Cablegate: Taiwan Seizes Counterfeit Pharmaceuticals

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 TAIPEI 003198

SIPDIS

STATE PLEASE PASS TO AIT/W AND EAP/RSP/TC

STATE ALSO PASS USTR FOR KI/FREEMAN
REF: TAIPEI 1033

E.O. 12958: N/A
TAGS: KIPR ECON ETRD TW
SUBJECT: TAIWAN SEIZES COUNTERFEIT PHARMACEUTICALS

1. SUMMARY: LOCAL PRESS REPORTED ON OCTOBER 2
THAT THE TAICHUNG PROSECUTORS' OFFICE RAIDED NINE
DIFFERENT LOCATIONS IN CENTRAL AND SOUTHERN
TAIWAN, SEIZING OVER 2.5 MILLION COUNTERFEIT DRUG
PILLS, INCLUDING VIAGRA, REDUCTIL, AND STILNOX,
AND ARRESTING FOUR SUSPECTS, INCLUDING ONE
LICENSED PHARMACIST. SUBSEQUENT REPORTS FROM
INDUSTRY PUT THE FIGURES AT LESS THAN ONE MILLION
TABLETS TOTAL, INCLUDING 146,000 VIAGRA TABLETS.
INITIAL PRESS REPORTS OF THE MARKET VALUE OF THE
SEIZED COUNTERFEIT PHARMACEUTICALS ARE CLEARLY
EXAGGERATED, BUT THIS SEIZURE IS STILL THE LARGEST
IN TAIWAN THIS YEAR WITH A MARKET VALUE OF SEVERAL
MILLION US DOLLARS. THE SUSPECTS FACE CHARGES OF
VIOLATING TRADEMARK LAW AND THE NEW PHARMACEUTICAL
AFFAIRS LAW. AMENDMENTS TO THE PHARMACEUTICAL LAW
IN MARCH 2004 INCREASED PENALTIES FOR
COUNTERFEITERS AND DISTRIBUTORS BUT THE DETERRENT
VALUE OF THE NEW LAW REMAINS TO BE SEEN. END
SUMMARY.

A SUCCESS, BUT NOT AS BIG AS ADVERTISED
---------------------------------------

2. AFTER RECEIVING A TIP FROM AN INFORMER IN JUNE
2004, THE MINISTRY OF JUSTICE INVESTIGATION BUREAU
(MJIB) BEGAN AN INVESTIGATION OF A GROUP PRODUCING
AND SELLING COUNTERFEIT PHARMACEUTICALS. ON
OCTOBER 2, THE TAICHUNG PROSECUTOR'S OFFICE LED AN
EIGHTY-MEMBER TASK FORCE ON RAIDS OF NINE
SUSPECTED PACKAGING HOUSES, PRINTING FACTORIES,
WAREHOUSES, AND DRUG STORES IN TAICHUNG, MIAOLI,
AND KAOHSIUNG. LOCAL PRESS REPORTED THAT THE TASK
FORCE HAD SEIZED 2.5 MILLION COUNTERFEIT PILLS,
VALUED AT NT$320 MILLION (US$9.4 MILLION) FROM A
WAREHOUSE IN TAICHUNG AND ARRESTED FOUR SUSPECTS,
INCLUDING A LICENSED PHARMACIST AND A
PHARMACEUTICAL DISTRIBUTOR. INDUSTRY
REPRESENTATIVES WERE LATER TOLD BY INVESTIGATORS
THAT THE INITIAL ESTIMATES HAD EXAGGERATED THE
TOTAL AMOUNT SEIZED AND THAT THE ACTUAL FIGURE WAS
LESS THAN ONE MILLION TABLETS.

MAINLAND PRODUCTION WITH TAIWAN PACKAGING?
------------------------------------------

3. INVESTIGATORS BELIEVE THE COUNTERFEITING RING
WAS PRODUCING FAKE PILLS IN GUANGDONG PROVINCE AND
THEN SMUGGLING THEM INTO TAIWAN BY CONTAINER OR
FISHING VESSEL FOR PACKAGING AND DISTRIBUTION.
THE QUALITY OF PACKAGING IS REPORTEDLY EXCELLENT,
WITH EVEN INDUSTRY INSIDERS UNABLE TO READILY SPOT
THE FAKES. INDUSTRY SOURCES SAY THE
COUNTERFEITERS WERE USING PACKAGING RESEMBLING
LOCAL TAIWAN PACKAGING AND ASIAN REGIONAL
PACKAGING, PERHAPS HOPING TO PASS THEIR
COUNTERFEIT PRODUCTS OFF AS PARALLEL IMPORTS.

DISTRIBUTION THROUGH DRUG STORES AND NIGHT MARKETS
--------------------------------------------- -----

4. UNLIKE SOME OTHER COUNTERFEITING GROUPS WHICH
SELL PRODUCTS THROUGH MAIL ORDER OR THROUGH A
WEBSITE, THIS GROUP WAS ALLEGEDLY DISTRIBUTING
COUNTERFEIT MEDICINES THROUGH TRADITIONAL DRUG
STORES AND VENDERS IN NIGHT MARKETS. ACCORDING TO
PRESS REPORTS, THE COUNTERFEIT PHARMACEUTICALS
WERE SELLING AT ABOUT A TWENTY PERCENT DISCOUNT TO
THE REAL PRODUCT. WIDELY CIRCULATED REPORTS THAT
THE ACTIVE INGREDIENTS IN THE COUNTERFEIT PRODUCTS
WERE ONLY ABOUT THIRTY PERCENT OF THE LEGITIMATE
PRODUCT WERE DENIED BY INDUSTRY AND THE MJIB.

INCREASED PENALTIES FOR PHARMA COUNTERFEITING
---------------------------------------------

5. IN MARCH 2004, TAIWAN'S LEGISLATIVE YUAN
AMENDED THE PHARMACEUTICAL AFFAIRS LAW TO CREATE A
STIFFER PENALTY FOR PHARMACEUTICAL COUNTERFEITING
AND THE DISTRIBUTION OF COUNTERFEIT DRUGS.
MANUFACTURERS AND IMPORTERS OF COUNTERFEIT
PHARMACEUTICAL PRODUCTS NOW FACE THE POSSIBILITY
OF A JAIL SENTENCE OF UP TO TEN YEARS (INCREASED
FROM SEVEN YEARS UNDER THE PREVIOUS LAW), AND A
FINE OF UP TO NT$10 MILLION (US$300,000), UP FROM
NT$150,000 (US$4500). THE SALE, DISTRIBUTION
STORAGE, OR DISPENSING OF COUNTERFEIT
PHARMACEUTICALS WILL BE PUNISHED BY JAIL SENTENCE
OF UP TO SEVEN YEARS (INCREASED FROM FIVE YEARS)
AND FINE OF UP TO NT$5 MILLION (US$150,000).
(REFTEL)

DISTRIBUTION AND ENFORCEMENT PROBLEMS
-------------------------------------

6. INDUSTRY EXPERTS BELIEVE COUNTERFEIT OR
PARALLEL IMPORTED MEDICINES MAY ACCOUNT FOR UP TO
TWENTY-FIVE PERCENT OF TAIWAN'S PHARMACEUTICAL
SALES. ONE EXPERT SUGGESTED THAT TAIWAN'S
COUNTERFEIT PHARMACEUTICAL PROBLEM IS PARTLY THE
RESULT OF A POORLY REGULATED DISTRIBUTION SYSTEM.
PHARMACIES REPORTEDLY OFTEN PURCHASE MEDICINES
FROM UNKNOWN WHOLESALERS OR SALESMEN WITHOUT
REVIEWING THEIR BONA FIDES. IN ADDITION TO A
DISTRIBUTION SYSTEM THAT ENCOURAGES SALES OF
COUNTERFEIT PRODUCTS, CONFUSION OVER WHICH AGENCY
SHOULD BE RESPONSIBLE FOR ENFORCEMENT OF TAIWAN'S
ANTI-COUNTERFEITING LAWS CONTRIBUTES TO THE
PREVALENCE OF BOGUS MEDICINES. THE DEPARTMENT OF
HEALTH (DOH) AND LOCAL HEALTH BRANCHES, NOT THE
TAIWAN INTELLECTUAL PROPERTY OFFICE (TIPO)OR MJIB,
ARE CHARGED WITH ENFORCEMENT OF THE PHARMACEUTICAL
LAW. HOWEVER, THESE HEALTH ORGANIZATIONS LACK THE
WILL AND THE ENFORCEMENT CAPABILITY NECESSARY TO
CRACK DOWN ON PHARMACEUTICAL COUNTERFEITING.

POSITIVE COOPERATION, BUT STILL WAITING ON RESULTS
--------------------------------------------- -----

7. COMMENT: RESEARCH PHARMACEUTICAL MANUFACTURERS
TELL US THEY ARE PLEASED WITH THE COOPERATION WITH
THE MJIB THAT LED TO THESE RAIDS AND THE RESULTING
SEIZURES AND ARRESTS. HOWEVER, THEY CAUTION THAT
ADDITIONAL INVESTIGATION MUST BE COMPLETED,
ESPECIALLY REGARDING THE UNDERGROUND PRINTING
OPERATIONS, BEFORE THEY CAN DECLARE THIS AN
UNMITIGATED SUCCESS. RAIDS BY MJIB IN JULY OF
PHARMACIES STOCKING COUNTERFEIT PHARMACEUTICALS
ALSO LED TO SEVERAL ARRESTS, BUT INDICTMENTS ARE
STILL PENDING. THIS CASE WILL PROVIDE ANOTHER
TEST OF THE ABILITY OF THE NEW PHARMACEUTICAL LAW
TO DETER COUNTERFEITING AND DISCOURAGE RETAILERS
FROM STOCKING FAKE AND POTENTIALLY DANGEROUS
PRODUCTS. END COMMENT.

PAAL

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