Drug Busters: Tracking Down Counterfeiters

Novartis deploys a global team to track down counterfeit drugs and help authorities prosecute counterfeiters.

Laid out on a conference room table at Novartis's headquarters in Basel, Switzerland, is a pile of pills. Pills to treat asthma, erectile dysfunction and diarrhea spill out of boxes labeled with well-known names of over-the-counter, prescription and generic drugs from around the world. The kinds of medicines people take

every day to cure their sickness or make them feel better.

But these particular drugs don't do either of those things. They're fakes.

Counterfeit medicines are a global scourge. The World Health Organization (WHO) estimates that as much as 10 percent of the half-trillion-dollar pharmaceutical market is counterfeit. In some developing countries, more than half of the drug supply may be fake. Every year, thousands die from ingesting fake medicines, many of which have been produced in squalid conditions using ingredients such as boric acid and highway paint.

To give an idea of the stark contrast between how genuine and counterfeit drugs are producedand why Novartis CSO James T. Christian and his security team travel the world to fight the spread of this problemour story begins at a manufacturing plant in Stein, Switzerland. There, about 40 kilometers from Novartis headquarters, is a factory that employs more than 1,400 workers and produces 2,500 different product dosages, including cardiovascular, transplant and cancer drugs, totaling 1,300 tons a year. Before Andrew Jackson, executive director and deputy head of corporate security, and this reporter are allowed into the manufacturing area, our guide politely hands us a set of pale blue sterile uniforms, from hats to booties.

Inside glass-enclosed rooms, glimmering stainless-steel machines clean and fill vials with various medicines. Technicians dressed in sterile garb peer through instruments and fill out paperwork. Remote-controlled platforms on wheels whisk boxes of medicines to their next destination, in preparation for shipping. As we wander along the halls and take in the enormity of a large-scale pharmaceutical operation, I find myself trying to hold back a lingering cough, for fear of exhaling a flurry of germs into the pristine air of the surgical-room-like environment.

Things aren't quite the same in Bogota. Back in a Basel conference room, Jackson pops a DVD into his laptop to show a grainy video in which a convicted Colombian drug counterfeiter, a former glass blower and engraver, describes in detail how he fakes a well-known pain relief drug.

In a filthy-looking, dark room on a table covered with newspapers and paint cans, he pulls a vial out of a box, and, using a sheet of acetate, applies a computer-scanned label to the outside of the glass. Next, he rolls the vial along a taut No. 3 guitar string, stretched between two blocks and moistened with paint, to apply a series of thin, colored bands. After stirring a mixture of powder (which has some active ingredient of the real drug in the mix) and distilled water with a wooden spoon, he fills a syringe with the counterfeit solution, empties it into the vial and seals it. VoilĂ counterfeit medicine, ready for immediate delivery into the underground drug supply chain. Its final destination: an unwitting patient, likely poor, who will ingest a substance made under abhorrently unsanitary conditions that, instead of bringing relief, might make the recipient sicker.

Drug counterfeiting is a big, deadly business. In locations ranging from one-room shacks in shanty towns to large, modern factories around the globe, illicit medicines are pumped out in astronomical quantities every hour, every day. Statistics on victims are difficult to come by; the official Chinese estimate is that 100,000 people in that country die every year from consuming counterfeit drugs.

Christian, vice president and head of corporate security at Novartis, is at the forefront of tackling this industrywide problem. He and his staff attack the issue on several fronts: raiding decrepit pill-making operations in Colombia and India; training local law enforcement and government officials around the globe to recognize and combat the problem; and building consensus among industry players to fight fake drugs. Christian gave CSO an inside look at his company's multipronged strategy to combat the growing epidemic of counterfeit drugs.

For Every Product, a Fake

Counterfeit medication, which WHO calls any drug that is "deliberately and fraudulently mislabeled," can apply to both branded and generic products. It could mean products that have the right or wrong ingredients, or insufficient or no active ingredients; they often have fraudulent packaging as well.

The reason criminals counterfeit pharmaceuticals is the same reason they manufacture fake handbags, wristwatches, DVDs or diapersto make a buck, or millions of them. The Global Business Leaders Alliance Against Counterfeiting, a cross-industry group, estimates that trade in counterfeit goods of all types reached $450 billion in 2000. The FBI estimates the impact on U.S. companies is $200 billion to $250 billion a year. It bears noting that such estimates are imprecise at best.

The legitimate global drug industry took in $550 billion in revenue in 2004, according to consultancy IMS Health.

To Novartis's Jackson, the counterfeiting problem cannot be measured, but he says the company's security team acts on every lead it receives. For example, in Colombia, where Novartis has raided buildings in which fake drugs are made, investigators have turned up yellow tablets of a popular painkiller that were made of boric acid, floor wax and lead-based yellow paint used to mark roads.

Incidents such as this lead to a singular edict for the Novartis team. "Every single report of suspicious and counterfeit Novartis product is responded to and investigated worldwide," says Jackson. "It doesn't matter where it is." He says they sent someone to investigate a report of suspicious product from the Ivory Coast, which turned out to be nothing. "We've got to follow these things up," he adds. (See "Intelligence Work")

Fighting Back

WHO began collecting data on counterfeit drugs around 1982, but a number of years passed before the problem gained the attention of the industry and governments. Christian says drug companies began to take notice in the early 1990s, particularly in Asia. He credits John Glover, then the head of security at Bristol-Myers Squibb (BMS), with proposing that drugmakers' security departments should join together to address the issue, and five did. "That was the first cooperative working that I was familiar with," says Christian.

The group, which called the project the Pharmaceutical Security Initiative, conducted market sweepspurchasing products, then shipping them to the companies to analyzein nations such as China, Indonesia and the Philippines. (Christian says the percentage of counterfeit product was small.) In 1996, that group became the Pharmaceutical Security Institute. Christian sits on its board.

The counterfeit problem spiked in the late 1990s; the folks at Novartis refer to 1999 as a "breakout season." That year Brazil listed 137 pharmaceutical products, such as Bactrim, Amoxil and Tylenol, on the market that had counterfeit versions, and by that time in Colombia, the activity in counterfeit medicines began to rival the illicit drug trade. The problem was growing in Asia as well, and new hot spots were emerging in Russia, India and the Middle East. After lying dormant or at least evading detection for years, the counterfeiting problem was becoming a fast-spreading cancer worldwide, with the lure of easy money and the ability to evade prosecution (both appealing incentives for organized crime) helping to fuel its growth.

Developed countries were not immune. In 2000, according to WHO, 240,000 packs of medicines and two tons of raw materials worth $1 million were seized in Italy; in 2003, 18 million tablets of the cholesterol-lowering drug Lipitor, the world's best-selling prescription drug in 2004 with sales of $10.86 billion, were recalled by Pfizer in the United States after fake pills were found in pharmacies; in 2004, fake Cialis, an erectile dysfunction drug, was found in the U.K. supply chain; and this year 120,000 packets of Lipitor were recalled in the United Kingdom after 73 counterfeit packets were found. Those are just a few examples of what's been found; plenty of counterfeit or substandard medicines have made their way into patients' bodies undetected.

Finding counterfeit pills, however, can be a crapshoot. "The only way I can tell a pill or tablet or capsule [is counterfeit] is to destroy it in a lab," says Christian. And detection has become noticeably more difficult due to the mixing of genuine product with bad product. "In the '90s, when you saw a counterfeit, whether in a plant, shipment or truckload, if you pulled one capsule, pill or tablet and tested it, if it was counterfeit you could pretty safely say everything was counterfeit," says Christian. Starting around 1999, the mixing began. "So now if you do a raid, you generally run into counterfeit, genuine, expired and stolen product. If someone reached into your container and took out one Lipitor capsule and tested it, and it turned out to be genuine, it does not mean the rest of the capsules in that container are genuine," Christian adds.

The Novartis Strategy

As the problem began to escalate in the late 1990s, Christian started planting the seeds for what has blossomed into a robust anticounterfeiting squadron. Christian has a long history at the company. After serving for 20 years with the U.S. Secret Service, which included a stint as head of Latin American operations, he joined the Switzerland-based pharmaceutical company Sandoz in 1989. In 1996, Sandoz merged with Ciba-Geigy to form Novartis.

Christian, 59, is someone who gives the impression he has seen it all. He's of medium build, with light blue eyes, the raspberry cheeks of a farmer or fisherman, and gray and white hair fashionably swept back. Christian smiles frequently and is quick to laugh, especially when Jackson and Adrian Roman, executive director of corporate security for Latin America, join the conversation.

Like Christian, both Jackson and Roman are veterans of the international security scene. Jackson, 44, who hails from the United Kingdom, joined the company in 2002 after working at SGS, a large, Swiss-based multinational. Prior to that, he worked for the British government in a security and intelligence capacity. Roman, who has 34 years of investigative experience, has been with Novartis for eight years. He had worked at Texaco, and, like Christian, had spent 20 years in the Secret Service. (The corporate security staff as a whole totals 34 people20 in corporate security, six in infosecurity and eight in the company's aviation unit, which Christian heads. There are also security managers in various countries that are, Christian says, technically part of the country business unit but in reality report to corporate security.)

By the late 1990s, Christian knew Novartis needed to attack the counterfeiting problem head-on. Since the merger, his department has seized counterfeit pharmaceuticals (purporting to be made by Novartis and other companies) worth hundreds of millions of dollars, participated in the arrests of hundreds of suspects and seized tons of manufacturing equipment, printing presses and raw materials.

Among the planks of Novartis's anticounterfeiting platform:

1. Investigations and intelligence.

Novartis's investigations seek to identify perpetrators (for example, producers and distributors), disrupt their activities, and support criminal prosecutions by local and national law enforcement authorities.

By chasing down every lead, Christian and his team pursue their primary goal to remove counterfeit product from the street. But there are plenty of other reasons: to prevent losses from lost sales of legitimate product; protect the integrity of the company name, products and reputation; identify weaknesses in their systems; and to be socially responsible. "One bad pill is too many," says Christian.

Sometimes Novartis performs its investigations jointly with authorities; other times not. "Sometimes we do it independently and call authorities when we have everything on a silver platternames of the violators, locations, what time they go to lunch, what time they open their plant to manufacture," says Christian. "Counterfeit cases are all the same, whether cigarettes, pharmaceuticals or DVDs; you're trying to get back to the source, always working your way back to the plant. The idea isn't just to arrest people who do it, who have a case or trunk full of them, it's to get back to the plant. That's a success, when you put a plant out of business."

It helps to have connections. Roman, for example, has a long history of working in Latin America, first with the Secret Service (in the Puerto Rico office with Christian at one time) and now as head of security in that region for Novartis. That experience has given him a leg up on developing key informants and investigators in the region, particularly in Colombia, where Novartis was able to dismantle 26 labs where fake drugs were made last year. In discussing Colombia, Roman says, "I have an excellent in-house investigator and excellent sources of information, former counterfeiters who have decided that it's better to work on the right side of the law than the wrong side. I also have good cooperation with authorities."

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