Keeping it real: anticounterfeiting strategies in the pharmaceutical industry

Although pharmaceutical counterfeiting incidents can be traced back thousands of years, it has been downplayed and even dismissed by pharmaceutical manufacturers in the past. That has changed. Pharmaceutical firms are newly dedicated to eradicate counterfeits globally and spending more money on anticounterfeiting efforts than ever before. The confluence of three factors seems to have drastically changed the existing paradigm for the pharmaceutical industry: increasing globalization, advancing technology, and the controversies surrounding the WTO Trade-related Aspects of Intellectual Property Rights Agreement and access to medicines. Given that counterfeit pharmaceuticals slip into the supply chain at every link, multinational pharmaceutical firms are searching for global solutions through increased interfirm cooperation along the supply chain. This research presents a theoretical model for characterizing the implications of these interventions on the motivations driving counterfeiters. The interventions are shown to increase the share of real pharmaceuticals and decrease the welfare losses attributable to counterfeiting. In practice, it is too early to evaluate the success of these new measures, but this research reflects on the extent of cooperation both across the supply chain and national boundaries and examines the likely long-run implications of these measures. Copyright © 2008 John Wiley & Sons, Ltd.