Life Science

Countering Counterfeit Drugs

Long supply chains offer criminals ample opportunities to sneak in counterfeit drugs, which pose a serious risk to public health. 
By: | December 14, 2015 • 8 min read
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We have all received them – spam emails offering cheap Viagra or other such male enhancement drugs.

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Chances are that they’re one of the millions of counterfeit drugs that flood the pharmaceutical market every year.

The World Health Organization (WHO) estimates that at least half of all drugs sold today on illegal websites that conceal their physical address are counterfeit. While counterfeit drugs account for only 1 percent of all medicines sold globally, that still amounts to $200 billion, according to the International Institute of Research Against Counterfeit Medicines.

Law enforcement agencies across the world have seen a huge increase in the manufacture, trade and distribution of counterfeit, stolen and illicit medicines in the last 10 years, with the WHO estimating that worldwide sales have increased by about 90 percent since 2005.

“Counterfeit medicines affect all types of legitimate drugs and threaten the entire health system by creating mistrust.” — Cyntia Genolet, associate manager, regulatory and health policy, International Federation of Pharmaceutical Manufacturers & Associations

“Counterfeit medicines affect all types of legitimate drugs and threaten the entire health system by creating mistrust,” said Cyntia Genolet, associate manager, regulatory and health policy at the International Federation of Pharmaceutical Manufacturers & Associations (IFPMA).

“They can be fake versions of patented, generic or over-the-counter medicines, and exist in all therapeutic areas.”

Counterfeit drugs not only put at risk the lives and health of millions of patients who believe that their prescription medicines are both safe and effective; they also cost the pharmaceutical industry billions of dollars in lost revenue every year and leave companies exposed to a host of reputational and liability risks.

Increasingly complex global supply chains, the rise of internet pharmacies and new advancements in technology have all made it far easier for criminals to produce and sell counterfeit drugs.

“We are seeing a geographical intensification of counterfeiting which is no longer focused on one or two parts of the world, but is now global, largely because of the internet,” said Geoffroy Bessaud, associate vice president of anti-counterfeit coordination at Sanofi.

Risk to Human Health

Matthew Bassiur, deputy chief security officer, Pfizer

Matthew Bassiur, deputy chief security officer, Pfizer

The main risks of taking counterfeit drugs are that they may contain the wrong ingredients, or they may contain too little, too much or no active pharmaceutical ingredient or API (which is what makes the drug effective) at all, according to Matthew Bassiur, deputy chief security officer at Pfizer.

That means patients are not receiving the therapeutic value they need and may suffer adverse effects of taking the wrong ingredients, ultimately putting their health, and lives, at stake.

“It really becomes a game of Russian roulette because you have no way of knowing what it is you’re ingesting,” Bassiur said.

In some cases, these drugs have been found to contain toxic substances such as leaded highway paint, floor polish, brick dust, antifreeze and even rat poison, often because they are being manufactured in unsafe and dirty conditions, he added.

“Counterfeit medicines are being produced in some of the most deplorable and unsanitary conditions imaginable,” he said. “So it’s no surprise that you find these kinds of contaminants in these bogus drugs.”

Worse still, in the case of treatment for infectious diseases with antibiotics or anti-malarials, some diseases can develop drug-resistance if the wrong dose of API has been administered.

To give an idea of the scale of the problem for human health, in 2008 the FDA recorded 81 deaths and about 600 allergic reactions resulting from a batch of counterfeit Herapin, a drug used to prevent blood clots.

“Counterfeit drugs raise significant public health concerns because their safety and effectiveness is unknown.” — Howard Sklamberg, deputy commissioner for global regulatory operations and policy, FDA

“Counterfeit drugs raise significant public health concerns because their safety and effectiveness is unknown,” said Howard Sklamberg, the FDA’s deputy commissioner for global regulatory operations and policy.

Supply Chain Problems

The problem of counterfeit drugs is made worse by an increasingly complex global supply chain network.

With almost 40 percent of all drugs that Americans take being made overseas, according to the FDA, the opportunity to infiltrate the supply chain with counterfeit drugs is far greater than before.

The fact that these drugs are imported also means they may have been mishandled, adulterated or counterfeited before entering the country.

Jim Walters, managing director, life sciences and chemical group, Aon Risk Solutions

Jim Walters, managing director, life sciences and chemical group, Aon Risk Solutions

“Patients expect the supply chain to work properly and if there’s a flaw in that chain it’s not only a potential risk to their own health, but also the reputation of the company making and selling that drug,” said Jim Walters, managing director of Aon Risk Solutions’ life sciences and chemical group.

Ned Milenkovich, principal and co-chair of the health care law practice at law firm Much Shelist, said that globalization was a key factor in the surge in counterfeit medicines.

“On the whole, the situation is worse internationally than in the U.S., where at least we have some safeguards to prevent these drugs entering the market,” he said.

Outside Influences

The majority of counterfeit drugs are manufactured outside the U.S., in largely unregulated markets such as China and India, according to the FDA.

Because of the relatively low production costs and the ease of transportation, as well as lighter penalties compared to other crimes like narcotics, they have become a magnet for international organized criminal gangs.

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The markups are also far greater. For example, based on an investment of $1,000, the estimated profit from counterfeiting a blockbuster drug can be as high as $500,000 versus $20,000 for heroin.

“The criminal world has recognized the margins that can be made from counterfeit medicines and it is much easier to copy these kinds of drugs than it was five to 10 years ago,” said Aon’s Walters.

Counterfeiting is also closely linked to money laundering, drug trafficking and terrorism, said Robert Lane, global practice leader at Willis Resolutions and executive vice president at Willis Global Solutions.

“Terrorism is at the core of this,” he said. “There is a lot of money involved and because of advances in technology, criminals are able to create counterfeit products and maintain a relatively low profile in the process.”

Advances in Technology

Advancements in technology and the internet have also made it easier for criminals to sell their counterfeit drugs online, many of which are a fraction of the price of the original and are dispensed without prescriptions.

Many use sophisticated marketing techniques or fraudulent web storefronts to sell their wares, according to the FDA.

And because of increased technological sophistication, counterfeiters are often able to pass off fake medicines as the real thing, said Bassiur.

“The real danger in ordering these medicines over the internet is a complete lack of transparency and intentional deception, which is a big problem in developed nations where patients are increasingly turning to online to source their medicines,” he said. “However, there are places that people can safely buy prescription medicine online.”

Reputational Risk

While a patient’s health can be compromised by counterfeit drugs, manufacturers and pharmaceutical companies can suffer a huge financial loss in terms of sales.

Robert Lane, global practice leader, Willis Resolutions; executive vice president, Willis Global Solutions

Robert Lane, global practice leader, Willis Resolutions; executive vice president, Willis Global Solutions

It can also infringe on their patent and trademark rights, as well as damage their brand reputation as a result of the negative publicity.

“Essentially what is happening is that your drug is being hijacked,” said Lane.

“There’s infringement across the board in every context and the reputational and financial hit you take as a result can be substantial.”

A company stands to lose not only the benefit of its investment in research and development and advertising that drug, but also the expense of hiring outside experts to look into the problem, according to Dan Torpey, partner in EY’s fraud investigation and dispute services.

“Essentially, someone else is getting the benefit of all your work and effort off the back of sales of a counterfeit product,” he said. “Unfortunately, because a lot of these counterfeiters are rogue individuals or small groups there’s not much recourse for recovery other than enforcement.”

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Laura Sunderlin, life sciences underwriter at Beazley, said that the bigger problem is for those companies in the supply chain who buy the drug without knowing it is counterfeit.

“The worst case would be a large distributor buying a big quantity of the drug and then it being passed on down the supply chain to the end consumer and the potential [repercussions] that could bring,” she said.

Tackling the Issue

The pharmaceutical industry has had some success in the fight against counterfeit drugs. In 2012, 79 arrests were made and $10.5 million worth of potentially lethal medicines was seized in Interpol’s Operation Pangea V, targeting illegal online pharmacies.

In November 2013, President Obama signed into law the Drug Supply Chain and Security Act. The act was designed to protect the public from exposure to counterfeit, stolen or otherwise harmful drugs by enabling the monitoring of certain prescription drugs as they move through the supply chain.

R12-15p30-31_03Counterfeit_RR.inddAnd in January 2016, the Council of Europe will bring into force the Medicrime Convention to police counterfeit drugs and prosecute offenders.

Many drugs companies have also implemented new technologies such as radio frequency identification (RFID) chips and tags to track and trace their products.

They also work with governments, regulators and bodies such as the IFPMA to combat the problem and to raise public awareness, as well as their own operations.

Sanofi, for example, has a dedicated team of experts who search for counterfeit drugs on the internet and has set up a central anti-counterfeit laboratory to analyze suspect products.

Walters, however, was a bit more skeptical about the problem. “While across the board there are lots of ways that companies are tackling the problem, conceivably there is no way that you are going to be able to monitor every single pill or capsule,” he said.

Available Coverage

Provided that there was no intent to defraud and they were unaware that they were buying and passing on counterfeit drugs in the first place, most companies in the supply chain will be covered by professional and product liability and errors and omissions insurance, said Sunderlin.

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However, she said that the problem would continue until an international standard is brought in for monitoring all drugs.

“Until there is an international, required standard of protection for technologies used in legitimate drug packaging which would track a product from manufacturer to consumer, and would make it difficult and very expensive to try to counterfeit, there will be an increasing number of counterfeits introduced and sold around the world,” she said.

Bassiur added: “Counterfeiting is a multibillion dollar enterprise. Large profits, combined with little risk of meaningful penalties in many countries, fuel this illicit industry.

“At the end of the day, the counterfeiter doesn’t care about your health and safety or whether you live or die, they only care about getting your money and lining their own pockets.”

 

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at riskletters@lrp.com.
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Risk Insider: Jack Hampton

The Conundrum of Walls

By: | December 7, 2015 • 3 min read
Jack Hampton is a Professor of Business at St. Peter’s University in New Jersey and a former Executive Director of the Risk and Insurance Management Society (RIMS). He was named a Risk Innovator in 2008 by Risk and Insurance®. He can be reached at hamptonjohnj@gmail.com.

The Diaoyu Fortress was a 13th century city in western China, legendary for its resistance to destruction by invading forces. For more than 30 years it successfully resisted more than 200 efforts by Mongols to breach its massive walls.

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Like Diaoyu, today’s computer networks are protected by walls separating our safe place from intrusion by barbarians. How much higher must we make them to keep out intruders? How much thicker to stop our enemies from breaking them down?

Let’s face it. We rely too much upon walls. We discuss height and thickness more often than we acknowledge the less secure doorways. We need to step back, recognize that passageways are the weakness, and fix the problem.

More recent history than the Song Dynasty supports this premise. The German Enigma machine was a formidable “wall” encrypting radio communications. By the time of its military use in the Second World War, an intruder needed to find the exact “password” from 159 quintillion different possibilities.

The combination was changed every day. By trial and error, a successful effort was valid for less than 24 hours.

We cannot build the walls high or thick enough unless we redesign the whole system to recognize that the Internet is not a fortress city.

Was the system impregnable? Not at all.

The Allies did not succeed in breaching the wall. Instead, they concentrated on the traffic.

By a combination of operator mistakes, the capture of documents and machines, and procedural errors, they entered the system every day and read communications that totally compromised the security of German military forces. The Allies went through the doorways. That is the story of hackers today.

To update the lesson from the Enigma machine, we need to distinguish the differences among social media, email, and serious system security. For Facebook, nothing is safe.

In the language of the Sopranos, “fuh ged da boud it” when it comes to securing anything. Email is more consequential so we secure it by starting our password with a capital letter and ending it with a number.

“Password1” feels sufficient even though it can be cracked by hackers in no time at all. Not a good idea for our bank account, compared to something like p@55W0RD# that can also be remembered without too much difficulty.

The more consequential cybersecurity issue involves the infrastructure of the Internet and other electronic systems. We need a far-better structure to protect us from attacks on power plants, telecommunications, financial systems, and a myriad of vulnerable organizations.

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We cannot build the walls high or thick enough unless we redesign the whole system to recognize that the Internet is not a fortress city. It is a highway for communications and increasingly a tool to support our lives whether at home, in our cars, and everywhere else.

At the moment, our security walls do not protect us from egregious misbehavior. We can visualize a sign above our computer networks.

“Through these firewalls pass the best people in the world. Also, ultra-sophisticated hackers, authorized users who do not protect their passwords, and disgruntled parties who seek to do us harm.”

Our computers and networks must always have highways and access points. We should always add more height and thickness to the walls. We desperately need better strategies to guard the openings.

How do we provide protection and access 24 hours a day in a complex and changing world? This is the cybersecurity conundrum of walls.

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Sponsored: Liberty Mutual Insurance

The Doctor as Partner

Consulting clinical expertise can vastly improve disability and absence management outcomes.
By: | January 4, 2016 • 6 min read

Professionals helping employees return to work after being on disability or a leave of absence face many challenges. After all, there is a personal story behind each case and each case is unique.

In the end, the best outcome is an employee who returns to the job healthy and feeling well taken care of, while at the same time managing the associated claim costs.

Learn what most employers want from their group disability and life benefits program.

While many carriers and claims managers work toward these goals, in the end they often tend to focus on minimizing costs by aggressively managing claims to get the worker back on the job, or they “fast track” claims, approving everything and paying little attention to case management.

Aggressively managed claims can leave many employees and their doctors feeling defensive and ill-at-ease, creating an adversarial relationship that ultimately hinders return to work and results in higher direct and indirect employee benefit costs for the employer. Fast track or non-managed claims can lead to increased durations, costs and workforce productivity issues for employers.

Is it possible to provide a positive employee benefit experience while at the same time effectively managing disability and lowering an employer’s overall benefit costs?

A Unique Approach

Yes.

Liberty Mutual Insurance’s approach to managing disability and absence management focuses on building consensus among all stakeholders – the disabled employee, treating physician, employer and insurer. And a key component of this process is a large team of consulting physician specialists, leading practitioners from a variety of specialties, highly regarded experts affiliated with leading medical universities across the country.

“About 16 years ago, our national medical director, Dr. Ed Crouch, proposed that if we worked with a core group of external consulting medical specialists – rather than sending most claims for Independent Medical Evaluations – we could do a better job making disabled employees and their attending physicians comfortable, and therefore true partners in producing better disability management outcomes and employee benefit experiences,” said Tim Kastrinelis, senior vice president, Distribution Partnerships at Liberty Mutual Benefits.

“In this way, our consulting physician and the attending physician are able to work with the disability case manager, the employee and the employer to deliver a coordinated, collaborative approach that facilitates a productive lifestyle and return to work.”

The result of Dr. Crouch’s initiative has produced positive results for the clients of Liberty Mutual Insurance. This consensus building approach to managing disability with consulting physician expertise has helped achieve industry leading client retention results over the past decade. In fact, 96 percent of Liberty Mutual’s group disability and group life clients renew their programs.

LM_SponsoredContent“By getting all stakeholders on the same page and investing heavily in consulting physician specialists, we have been able to lower claim costs and shortened claim duration for our group disability policyholders. …In the end, it’s a win-win for all.”
–Tim Kastrinelis, Senior Vice President, Distribution Partnerships, Liberty Mutual Benefits

A Collaborative Approach

In the case of complex disability medical health situations, Liberty Mutual’s disability case managers play a vital role in seeking additional expertise—an area where the industry’s standard has been to outsource the claimant for independent medical examinations.

However, Liberty Mutual empowers its disability case managers with the ultimate responsibility for the outcome of each claim. The claimant and the case manager stay together throughout the life of the claim. This relationship is the foundation for a collaborative approach that delivers a better employee benefit experience and enables the claimant to return to work sooner; which more effectively controls total disability claim and absence costs.

Sending a disabled employee with complex medical needs to an external specialist may sound like a cost-effective path, but it often comes at the cost of sacrificing the relationship and trust built between the employee and case manager. The disabled employee must explain their medical history to a new clinician, which he or she is often reluctant to do. The attending physician may be uncooperative as this move can appear to question his or her treatment plan for the employee.

As a result, the entire claims process takes on an adversarial atmosphere, building major roadblocks to the ultimate goal of helping the claimant return to a productive lifestyle.

Liberty Mutual takes a different approach. Nearly 100 physicians representing more than 30 medical specialties are available to consult with its medical and claims professionals, working side-by-side with case managers.

More than 95 percent of these consulting physicians are in active practice, and therefore up-to-date on the latest clinical best practices, treatment guidelines, therapies, medications, and programs. Most of these physicians are affiliated with leading medical universities across the country. “We recruit specialists from around the country, getting the best from such prestigious institutions as Harvard, Yale, and Duke,” said Kastrinelis.

These highly-credentialed physicians help case managers focus on providing the support needed for the disabled employee to successfully return to work as quickly as appropriate. Their collaborative work with the attending physicians provides the behind-the-scenes foundation that leads to a positive claimant experience, results in a better outcome for the claimant, and more effectively reduces total claim costs.

Coordinated Care Plan

When one of these consulting physicians reaches out to an attending physician, there’s an immediate degree of respect and high regard for his or her opinion. This helps pave the way to working together in the best interest of the employee, improving treatment plans and return to work results.

In this process, the claimant is not sent to yet another doctor; instead, the consulting specialist works with the attending physician to help fill in the gaps of knowledge or provide information that only a specialist would have. Although not an opportunity to direct care, these peer-to-peer discussions can help optimize care with the goal of helping the employee return to work.

The attending physician may have no knowledge of the challenges the employee faces in order to return to work. A return to work plan created in concert with the specialist, disability case manager, employer, and attending physician can set expectations and provide the framework for a proactive and effective return to a productive lifestyle.

“Our consulting physicians bring sophisticated medical expertise to the discussion, and help build consensus around a return-to-work plan, helping us more effectively impact a claim’s outcome and costs, and at the same time provide a better claimant experience,” said Kastrinelis.

“We can work more collaboratively with the attending physician, manage expectations, and shepherd the employee through the process much more effectively and in a much more high-touch, caring, and compassionate manner. Overall, we’re able to produce better outcomes as a result of this consensus building approach.”

Better Outcomes

“Our approach – including the use of consulting medical experts – helped us significantly reduce disability costs over two years for one large health service company,” notes Kastrinelis. “We cut average short-term disability claim durations by 4.2 days in that time, while increasing employee satisfaction with our unique disability management model and collaborative, partnership approach.

How did Liberty Mutual’s unique approach lower claim costs, reduce disability duration and improve the benefit experience for one customer?

“By getting all stakeholders on the same page and investing heavily in consulting physician specialists, we have been able to lower claim costs and shortened claim duration for our group disability policyholders,” said Kastrinelis.

“Plus, we, the employee, and the employer also get the bonus of creating a better employee benefit experience. This model has shaped our disability and absence management program to more aptly reflect our core mission of helping people live safer, more secure lives. In the end, it’s a win-win for all.”

How does Liberty Mutual provide a superior employee benefit experience?

Tim Kastrinelis can be reached at timothy.kastrinelis@libertymutual.com. More information on Liberty Mutual’s group disability and absence management offerings can be seen at https://www.libertymutualgroup.com/business-insurance/business-insurance-coverages/employee-benefits.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.




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Liberty Mutual Insurance offers a wide range of insurance products and services, including general liability, property, commercial automobile, excess casualty, workers compensation and group benefits.
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