1. 1 Good Intentions – Bad Drugs Washington, DC Thursday, 10 March 2005 Robert D. Moore, Executive Director; Global Security Group Merck & Co., Inc.

2. 2 In Perspective n “Counterfeiting of Pharmaceuticals is now a global trade” Source: Eye on Europe – Stockholm Network Autumn 2004 n “China…is an economic gorilla; its counterfeiting is turning into quite the beast as well – yet slowing down the counterfeiters in China and elsewhere will take heroic efforts…Counterfeiting thrives on…globalization itself. Globalization is the spread of capital and know how to new markets.” “Armed with digital technology, counterfeiters can churn out perfect packaging” “Financing comes from a variety of sources, including Middle East middlemen, local entrepreneurs and organized crime” Source: Business Week – 7 February 2005 n “New technologies are clearly providing the offense an advantage over the defense” Source: David Kay – Center for Strategic & Int’l Studies; Washington, D.C.

3. 3 EPOGEN ® / PROCRIT ® n 110,000 counterfeit vials of EPOGEN® reached market in 2002 u Used to boost red blood cells in cancer pts u Low-dose vial relabeled as high-dose u Same vial, cap etc used u Wholesaler purchased legal product, PROCRIT®, and relabeled as EPOGEN® u $22/vial vs. $445/vial u $48,000,000 profit Source: www.fda.gov

4. 4 Factors Leading To Increased Counterfeiting n Well funded counterfeiters u Organized crime, syndicates, illicit drug cartels n Varying degrees of intellectual property laws n Advancing technology to duplicate products and packaging n Global economies and international commerce n Internet as a sales and marketing tool n Relatively light penalties n MONEY Estimated earnings of $32- 46 billion per year Source: WHO Fact Sheet No. 275 – www.who.int/mediacentre/factsheets/2003/fs275/en/print.html

5. 5 How Does It Happen? n Interception of expired goods u Relabeled to extend expiration date n Theft of authentic product u Often relabeled to hide theft n Relabeled authentic product u Change potency/dosage information n Generic materials marketed as authentic n Completely counterfeited u Most often performed in parts u May contain actual API at reduced concentrations

6. 6 Stolen Genuine Products Adulterated Product Counterfeit Product Diverted Product Expired Product Contraband Pharmaceutical Criminal Distribution System Distributor / Repackager Government Health Systems Hospitals Pharmacies Export Patients

7. 7 Counterfeit Commerce Source: Merck Global Security

8. 8 Counterfeit Manufacturing Source: Merck Global Security

9. 9 China: Tienam 2003

10. 10 China: Tienam (2003)

11. 11 England (2004) n A small appliance store was found to be a front for counterfeit pharmaceutical operation capable of producing and packaging 500,000 tablets per day u Used high tech tablet presses and blister packaging machines similar to those used in the pharma industry n Authorities seized 580,000 counterfeit tablets and raw materials for another 5.5 million tablets valued at $11.5 million n Drugs were traced to countries all over Europe and the Mediterranean n Despite 14 prior convictions, operator sentenced to 5 ½ years in prison for copyright infringement Source: www.timesonline.co.uk

12. 12 Merck’s Strategy n Clients u Sales & Marketing Groups u Governments, Patients & Healthcare Providers n Immediate Response Evaluation Team u Global Security Regional Director u Manufacturing Quality Assurance (Central) u Manufacturing QA Legal Support (Central) n Key Decisions u Testing u Investigation u Regulatory

13. 13 Visual Inspection of Product Source: Merck Global Security Merck’s Strategy Source: Merck Global Security

14. 14 CONCLUSIONS n Counterfeit medicine is a challenging global problem n Incidences are increasing n Supply chain management is key issue n As counterfeiters become more sophisticated, the methods and technologies to detect them need to follow n Major pharmaceutical companies are aggressively pursuing product security measures, as well as detection capabilities, to assure the safety of the drug supply n By it’s nature, the Internet is a commercial channel for counterfeiters Merck’s Strategy

15. 15 CONCLUSIONS n Manufacturers have: u Recognized criminal nature of this issue u Responded by: F Assisting government authorities F Building structures to thwart counterfeiters F Continued evaluations of supply chain security F Dedicating resources, and F Supported stronger penalties Merck’s Strategy