Report Examines Adulteration, Counterfeiting of Products

The Grocery Manufacturers Association (GMA) and A.T. Kearny, very diligently lay out an excellent industry primer for the various members of the supply chain to learn about the impact and economics of adulteration and counterfeiting of products in a recently released study.


The report, Consumer Product Fraud: Deterrence and Detection, suggests that a shared library of ingredient data could reduce analytical costs and increase quality.

GMA and A.T. Kearny estimate the economic adulteration and counterfeiting of global food and consumer products is expected to cost their specific industry $10 to $15 billion a year.

Sales of counterfeit drugs world wide are estimated by the World Health Organization at reaching $75 billion in 2010.

According to the study, "the cost of one adulteration incident costs a company between 2% to 15% of its annual revenues depending upon the size of the company. This translates to $400 million to a $10 billion dollar company and $60 million to a smaller $500 million dollar a year company."

The GMA study obviously centers primarily on the food and consumer products industry but has relevance and great insight for nearly all industry supply chains as it relates to effective strategies and the economics on counterfeit products. Much can be taken by other consumer related industries, like Pharma, including relevant statistics.

Secure Pharma Chain Blog highly recommends that all members of the supply chain, manufacturers, distributors and dispensers read this report as an introduction into crafting tactics and policy towards dealing with fraudulent, adulterated and counterfeit products.

To read the report, visit: http://www.gmaonline.org/publications/consumerproductfraud.pdf.



To learn more about technologies and solutions that can effectively protect consumer product supply chains, visit: http://www.xstreamsystems.net/.

Fake FDA Agents Pursue Consumers for Bogus Drugs

The FDA is warning the public about an international extortion scam by criminals posing as FDA special agents and “fining” consumers who purchased drug online or via telepharmacies. The FDA press release appears below:

FDA Warns Public of Continued Extortion Scam by FDA Impersonators

The U.S. Food and Drug Administration is warning the public about criminals posing as FDA special agents and other law enforcement personnel as part of an international extortion scam.

The criminals call the victims -- who in most cases previously purchased drugs over the Internet or via "telepharmacies" -- and identify themselves as FDA special agents or other law enforcement officials. The criminals inform the victims that purchasing drugs over the Internet or the telephone is illegal, and that law enforcement action will be pursued unless a fine or fee ranging from $100 to $250,000 is paid. Victims often also have fraudulent transactions placed against their credit cards.

The criminals always request the money be sent by wire transfer to a designated location, usually in the Dominican Republic. If victims refuse to send money, they are often threatened with a search of their property, arrest, deportation, physical harm, and or incarceration.

"Impersonating an FDA official is a violation of federal law," said Michael Chappell, the FDA's acting associate commissioner for regulatory affairs. "The public should note that no FDA official will ever contact a consumer by phone demanding money or any other form of payment.”

FDA special agents and other law enforcement officials are not authorized to impose or collect criminal fines. Only a court can take such action, with fines payable to the U.S. Treasury.

Anyone receiving a telephone call from a person purporting to be an FDA or other law enforcement official who is seeking money to settle a law enforcement action for the illegal purchase of drugs over the Internet should refuse the demand and call the FDA’s Office of Criminal Investigations Metro Washington Field Office at (800) 521-5783 to report the crime.

In addition to posing as FDA officials, criminals have posed as special agents of the DEA, FBI, U.S. Secret Service, U.S. Customs Service, as well as U.S. and Dominican prosecutors and judges. In response, the FDA, in conjunction with various federal, state, and local agencies, is actively pursing criminal charges.

The FDA also reminds consumers to use caution when purchasing prescription drugs over the telephone or the Internet. In addition to the increased risk of purchasing unsafe and ineffective drugs from Web sites operating outside the law, there is the danger that personal data can be compromised.

For more on FDA’s concerns about unlawful drug sales on the Internet, see http://www.fda.gov/ForConsumers/ProtectYourself/default.htm.

Contract Pharma: Assuring Quality in the Global Supply Chain-Measuring Risk in Sourcing

In the September 2009 issue of Contract Pharma magazine, Helena Champion the Principal Consultant with Drug Quality Assurance LLC, writes a must read article for senior to mid level pharmaceutical executives about dealing with the risk of quality assurance of pharmaceuticals in this era of globalization of the pharmaceutical supply chain.

As posted on previous stories and blogs at Secure Pharma Chain Blog, the issue of the globalization of the pharmaceutical supply chain has led to a worldwide epidemic that affects the quality of medications and a proliferation of counterfeit drugs.

XStream Systems endorses the concept that both private industry and government regulatory agencies use technology such as XStream’s XT250 to screen, authenticate and verify the contents of products within the supply chain from the point of production to the consumer. The use of a material screening process, which verifies the material inside its unit-of-sale container, enables the entire supply chain to mitigate its liability and ensures the consumer that the product is safe and efficacious.

In the article titled Assuring Quality in the Global Supply Chain-Measuring Risk in Sourcing, Ms. Champion outlines a compelling history and case for quality assurance measures along with a Supplier Risk Scoring Tool for use by a Material Supplier/Provider Combination. Ms. Champion states in the introduction that, “this article explores the risks of depending, without reliable verification, on remote suppliers to maintain the quality and safety of their supply chain and the materials we buy from them.” Although Ms. Champion primarily focuses on manufacturing, much of her article is relevant and could be applied and used by members of any supply chain-from production to dispenser.

Here are some of interesting portions pulled from Ms. Champion’s article:

• Heparin Tragedy-In early 2008 there were numerous adverse events, some fatal associated with Baxter International’s heparin parenteral products and they voluntarily recalled nearly all their heparin products in the United States…at least 80 people in the United States died from contaminated heparin products.


• Experiences in Other Industries-Experiences in other industries moving production and supply to low-cost suppliers have not been very different from the heparin experience. The Economist recently reviewed a book by Paul Midler, Poorly Made in China: An Inside Account of the Tactics Behind China’s production Game. Mr. Midler is fluent in Chinese and has consulted in China since 2001 for Western companies replacing factories in Europe and America with sub-contracting relationships in China. His Western clients were delighted with how Chinese factories could do things so well, so fast and so cheaply, but were puzzled as to how this was possible. There was reason to question the low prices-he soon found that “quality fade” was common, as Chinese factories transformed what were, in fact profitless contracts into lucrative relationships.


• Even if test are made more specific, third party testing is certainly not enough to assure the quality of pharmaceuticals and especially biologics and biopharmaceuticals.


• The tryptophan dietary supplement disaster over 20 years ago provides an example of the risks of changing a process without extensive testing to validate the new process-a manufacturer made a change to the process and did not anticipate that a very toxic impurity would result, which killed at least 37 people and permanently disabled more than 1,500 people in the United States.


• The existence of a United States affiliate or a United States Agent does not guarantee real knowledge of the supply chain or its integrity.


• Economic fraud is not new and nor is it confined to any one country or industry…In the 1990’s Flavine International, a NJ-based broker of bulk drugs, bought bulk gentamicin sulfate at low prices from unapproved sources in China. Flavine repackaged the bulk drug to resemble gentamicin sulfate manufactured by Long March Pharmaceutical...there were a number of adverse events linked to drug product made with the counterfeit gentamicin…Flavine, its owner and its vice president were fined and the owner got a two-year prison sentence.


• You are Responsible For Your Supply Chain-It has become obvious that companies in general need to know much more about their supply chains than in the past and that there are hazards in taking supplier information at face value.


• Five Steps To Achieve and Maintain Comprehensive Supplier Qualification:

Step One-Quality in Depth, A company needs to perform a comprehensive, in-depth evaluation of a supplier for a particular material. API and component manufacturers often do not allow a customer to audit their operations in detail, to protect proprietary knowledge and confidentiality, but a superficial audit is no long a viable approach.

Step Two-Use Experienced, Technically Expert Auditors to Perform On-Site in Depth Audits-They Can Change the Game

Step Three- Need to Identify and Audit the Upstream Supply Chain for Critical Materials - Audits conducted by You or Your Agent

Step Four-Trust But Verify Regularly, After initially qualifying the supplier of an API or components and demonstrating that the supplier can consistently provide material that meets specifications, drug product and device manufacturers still need to regularly check supplier compliance through reliable means.

Step Five-Management Responsibility to Understand and Mitigate Supplier Risk, Senior management should be informed and updated regularly as to the security and integrity of critical supply chains.

• The best suppliers will accept the new reality of increased transparency, and brokers and distributors who can establish and guarantee the level of quality assurance associated with more rigorous auditing and supply chain verification will be invaluable.

Written for and from the standpoint of quality assurance at the point of manufacture, this very detailed article gives a solid roadmap for executives and managers to gauge and or build a process that protects their supply chains and begin to understand the potential for catastrophic consequences economically and to the general health of a population if they do not take the issue seriously.

Not mentioned by Ms. Champion in this article is the role that technology can be deployed and used to screen and protect manufacturers, packagers, distributors, dispensers and ultimately the consumers in authenticating at each step of the supply chain the veracity of their products. By using the processes described in the article with a suite of technology it is possible for the supply chain to protect itself from the various nefarious sources that threaten it.

To read Ms. Champion’s article in full in the September 2009 issue of Contract Pharma, visit their website at: www.contractpharma.com.

To learn more about XStream Systems and its revolutionary technology that allows the pharmaceutical supply chain to verify and authenticate materials inside their sealed unit-of-sale container, visit their website at: www.xstreamsystems.net.

FDA: Supplier Audits, Qualification Needed to Protect Supply Chain

At the Parenteral Drug Association-FDA 2009 Joint Regulatory Conference the FDA was on record stating that manufacturers should secure their supply chains through testing and anticipate risks to head off issues like the recent contamination of imported ingredients.

Steven Wolfgang, FDA Consumer Safety Officer is quoted as saying, “ the FDA is looking more closely at quality management systems as a first step toward that goal.”

This reinforces XStream’s position that material screening should be done throughout the supply chain to verify and authenticate materials from raw materials, to production, through distribution and to the point of dispense. Material screening is the most effect way to make certain that the product is protected and maintains it effectiveness to the consumer.

XStream’s XT250 solution allows the entire supply chain to quickly screen products, within the supply chain, inside it unit-of-sale container without degradation or the destruction of the material.

To view more about the FDA statement, follow this link: http://www.fdanews.com/newsletter/article?articleId=120738&issueId=13038

To learn more about XStream’s XT250 system, visit: www.xstreamsystems.net.

New England Journal Medicine: Multinational Medicines — Ensuring Drug Quality In an Era of Global Manufacturing

In the August 20, 2009 issue of the New England Journal of Medicine, Susan Okie, MD writes about the emerging health care issue regarding the quality of branded and generic drugs in the new era of a globalized pharmaceutical supply chain.

In this new global economic age, Dr. Okie describes the problem and proliferation of a major global health care epidemic due to quality control and fraudulent prescription medications that are manufactured overseas in countries with a poor record of quality processes. In the article Dr. Okie also writes about the challenge of regulation and oversight as many pharmaceutical manufacturers and providers move their supply chain overseas to make and procure medications.

One of the more disturbing examples of the potential danger of lack of quality oversight regards the super potency of Digitek in 2008:

"…FDA’s Adverse Event Reporting System (AERS) contains data on adverse reactions to medications in a self selected subgroup of an exposed population of unknown size. In April 2008, the FDA and Actavis Totowa, the manufacturer of Digitek, a widely prescribed generic digoxin, announced a nationwide recall of 800 million tablets, triggered by concern that double-thickness tablets containing twice the approved dose might have been released commercially. Between April and September 2008, AERS received reports of 2,912 serious injuries and 1,094 deaths associated with digoxin, about 80% of them linked to the recalled product. Thomas Moore and colleagues at the nonprofit Institute for Safe Medication Practices have called for systematic testing of the recalled tablets, commenting that “if many of these cases prove to be linked to manufacturing problems, then the nation has experienced a little noted drug disaster of major proportions.”

As have been reported in this blog for sometime the incidents of recalls related to lack of quality control and oversight connected to product production has spiked in the past several years and according to Dr. Okie may continue to increase due to the FDA’s lack of resources.

XStream Systems endorses the concept that both private industry and government regulatory agencies use technology such as XStream’s XT250 to screen, authenticate and verify the contents of products within the supply chain from point of production to the consumer. By using a material screening process, which verifies the material inside its unit-of-sale container, the entire supply chain mitigates its liability and ensures the consumer that the product is safe and efficacious. The current costs of the issue of poor quality medications within both the supply chain and the health care of the consumers, seems nearly impossible to effectively gauge or predict but it seems reasonable that whatever the price, the costs in both dollars and human suffering are far too high. Through proper verification within the supply chain, XStream feels that many of these incidents can be averted and the health care of the consumer protected.

To view Dr. Okie’s article in the August 20, 2009 issue of the New England Journal of Medicine, visit their website at: http://www.nejm.org/.

To learn more about XStream Systems verification technology, visit: http://www.xstreamsystems.net/.

IBM Study: Pharma Executives Concerned About Supply Chain Safety

Supply chain executives at pharmaceutical and life sciences companies are increasingly concerned about the risk of counterfeit drugs and contaminated medications amid the complexity of global manufacturing, according to an IBM study.

In a September 9th, press release by IBM, the company describes how they conducted a study which surveyed executives at pharmaceutical, biotechnology, medical device and consumer health care industry companies who are responsible for planning, logistics, procurement and coordination throughout the life of a drug or medical device. Here are some of the key findings from the study:

• Reducing the risk of counterfeit drugs and contaminated medications amidst the complexity of global manufacturing are among the top concerns of the pharmaceutical and life sciences industries today.
• Tracking every step of how drugs are manufactured and distributed are key priorities for more than 70 percent of companies.


• Monitoring risk to prevent counterfeiting, drug and device recalls, or even the loss of intellectual property, is a priority for 75 percent of executives, as margins become slimmer and supply chain complexity rises. Three-quarters have risk and performance initiatives such as surveillance programs, anti-tamper devices and specialized labeling, but with mixed results.


• 46 percent consider vendor-managed inventory for their customers extremely effective but only 4 percent use it to ensure they are precisely meeting customer demands for products.


• Compared to 18 other key industries, the life sciences business is one of the most highly globalized, particularly in the area of Research and Development. From a supply chain perspective, the industry is not as advanced. In general, global sourcing brings with it challenges including daunting capacity, quality, lead times and delivery issues.


• For the life sciences industry, seventy-six percent of respondents suffer quality issues linked to global sourcing while nearly fifty percent reported increased sales from their globalization efforts due to the growing population of consumers in rapidly developing markets.


• "As the industry faces a time of transition, supply chain executives are outsourcing more business processes, turning to emerging markets and becoming more globally integrated, all while actively managing risk," said Dr. Philippe Cini, IBM Global Business Services, Life Sciences Supply Chain Management Partner.


• Counterfeiting is one of the biggest risks facing the pharmaceutical industry today. According to the World Health Organization, approximately 10 percent of the worldwide drug supply is counterfeit. To combat such risks, sophisticated simulations and data models help companies calculate risk, and building intelligence into products and packaging such as barcodes, RFID tags and other smart devices, supply chain executives can prevent theft. This type of new intelligence along with e-pedigree and track-and-trace capabilities also enables the entire supply chain to respond quickly in the event of a recall.

The study -- "The Smarter Supply Chain of the Future: Life Sciences Edition" -- was developed by IBM Global Business Services' Supply Chain Management Practice in conjunction with the IBM Institute for Business Value, which develops fact-based strategic insights for senior business executives.

While XStream endorses this study, much of IBM’s conclusions regarding the solution to supply chain safety center on taggants and smart track and trace solutions. XStream acknowledges that these are a part of the overall solution but also believes that it is also crucial for the entire supply chain to incorporate materials authentication and verification into an entire suite of solutions to monitor quality, handling, fraud and counterfeiting. Sophisticated supply chains not only require knowing where a product has been, but what is in package.

To view the press release visit: www-03.ibm.com/press/us/en/pressrelease/28352.wss
To learn more about XStream Systems’ solutions, visit: http://www.xstreamsystems.net/

Pharmacy Industry and Regulatory Mimic Our Warning During This Flu Epidemic

Earlier this week, XStream warned in several of its blogs about the risks of scammers, spammers and counterfeiters taking advantage of the Swine Flu Pandemic to exploit the public into buying their disreputable fakes and forgeries on-line.

It would appear that now healthcare officials around the globe are similarly offering their own warnings to the public at large. The Royal Pharmaceutical Society of Great Britain (RPSGB) is offering their warning in an article that appeared in healthcarepublic.com news.

David Pruce, Director of Policy at the RPSGB stated: “ With the current fears about swine flu, we are concerned that unscrupulous people are exploiting the public’s fears about swine flu by offering to sell the antiviral drugs Tamiflu and Relenza over the internet. This is a golden opportunity for counterfeiters to offer fake supplies of these drugs. People can be at real risk if they buy medicines from unknown sources.”

As stated before, it is critical that consumers and those within the supply chain use common sense and professional ethics when dealing with this global epidemic. Many are out to scam you with fraudulent product:

1. Only buy from legitimate pharmacies, licensed in your state or country.

2. Do not buy from any on-line pharmacy that does not require a prescription.

3. If the price or deal sounds too good to be true, it probably is.

4. Professionals within the supply chain should only deal with the drug manufacturers or reputable suppliers.

5. They should have a verified pedigree of the product and verify the authenticity of the drug with a materials identification system.

6. Distributors and Providers should not be accepting returns on these products during this pandemic.

In the 21st century we live in a global economy that is connected at light speed via the internet. There are few barriers to being caught up in these scams outside of your own common sense. Buyer beware!

Origin of Our Medicine - Does the Consumer Have a Right to Know?

The following is a summary of an editorial that appeared in the Los Angeles Times about the transparency of the global supply chain and more specifically the pharmaceutical supply chain.

We feel that it is important for the safety and security of the American Consumer to understand the extent of how many global imports affect their health and the need for adequate measures to secure them. Many of the products that we consume in the United States come directly or indirectly from countries whose track record on adulterated raw materials and counterfeit products is incredibly poor. How many contaminated or fraudulent products exist within our supply chain and what can we do to protect ourselves from them?

Before I pop this pill, I'd like to know where it came from
(Summary of an editorial by David Lazarus that appeared in Los Angeles Times March 22, 2009)

In his editorial, David Lazarus discusses the issue of the consumer’s right to know not only where their food comes from, but also pharmaceuticals. To prove his point he follows a rather in depth search for the origins of his Sunmark pain reliever, a generic equivalent of extra-strength Tylenol.

He shares with his readers some interesting little know facts he learned along his quest, for instance:

“What I did learn, though, is that more than half of the world's aspirin now comes from China, as does more than a third of acetaminophen and almost all synthetic vitamin C. Chinese drug imports into the United States top $700 million a year.”

He uses two recall examples to emphasis why consumers should be aware of where their medicines originate. One is the recent recall of heparin that occurred last year after more than a dozen deaths. In this case an adulterated ingredient was traced back to Shanghai, China. The second is a recall which occurred in 2006 by Perrigo, one of the world's largest manufacturers of store-brand over-the-counter medicines. Perrigo recalled 11 million bottles of acetaminophen sold under various brands due to small metal fragments which were discovered in some batches. The cause was stated as raw materials obtained from a third party, but Perrigo would not comment on the name or location of the party.

Finally, he gives his suggestions on what he sees as critical information that should be listed on each label. This is necessary in his opinion because as he states: “I'm not saying that drug makers should be required to do everything in-house. But as a consumer, I'm entitled to know exactly what I'm putting in my mouth and how it got there.”

To view the entire editorial, visit the Los Angeles Times at www.latimes.com.

How do Recalls Affect Consumer Loyalty?

A new study release by Deloitte shows that safety issues costs companies millions of revenue dollars. The study shows that when consumers hear of product safety and/or quality issues, more than half of them switch products for nine months or more, increasing the likelihood that they would discontinue the brand use entirely.

Modern consumers are less tolerant of recalls and over 49 percent are extremely concerned with product safety. Those population segments with the greatest concern are women (53%) and seniors (56% of those over the age of 55).

In addition, recent recalls from China have left the public with a distrust of items manufactured there. Over 73 percent stated they were extremely apprehensive about items manufactured in China.

To see how loyalty is affected, just look at last year’s recall issue where thousands of pets died from tainted products resulting in the largest recall of pet food in US history. Today, pet owners, even in this economic downturn, are reluctant to change to a cheaper pet food. ….

A recent article by the associated press stated “That's because many pet owners, who upgraded their kibble after contaminated pet food killed or sickened thousands of animals last year are leery of switching back…..”

So what can companies do to assure their customers that their products are safe? Consumers want safety information on the package, on the company website, and from the government. Furthermore, testing materials for consumer safety is a necessity.

Build and they shall come – But, test and assure and they will stay.

Pharmaceutical Regulatory News Headlines - Week of October 31, 2008

In the United States, Halloween is the day for Tricks and Treats. But - Globally regulatory authorities have Penalties not Treats for would be counterfeiters.

Here are a few of stories that we at XStream Systems think are noteworthy as it relates to the ever growing issues of counterfeit and adulterated medications. Global regulatory authorities are now recognizing the increasing threat these fraudulent products place on their citizens and are taking legal actions to discourage it:

Saudi Arabia: Local Markets Flooded with Counterfeit Drugs
Agreements were made on Tuesday to step up legal action against counterfeiters in Saudi Arabia to ensure consumer safety. According to Abdullah Al-Abdelgader, a pharmaceutical manufacturing director, counterfeit drugs account for around 30-40 percent of medicines sold at local pharmacies and hospitals in Saudi Arabia and expose consumers to great risk. In the Gulf area, the counterfeiting economy accounts for $13 billion, with a share of $4 billion in the Saudi market. ("Some 30-40% of Medicines Sold Locally 'Are Counterfeit', Says Manufacturer," Saudi Gazette, October 22, 2008)

FDA Oversight of Foreign Drugs Lacking
The Food and Drug Administration is failing to keep accurate data about foreign drug facilities it is supposed to oversee and often doesn't follow up warning letters with inspections, according to a report by the Government Accountability Office. The House Energy and Commerce Committee introduced a bill that would mandate foreign inspections at a rate close to that of FDA inspections of U.S. plants. U.S. companies are inspected about every 2.7 years, but the rate for foreign inspections is roughly once every 13 years. ("FDA Is Faulted for Oversight of Foreign Drugs," Wall Street Journal, October 21, 2008)

Nigeria: Government Takes Steps to Block Counterfeit Drugs
The National Agency for Food and Drugs Administration and Control (NAFDAC) has blocked 22 Indian pharmaceutical companies from importing and distributing drugs in Nigeria. The agency has outlawed the use of about 40 imported drugs in the country, describing them as potentially dangerous for human consumption. As part of its efforts to curb drug counterfeits, NAFDAC is advocating for greater public education and awareness. ("Fake Drugs: NAFDAC Bans 22 Indian Firms," AllAfrica.com, October 22, 2008)

XStream Systems thinks that its penetrating authentication technology can be an integral part of the comprehensive solution to this global problem.

Inter-Industry Summit Discusses Import Safety in Washington DC

A representative from XStream Systems attended a unique event in Washington DC this week. The event, titled the Inter-Industry Import Safety Summit, was an unusual partnership of twelve industry associations and their membership. The impetus behind the summit was an effort to promote a “robust exchange of ideas and information that will further help our industries assure the safety of consumer products regardless of where they are made.”

The gathering of nearly 350 people included speeches by government officials including Michael Leavitt, Secretary of Health and Human Services and Andrew von Eshenbach, Commissioner of the Food and Drug Administration.

Secretary Leavitt, at the Summit, made a significant announcement regarding the U.S. collaborating with the European Union and Australia on inspections of overseas manufacturers of drug ingredients as a way to check more plants. Regulators from the countries will inspect different plants and then share their findings under a pilot program to alleviate duplication and inefficiencies in this process.

In a Medical Products Panel discussion during the Summit, executives from J&J, HDMA, Barr Labs, MedImmune, Schering-Plough and Bayer discussed pharmaceutical safety and the effects of counterfeit and adulterated medications within the Global Supply Chain. The Panel was chaired by Commissioner von Eshenbach from the FDA.

Significant in the Panel discussion was that most were of the opinion that technology needed to be part of the solution of counterfeit and adulterated products within the supply chain and those current initiatives to date with Track and Trace technology is effective to a point but only tracks the transaction of the product.

The industry associations which sponsored the Summit were:

• American National Standards Institute
• Biotechnology Industry Organization
• Consumer Healthcare Products Association
• Food Marketing Institute
• Generic Pharmaceutical Association
• Grocery Manufacturers Association
• Healthcare Distribution Management Association
• National Fisheries Institute
• National Restaurant Association
• Pharmaceutical Research and Manufacturers of America
• Retail Industry Leaders Association
• Toy Industry Association, Inc