NCPA - National Center for Policy Analysis


June 8, 2009

Counterfeit and substandard drugs are a serious and growing problem around the world -- especially in less developed countries.  These fake drugs pose three direct threats to patients: failure to provide effective treatment; adulteration with toxic chemicals, often leading to death or injury; and if a drug contains some active ingredient but too little to kill all the disease agents, it can lead to the emergence of drug resistant strains of disease.

These problems are caused in large part by a combination of defective legal systems and government-imposed distortions of the pharmaceuticals market, say researchers at the International Policy Network:

  • Poor countries tend to have highly inefficient, slow and expensive legal systems, which makes it very difficult for people to be assured of the quality of the medicines they purchase.
  • Lack of enforceable trademarks and civil liability are instances of a wider problem; in such an environment, legal decisions tend to be arbitrary and designed to benefit the elite.
  • Price control measures, like tariffs, on imported medicines are very common in poor countries and drive up the price of high quality medicines creating opportunities for suppliers of fakes, who can then more easily undercut them.
  • Tariffs can also lead to unnecessary delays in ports, where improper storage conditions can cause drugs degrade.

However, bolstering the rule of law is a long term process in many countries.  In the short-term, the private sector should take advantage of its innovative capacity to experiment with various technological solutions that enable it to protect the identity of its products.  Governments, meanwhile, should reduce those interventions which undermine the supply of quality drugs, such as taxes, tariffs, price controls and other arbitrary regulations, say researchers.

Source: Julian Harris, Philip Stevens and Julian Morris, "Keeping it Real: Combating the spread of fake drugs in poor," International Policy Network, 2009.


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