India is a center for drug counterfeiting—a profitable and deadly business that is spreading to the United States and Europe. 

Fake drugs are lethal and a growing global problem. As much as 10 percent of prescription drugs on the world market are estimated to be counterfeit, although no reliable figures exist. Untold numbers of people die from fake drugs, with poor countries most at risk. 

Many of the deadly medicines originate in India. I decided to visit to get a firsthand view.

Western companies trying to protect their intellectual property and brand integrity have led the way in exposing India’s fake drugs. They are challenged by organized criminal rings that profit from selling fakes on a global black market. 

Of course, the counterfeit problem in India is not limited to drugs. “Indians copy everything, and many Western firms have given up trying to prevent it,” the former police chief of Delhi, Vijay Karan, told me. “There is more Black Label whisky sold in India than made in Scotland,” he jokes. 

But counterfeiting drugs is particularly attractive for knock-off specialists. They can be produced cheaply and sold for high prices. And, of course, it is nearly impossible for a sick Indian, or anyone else for that matter, to determine that a drug is fake. If the patient remains ill after taking the medicine, he might fairly assume that it’s not the drug’s fault. And, at any rate, the dangerous consequences of the fake drug—if only in the lost opportunity to take a real drug that would cure him—may be discovered too late if at all. 

The European Commission’s customs department seized 2.7 million fake medicines in 2006, about a third of which originated in India.

India’s relatively unregulated drug distribution system fosters fakes. Indian consumers can buy most drugs, including many that would require a prescription in the United States, over the counter at small kiosk-like pharmacies. In rural areas, hundreds of millions of Indians buy drugs from traveling sellers or local stores. 

According to Karan, most of these products are sold locally. Still, he says, some “can find their way into Western markets.” He worries that if knock-off drugs get into foreign supply chains and kill or harm consumers, this will badly damage India’s commercial reputation abroad. 

So today, retired from the police and security services, Karan advises private companies and Indian state and federal government officials on how to stamp out the counterfeit trade. 

The United States and Europe have a much smaller counterfeit problem than India, for several reasons. First, all operations in the pharmaceutical supply chain are watched over by rigorous national regulatory authorities. 

Second, American and European customs officers have sophisticated inspection systems for packages entering their markets. And, finally, Western pharmacists are typically well-trained professionals, and their consumers tend to be discerning and well informed, and more likely to ask questions if a product appears not to work. Even so, more and more fake drugs are leaking in. 

One of the world’s most copied drugs is Viagra, used for the treatment of erectile dysfunction. The active pharmaceutical ingredient, sildenafil citrate, can be bought in India for 4,800 rupees ($120) a kilogram. 

Counterfeiters procure the active ingredient and then produce fake pills, which may contain sildenafil citrate in a low concentration or be contaminated with dangerous impurities and bacteria. In some instances, fakers will use chalk instead of the active ingredient. 

The counterfeiters can illegally buy the pill bottles used for legitimate pills for about 3 cents. Near-perfect fake labels cost about 20 cents each. The active ingredient for 30 pills costs, at most, 25 cents. So, for about 50 cents, counterfeiters can make a bottle of Viagra with an end value of between $30 and $50 in India. If the counterfeiters have international connections, then the profits can be even greater. A 30-pill bottle of a drug labeled as Viagra could sell for as much as $360. 

In 2006, the European Commission’s customs department seized 2.7 million fake medicines, about a third of which originated in India. In 2005, the Drug Enforcement Administration investigated a Philadelphia-based Internet pharmacy that smuggled an estimated 2.5 million dosages of drugs into the United States from India, including the painkiller Vicodin, anabolic steroids, and amphetamines. 

The dangerous consequences of the fake drug—if only in the lost opportunity to take a real drug—may be discovered too late if at all.

Several multinational pharmaceutical firms spend a lot of time and effort trying to stamp out illegal copies of their drugs. They cultivate relationships with local consultants, who often have backgrounds as police officials or pharmacists. The consultants find out where fake drugs are being produced and sold. They gather evidence to provide to local police, who can conduct raids on the identified sites. 

Combating counterfeits is painstaking work, often with little long-term reward. Shutting down one manufacturer or trader may be financially worth the cost of engineering the raid, but without criminal convictions and jail time for perpetrators, raids may not deter other actors within the counterfeit supply chain. Although there have been many prosecutions, to date there have been no major convictions, says former police chief Karan. 

One explanation for the lack of convictions is corruption. For example, a drug counterfeiter told a BBC correspondent that he gave the chief minister of an Indian state a Bentley automobile from the proceeds of his counterfeit drug sales. The counterfeiter said that he wanted to “share the wealth around.” 

Companies hoping to combat fakes—from Pfizer to Mercedes to Bausch & Lomb to Oxford University Press—must satisfy themselves with improving the situation one raid at a time. Suresh Sati, a consultant to large multinational companies who investigates intellectual property fraud, says that the first police raid in which he was involved, back in 1980, led to the arrest of a man illegally manufacturing copycat TV antennae. Since then, Sati has watched the market for counterfeit drugs explode. 

Raids by police instigated by Sati, Karan, and their counterparts are making traders in Delhi less brazen. Karan told me that six or seven years ago a well-known market openly advertised and displayed counterfeits, and offered discounted prices to retailers. But with frequent monitoring and raids, that is no longer the case. While the trade continues, it is more surreptitious, with deals done behind the scenes. 

Partly as a result of increased vigilance in Delhi, the center of the counterfeit trade has moved to the ancient city of Agra, which is best known for the Taj Mahal. Agra is home to vast wholesale markets, where counterfeits are sold along with legitimate products. The largest of these sprawls over three stories with hundreds of small stores. According to Dr. Uday Shankar, a pharmacist with the Agra Government Hospital, 20 percent of the products sold in these shops are fake, with a total sales value in excess of $5 million a day. Another nearby market comprises at least 50 stores trading both legal Indian copies of Western medicines and their illegal counterfeit counterparts. Still another market near the SN Medical College hosts, according to Shankar, 200 stores trading in drugs. 

‘There is more Black Label whisky sold in India than made in Scotland,’ the former police chief of Delhi, Vijay Karan, joked.

Shankar told me, “Many doctors at the college will tell patients to buy drugs from particular vendors within the market, some to ensure that these patients buy drugs of decent quality, but others to intentionally direct them to pharmacists supplying fakes.” 

In these situations, Shankar suggests the doctors are probably receiving kickbacks, at the expense of patients. 

Counterfeit production is the least understood part of the poorly studied supply chain. The consensus of the police and intellectual property experts I spoke with is that fake drugs come from a wide variety of different producers. Some of the drugs are of pretty good quality, coming from otherwise legitimate suppliers running shifts after hours with poorer hygiene and safety compliance. 

Other drugs are produced in factories, houses and rundown dwellings, entirely inappropriate to good manufacturing practice. 

After production, the pill manufacturer often passes the medicines to another party, which will pack them and send the products to the wholesale markets of Agra, Delhi, and other cities, says Karan. Making fake packaging material is a specialist job, which is often done by another group at another location. 

While in India, I joined the early stages of an investigation, undertaken by consultants to a variety of Western firms, of a facility packaging and distributing the final product to the market. 

The facility’s remoteness illustrates how hard it can be to stop the fake trade. The location (which I can’t name, because the investigation is still pending) is a village 10 miles off a main road out of Aligarh, a city located 90 miles southeast of the capital, New Delhi. A single-lane, partly paved road runs through the village, pocked with potholes and teeming with the straying bicycles, cattle, dogs, children, and other hazards that make driving at more than 15 miles per hour in India’s rural areas impossible. Sati shakes his head and tells me that he has gathered enough evidence for the police to act, but it will be difficult, because of this single road, to stage a raid without first alerting the counterfeiters. 

The police tracked this wholesaler’s products to a store at the Aligarh market. The investigators purchased the drugs and tested them, finding the medicines of surprisingly good quality. 

Sati says that the counterfeiter likely has someone working inside a legitimate producer, stealing product or running an extra shift. India’s fake drug traders come from organized-crime gangs in urban as well as rural areas. A trader comes to the wholesale market and fills up a basket with drugs, spending about $200. He will then travel to poorer areas, where he will sell the drugs to local general stores, which then sell them to individuals a handful of pills at a time, rarely in any packaging. Users will have no idea if they are buying fakes. 

In Delhi, I watched urban pharmacists come to the large wholesale pharmaceutical markets to buy drugs for their stores. Depending on their integrity, they buy either legitimate or fake drugs. They may purchase drugs with a low proportion of the active ingredient and a high share of filler—drugs which will not necessarily work, but which might fool Indian authorities conducting random spot tests. Patients with or without a prescription then purchase drugs from these pharmacies, just as they would in the West. 

Criminal exporters may act in a similar way to the traders, but are more likely to deal directly with pill producers. Some criminal gangs even own vertically integrated businesses that help lessen leaks to the authorities, says Karan. 

A few criminal exporters may produce large quantities of fake drugs made to order for a specific buyer. In an undercover investigation, a BBC film crew posed as Eastern European buyers looking to purchase drugs from a counterfeiter. He showed off his latest pill production machine—which, he said, could produce 5 million tablets a day—and offered the crew a wide variety of drugs, including a knock-off version of nifedipine, a blood pressure medicine. Karan says the main export markets for India’s drugs are Eastern Europe, Africa, and, increasingly, the United States and Western Europe. 

Karan was the director for two years of India’s Criminal Bureau of Investigation, similar to the FBI. These days, it has more power and funding, but it typically focuses on fighting narcotics and rarely investigates the fake drug trade. 

“The authorities like to say things are blown out of proportion,” says Karan. He claims that if the CBI were more serious about counterfeiting, it would help to share information across the myriad agencies and local police authorities that currently are supposed to address the problem.

For about 50 cents, counterfeiters can make a bottle of Viagra valued around $40 in India. If they have international connections, profits can be greater.

He agreed with me that the only way change will occur is if there is international pressure for action. It would need to be “a bit like we’re seeing on China over contaminated product boycotts in America,” Karan says. “The United States complains, and the Chinese take action, but that has not so far occurred in India.” 

Not everyone was so pessimistic. I spoke with Ramesh Adige, who is executive director of global corporate communications at Ranbaxy, a large and respected Indian drug company with 11,000 employees spread across 49 countries and with sales of well over $1 billion. 

Adige sees a “perceptible change in efforts” by the Indian government and believes that there is enough political will to contain the problem through increased vigilance and enforcement, without outside pressure. He told me that the law is improving, as is its enforcement. 

The Ranbaxy story is important. The company was once viewed as a rogue copycat firm that focused on reverse engineering Western products and aiming to weaken global intellectual property rights. But Ranbaxy is now a major research firm seeking stronger patent protection. As a local firm with a promising future in the global pharmaceutical trade, Ranbaxy is likely to have sway with the Indian government, more than the U.S. government or Western firms like Pfizer or Lilly. 

Indeed, Ranbaxy is pushing the Indian Parliament to include provisions for increased fines and sentencing for producers and traffickers in fake pharmaceuticals. Adige hopes that future governments will establish fast-track courts for hearing counterfeiting cases, and will make drug counterfeiting an offense for which bail is not permitted. With these provisions in place and properly enforced, counterfeiting won’t be the flourishing—and deadly—business it is today. 

Roger Bate is a resident fellow at the American Enterprise Institute and author of the book “Making a Killing: The Deadly Implications of the Counterfeit Drug Trade” (AEI Press, May 2008).

Image by The Bergman Group/ Dianna Ingram.