Articles
Tulip® - Combating Counterfeiting and Cashing in
| Release Date: |
01 August 2003 |
| Author: |
Jeremy Hertzog |
| Original Publication: |
Pharmaceutical Business News |
Counterfeiting is costing the pharmaceutical industry billions of dollars, but this money does not have to be lost to the industry, according to Jeremy Hertzog, partner in the Brands and Rights Group at Mishcon de Reya. Historically, the industry has concentrated on seizing fake products, rather than on taking the profits made from their distribution. The latter approach could be more lucrative for manufacturers and also be more effective in shutting the illegal operators down.
In common with most other brand owners, pharmaceutical manufacturers have reacted to the rise in counterfeiting with attempts to trace the source of counterfeit products and seize the supplies. This is a very costly business, both in terms of the bill for policing the industry and in terms of lost sales. And, typically, all the industry has to show for this activity is 1-2 million tablets seized and destroyed at the end of the year.
While in no way suggesting that activities to remove counterfeit products from the market should stop, because of the health implications of allowing fake products to be circulated, Mr Hertzog suggested tackling the problem in a different way could turn it from a cost burden to a profit centre.
"These people are defrauding your company. It is not a quaint intellectual property issue, it is fraud and should be treated as such."
Mr Hertzog believed that the industry should go after the distributors of the counterfeit products and seize the profits they make from the illegal sales. In the past, Mishcon de Reya has at least covered the costs of the operation, but often obtains damages two to three times larger than costs.
"In one action, we even reaped 20 times the cost of the operation,"
he told Pharmaceutical Business News. He noted that attacking the distributors had proved more effective than seizing products directly from the manufacturer. Unfortunately, the cost of setting up a counterfeiting operation is minimal. When product is seized, these groups tend to simply move to a different location and start again. However, if the distributors bringing products in to the country no longer have the money to import the product, then there is little incentive for the counterfeit manufacturer to continue its activities. The distributors who have been the focus of Mishcon de Reya's activities have also begun to think twice about their operations.
"We have been doing this in other industries for two-and-a-half years, and we have not come across the same distributors twice. If they have diverted their activities on to other brands, then we have not encountered them."
He added that, following one action, there was no counterfeiting activity of any kind for six months, either against the client's brand or any other brand in the market.
In answer to whether this kind of action was profiteering from the illegal trade, Mr Hertzog commented that he felt it was in everybody's interests. In the UK, trading standards officers have more work than they can physically do and too few resources. By undertaking the activity themselves, the pharmaceutical companies are transferring some of the burden from the public sector into private hands.
"It frees up public resources to carry out other pressing trading standards investigations, it keeps the consumer safe and brings profit and a secure brand for the industry. It has benefits for all,"
Mr Hertzog concluded.
This article first appeared in Pharmaceutical Business News issue 444, 13 August 2003. For more information on the publication or to receive a sample copy, please contact Rashed Qureshi, Tel: +44 20 7017 4770, e-mail: rashed.qureshi@informa.com or visit www.healthcare-info.co.uk/pbn.