Wednesday, December 17, 2008


By Patricia A. Earl,
Executive Strategist
VP Business Development
XStream Systems, Inc.

As succinctly stated in the earlier blog post, it is a near certainty that the United States pharmaceutical industry will face growing counterfeiting issues in the coming years.

These increasing occurrences will impact the industry in a number of important ways. The primary, and most obvious, concern is the liability problem. Trial lawyers have eagerly pursued businesses throughout the chain of custody when filing claims in other product liability areas.

A second issue regarding counterfeiting is integrity. From a professional and personal standpoint, members of the pharmaceutical industry do, and should, want to assure the end users of the products that they are safe and effective. Add to this the desire for safety and efficacy in a regulatory environment that when functioning properly will demand accountability. When companies within this industry sell or distribute products, they should be exactly what the customer expects.

The third issue is trust…and reliability. In order for our industry to grow effectively and for each of our companies or institutions to thrive, our customers must be able to trust us and the products that we deliver. Counterfeits, regardless of where they exist in the distribution chain, undermine the customers’ faith in the industry as a whole.

A final issue that I wish to discuss is the possibility of government intervention in the pharmaceutical distribution process. If counterfeiting becomes more prevalent and risks to patients are growing, then Congress, the Executive branch and its regulatory agencies will face increasing public pressure to “do something.” In this scenario is likely that they will respond with knee jerk mandates. Given government history in other industries, those mandates can be too severe, and at the same time, generally ineffective.

Finally, the pharmaceutical distribution chain should address a proactive posture to assure the integrity of the product. If done thoughtfully, this would limit liability, maintain integrity, enhance trust and reliability and, perhaps, preempt overreaching government meddling. Leaders in the pharmaceutical industry should implement counterfeit detection technology now to protect our reputations and our bottom lines.

Friday, December 12, 2008

When, Not If, a Major Pharmaceutical Counterfeit Incident Will Impact the US Supply Chain In 2009

By: Alan Clock, Senior Vice President, XStream Systems, Inc.

As I have traveled around the country speaking with many pharmaceutical industry and supply chain thought leaders in 2008, it seems apparent to me that all those in the know realize that the United States will shortly be facing a major health care crisis caused by the introduction of large amounts of counterfeit pharmaceuticals into the supply chain.

The question among these leaders is not if, but when.

I am predicting something in 2009. And it won’t be something as subtle as the counterfeit heparin which officially wasn’t a counterfeit, but poor manufacturing process caused by counterfeit raw materials. The number of casualties will go well beyond the 250 or so officially considered killed by the bad heparin. I am guessing we in the United States will be dealing with something that will affect thousands of lives this time. Unfortunately this incident or number of incidents, will force many within the industry and regulatory agencies to finally act aggressively and begin doing things that will actually solve the problem.

Just for the record, I consider counterfeit raw materials a counterfeit and officially labeling it otherwise does not make the consequences any less deadly. I don’t believe officials will be able to pass the next incident off as bad manufacturing practices, because likely it will not be quite as subtle.

I don’t like to predict doom and gloom, but my outlook for this healthcare issue is based on some pretty significant evidence that points me to this ultimate conclusion.

• The continued rise in the estimated counterfeit percentage of the supply chain globally. Most experts believe that globally, in third world and developing countries that up to 50% of the medication within their supply chain is counterfeit or adulterated.

• The rise in percentage of counterfeit and adulterated medications in the supply chain in non-third world countries. Some European countries estimate averages above and beyond 10% of the medications within their supply chain are counterfeit or adulterated.

• The fact that over 90% of the raw materials and 60% of the production of medication globally (including Europe and the United States) is now done in countries with some of the highest rates of counterfeit medications within their supply chain.

• High death rates in Africa and Asia based on either the consumption of counterfeit or adulterated medications or diseases like malaria which were not properly treated because of counterfeit or adulterated drugs.

• The FDA hastily opening three major field offices in China and the deployment of thousands of inspectors overseas in an overt but questionable effort to somehow police hundreds of thousands manufacturers and suppliers importing billions of tons products into the United States into hundreds of ports of entry.

• The fact that nearly every major pharmaceutical manufacturer and pharmaceutical distributor in the United States has had to deal with significant liability because of a counterfeit or adulterated medication within their brand or distributed through their companies. The reality is though even after spending millions in attorneys, court cases and settlements there is still not a significant deterrent or protection of their inventories, in fact now given the increased globalization these same entities are in fact more vulnerable now than they were ten years ago.

• The global economy as it continues its slide will continue to fuel individuals and well financed organizations to continue their harmful but profitable enterprises of counterfeiting medications.

• Finally and of most significance to me is the fact that when XStream deployed an XT250 system within a small secondary distributor in the Southeast United States, our system discovered four individual counterfeit medications within the first sixty days of authenticating their inventory.

There are many more “signs” or evidence that I could point to but I think that I have made my point. This is one of those "perfect storm" issues where all of the elements of a significant disaster seem headed for a major collision and the United States consumer is the tiny boat hoping to stay afloat and above water.

I hope I am wrong, but unfortunately, I know I am right. Maybe not about the exact date but now it is a matter of when, not if.

About the author: Alan Clock is a veteran of over 20 years within the pharmaceutical industry. He has served in senior positions with pharmaceutical distribution companies and disease management organizations. He is currently the Senior Vice President of XStream Systems, a high tech start up focused on a revolutionary solution to the authentication of pharmaceutical products within their sealed unit of sale. He can be reached at For more information on XStream visit their website at

XStream Systems Stories and News for the Week of December 12, 2008

Here are a few of stories that we at XStream Systems think are noteworthy as it relates to counterfeited, adulterated and contaminated medicinal products:

Starcaps Dietary Supplement Capsules Found to Contain an Undeclared Drug Ingredient
The recall is effective immediately and is being undertaken because these lots of STARCAPS contain an undeclared drug ingredient- Bumetanide – a diuretic available by prescription only. Bumetanide is also not listed on the product label as an ingredient in this product.

The company’s investigation to date has indicated that an additional lot of raw material intended for use in the production of STARCAPS which has been stored in sealed drums since the time of its importation into the U.S. is also contaminated with Bumetanide. This information seems to indicate that the contamination occurred at the point of production of the raw material in Lima, Peru.

China blacklists 74 websites selling fake herbal drugs
China's traditional medicine watchdog has issued a blacklist of 74 Beijing-based websites suspected of selling fake herbal medicines online and warned consumers not to buy their products.

Herbal medicine is a huge industry in China with sales in the first 11 months of 2007 totaling 118 billion yuan (17.1 billion dollars) and up to one billion dollars of these sales were overseas sales, according to the Hong Kong-based consulting firm China Commodity Marketplace.

Sierra Leone: Le 1 Billion Fake Drugs Destroyed
Freetown — Ministry of health and sanitation has teamed up with the pharmacy board to dispose of more than Le1 billion worth of counterfeit, substandard, expired and fake drugs.

Thursday, December 11, 2008

Communication is the key – How is the FDA extending communication on Threats to Public Safety?

To better reach the public on safety issues throughout the pharmaceutical supply chain, the Food and Drug Administration (FDA) is collaborating with WebMD. This will allow the FDA to expand its Consumer Health Information and give the consumers important information on product recalls and emerging public health safety issues in a timely manner.

FDA’s website currently gets 6 million viewers a month from the regulatory pharmaceutical industry while the WebMD site is geared to consumers and gets 49 million viewers a month.

This extends the FDA’s current efforts in consumer communications such as “Andy’s Take” which is a weekly online audio broadcast on the FDA initiatives in ensuring public safety.

Consumers can access the latest FDA information on WebMD’s “Protect Your Health” page. Information is provided for food safety, medication safety, cosmetic safety, product recalls and a guide to reporting problems to the FDA.

We, at XStream Systems applaud the FDA on their expansion of communication with the general public. This combined with patient’s ability to communicate problems back to the FDA completes the two-way communication needed between patients and the authority that regulates their medications.

Friday, December 5, 2008

Are Counterfeit Drugs in the U.S. Supply Chain?

The general consensus has always been that only a small amount of counterfeit drugs are in the domestic supply chain. True relatively speaking, the percentage of counterfeits found in the United States is lower (estimated at around 1%) than some underdeveloped countries (estimated as high as 50%).

However, this does not paint the whole picture… The U.S. has almost 43% of the market share, which means there are still thousands of counterfeit pills in our distribution cycle. To the consumer that is a victim, it matters not whether he is in the company of many fellow victims or only a few.

Furthermore, the frequency of counterfeits is increasing in more developed countries such as the U.K and the U.S. Now, incidents are showing up in the regular supply chain as you can see from the following news items:

First Foreign National Extradicted For Importing And Distributing Counterfeit Pharmaceuticals Drugs In U. S. Sentenced To Prison
Randy Gonzales, 40, a citizen of the Republic of the Philippines, was sentenced to prison for his role in a scheme to manufacture, import and distribute counterfeit pharmaceutical drugs in the United States.

Gonzales was extradited to the United States from Bangkok, Thailand on March 26, 2008 and indicted four days later. Special agents of the Immigration and Customs Enforcement (ICE) and the Food and Drug Administration Office of Criminal Investigations (FDA)seized more than 60,000 counterfeit Viagra pills and 15,000 counterfeit Cialis pills. The counterfeit drugs were valued at more than $776,000.

Miami Man Sentenced To 20 Years For Massive Drug Diversion Operation
A Miami man has been sentenced to 20 years in prison for running a massive drug diversion operation that made millions of dollars in illegal profit. Jose Luis Perez, 52, had illegally bought expired, counterfeit or adulterated medicines, relabeled them and shipped them through a series of his own pharmaceutical firms in order to sell them to mainstream suppliers.

Investigators were tipped off by a Cincinnati pharmaceutical wholesaler who, while filling a prescription, noticed that the wrong pills were inside and the accompanying paperwork was for a different drug.

At Perez’ Hialeah warehouse, law enforcement officers found $500,000 of prescription pills used for the treatment of HIV-related illnesses, Schizophrenia and erectile dysfunction. Law enforcement also found counterfeit labels and prescription paperwork for more that $8 million-worth of pharmaceuticals.

Local pharmacist, businesses disciplined by state
(Nov. 30, 2008; The Telegraph) In 2006, Hudson resident Richard Minasian, owner of Nashua-based Armin Medical LLC, pleaded no contest in a Florida court that he and a Miami man had sold drugs with fake pedigrees.

That same year, the New Hampshire Board of Pharmacy revoked Minasian's license to sell drugs for at least 10 years, and he was assessed a $29,000 fine, but $20,000 of it was stayed for two years pending good behavior.

As these stories indicate, government intervention is gearing up and we at XStream Systems applaud the increased authority given to FDA and law officials to seize products and prosecute criminals. But the reality is that these undercover operations often take a year or more to complete. During this time consumers, wholesalers, and repackagers are exposed.

Now is time for businesses to protect themselves and their customers by effectively securing their on-site inventories. It is too late to hide our heads in the sand and deny that counterfeits exist – they do and what are the implications for you if they unknowingly pass through your hands!

Thursday, December 4, 2008

Diethylene glycol, killer on the prowl

Nigerian death toll rises in tainted infant teething drug

The latest victims to greed are the smallest among us…….

Over 45 babies have died in Nigeria from the tainted teething syrup, "My Pikin Baby Teething Mixture". The medicine is contaminated with diethylene glycol, causing kidney failure in the children who died.

The National Agency for Food, Drug Administration and Control (NAFDAC) has shut down the manufacturer of "My Pikin", Lagos-based Barewa Pharmaceuticals, as well as a company called Tranxell Ltd, which is believed to have supplied chemicals to Barewa and possibly to other local drugs manufacturers.

Diethylene-glycol-contaminated products have had a long history in dealing death. This chemical, which is used in antifreeze, is sometimes added illegally as a cheaper sweetener or thickening agent with deadly results.
So deadly in fact, that the catastrophic deaths following its first use in medicines led to the passage of the 1938 Federal Food, Drug, and Cosmetic Act.

In 1937 more than 100 U.S. citizens, many of them children, died when diethylene-glycol was added to an antibiotic to make the liquid form, Elixir Sulfanilamide.

And their deaths were painful as noted in a grieving mother’s letter to President Franklin D. Roosevelt:

"The first time I ever had occasion to call in a doctor for [Joan] and she was given Elixir of Sulfanilamide. All that is left to us is the caring for her little grave. Even the memory of her is mixed with sorrow for we can see her little body tossing to and fro and hear that little voice screaming with pain and it seems as though it would drive me insane. ... It is my plea that you will take steps to prevent such sales of drugs that will take little lives and leave such suffering behind and such a bleak outlook on the future as I have tonight."

According to the World-wide Organization of the Health during the 1980's and 1990's more than 600 people were killed by this type of contamination.

Furthermore it continues still today and is becoming more prevalent. In 2007, Diethylene glycol was found in contaminated toothpaste manufactured in China. Over a hundred people died in Panama. That same year The New York Times reported that about 900,000 tubes turned up in the United States, including correctional facilities, juvenile detention centers, and some hospitals, as well as discount stores.

In today’s global economy ingredients can be manufactured anywhere and consumers rely on companies to look out for their safety. Authentication of raw materials is essential to ensure the safety of consumers and mitigate the risks of contamination to the finished product.