Counterfeit drugs challenge pharma industry

According to a 2009 report published by Business Monitoring International Ltd, there are about 57,000 pharmacies in Viet Nam, or 6.6 outlets per 1,000 people – a high figure for a developing country. But the same report shows that only 20-30 per cent of patients buy prescription medications with a prescription, despite this being unlawful.

The market in counterfeit products is also soaring, driven by a shortage of qualified pharmacists and a low awareness of intellectual property issues increasing the risk that lookalike products will be confused with the real thing.

Viet Nam’s domestic pharmaceutical industry supplied over half of the market in 2008, and the Government encourages the import of generics to reduce the costs of drugs.

In line with global trends, however, manufacturers of generic products in Viet Nam regularly use names and/or packaging similar to those of famous brands (‘lookalike’ products), causing confusion to the general public.

These are major problems for multinational pharmaceuticals whose reputations ride on the safety and effectiveness of their products.

When an intellectual property rights holder finds that the market has been flooded with copies of its own drug, it is essential that it acts positively to protect both the integrity of its brand and the health of the public.

Production, distribution and circulation of pharmaceuticals are controlled by the Drug Administration of Viet Nam (DAV). Pharmaceutical products must be registered with the DAV.

A proposed product name should not be identical with or confusingly similar to international non-proprietary names (INNs), and the DAV and the National Office of Intellectual Property (NOIP) work together to prevent such registrations.

In practice, however, several trademark applications for confusingly similar trademarks have matured through registration, a source of a growing concern for rights holders in the pharmaceuticals sector.

Once an infringement is discovered, the most straightforward route to enforcing IP rights is by way of administrative or criminal actions through the administrative authorities or the police.

While the authorities are willing to assist rights holders in enforcing their rights, a lack of manpower and training means that substantial support is required from rights holders.

Following up with the authorities post-raid is also vital to push for strong sanctions and the complete destruction of seized goods. Without stringent follow-up, the infringements may not be handled thoroughly.

IP litigation is in its infancy in Viet Nam and few civil cases have yet been filed in court. The outcome of civil litigation remains uncertain. It is a long process with notoriously low damages up to a maximum of VND500 million (approximately US$26,000).

With little precedent and no real guidance as to how to calculate damages, it is difficult for judges to award damages at the highest levels.

The Criminal Code provides strong sentences (between two and seven years of imprisonment) for manufacturing or trading in counterfeit products that pose a threat to the safety of the public. If such manufacture or trade is carried out in a ‘professional’ or ‘organised’ manner or ‘causes serious consequences’, the sentence can range from five to 12 years.

Should the offence have ‘particularly serious consequences”, the infringer could be sentenced to life imprisonment or even capital punishment.

Despite the fact that there is no guidance on what amounts to ‘serious consequences’, we have seen an increasing number of cases in which infringers have received sentences of three to seven years of imprisonment for manufacturing or trading in counterfeit pharmaceuticals.

In July 2009, a pharmaceutical representative was sentenced to three years’ imprisonment for trading in counterfeit drugs, and in March 2010, a court imposed prison sentences totalling almost 22 years on a criminal ring of six people for producing and trading in counterfeit pharmaceuticals.

Under its WTO commitments, Viet Nam is opening its pharmaceuticals market to foreign competition. This is good news for international pharmaceutical companies looking to expand into new territories.

However, the insidious problem of counterfeit and lookalike drugs remains a major deterrent for research-based foreign companies. Viet Nam remains on the Watch List of the Pharmaceutical Research and Manufacturers of America (PhRMA)’s Special 301 submission for 2010.

As such it is essential that IP rights holders are prepared to invest time and money in enforcement programmes, supporting the enforcement authorities, and lobbying for clarification of the existing laws to ensure adequate protection in this developing jurisdiction.

Tags: Counterfeit drugs, Vietnam phamarceuticals, Vietnam Pharma Sector