A high proportion of pharmaceutical drugs on sale in China are not only counterfeit – produced without a license – but are also fake, having no medical effect, or not the effect as advertised. It is a parallel for the world of DVDs and knockoff Prada bags, but has the added downside of potentially killing people.
A related case in point was the fake baby formula scandal two months ago in central China in which more than a dozen infants died from malnutrition.
Foreign pharmaceutical companies are working closer than ever with Chinese authorities to fight counterfeit drug producers and distributors. Pfizer recently signed an agreement with Shanghai regulators to cooperate in searching out and shutting down drug counterfeiting operations.
Eli Lilly and Co, which produces Cialis, a competitor to Viagra, said that it is cooperating not only with Chinese authorities, but also with pharmaceutical companies with which it normally competes, to conduct anti- counterfeiting operations that have resulted in seven raids and 20 arrests in recent months connected to a drug counterfeit ring that was producing and distributing fake erectile dysfunction drugs.
The Quality Brands Protection Committee (QBPC), an ad hoc consortium of foreign companies with operations in China that targets intellectual property rights violations and includes Pfizer, Eli Lilly and GlaxoSmithKline and leading corporations from other sectors, is working with the Chinese government to tackle the counterfeiting problem.
The QBPC said in a recent report that China's shortcomings in the fight against counterfeit drugs are similar to those found in other countries, but that the country's vast scope means the problem is bigger than elsewhere. The top issues are inadequate criminal enforcement, inadequate resources and training to combat counterfeiters and local issues of enterprise protectionism and corruption.
As for China-specific IPR enforcement issues, the QBPC cited China's historical reliance on administrative enforcement and light punishments, a lack of clear standards for criminal liability and the fact that this is terra incognita for domestic law enforcement and prosecutors.
One China-based manager at a foreign pharmaceutical firm said the best way to fight the problem is to address the light legal repercussions faced by counterfeiters.
"The government should criminalize every activity and individual involved in counterfeits and introduce far greater penalties," he said. "They should cease regarding the problem as a market rectification or administrative issue with light fines, which counterfeiters cost into their calculations."
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