Phase out the Fakes

3 April 2008 (Last Updated April 3rd, 2008 18:30)

Medical counterfeiting globally is rife, with only a fifth of countries having strict regulations to prevent forgery. Jayant Singh of Frost & Sullivan examines the reasons why such a practice must be stopped.

Phase out the Fakes

The menace of counterfeit goods globally is increasing as there is more free flow of goods across the world. The case of counterfeiting in healthcare goods such as medications and medical devices is also assuming critical proportions. As per an estimate of the OECD and WHO, around 6–8% of the total medical devices market comprises of counterfeit goods. This does not include unaudited and unaccounted markets where the problem might be more serious.

The US FDA reported that intra-aortic pumps worth $7m were recalled after malfunctioning components were found to be counterfeit. The problem has also attracted the attention of the WHO: more than 2,000 kits containing stethoscopes and sphygmomanometers were seized during transport from China to Greece, and every part of the shipment had been counterfeited – packaging, instructions, devices and European standards marks.

The problem becomes compounded further by the fact that trade in counterfeit goods is expected to outpace the industry growth average. Counterfeits/parallel trade is expected to disturb the healthcare value chain if it continues to grow at this pace.

"India and China are considered the nodal centres for counterfeiting."

Counterfeiting in medical devices occurs at various levels of the value chain, from device components to finished products. The finished products mostly affected by counterfeiting are blood glucose monitoring systems, surgical sutures, catheters and heart valves.

In the case of device components, counterfeiting can be seen in the field of cardiovascular and orthopaedic product lines.

India and China are considered the nodal centres for counterfeiting, with many counterfeit medical devices thought to be produced and routed through the two.

REASONS FOR COUNTERFEITING

It can be safely assumed that counterfeiting is a function of economic, social and political factors. Besides this, corruption, lax regulations and inefficient bureaucracy also aid and abet this practice:

  • Economic factors. The primary reason for counterfeiting growth is the significant cross-border price differential between the developed and developing countries. This attracts many small-time manufacturers who have low overheads and costs, persuading them to enter this lucrative trade. This practice gets a further boost due to the rising pressure on healthcare providers to supply cost-effective solutions.
  • Social factors. The fruits of innovation of the West have still not reached to a large section of population who are in dire need of it; this provides a ready-made platform for counterfeiting.
  • Political factors. The political leadership of the country turns a blind eye to these practices as often it does not find itself in a position to provide the necessary solutions.

Besides the factors mentioned above, the growth and increased penetration of the internet is another causative factor for the growth in the trade of counterfeit medical devices. This is typically true for devices that are meant to be used in a home setting, such as a blood glucose monitor.

Lax regulations in these countries also motivate this practice; as per WHO estimates, only 20% of countries have stringent regulations, leaving the field wide open. As more manufacturing activities are being relocated to China and India, there is an urgent need to curb this practice.

HAZARDS OF COUNTERFEITING

The practice of counterfeiting poses a problem for the industry, the country concerned and the general population at large:

  • Implications for the industry. The industry suffers a loss of sale which is a direct cost, it also creates a bad name for the original seller thus impacting his goodwill and credibility. The costs associated with it are difficult to gauge.
  • Implications on the country's economy. The economy of the concerned country also takes a hit because of this practice. The costs associated with it can be summed up as the losses suffered on account of loss of goodwill of the country, the additional burden on healthcare infrastructure, public health burden and loss of productive manpower.
  • Implications for the people. Patient suffering, loss of life, costs associated in recovering and the loss of man days are the few social costs associated with counterfeit medical devices.

FIGHTING FORGERY

The global community, led by the WHO, has taken the threat of counterfeiting seriously and efforts are on to curb this menace as soon as possible. They are following a two-pronged strategy for this. The first aspect of this strategy is to use technology as an enabler in curbing this practice.

Technology initiatives involve the use of high-tech devices to track and monitor the medical devices. They can be referred to as auto-identification technologies and can be further reclassified into the following three types:

  • Barcoding. A unique bar code is placed on the product, which mainly helps in tracking the inventory levels. This has not found much usage in tackling counterfeiting.
  • Radio-frequency identification (RFID). A tag is attached to the product/device and a radio frequency reader monitors the product at all stages of the value chain. This technology is expected to put an end to the practice of counterfeiting.
  • Optical character recognition (OCR). Images of printed characters which are attached to the device /equipment are converted into scanner readable format. The usage of it is primarily for stocking and inventory tracking.
"Technology initiatives involve the use of high-tech devices to track and monitor devices."

The WHO in collaboration with its member countries is trying to enable the usage of these technologies. This approach will concentrate on the point of manufacture and the point of end sale. This technology in association with the data management infrastructure of the company will alert the company if counterfeiting is attempted at any level of the value chain.

OTHER INITIATIVES

A number of other initiatives are also in place to fight the battle against counterfeiting medical products, including:

  • Imposing strict penalties (not notional) keeping in mind the health hazard these goods create; data suggests that countries which have a capital punishment for use of drugs abuse do not have any problems. Something can be designed for medical devices on the same lines, albeit not that stringent.
  • The respective governments working towards stronger licensing agreements for distributors of medical devices.
  • Eliminating or limiting the need of repackaging to avoid tampering with the product or product information leaflets.

Governments worldwide are also trying to develop a global communication programme to raise the public awareness about the real threat posed by counterfeit devices and the costs associated with them.