of high-value, high-demand drugs when selecting medicines to fake.
Reports coming from across Asia, Africa and the Middle East indicate that a patient may be paying top market prices to buy well-known brands of neomycin eye drops and meningococcal vaccine made of tap water; paracetamol syrup made of industrial solvent; ampicillin consisting of turmeric; contraceptive pills made of wheat flour; and antimalarials, antibiotics and snake antivenom containing no active ingredients.
Such fakes are to be differentiated from the cheap knock-offs of well-known global drugs that flood Asia, including India. Such knock-offs are copycat versions of the original medicine, manufactured and sold by non-patent holders, causing a loss of revenue to those who have spent billions of dollars in developing the drug. Since the drug "pirates" - a term popularized by the New York Times in December 2000 - do not spend on research and development, they are also able to market the drug in their country at one-twentieth to one-fifth its price in the Western market.
In India, drug pirating is made possible by the existing patents regime. These laws offer protection only for manufacturing processes and not for the products themselves. Besides, protection for process is also available for a period of seven years, unlike in the West, where patent protection is for a period of 20 years. As a result, under existing Indian patent laws, Indian drug companies are well within their rights to reverse-engineer well-known brands and sell them as their creation.
This explains how one can buy a cheaper knock-off of Viagra called Erecto in Indian drug stores. Prozac can be bought as Nuzac, antifungal Diflucan as Forcan and hypertension drug, Norvasc by the name of Amlopres, all priced at miniscule their retail prices in US markets. "We did a little study," Yusuf K Hamied, the managing director of Indian pharmaceutical company Cipla told the New York Times in a December 2000 article to reflect the price differentials between the markets, "Our turnover is $200 million. If we sold our products at the American-originator prices, our turnover would be $4 billion."
Hamied spoke without guilt or hesitation since he was not breaking any law in India, his operating base. Disputes continue on the loss of revenue to Western drug manufacturers on account of drug piracy in countries like India, Brazil, Argentina, Thailand, Egypt and China, but estimates range between 10-15 percent of the world annual pharmaceutical sales of $3 trillion.
Significantly, drug piracy of this kind is due to end in 2005, when India and many other developing countries extend process patents to products too under the World Trade Organization. In view of this development, some Indian drug companies are already moving away from the manufacture of generics to the development of new drugs through research and development. Two standing examples are leading Indian drug firms Ranbaxy and Cipla. The former is developing a new and patentable dosage form of Bayer's antibiotic Ciprobay (ciprofloxacin) before patent expiry. Similarly, Cipla has developed a new dosage form of AstraZeneca's anti-ulcer drug Losec. Simultaneously, Indian drug companies are also developing new molecules. At the helm of this brigade is Dr Reddy's, which is developing new drugs for diabetes and related ailments in collaboration with Danish company Novo Nordisk. These drugs, which are under clinical trial, are expected to hit the shelf by 2005. Similarly, Ranbaxy is working on a new drug for the treatment of the prostrate gland in aging men.
Simultaneously, India is also expected to see renewed interest from foreign drug companies - whose numbers have fallen during the decade in the top 20 Indian drug manufacturers from nine to five, along with a fall in their market share - starting in 2005. Under a stronger patent protection regime, multinationals are expected to relocate their research and development base in India to take advantage of the lower costs and highly qualified manpower.
Against this background, the new focus is off piracy and on counterfeiting of drugs, where the intent is to deceive the public by selling substandard drugs, placebos or even dangerous variants of a known drug, thereby endangering lives.
The World Health Organization (WHO) defines counterfeiting as a criminal activity, often occurring in countries where drug regulation is ineffective, smuggling of drugs is rampant, clandestine manufacturing exists, sanctions are absent or very weak, and there is high corruption. According to the WHO definition, a counterfeit is a "a medicine which is deliberately and fraudulently mislabeled with respect to identity and/or source. Counterfeiting can apply to both branded and generic products and counterfeit products may include products with the correct ingredients or with the wrong ingredients, without active ingredients, with insufficient active ingredients or with fake packaging."
Though no firm estimates of counterfeit and substandard drugs are available, the WHO pegs estimates at roughly 10 percent of the global drug trade. "Counterfeiting is an underworld activity," states the WHO. "It is hard to detect and investigate. Moreover, countries and companies that detect the problem do not report. So, it is hard to know or even estimate the true extent of the problem." What is known is that they occur worldwide, are more frequent in developing countries and they affect all countries, says the WTO.
That the counterfeit drug menace has the global community worried is reflected by the fact that in 2000, a US House Commerce Subcommittee on Oversight and Investigations probed counterfeit drugs. The subcommittee's investigations revealed that the US Food and Drug Authority (FDA) had linked adverse drug reactions in 155 US citizens to drug ingredients originating from China. The FDA informed the subcommittee that the 4,600 foreign, bulk drug suppliers to the US had not been inspected. Of these, 5-8 percent could be substandard, fake or unapproved.
The US has been concerned since 80 percent of the active ingredients in its prescription drugs are made overseas. Hence the pressure from the US to resort to tough regulatory norms in developing countries, testing at the point of entry in the US, as well as global information sharing to nab counterfeiters.
For India, the concerns are as severe, with estimates of fake or spurious drugs being pegged in the range of 10-35 percent of the total annual pharmaceutical manufacture in value terms. That could be a lot of fake drugs in circulation, though India is contesting these figures. In 2000-01, India's pharmaceutical production in value terms stood at $4.52 billion, as against an estimated global trade of $3 trillion. Of this, formulations (medicines ready for consumption by patients) accounted for $3.64 billion and bulk drugs (chemicals having therapeutic value used for production of formulations) for $886.5 million. The value of Indian exports stood at about $1.35 billion in 1999-00 (as against global exports in pharmaceuticals exceeding $94 billion), while import of drugs and pharmaceuticals amounted to about $400 million during this period.
This roughly means that about $452 million to $1.58 billion of India's annual drug production in value terms could be controlled by counterfeiters, but Kashyap Nansi, product manager, Wockhardt Merind, has an even more frightening insight to share. "This is just in monetary terms. Actually, spurious drugs are cheaper than the real ones [to make]. Thereby, fabulous amounts reach the market," he told the Times of India, India's leading news daily after a recent drug raid.
Added S C L Gupta of the Delhi Medical Association, briefing the media soon after the spurious-drug raid, "The most serious issue which concerns the medical fraternity is that of spurious drugs. Any famous brand is susceptible to being copied." Sujata Tiwari, coordinator, brand protection committee of India's leading industry chamber, the Federation of Chambers and Commerce and Industry, echoed Gupta's concern soon after the raid. "Of the 53 samples of drugs seized as part of the raid, only nine were genuine. In fact, there are spurious drugs in the market made of chalk powder," she said.
The spurious samples collected in these raids belonged to well-known companies like Cadila, Unichem, Lupin, Novartis, Dabur, Aristro, Pfizer and Glaxo, clearly indicating that all drug companies were susceptible to the threat from counterfeiters. Delhi apart, raids by the drug authorities show that spurious drug manufacturing units are operating out of the Indian states of Bihar, Gujarat, Madhya Pradesh and Uttar Pradesh. The Indian Pharmaceutical Alliance also spearheaded some raids last year to safeguard the interests of members, but these were disconcerted efforts to check the spurious drug menace.
Manufacturers have come together to put pressure on the authorities to tackle the fake drug menace as counterfeiting of such dimensions could hit India's large drug manufacturing industry hard, which currently comprises about 250 large units, and about 8,000 small-scale units, including five Central Public Sector Units. These units produce the complete range of formulations and about 350 bulk drugs.
It is estimated that 70 percent of the indigenous demand for bulk drugs and almost the entire demand for formulations is met through domestic production. The big names include Cipla, Ranbaxy, Dr Reddy's, Lupin, Alkern, Knoll (BASF), Hoechst Marion Roussel, Pfizer and Cadilla.
The Indian pharmaceutical industry in the past decade has shown a compounded annual growth rate (CAGR) of 15 percent to achieve a turnover of $4.5 billion in 2000-01, but lately it has been growing only at 10 percent per annum. The industry is fragmented, but the top 50 players account for 70 percent of industry turnover. Government-owned companies command about 65 percent market share, while the rest of the market is divided among private players. One distinct trend in recent years has been the fall in the share of the public sector, accompanied by a gradual increase in the share of the private sector.
It is against this growing importance of the drug and pharmaceutical industry and the growing threat of spurious drugs that the inability of the Indian government to constitute a National Drug Authority (NDA) comes as a surprise, and a setback for the industry.
The constitution of an NDA is considered to be the panacea for the several ills that plague the Indian drug industry, such as the alarming prevalence of spurious and fake medicines, entry of irrational drugs, fixed dose combinations and wrongful branding in the market.
The constitution of strong national drug regulatory authorities is also a part of the WHO's prescription for dealing with the menace of spurious and substandard drugs. India's drug policy of 1994, the spirit of which is enshrined in the drug policy announced by the government recently, also recommends the constitution of the NDA.
The constitution of the NDA involves the setting up of a single drug licensing and regulatory authority at the center (that is, from the government in New Delhi) replacing the two-tier regulatory system in existence, where the center is responsible for policy formulation, while the state governments control licensing and enforcement. Merging of the two functions under a single umbrella should sound like a simple enough feat, but it is full of hurdles on account of India's federal character.
This character makes it impossible for the central government to dictate to the states. Instead, they have to be convinced on any reform measure. Significantly, it is not easy to take the states along on the NDA, as they are loath to give up the licensing powers, which not only means erosion in their powers, but also spells the end to speed money that normally accompanies the licensing function.
It is in this context that a recent meeting called by Shatrughan Sinha, India's actor-turned-union minister for Health and Family Welfare, in November assumed significance. At this meeting, Sinha mooted the idea of the NDA in the presence of 13 state health ministers, belonging to critically important states in India's federal set-up.
Soon after the meeting, senior health ministry officials even briefed the media about the receptiveness of some of the state health ministers to the idea. However, given the pulls and pressures of coalition politics, the center's grandiose plans of having a strong, single drug licensing and regulatory authority, seem to have come to naught.
Answering a question in the Indian parliament in early December, minister A Raja informed the Lok Sabha, the lower house, that there was no "live" proposal for setting up the NDA. In his reply, Raja, who is Shatrughan Sinha's deputy in the ministerial hierarchy, made the point that the setting up of the NDA would require major structural changes, including strengthening the central drug standard control organization, which was not possible at this point of time. Clearly, the message had gone through to the leadership in the health ministry. The NDA was a political hot potato that the highly fragmented Bharatiya Janata Party, s head of the coalition central government, could ill afford to hold.
For India, the decision can only mean a loss, since a weak regulatory structure will promote the unchecked sale of spurious and substandard drugs, which can only be detrimental to public health, add to social costs, and hurt the interests of drug companies, both domestic and foreign.
According to the WHO, the use of unsafe, substandard, ineffective and counterfeit drugs and vaccines can be harmful to the health and well being of the individual user as well as to a wider section of the population. They also undermine confidence in the health service, health professionals who treat patients, prescribers, as well as those who manufacture, distribute and dispense drugs. Further, the purchase of unsafe, substandard, ineffective and counterfeit drugs is a waste of money for the government, the individual patient and the public.
It is because of this that the WHO strongly advocates that governments regulate manufacture, export, import, storage, distribution, supply and sale of drugs to ensure the safety, efficacy and quality of drugs. "Governments have to establish strong national drug regulatory authorities (NDRAs). To enable the NDRAs to operate effectively, governments have to provide strong political support, adequate and sustainable human, financial and other resources, and legal power for enforcement. Ineffective regulation and control can result in the proliferation of unsafe, ineffective, substandard and counterfeit drugs. In addition, manufacturers have to produce drugs in accordance with good manufacturing practice requirements and distributors have to store and distribute drugs under proper conditions," it states.
WHO reports that between January 2000 and December 2001, it received 42 reports of cases of counterfeit drugs from 20 countries. The types of counterfeits reported included: products with no active ingredients (43 percent); low content of active ingredients (21 percent); poor quality drugs (24 percent); wrong ingredients (2 percent); and wrong source (7 percent).
The WHO reports, based on reports received from member countries and information published in newspapers and journals, show that both well established (generic) drugs and innovative drug products are affected. The largest number of reports relate to antibiotics, antiprotozoals, hormones and steroids. In developing counties, antibiotics and other aniprotozoals such as anti-malarial drugs are commonly counterfeited. In developed countries hormones and steroids account for the majority of the cases reported. Generally, high volume (high consumption) and expensive drugs are the main targets of counterfeiters.
It further reports that out of the 191 WHO member states, about 20 percent are at present known to have well-developed drug regulation. Of the remaining, about 50 percent implement drug regulation at varying levels of development and operational capacity. The remaining 30 percent either have no drug regulation in place or a very limited capacity that hardly functions. Ineffective or weak drug control could promote smuggling, and illegal manufacture and distribution of drugs leading to the proliferation of counterfeit drugs on national market.
Taking this argument further, Paul N Newton, clinical lecturer, Center for Tropical Medicine and Infectious Disease, Nuffield Department of Clinical Medicine, Oxford University argues in the British Medical Journal (Murder by fake drugs, April 6, 2002), that governments need to take steps to reduce the profit margins for manufacturing fakes, such as reducing the price and increasing the availability of genuine, quality assured drugs. He further adds that uncompromising international police action against the factories and distribution networks needs the same vigor as that associated with the pursuit of narcotic peddling.
"International technical, logistical, and financial support, possibly through a specialized non-governmental organization, is needed to allow impoverished countries to protect their drug supplies. Measures would include supporting drug regulatory authorities; providing simple, easily interpretable and cheap markers of authenticity; coordinating international surveillance for fake and substandard drugs; improving the availability of quality assured essential drugs; and educating patients, healthcare workers, and pharmacists," he states.
Newton further makes a case for information sharing on counterfeit drugs. "Information on fake drug identity and distribution needs to be shared nationally and internationally between government drug regulatory authorities, customs and police organizations, pharmaceutical companies, non-governmental organizations, and consumer groups," he states.
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