Cost of Counterfeit Drugs to Patients and Society

The pharmaceutical industry had an estimated $1.25 trillion in sales in 2019 per Due to this massive market, they are one of the favorite targets of counterfeiters. Without the need to spend a single penny to develop an innovative life-saving drug, counterfeiters invest minimally to make look-a-like counterfeit drugs that might not even contain the active pharmaceutical ingredient, spend their energy to circumvent various anti-counterfeiting technologies, develop vast and most deceptive sales channels to push those counterfeit drugs to needy patients, and pocket huge profit with minimal legal and financial risk. At the same time, patients suffer, pharmaceutical companies suffer, governments suffer, and the global society suffers.

Definition of Counterfeit Pharmaceuticals/Medicine/Drugs

There are quite a few definitions of counterfeit pharmaceuticals from different authorities. The World Health Organization (WHO) updated its definition of counterfeit pharmaceuticals in 2017 (, which refer to products that are either:

  • Substandard: Also called “out of specification”, these are authorized medical products that fail to meet either their quality standards or specifications, or both.
  • Unregistered/unlicensed: Medical products that have not undergone evaluation and/or approval by the National or Regional Regulatory Authority (NRRA) for the market in which they are marketed/distributed or used, subject to permitted conditions under national or regional regulation and legislation.
  • Falsified: Medical products that deliberately/fraudulently misrepresent their identity, composition or source.

The Food and Drug Administration (FDA) in the US has a similar definition that mainly concerns fake medicine with contamination, wrong or no active ingredient, or wrong dose ( The legal definition of “counterfeit drug” can be found in the U.S. Code 21 (

It is important to point out that stolen and illegally diverted pharmaceuticals are not considered counterfeits, although they also have significant negative impact on patients and society.

Impact of Counterfeit Drugs

The most significant impact of counterfeit drugs is the tremendous negative effect on human health, including many tragic deaths worldwide. According to WHO ( and, counterfeit drugs may affect individual in a variety of ways, including adverse effects from incorrect active ingredients, failure to cure disease or prevent future disease, contributing to the progression of antimicrobial resistance and drug-resistant infections, and loss of confidence in healthcare professionals and healthcare systems.

The WHO estimated that between 72,000 and 169,000 children die from pneumonia every year after taking counterfeit drugs, and fake anti-malarial medication might be responsible for 116,000 deaths per year ( More specifically, about 60,000 children in Niger with falciparum malaria were treated with a counterfeit vaccine that only consisted of chloramphenicol and resulted in over 100 fatal infections ( A recent UK found that 32% of those who have bought counterfeit medicines have suffered a health issue subsequently (

Pharmaceutical companies are impacted by counterfeit drugs at several levels, including lost sales, damage to brand and reputation, and cost of implementing security measures and business practices to reduce the prevalence of counterfeit drugs. The impact to sales is not limited to the revenue that counterfeiters take away from brand owners. When a pharmaceutical brand is victimized by counterfeits, especially in the legitimate supply chain, consumers will look to avoid it, especially if there is a competitive medicinal alternative. A wide range of figures have been used to estimate the lost sales due to counterfeit drugs, ranging from $4.4 billion ( to $163 billion (, mostly because nobody knows the actual scale and penetration of counterfeit drugs in the global economy. Nevertheless, most pharmaceutical companies understand the seriousness of counterfeit drugs and have taken actions. A few leading pharmaceutical companies that are the prime targets of counterfeit drugs, such as Pfizer, Novartis, Roche, and Merck, have even included a paragraph on counterfeits in their annual reports to outline the risk and emphasize their commitments.

Not all drugs are counterfeited equally. Some brands, especially those blockbuster drugs, are more apt to be counterfeited than others. The reality is that a pharmaceutical company cannot protect every unit to the same degree. Risk differentiation is needed, utilizing factor like price, method of distribution and administration, temperature requirements, and black-market prevalence, etc., to rate brands. Once risks are identified, business justification for level of brand protection can be made.

Counterfeit drugs also impose negative impacts on governments. They divert resources away from treatment using genuine drugs and place the burden to treat adverse effects of counterfeit drugs on governments and healthcare organizations. Counterfeit drugs also mean loss in taxes and increased regulatory and law enforcement cost.

Origins and Distribution of Counterfeit Drugs

Counterfeit drugs are made on all continents with its own global supply chain. For example, a counterfeit medicine may be made in Asia and packaged in Africa with fake packaging from South America. India remains the top country who produces the most counterfeit drugs according to customs seizure data (53% of the total seized value of counterfeit drugs worldwide in 2016 was originated from India (, followed by China (30% for 2014-2016). Although smaller yet still significant numbers of customs seizures were found to originate from Hong Kong (China) and United Arab Emirates (4% of the total seized value for both for 2014-2016), further analysis suggested that these both appear to be the main transit points for counterfeit drugs shipped worldwide, followed by Egypt, Cameroon, and Turkey.

Mail and courier services have become the main modes of transport for counterfeit drugs traded worldwide. Instead of sending large quantity of counterfeit drugs at a time, counterfeiters now use small parcels to cloak their activities, taking advantage of the explosive growth in e-commerce, especially cross-border transactions by businesses and consumers on platforms such as Amazon, Alibaba, and eBay. This shift posted a significant challenge to customs authority, because they need to balance the needs for fast processing of all imports and the needs to catch counterfeit drugs. The US has passed the STOP Act in 2018 that requires foreign postal authorities to provide advance electronic data on all inbound packages or packets under 2 kg. Despite 100% compliance by foreign postal operators in China and Hong Kong (China) since 2018 (, the inflow of counterfeit drugs continues.

The Role of Internet for Counterfeit Drugs

The rapid growth of e-commerce is a boom for legitimate pharmaceutical products as well as for counterfeit drugs. Now counterfeiters can easily hide their true identity, misrepresent the counterfeits as genuine ones with minimal effort and investment, rake in handsome profit, and suffer almost no legal or financial risk.

It has been widely publicized that a super majority of online pharmacies are problematic. For example, the LegitScript study indicated that 96% of estimated 35,000 online pharmacies didn’t adhere to applicable legal requirements, and 92% of those operating illegally sell prescription drugs without a valid prescription ( The fact that those online pharmacies still exist and probably flourish today brings two questions. First, why do consumers continue to buy medicine online, knowing that they have a good chance to receive counterfeit drugs? Second, have governments and Internet authorities done enough to close those proven illegal online pharmacies to protect patients?

Surveys have been done to understand the reasons for the first question. The Alliance for Safe Online Pharmacies has conducted a consumer behavior and perception survey in 2017 with 500 people in Indiana ( A few findings are interesting:

  • Online pharmacy has room to grow: only 27% of respondents were very familiar with online pharmacies.
  • Consumers are happy: 74% of consumers who have purchased prescription medicines from an online pharmacy in the past would do it again. Not comfortable or do not trust online pharmacies accounted for only 22% of people who have not purchased prescription drugs online.
  • Safe list does not work: less than 5% of consumers are aware of or would use tools to find safe online pharmacies.
  • Consumers are doing it on their own: 88% of consumers who have purchased prescription drugs online did not discuss it with their healthcare provider. Price and insurance issues are the most common reasons for using online pharmacies.

Limitations of Existing Strategies

While the counterfeit drug problem is global and complex, innovative solutions have been developed continuously trying to reverse the tide. Despite areas of progress, the growing spread of counterfeit drugs continues. Two major limitations of existing technologies are: (1) some technologies are no longer effective. As bad as counterfeiters are, they are smart and resourceful. They have kept and will keep trying to defeat new anti-counterfeiting technologies as long as they can still make profit. Some brand owners have taken the multilayered approach, which deploy several authentication technologies (overt, covert, forensic) at once. Although it delivers better result, increased cost and complexity of field use may be of concern. Industry experts believe that to be effective, an anti-counterfeiting technology needs to be nearly impossible to duplicate and be as close to the medicine it protects as possible. (2) some technologies are too expensive for most brand owners, too laborious to use in real-time, not accurate enough, and/or too disruptive to existing business operations. Only after addressing the affordability, reliability, and usability issues can a technology be widely adopted. Compliance with the law is another important aspect to consider.

A Potential Winning Strategy

Now imagine a better-than-FedEx service at an affordable cost for every bottle/vial/blister pack of genuine drug. This service ensures that only genuine drugs are dispensed at pharmacies although they flow through a supply chain that is not completely secure. It has the same effect as when a genuine drug is hand-delivered by a trusted courier from its manufacturer to a patient. The following is how it might work.

Once genuine medicine is placed in a container at a packaging line, the container is sealed and tagged with a unique identifier-containing miniature DNA chip. Any attempt to open or damage the container will destroy the chip and the ability to read the chip, rendering the container and its content unsalable. This is better than a human courier, because a DNA chip and a tamper-proof container can’t be bribed.

At a packaging line, multiple containers are placed into a package, which is sealed and also tagged with a DNA chip. The coupling of unique identifiers in DNA chips for a container and its package means if a container is subsequently taken out of a package and repackaged, this change can be immediately detected when DNA chips on containers and package are read. This is likely to give a severe headache to those who are involved in drug theft and/or illegal diversion, because they frequently rely on clever repackaging to sell stolen/diverted drugs outside of intended territories.

As a package travels through the supply chain, its whereabouts are captured and tracked with each read of the DNA chip attached to the package and stored in a blockchain in a cloud-based database. The reading is performed by a smartphone app and assisted by a smartphone case. Because each smartphone app has a unique identifier linked to a supply chain personnel, these chip reads automatically establish transaction history that not only satisfies various government regulations but also provides real-time visibility to supply chain partners.

When a container arrives at a brick-and-mortar pharmacy, its integrity and authenticity are verified for the last time before the container is opened, its content is dispensed, and the DNA chip is destroyed. On the other hand, when a container arrives at an online pharmacy, before a patient pays for it and its content, the patient may request a reading of the DNA chip. Once the patient receives the still sealed and intact container, another reading of the DNA chip absolutely confirms the genuineness of the medicine. 

The above process will work only if (1) the DNA chip can’t be reproduced by counterfeiters; (2) the container is indeed tamper-proof; (3) DNA chip reading is 100% accurate; (4) DNA chip is affordable for large-scale deployment; (5) the attachment of DNA chip minimally impacts the packaging line efficiency; (6) DNA chip reading can be done in seconds with handheld devices such as smartphones; and (7) DNA chip reading is as simple as a 2D barcode reading thus manageable by supply chain personnel and the general public.

The encryption on data stored in DNA chip can be made practicable unbreakable by employing a DNA/digital double encryption scheme. Besides robust digital encryption techniques such as 4096-bit RSA, 256-bit AES, and 256-bit elliptic curve cryptography that are used by banks and governments, a novel DNA-based encryption means counterfeiters have to spend their collective lifetimes and the lifetimes of billions of people working in biological laboratories with sophisticated equipment to systematically crack the encryption. Who want to work that hard? Realizing that they can’t fake the DNA chip, counterfeiters will try to sidestep it by attacking the container while keeping the DNA chip intact. However, it is not possible because the container and the DNA chip are integrated seamlessly so tampering will destroy the chip.

Many real-world factors influence the reliability of DNA chip reading and must be accounted for. DNA is known to be stable for hundreds or thousands of years under dry ambient conditions. It is embedded inside a DNA chip thus well protected against scratch, dust, wind, etc. Signal obtained from chip read, which is in the form of an image, is processed by an machine learning-augmented image processing algorithm along with an error correction algorithm. As a result, 100% accuracy of chip read can be achieved.

The technology can be affordable for most brand owners by using existing mass-produced materials and clever engineering so that millions or even billions of DNA chips can be made every year without heavy capital investment. As a result, many brand owners are willing to try and subsequently see significant positive return on investment. Only then this technology can take off.

The remaining usability issues are easier to address: The integration of container and DNA chip means that existing packaging lines should be able to handle the deployment of this technology without expensive reconfiguration. Each DNA chip read only takes a few seconds with a single manual operation, which is to press the smartphone to a DNA chip. Even a 5th grader knows how to do it.

In summary, if implemented successfully, the novel DNA/digital authentication technology as described above has the potential to effectively address the existing counterfeit drug problem in a meaningful way and send a clear message to counterfeiters: give up or fake something else.

Europol on Counterfeits in COVID-19 Pandemic

While the world is suffering because of the COVID-19 pandemic, counterfeiters and criminals have lost no time to exploit and profit from this dire situation. On April 17, 2020, the European Union Agency for Law Enforcement Co-operation (Europol) published a report describing key findings on counterfeits, substandard goods, and intellectual property crime in the pandemic in the European Union (EU).

The most concerning aspect is the counterfeiting of pharmaceutical products that are considered as treatment options to fight the COVID-19 infection. For example, chloroquine is regularly used to treat malaria but has shown promise against COVID-19 in some patients. “Counterfeiters and fraudsters quickly started offering chloroquine either to distribute counterfeits of the substance or as part of scams”, the report stated. The drug is offered on many online platforms as well as in instant messaging apps, posting potential severe health risk to our society. Many websites were also found to sell fake COVID-19 home test kits and face masks.

Panic buying of certain food such as meat, flour, and milk during the early phase of the pandemic has caused a temporary shortage and created an opportunity for counterfeiters. Europol found that “Food and other related counterfeit and substandard products are offered via dedicated websites as well as through listings on other platforms including social media platforms. These products are also found on the dark web marketplace”.

Heightened criminal activity during this trying time calls for more effective anti counterfeiting technology, especial solutions such as Helix Shield that offer online brand protection and supply chain traceability. Counterfeiter’s golden days are numbered.