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"Phake: The Deadly World of Falsified and Substandard Medicines" explores the underground trade in illegal medicines that kills over 100,000 people per year and supplants billions of dollars of real products. Roger Bate provides a fascinating firsthand account of the illegal industry and an incisive academic and policy analysis, unraveling a complex web of criminal traders, corrupt officials and an inattentive international community. Part investigative journalism and part academic research into the legal, economic, and scientific underpinnings of the fake drug market, "Phake" provides the fullest picture to date of this odious trade and outlines how we can defeat it.
Dr. Roger Bate is the Legatum Fellow in Global Prosperity at the American Enterprise Institute in Washington, D.C. Dr. Bate spent years tracking stolen, counterfeit, and substandard medicines in Asia, Africa, and the Middle East, discovering the anatomy of the nebulous black market and identifying its perpetrators. He has published widely on the topic in the popular media outlets and in peer-reviewed scientific, legal, and economic literature.
Compiling data from the manufacture, sale, and distribution of fake and substandard drugs from over 100 countries, this document illustrates the global nature of the trade in fake and poor-quality drugs, and highlights the riskiest regions. While it is impossible to determine the scale of the problem, the examples below illustrate that the trade in fake and poor-quality medicines is far too large, and far too deadly, to be ignored.
Most of the counterfeit and substandard drugs found in the United States are lifestyle medications, such as diet pills and Viagra, which are purchased online, but fakes can infiltrate legitimate outlets as well. In 2001, counterfeit Serostim, an AIDS drug, was found in two California pharmacies. In 2003, fake Lipitor (high cholesterol medication) was discovered in pharmacies across the US. In a drug bust the following year, U.S. customs seized 3,000 packages of suspected counterfeits destined for American consumers.
Locally-produced counterfeits have been discovered, but drug seizures indicate that the majority of fakes are either imported from countries like China and India or smuggled across the Mexican and Canadian borders. In October 2009, a shipment containing 21,600 Viagra pills was seized at Miami International Airport; the counterfeits had originated in India. Testing of the seized drugs revealed that 67 percent either were never approved by the FDA or had been withdrawn from the US market for safety reasons. 28 percent contained controlled substances banned from importation, and 5 percent of the packages contained no active pharmaceutical ingredient (API).
According to a 2010 report sponsored by drug company Pfizer, 'Cracking Counterfeit Europe,' the market for counterfeit medicines in Europe has quadrupled in size over the past five years, and is now worth an estimated USD 14.3 billion a year. Many of these drugs trickle in through porous borders in Eastern Europe. Many European countries have stepped up enforcement efforts along borders in recent years to prevent counterfeits from entering Europe. During a two-month operation against counterfeit and illegal medications in 2009, Belgian customs agents seized more than 2.2 million counterfeit painkillers and anti-malarial medications. Across the continent that year, authorities unearthed 11 million counterfeit medications.
Latin American is home to production and transit sites for counterfeits targeted at the wealthy American and Canadian markets, in addition to burgeoning markets within Latin American itself. The counterfeit pharmaceutical industry's huge potential profits outweigh possible penalties for many notorious gangs, including the Mexican mafia and Colombia's cocaine traffickers. In 2008, the Caribbean Poison Information Network estimated the value of the counterfeit drug trade in Latin America and the Caribbean to be around USD 30.5 billion.
A counterfeiting ring with production facilities in Belize and a distributor in Norcross, Georgia was shut down by U.S. authorities in 2006 with the arrest of 11 key members in both Belize and the US. Investigators estimate the ring netted over 19 million in profits before it was shut down. In addition to Belize, production facilities have been found in Guatemala, Mexico, Bolivia, Cuba, the Dominican Republic and Haiti.
Counterfeits are especially prevalent in sub-Saharan Africa, where poorly-regulated markets, porous borders, and pharmacists leniency routinely allow fakes to slip through the cracks. The WHO estimates that counterfeits could compose up to a third of pharmaceutical markets in some countries, and low-quality, or substandard, drugs are equally prevalent. Unlike in the West where lifestyle drugs are most common, many counterfeits in Sub-Saharan Africa are life-saving medications like antibiotics, anti-malarials, fake cancer medications, or anti-retroviral drugs.
The Middle East and North Africa (MENA) region both provides a vital transit routes from Asia into Europe and Africa, and houses production facilities of its own (see upcoming paper on ME drug ring). The WHO estimates fakes may constitute 35 percent of the MENA pharmaceutical market. Available data suggest that Viagra, antibiotics, psychotropic drugs, and oncology heart and liver medicines are most commonly counterfeited.
Disturbingly, fake drugs have in some cases penetrated legal distribution systems in the Middle East. Free trade zones—specially designated areas with no tariffs and minimal regulatory oversight to encourage trade — undermine the safety of supply chains and encourage illicit activity. In 2008, EU customs officials reported that a third of the medicines they confiscated along its borders originated from the UAE, which has multiple free trade zones. Lack of appropriate legislation, weak regulatory authorities, poor enforcement, corruption, and the sheer sophistication of the illegal drug manufacturing industry also contribute to the dangerously high prevalence of fakes.
Asia is widely considered the fake drug factory of the world. India and China, which both have thriving legitimate pharmaceutical manufacturers, are also the source of most substandard API and counterfeit drugs. Insufficient regulation, porous borders, and lack of enforcement mechanisms in Pakistan, Iran, and the Mekong River Valley countries (Cambodia, Laos, Thailand, and Vietnam) have enabled Asia's myriad, unregulated small producers to market fake and substandard drugs to Asia, Europe, Africa and even the Western Hemisphere.
As the production hub for counterfeit and substandard drugs, insufficient regulation and poor manufacturing in Asia present an enormous threat to consumers around the globe. This danger is particularly alarming for people in the United States, because roughly 20 percent of generic drugs and 40 percent of the active pharmaceutical ingredients (APIs) in all medications in the US are produced in either India or China.
The presence of counterfeits in the region depends largely on national regulation and enforcement systems. In Australia and New Zealand, the percentage of counterfeits is low. In places where virtually no regulatory body exists, like Papua New Guinea, fake medicines are widely available. Counterfeiters have used islands in Oceania, such as Vanuatu, as transit points for fake medicines sent from China and the Middle East, destined for Europe, Canada, and the United States. Overall, however, since most islands in Oceania provide neither a particularly lucrative market nor a vital transit route to the West, the very limited information available suggests Oceania is not a key target for counterfeiters.