Profting from fake pharma
By Arik Hesseldahl, BusinessWeek
Tuesday, August 21 2007 12:54 PM

Online sellers of counterfeit versions of several name-brand drugs generate more than US$4 billion a year, according to a new study.

If it seems like the number of e-mails clogging your in-box from "the pharmacy America trusts" promising "genuine Viagra and Cialis" is on the rise, do not be surprised. Online sales of less than bona fide drugs are booming.

Using spam to sell what are usually fake pills on the Internet has grown into a business worth billions of dollars a year, with costs and barriers to entry that are so low that a vendor need only make a few successful transactions to turn a profit. A new study from MarkMonitor, a San Francisco-based company that monitors online brand abuse, sheds new light on a growing problem for legitimate pharmacies that sell their products online, the pharmaceutical companies spending billions of dollars to develop drugs, and the consumers whose health can be at risk from using tainted pills.

The study, MarkMonitor's second quarterly survey of what it calls "brandjacking", made some startling discoveries: Most of the sites advertised are unlikely to be the real thing, and Web sites used to sell the pills rarely take any precautions to protect customer data. In many cases, operators say the sites are run in the United States or Canada, but in fact the businesses are traced to countries like China, Russia, or India.

Unsettling numbers
MarkMonitor, which released the results Aug. 20, examined the contents of some 60 million spam e-mails advertising six popular drugs. The company did not name the drugs, but said they included well-known brands of widely sold drugs for erectile dysfunction--possibly Pfizer's Viagra and Eli Lilly's Cialis. The list includes antidepressant and antianxiety drugs. All are commonly advertised in e-mail messages sent in bulk and used to attract consumers to online pharmacy sites.

The messages led to some 110,000 advertisement pages hosted on as many as 11,000 Web domains on any given day, operated by 3,160 online pharmacy businesses. Of that number of pharmacies, only four turned out to be legitimate, properly certified online pharmacies.

And traffic to these sites is substantial, according to the study. Nearly one-third had sufficient traffic to show up on the Web traffic measurement services offered by Alexa.com, and the average daily number of page views recorded on those sites averaged 32,000. "There were a lot of people going to those sites who were curious to know if they really could get their drugs cheaper than at their neighborhood pharmacy," says MarkMonitor Chief Marketing Officer Fred Felman.

While it is impossible to say precisely how much money the sites generate, MarkMonitor estimates that if only one-half of 1 percent of visitors spent an average of US$70, the annual combined revenue of the sites surveyed could be in excess of US$4 billion.

That number may be too low, says Jon Praed, an attorney with the Internet Law Group in Arlington, Va., who tracks the sale of illegal drugs for the pharmaceutical industry. "I think billions of dollars in sales of counterfeit drugs online is a conservative guess," he said. One estimate by Pfizer said that global sales of counterfeit drugs could be as high as US$35 billion a year.

Unprotected data and artificial drugs
And very often online pharmacies make no effort to protect the personal data of the customers. MarkMonitor's Felman says that half of the sites examined for the study did nothing to secure customer data, and the majority did not even bother to use Secure Socket Layer encryption, a common method used to secure online credit-card transactions.

In one case, a link found in a spam e-mail linked directly to unencrypted customer data. "There were credit-card numbers, names, addresses,"Felman says. "They weren't even protected by a password."

And in most cases the money goes to vendors who are highly unlikely to be selling real pills. Ten percent of the pharmacy sites clearly said they did not require prescriptions from a doctor before selling the drugs. In many cases, the drugs sold for an average price per dose of less than US$3, compared with a typical price for the drugs of more than US$10 a dose, even allowing for heavy discounting--another indication the pills could not have been made by a reputable manufacturer. "We suspect that given the prices, if they weren't fake they had to be stolen, expired, or diluted," Felman says.

Public health issue
Illegal online sales of drugs has become a public health issue. In July, authorities in Canada blamed the 2006 death of a 58-year-old British Columbia woman on sleeping pills purchased online. Officials have sought to crack down on the problem with varying degrees of success. This month, the U.S. Food & Drug Administration traced a million fake versions of a diabetes test strip made by Johnson & Johnson to a distributor in China. And in July, police in that country seized a ton of fake Viagra pills and fake doses of Tamiflu, an anti-influenza treatment made by Roche. The raids came on the heels of the execution of the onetime head of China's main drug regulatory agency, who had been found guilty of accepting bribes in exchange for approving drugs for sale in China, some of which were later found to be unsafe.

So what is a consumer to do? When buying drugs online, get them only from pharmacy sites that are certified by the National Association of Boards of Pharmacy (NABP), experts say. The organization has a strict accreditation process and so far has certified only 13 Web sites. Among them are sites run by CVS Caremark and Walgreen, as well as online-only concerns including Drugstore.com. The 13 accredited sites are listed at the NABP's Web site.

Further, concerned consumers should ignore e-mailed come-ons from unrecognized companies, says Internet Law Group's Praed. "There isn't a single reputable company that sends unsolicited e-mail to consumers,"he says. "If it's in your e-mail in-box, it's probably not from a legitimate company."