US embassy cable - 04TAIPEI3198

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