How to bring safety and transparency into the pharmaceutical industry?

6 min readAug 4, 2020

The counterfeiting of pharmaceuticals has been detected since about 1990 and, recently, the problem has worsened. Pharmaceutical counterfeiting is becoming a serious problem both in developed and developing countries. The WHO (World Health Organization) system receives reports from every region of the world, providing strong evidence that the problem is global.


According to the OECD/EUIPO (European Observatory on Infringements of Intellectual Property Rights, and together with the Organisation for Economic Co-operation and Development) in 2019 study, the value of global trade in counterfeit pharmaceuticals was up to USD 4.4 billion in 2016. This represents 0.84% of total worldwide imports in pharmaceutical products.

As stated by the World Health Organization (WHO), counterfeit drugs are those which are ‘‘deliberately mislabelled with respect to identity and/or source. Counterfeiting can apply to both branded and generic products with counterfeit products including drugs with the correct ingredients or with the wrong ingredients; without active ingredients, with insufficient active ingredient or with fake packaging.’’

Due to lack of regulation and enforcement, the quality, safety and efficacy of both imported and locally manufactured medicines in many developing countries cannot be guaranteed. Smuggling and illegal importation of drugs are rife. Counterfeit drugs are not only sold in these countries but also exported or re-exported. Some local policy-makers have argued that drug regulation represents an unnecessary barrier to trade and should be reduced to a minimum. Pharmaceuticals, however, should not be considered a standard commodity, since consumers are unable independently to assess their quality, safety and efficacy and the results can be deadly to patients.

Major types of fraud in the pharmaceutical and medical equipment industries include:

1.Off-Label Marketing

Off-label marketing occurs when a pharmaceutical or medical device manufacturing company markets a drug or device for uses that are not approved by e.g. the Food and Drug Administration (FDA in the USA) in order to increase its profits.

Since the FCA (Financial Conduct Authority) was amended in 1986, whistleblowers have saved billions of tax-payer dollars taken by drug and medical device companies that illegally promoted off-label uses for products that were ultimately reimbursed by federal and state healthcare programs.

2. Pricing Fraud

Charging patients full cost rather than the lower negotiated price or retaining manufacturer rebates rather than passing them on to the patient. Another example from the U.S. is drug companies inflating the Average Wholesale Price which is used by Medicare to determine the refund for each drug.

Wasting money

While falsified medical products in the unregulated and informal marketplaces are sometimes less expensive than quality, safe and effective medicines, they cost more in the end, from the long term point of view. Uninsured patients have to dig deep into their pockets a second time to buy effective treatment when a substandard or falsified product fails to work. Indeed, these patients are often among the very poorest. Insurance companies or national health systems also have to pay twice if medical products fail to work. Further, they face the extra costs of coping with the adverse reactions and drug-resistant infections that substandard and falsified medicines and vaccines can trigger. Moreover, the legitimate pharmaceutical manufacturers must bear the cost of product recalls, and they may lose out on a substantial part of the business if falsified products undermine consumer confidence in their products.

3.Prescription fraud

Prescription Drug Switching — Substituting a more expensive drug for a cheaper one or billing for brand name drugs when generic drugs are dispensed.

Phantom Prescriptions — Billing for a forged or nonexistent prescription.

Duplicate Billing — Billing multiple payers for the same prescription.

Prescription Shorting — Filling less than the prescribed quantity of a drug.

Drug Diversion — Diverting a prescription drug for sale or use in some illegal activity. This medical concept involves any legally prescribed controlled substance from an individual for whom it was prescribed to another person for any illegal use. Often the patient is paid for the prescription and the drugs are recycled by the pharmacy or sold on the black market.

Complex and transparent supply chains

No doubt global supply chains require a global system that can quickly alert people worldwide to the danger posed by substandard and falsified medical products. More than that, it highlights the urgency of the task, because the consequences of failure can be fatal.

Nowadays, a tablet taken in Germany may be made in Egypt from ingredients imported from India, Brazil and Spain, packaged in foil that came from China, inserted into a box designed for the UK, and shipped to Liverpool by way of Dubai. A trader in the United Kingdom, taking advantage of fluctuations in the foreign exchange rate, might legally repackage the medicines with information written in German and ship it to Munich. This extraordinary complexity involves a high turnover of products passing through many hands and presents numerous opportunities for mistakes, bad practice, and unethical activity.

Anti-counterfeiting technologies

Digital solutions are a clear and growing enabler to solve the authentication problems. The combination of packaging track and trace systems with other solutions is considered as the foreseeable future.

Some of these solutions are low tech, such as simple colorimetric (color) assays developed for artemisinins used successfully to identify fake artesunate antimalarials. The German Pharma Health Fund has developed the “Minilab” for analyzing the authenticity of a wide range of essential drugs relatively simply and inexpensively. Other technological solutions currently being tested are expensive. However, naiscants technologies such as blockchain in combination with unique physical identifiers may answer part of the question in terms of affordability.

Blockchain-based traceability and counterfeit prevention

Indeed, the unit cost for the protection of pharmaceutical products considering current technologies is disproportionately high, while the centralized nature of available system solutions cannot exclude manipulation of recorded data in case of high-stake wrong-doings. On the other hand, decentralized systems based on principles of blockchain technology allow for secured, intrinsically traceable storage of information about the origin, the price, intended consumer, and other information recordings at relatively low transactional costs.

Companies like 3IPK which have developed blockchain-based traceability solutions for various industries are therefore naturally looking into the pharmaceutics domain to provide technology solutions to remedy the challenges of drug and medical devices counterfeiting.

General impact

It is very difficult to quantify the impact of falsified medical products. However, there can be no doubt that falsified products may cause various problems:

  • Endanger health, prolong illness and even kill
  • Undermine confidence in health professionals and health systems
  • Create distrust about the effectiveness of vaccines and medicines
  • Eat into the limited budgets of families and health systems
  • Provide income to criminal networks

In the table below you can find examples of falsified medicines reported to WHO:


Companies looking to protect their products against brand piracy and reduce the levels of counterfeiting are adopting advanced authentication and verification technologies. Distributed ledger technologies and in particular blockchain have the potential to become the mainstream solutions thanks to their low transactional costs and unparalleled data security properties.

It is obvious that international cooperation is needed, as counterfeits are a global problem that can only be solved through cross-border actions. Every country and every company must also take responsibility to protect consumers and patients. It is essential to relentlessly uncover fraud, and effectively prosecute counterfeiters. It is difficult to determine the extent of counterfeiting globally. The available data come from a wide range of sources — reports from national medicines regulatory authorities, enforcement agencies, pharmaceutical companies, non-governmental organizations and other studies. Data are collected in different ways, so different studies are difficult to be directly compared. And while the data from one study are being analyzed, the adaptable criminal will have moved on to the next project — a new medicine, a new manufacturing technique, or new markets.

Therefore, while anti-counterfeit combat in the pharmaceutical domain remains a challenge, technologies such as blockchain and immutable physical identification techniques shall render the fraudulent activities more difficult and easier to uncover for the authorities.




3IPK develops blockchain-based solutions automating certification, supply chain and maintenance of processes for aerospace, defence & other consumer goods.