Combating the Spread of Fake Drugs in Kyrgyzstan

The Cenral Asian Free Market Institute co-sponsored a recent research paper authored by Julian Harris, Philip Stevens and Julian Morris of the London based International Policy Network. The paper titled, Keeping it Real: Combating the Spread of Fake Drugs in Poor Countries, highlights the effect of fake drugs, which are having devastating effects on peoples of developing countries, including Kyrgyzstan. Fake drugs are both drugs that are intentionally manufactured to mislead the consumer of their identity and those that have deterioriated in quality due to mishandling or aging.

Problem
The World Health Organization estimates that counterfeit drugs constitute 10% of the global drug market and 25% in less developed countries. The UN estimates the figure to be 10% in the CIS. Studies have more found that among Kyrgyzstan’s biggest economic fake drugs make up a large portion of the market:

• 35% in Uzbekistan
• 30% in Kazakhstan
• 10% in Russia

There is lack of hard data as to the share of the fake drugs on Kyrgyzstan’s drug market due to lack of such research but a regional comparative analysis suggests it is in the range between 20% and 30%. Furthermore, according to Vladimir Pluzhnik, Director of the Center for Protecting Consumer’s Rights “Vigens”, the number of complaints about fake drugs is increasing by the year.

According to WHO most faked medicines in developing countries were antibiotics (28%) and hormones and steroids (14%). Rustam Kurmanov, director of the pharmaceutical supply department at Kyrgyzstan’s Ministry of Health, concurs that most prevalent fakes are antibiotics. Yet, the authors of the research paper admit that most cases of counterfeit drugs are not known to governments since there is no systematic mechanism for discovering and disclosing them.

Danger

1. Fake drugs can cause health damage, even death, due to:
2. poisoning,
3. failure to cure disease and
4. provocation of drug resistance.

A fake medicine can cause at least one and even three of these effects. The most common effect is the failure to provide a successful treatment. This can occur when a fake contains insufficient quantity of the necessary ingredient or if the delivery mechanism (the other ingredients that enables the drug to be taken up by the body) does not function properly. The paper notes that a particularly pernicious instance of a failure to treat occurs as a result of “trick” fakes. These drugs are entirely ineffective against a disease but contain ingredients which only negate the symptoms, while the actual cause survives.

In some cases fake drugs cause direct harm. Fortunately, no such cases were registered in Kyrgyzstan yet, but a batch of counterfeit was exported to the US and killed 62 americans in 2008.

Another possible harm from fakes is the presence of insufficient active ingredients to eradicate the microorganisms. The surviving microorganisms breed, resulting in drug-resistant strains. Hence, the real medicine becomes less effective at treating the disease. This has been a particularly severe problem in treating malaria, for in the 1980s and 1990s antimalarial drugs such as chloroquine were used inappropriately so that parasites became resistant to them.

Causes
The causes for prevalence of fake medicines are numerous. Some suggest that because fakes are more widespread in less developed countries; consumers in these countries are less willing to pay for quality medicine. While the first part of the claim is true the second part is not. Claiming that poor people are are unwilling to pay for quality medicine implies that the poor are unable to make rational decisions; hence, are willing to consume harmful medicine, which is a clear logical fallacy.

Rather the prevalence of fake medicines in poor countries is best explained by:

1. defective legal systems and
2. government distortions of the pharmaceutical market
3. These two causes create an environment in which fake drugs thrive.

Buying cars many people often simply go by the brand, associating Toyota to longetivity, Mercedes to quality and Lada’s to catastrophe. Manfucaturers go to great pains to retain their stellare reputation as when Coca Cola recalled 2.37 million bottles in 2006 in Japan. Similarly, it is in the interest of drug makers to have trademark that have a reputation for quality and effectiveness so that they maintain strong sales and large profits.

Unfortunately; in many developing countries like Kyrgyzstan it is difficult to enforce trademarks. Therefore,the paper finds, “where trademarks cannot be enforced, cheaply produced poor quality copies will typically crowd out good quality drugs” simply because they are cheaper and it is hard to distinguish quality from fake. The weakness of trademark protection means that producers of high quality medicines are unable to protect their brands, which might even deter them from entering the market altogether, therefore, leaving consumers no choice fakes.

The other legal failure allowing the existence of fake drugs is the weakness in civil law. Civil law protects consumers against defective goods. It enables the consumer (or their relative) to obtain compensation from the manufacture or supplier of a harmful product. This discourages the manufacturer or supplier from producing and selling fakes. However; in Kyrgystan civil law is poorly defined or inadequate to be effective. Vladimir Pluzhnik concedes that although it is possible to take to court the pharmacy that sold the fake drug, the legal hurdles are enormous and benefits minimal; therefore, few actually do. Actually, no such cases have been registered.

Solution
Kyrgyzstan’s government has adopted policies to tackle the problme of fake medicines. On April 27, 2009, Prime Minister Igor Chudinov signed legislation ratifying Kyrgyzstan’s fight against fake drugs, as part of the Commonwealth of Independent States agreement.The Ministry of Health and the State Customs Committee are responsible for the implementation of the law.

The country’s current approach to increase spending on detection and seizure of counterfeit drugs is likely to have positive effect of stopping their reach to victims. On the other hand, this approach’s long term effect on solving the problem is doubtful for it fails to address the root cause: trade in counterfeit medicines.

Another common method used to fight fake drugs has been to introduce heaftier criminal punishments for people involved in the trade of fake medicines. In June 2008, Peru increased the stakes for anyone found guilty of selling, storing, packaging or producing fake medicines by making the maximum penalty 10 years. At the extreme, China and India introduced the death penalty for severe offences in fake drugs, and recently China executed the former head of the Food and Drug Regulatory Agency.

The papers authors, Harris, Stevens and Morris are convinced that while these "measures suggest powerful signals to those involved in trading and delivering fake drugs their actual effect may be less effective and…even be counterproductive.” Stronger criminal penalties will likely drive activities further into the hands of organized criminal cells. They will also likely result in increased corruption, as criminal cells seek to infiltrate law-enforcement agencies. This was the case in 1930s with the start of Prohibition in the US and the USSR in 1980s and is the reailty in many developing countris like Kyrgystan and Mexico that have outlawed drugs.

The fundamental problem is that as long as consumers lack reliable means of ensuring the identity (brand) of the drugs they are purchasing the problem of fake drugs remains. The fundamental problem is in the inability of consumers to identify a drugs identity. Harris, Stevens and Morris recommend measures by the private sector to prevent counterfeiting as these seem to be most effective in curbing trade in fake drugs.

The simple measures undertaken by private initiative already prevale in Kyrgyzstan:

• > Oddly shaped pill shapes
• > Tamper-evident packaging
• > Holographic images

However; even these challenges have been overcome by counterfeiters. Curren private efforts focus focus on more complex systems that are believed to be sufficiently complex to render counterfeit activities uneconomical.

A particulary interesting solution is the us of SMSs. Mobile phones are now sufficiently widespread in Kyrgyzstan, about 60% penetratin 2008, that access can be considered near-universal. SMSs could be used to check the authenticity of medicine. Each drug is given a unique identifying code in the form of a simple series of numbers, which is printed on the pack and concealed. When the pack is bought, the purchaser scratches off the concealing panel to reveal the code and sends the code by SMS to a central registry, which contains a copy of each code made for the medicine. If the code is unique and matches the number in the registry then the purchaser will receive a message informing them that the medicine is unique. If the code is not in the system or is not unique, then they will be told than the medicine is likely counterfeit. Such SMS sysems have been developed in Ghana, India and USA, and are currently being offered across Asia and Africa.

Kyrgyzstan’s government took laudable steps in 2008 for scrapping VAT on imported medicine. This causes the price differential between quality medicines and fakes to diminish and removes opportunities for fake medicines who don’t bother to pay VAT anyway. Secondary benefit of minimizing costs of quality drugs is that such tariffs as VAT and import duties removes extra layers of slow- moving customs bureaucracy. This gives customs officials opportunities to solicit bribes to decid which drugs are help up and which are fast tracked- “a situation which favours importers willing to behave illegaly,” believe the papers authors.

Conclusion

The fight against fake medicines has the advantage that many criminals involved are unlikely to have a particular commitment to this activity. At present it is simply an easy and convenient way to make money. By addressing the root causes that enable such profitable opportunities, their incentives can be diminished, thereby reclaiming the market for high quality medicines.

This paper suggests that the supply of fake drugs could  be considerably reduced by:

1. Strengthening local institutions, in particular the rule of law
2. Governments intervening less in the pharmaceutical market
3. Better use of technologies for identity preservation.

Governments have a role to play beyond improving the rule of law. Many government interventions in the pharmaceutical market have restricted supplies of quality medicines, driving up prices and simply leading to gaps in the market. These have then been exploited by purveyors of fake medicines. Governments could substantially reduce these problems by removing impediments to the supply of quality medicines, such as taxes, tariffs, price controls and arbitrary regulations.