Ten countries in the Southeast Asian region, known as the “ASEAN bloc”, face the particular challenge of flooding the pharmaceutical and healthcare markets with counterfeit products.
The healthcare market in ASEAN is huge, led by Indonesia, followed by Vietnam and Thailand. Pharmaceutical companies see it as an attractive growth location. But the reality is that the flood of counterfeit drugs here not only endangers the health and safety of vulnerable groups, but also damages the legitimate return on investment of the R&D team. According to the survey, in an extensive study initiated by the United Nations Office on Drugs and Crime, data showed that as much as 47% of anti-malarial drugs in the Southeast Asian market are counterfeit to some extent.
Most counterfeit medicines and health products are imported into the region, and only some are produced locally (especially after manufacturing shifted from mainland China to Vietnam, Cambodia and Myanmar). Besides finished products, active pharmaceutical ingredients (APIs) also often flow into the region from India and China. It is difficult to take action on API (Active Pharmaceutical Ingredient) imports as only some medicines have been patented in Southeast Asia. Some imported health care products will be split into different parts, each part is labeled and packaged with its own brand, and then distributed to the market.
Customs systems in the ASEAN region remain weak; relatively speaking, customs systems in Thailand and, to a lesser extent, Vietnam function well. Both countries conduct regular seizures of counterfeit goods, so healthcare companies can file their key brands with customs in advance. Although the Philippines has a filing system, in fact they rarely take action against counterfeits involving registered brands (rather, random seizures do not appear to be directly related to filing). Indonesia also has a new filing system and has organized several seizures, but so far few brands have registered with the system due to the complexity of filing applications. Malaysia has no relevant customs intellectual property rights system at all.
In Singapore, very few counterfeit goods enter the local market; the real challenge is that all kinds of illegal and counterfeit goods are being transshipped to the world through the world’s largest transshipment port. During the epidemic, e-commerce flourished in Southeast Asia. Many e-commerce platforms offer consumers a wide variety of health products, even some prescription drugs. Some markets have voluntarily halted the supply of regulated healthcare products to the public, while others have been more lax on the matter. Healthcare companies must develop the following strategies to deal with the current situation:
- Investigate, identify, entice purchases (obtain evidence by knowing and buying fakes) and verify documents, usually by analyzing labels, batch numbers, etc., to identify counterfeit and unregulated products
- Use the notification and takedown process. This can be done with both outsourced suppliers and local suppliers (especially if factors such as language or distance make takedown inefficient)
- Target key traders (repeat, large scale, or other notable targets) and conduct online-to-offline investigations, warning letters, and worst case legal action. Given that most traders are small merchants, low-cost enforcement action is critical. In some countries, a regulatory complaint to the Ministry of Health may be more effective than a counterfeit/IP complaint
- Cooperate with major platform players to improve delisting efficiency, take specific actions against repeat traders and high-volume traders, supplemented by legal measures
In these respects, the Regional Office of the Institute for Drug Safety in Singapore is very active. They have signed a memorandum of understanding (MOU) with the e-commerce platform. They have also taken broader steps to improve the counterfeit situation in Southeast Asia’s e-commerce market. Similarly, the British Intellectual Property Office has also initiated a memorandum of understanding between platforms and intellectual property rights holders in the Philippines, hoping to better improve the e-commerce market environment in the Philippines.
Thailand’s Intellectual Property Office has a similar effort to improve merchant surveys. Indonesia is also considering signing the MoU in early 2023, with the help of the UK’s Intellectual Property Office.
Investigating and enforcing counterfeit products remains a challenge in most Southeast Asian countries and regions. The COVID-19 pandemic has further hampered implementation at the law enforcement level. Surprise inspections in Thailand are generally more effective. Likewise, the Philippines has a National Intellectual Property Coordination Center to conduct surprise inspections. While some jurisdictions, notably Thailand and Indonesia, are affected to varying degrees by issues of police corruption, enforcement efforts need to be carefully scrutinized. Law enforcement in Vietnam is often slow and bureaucratic. As a result, criminal authorities in few countries are likely to actively initiate investigations and enforce cases without some degree of oversight by brand owners. This situation results in an overall lack of criminal deterrence in the fight against counterfeiting. Intellectual property owners should have seen the impact of the epidemic on intellectual property enforcement actions, and further efforts are needed to improve the authorities’ enforcement and execution capabilities.
Here are some recent examples of action taken:
Indonesia
In 2022, Indonesian police arrested manufacturers of various health products, including Becomzet vitamins and Bio Insuleaf herbal diabetes supplements, in Lembang, in north-central Java.
In Lombok in 2020, two men were arrested for selling counterfeit medicine purchased on an online platform and supplying it to the eastern Indonesian islands.
In 2019, police busted a drug wholesaler, PT Jaya Karunia Invesindo, which repackaged generic drugs as branded drugs and sold them at higher prices.
Philippines
In 2022, customs seized 30 million pesos (about $585,000) worth of counterfeit medicines at two warehouses in Paranaque City. The seized counterfeit medicines were packed in cardboard boxes with Chinese characters printed on them. These include counterfeit products of well-known pharmaceuticals such as Alaxan FR, Bioflu, Biogesic, Medical, Neozep and Panax. Also included are fakes of the antiparasitic drugs Ivermectin and Phenokinon-F Injection, as well as Immunpro and MX3 supplements. In this case, Adel Rajput, a Pakistani national, was arrested.
In early 2022, Manila’s Special Mayoral Response Team (SMaRT) arrested Monique Gamboa for selling counterfeit drugs online, allegedly produced by Unilab. After a trial purchase, Gamboa offered 18,000 Bioflu tablets and a box of Neozep tablets. The case is now in litigation.
Also, in early 2022, seven people were arrested for allegedly selling unauthorized Clun gene COVID-19 antigen rapid test kits and counterfeit medicines worth more than P2 million in Quezon City. Hangzhou Longji (Clongene) is a real manufacturer. In addition, the police also confiscated about 300 boxes of testing kits worth P1.2 million, a Ford vehicle and a mobile phone. These sellers generally conduct counterfeit transactions through the Facebook platform.
Pampanga police raided the home of a 47-year-old man and arrested him, where seven bags of counterfeit medicines were seized. These counterfeit drugs included celecoxib, cefuroxime, etoricoxib, emeprazole and recombinant human erythropoietin, as well as two bags of compound amoxicil.
Singapore
In 2021, police arrested a 34-year-old man for selling 41,000 respirators allegedly infringing trademark rights, with an estimated value of more than S$201,000. In late 2021, police arrested a woman who was selling 300 fake thermometers online. Outrageously, this batch of thermometers only read 37°C!
Customs seized 1,520 illegal drugs entering Singapore from Malaysia at the Woodland Checkpoint in Causeway Bridge, Johor, hidden in the rear door panels of cars; 2 Singaporeans were arrested.
Cambodia
In 2019, the Home Office’s Anti-Counterfeiting Committee seized thousands of illegal herbal pills and aphrodisiacs. The police raided three shops and found that some of the counterfeit medicines had no marketing authorization, and some authorizations had expired.
Vietnam
In 2022, Vietnam fired a deputy health minister after he was accused of being part of a counterfeit drug ring. Police investigated him in November for allegedly allowing a local company to import fake drugs worth more than 54 billion Vietnamese dong (about 2.38 million U.S. dollars) for domestic sale. Truong Quoc Cuong is the head of the Drug and Cosmetics Regulatory Department.
In 2019, the former CEO of a private pharmaceutical company in Saigon was sentenced to 17 years in prison for smuggling counterfeit anti-cancer drugs. The company claimed that the batch of drugs came from the Canadian pharmaceutical company Helix Pharmaceuticals, but in fact this Canadian pharmaceutical company does not exist; in fact, the fake drugs were inferior compounds imported from India. The variety of these cases shows how the proliferation of counterfeit medicines is linked to international and domestic trade.
It is worth noting that compared with the number of counterfeit drugs that actually flowed into the market, the number of seized drugs is very small, and there are not many cases of final sentences. The situation is further exacerbated by online transactions and lack of coordination between the Ministry of Health and criminal law enforcement officers and customs. However, there are also many gratifying measures, such as the Philippine National Coordinating Center successfully facilitating the collaboration of multiple agencies; Thailand’s customs system is functioning well; the signing of a memorandum of understanding with Southeast Asian e-commerce platforms has improved the situation of counterfeit goods to a certain extent.
At the same time, healthcare companies are continuing their efforts to require public authorities to establish effective enforcement programs for the Southeast Asian market.
This article was included in the latest issue of Law Lore & Practice and was also presented at the 100th Congress of the Pharmaceuticals Trade Marks Group (PTMG) in Lisbon.
For further information, please contact:
Nick Redfearn, Rouse
nredfearn@rouse.com
