Defense, pharmaceuticals among most vulnerableBy Peter A. Buxbaum, AJOTLast August, in an announcement in the Federal Register, the White House intellectual property enforcement coordinator sought public comment about “how the U.S. government can prevent counterfeit products from entering its supply chain.” At the same time, the federal government formed an anti-counterfeiting working group comprising fourteen government agencies tasked to provide legislative, regulatory, and policy recommendations to address this problem. Counterfeiting is nothing new, but the fact that the White House has become involved shows that it has reached a new level of criticality and visibility. The defense and pharmaceutical industries are two in which counterfeiting is rampant. The federal government is closely linked with these two industries, through military acquisitions and the administration of defense and veterans health care programs. In both cases, too, counterfeiting of products could have life or death consequences. The Department of Commerce released a study in the last year that documented the extent of infiltration of counterfeit electronic parts into U.S. defense supply chains. According to the study, 3,300 counterfeiting incidents were reported in 2005; over 8,000 incidents were reported in 2008. “We know counterfeit parts enter the aerospace supply chain, but the time and place of their entry is unpredictable,” said Marion Blakey, president of the Aerospace Industries Association. “Managing this uncertainty has become more important due to the recent rise in the incidence of counterfeit reporting. This sharp increase in incidents indicates that the volume of counterfeit parts is increasing, and mitigation plans must be developed and implemented.” International trade in counterfeit medicines is also rapidly increasing, presenting serious risks to public health around the world. “Fake products range from placebo starch pills to products containing anything from cement powder to more harmful substances, or even the wrong quantity of an active ingredient,” said Neil de Crescenzo, senior vice president at Oracle Health Sciences. The World Health Organization has reported on two cases of women in Argentina who died after receiving injections of an iron supplement for anemia which were later discovered to be “highly toxic counterfeits” that had entered the legitimate supply chain undetected. One leading cause of drug counterfeiting is the shortage in the U.S. market of some key medicines. A study at the University of Utah reported that 180 diverse drugs were in short supply over the first half of 2011. According to a report from Premier Healthcare Alliance, a network based in Charlotte, N.C., over 240 drugs were either in short supply or completely unavailable, and over 400 generic varieties were back-ordered for five or more years during the second half of 2010. “There are no signs of this issue improving,” said the Premier report, “as the industry could see more than 350 drug shortages in 2011, the most in recorded history.” Because of the enormous profits associated with distributing pharmaceuticals, distributors sometimes turn to questionable sources for scarce supply, according to the Premier report. “As a result,” said the report, “counterfeit or potentially unsafe drugs obtained from foreign or other illegitimate sources have been known to reach consumers.” A 2008 study conducted by Pfizer Inc. estimated that the market for counterfeit medicines in Europe amounted to over $14.5 billion. “To ensure patient safety,” said de Crescenzo, “pharmaceutical manufacturers urgently need to find ways to protect the integrity of their own products and keep counterfeit medicines out of the legitimate supply chain.” The same goes for the defense supply chains. According to Blakey, possible adverse effects of counterfeiting to the government could include national security or civilian safety issues, the costs of enforcement, and lost tax revenues. For industry, they include the co