COUNT NTERFEITING NG & THE MEDICA CAL DEVICE INDUSTRY BY: RICHARD M. BARNES, ESQ. GOODELL DEVRIES LEECH & DANN, LLP. AUGUST 25, 2016 41 410-783-4004 rmb@gdldlaw.com
SETTING T G THE S STAGE GE: : Examples O Of Medica cal D Device ce C Counterfeiting Counter erfei eit Blood ood Counter erfei eit Contact act Glucos cose T e Test Strips ps Len Lenses •February 2016: Federal Grand •August 2013: Johnson & Jury Indictment Johnson v. Azam Intern. Trading, 2013 WL 40482 •Defendant accused of importing thousands of colored •Defendants distributed contact lenses from the counterfeit blood glucose test People’s Republic of China and strips, originating in Pakistan South Korea. and/or China. •Contacts bore the trademarks •Test strips bore the trademark for “Ciba Vision FreshLook “OneTouch,” owned by COLORBLENDS,” which are Johnson & Johnson. manufactured by Novartis International AG.
SETTING T G THE S STAGE GE: : Examples O Of Medica cal D Device ce C Counterfeiting Counter erfei eit Blood ood Counter erfei eit Contact act Glucos cose T e Test Strips ps Len Lenses •August 2013: Johnson & •February 2016: Federal Grand Jury Indictment Johnson v. Azam Intern. Trading, 2013 WL 40482 •Defendant accused of •Defendants distributed importing thousands of colored counterfeit blood glucose test contact lenses from the strips, originating in Pakistan People’s Republic of China and and/or China. South Korea. •Test strips bore the trademark •Contacts bore the trademarks “OneTouch,” owned by for “Ciba Vision FreshLook Johnson & Johnson. COLORBLENDS,” which are manufactured by Novartis International AG.
SETTING NG T THE S STAGE GE ( (Cont.) .): : Counterfeiting C Consequences Counter erfei eit Contact act Counter erfei eit Blood ood Len Lenses Glucos cose T e Test Strips ps • Worldwide sale and • Customers complained distribution of potentially about quality of lenses. deadly counterfeits. • Contacts allegedly • Unreliable performance, contaminated with including highly inaccurate hazardous bacteria. test results. • Could result in serious injury • Could cause eye or death from insulin infections, corneal treatment based on ulcers, and even inaccurate blood glucose blindness. results.
SCOPE OF THE PROBLEM
WITH TH MU MUCH A AT T STAKE, TH THERE A ARE MA MANY NY STAKEHOLDER DERS United Nations FDA U.S. I.C.E. Interpol WHO National National National Crime Association of CDC Consumers Prevention PhRMA Boards of League Council Pharmacy Health Sciences National Health Health Canada TGA Authority, The Media Service (England) Singapore
COUNTERFEITIN ING I G IN T THE N NEWS USA Today 2011 2011 • The Dangerous us W World O d Of Count unterfeit Prescript ption D n Drug ugs CBS 60 Minutes 2011 2011 • The Difficul ult F Fight ht Agains nst C Count unterfeit D Drug ugs Forbes 2012 2012 • Fake D e Drugs s – All A At a a Pharma rmacy N Near Y r You! Bloomberg 2013 2013 • Inside de P Pfizer’s F Fight ht A Agains nst Count nterfeit Drugs Newsweek 2015 2015 • The he Fake D Drug ug I Indu ndustry i is E Exploding, and W nd We Ca Can’t D Do A Any nything A Abo bout I It Regulatory Affairs Professionals Society 2016 2016 • US Gener erics F Firm R Repor orts s Counterfei eit C Cancer D Drug Sales es in Three ee Co Coun untries
THE BOTTOM LINE
MEDIC DICAL D DEVIC ICE C E COUNTERFEIT EITIN ING: G: An n Int nternational I Issue Operat ation on P Pangea V ea VIII: J : June In 2010, the World 2015 G Global Effo Effort (FDA) Health Organization (WHO) estimated that • Cooperative effort (115 countries) to combat more t than 8% 8% of online sale and distribution of potentially medical devices in counterfeit and illegal medical products. circulation are • Shut down 2,400 websites and seized $81 $81 milli llion in illegal medicines and medical devices counterfeit. worldwide. • 2008 – 2015 FDA’s Office of Criminal Investigations (OCI) has resulted in the seizure of more than $172 m $172 million in unlawful medical products.
BEYOND THE BOTTOM LINE
Counterfeiting C Consequence ces • Potential health risks to • Loss of consumer confidence in consumers medical products, healthcare providers and health systems • Legal liability • Threat to innovation • Negative branding and/or brand diminishment • Loss of tax revenue • Revenue loss • Health plans defrauded • Intellectual property theft • Resources wasted to combat counterfeiting
COUNTERFEITIN ING G FAST F FACTS The WHO has found that the majority of counterfeit drugs contain no active ingredient, the wrong active ingredient, or the wrong amount of the correct active ingredient. At least 60 different Pfizer products are being counterfeited around the world. More than 920 medical products are reported to be substandard, spurious, falsely labelled, falsified and counterfeit (SSFFC), according to WHO (2016). As many as 1 million people die annually from ingesting counterfeit drugs, which have been found to contain rat poison, brick dust, boric acid, floor polish, paint and inkjet material, and are sometimes contaminated with bacteria. WHO estimated the counterfeit drug trade to be a $431 billion industry (2012). Worldwide counterfeit sales are increasing about 13% annually – nearly twice the rate of legitimate pharmaceuticals. Sales of counterfeit medical products rose 90% between 2005 and 2010. 50% of online pharmacies are selling counterfeit medications.
PRODU DUCT L LIABIL ILIT ITY I IMPLIC ICATIO IONS Ash shworth v. . Albers Medical, In Inc. 410 F F.Supp.2d 4 471 (S.D.W.V. Aug. 2 23, 2 2005) • Plaintiff purchased counterfeit LIPITOR from Rite Aid and sued Pfizer. • Argued that Pfizer failed to institute reasonable safeguards against counterfeit LIPITOR products entering the stream of commerce and that the risks of counterfeit proliferation were well known to them.
Ashw hwor orth v v. . Alb lbers M Medical, In Inc. Stric ict L Liabilit ility and Breach o h of Frau aud C Clai aim Neglige gligence C Claim im Warra rranty C Claims • Dismissed because • Dismissed because • Typically, under West Pfizer was not a any representation Virginia law, a person participant in the about the counterfeit “does not have a counterfeiting product was not duty to protect others scheme. made by Pfizer. from the deliberate criminal conduct of • It would not make • Pfizer only made third parties.” sense for Pfizer to representations • However, some counterfeit its own about genuine special relationships product – nor did LIPITOR, not the can be imposed. Plaintiff allege this. counterfeit product.
Ashw hwor orth v v. . Alb lbers M Medical, In Inc. Plaintiff advanced two negligence theories. Pfizer should have designed Pfizer should have exercised a more counterfeit resistant more control over its product/package. distributors. Manufacturers do not have a duty to There was no law the Plaintiff could anticipate and frustrate criminal point to that placed a duty on Pfizer to tampering. Pfizer is not a marketplace police its distributors. insurer of counterfeit goods.
PROTECTING YOUR TRADEMARK
WHAT I IS A TRADEM DEMARK? Tradem emar ark: QUALITY A trademark is a brand name used to identify and BRAND SOURCE distinguish the goods/services of one seller or provider from those of others, and to indicate the TRADEMARK source of the goods/services.
WHAT I IS A COUNTER ERFEIT IT? Counter erfei eit: “[A] spurious mark that is identical with, or substantially indistinguishable from” a mark registered in the • Unregistered marks United States PTO. cannot form the basis for a counterfeiting claim . 15 U.S.C. § 1127.
Why w would s someone c count nterfeit yo your ur tradem emar ark? • Counterfeiters want to Your r trade on your brand. trad adem emar ark is • Favorable risk/reward valu luable le, and and ratio: Penalties are coun ounterf erfeiters ers lenient and profit know now it. margins are high.
THE GR E GRAY M MARKET The t trade de o of p produ ducts through l legal di distribution chan annels that at ar are n not in intended b by t the m man anufac acturer. Company X That product, manufacturers a substantively identical to Product is resold for a prescription medication a United States branded much lower price than that is branded and sold product (under a its American counterpart. in countries outside of different name), enters the Unites States. the U.S. Gray Market. Remember, gray market goods are legitimate goods – not counterfeit.
A CASE STUDY Widget Company v. Russian Counterfeiting Incorporated
THE FACTS ■ Widget Co. manufacturers highly technical medical devices. ■ While using a widget during a procedure, a famous European doctor notices the widget does not work properly (caused injury to patient). ■ Following the procedure, the doctor calls Widget Co. to report the problem. ■ Ultimately, Widget Co. determines that, although the widget bore its trademark, it was not manufactured by Widget Co.
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