The Dark Side of Stolen abd Diverted Pharmaceuticals

In part 1, We wrote about the complexities of medicines journey from manufacturing to the supply chain endpoint and how highly intricate, posing significant challenges that counterfeiters exploit to their advantage.  

Similar to FMCGs and CPGs’ warehousing operations, distribution and inventory Reconciliation - a critical process of verification of product inventory by manually counting and comparing physical stock with recorded data to ensure accurate shipment, delivery, and quarantine. Numerous companies still rely on this regardless of   it’s high susceptibility to  supplychain leakages, helplessly perpetuating the unending cycle of pilferage adn diversion. 

Unfortunately, quarantined products face a 95% risk of being stolen or diverted.

Stolen products are goods that have been illegally taken from the supply chain. This can happen at any stage—from warehouses and shipping containers to retail shelves.

Diverted products refer to goods that are rerouted and sold through unauthorized channels. While they may be legitimate items initially, their sale outside authorized networks circumvents official distribution agreements and quality controls and is common in industries like pharmaceuticals, cosmetics, and electronics.

The journey of products from manufacturer to consumer should be straightforward. However, the reality is often much more complex, and unfortunately, riddled with illicit activities, such as product diversion, undermining legitimate supplycain operations by contributing significantly to the rise of counterfeit medicines. Understanding this link is crucial for both consumers and companies looking to protect themselves and maintain the integrity of the market.

Quarantined products involve segregating goods for inspection or further action, often  due to suspected defects or quality issues. This process includes marking quarantined items, storing them in designated areas, and following specific protocols for inspection and disposition. Quarantined product is a metric that Compliance directors must keep under their Radar. Less than 1% of Compliance personnel know that Quarantined products are high risk targets. Monitoring quarantined products is crucial for compliance directors, as these items are often high-risk targets. Surprisingly, less than 1% of compliance personnel are aware of this vulnerability.

Scraps

Standard operating procedures for handling scraps covers details on generating scrap, collecting it, sorting it by type, defacing labels, and disposing of or selling the scrap through authorized channels. Failure to follow these SOPs strictly and other GMPs increase the likelihood of having scraps become a starting point for counterfeits. 

 Rework

Reworks are products or groups of products that successfully completed their journey through the production and packaging proccesss but lack finishing details required to pass the final quality checks often as a result of Technical glitches. However minor these defects are good manufacturing practices (GMP) require that the defects get fixed through a rework usually a manual   that require minimum  Similar to rework

Apparently, a pattern emerges. The Nexus;

The Nexus Between Diversion and Counterfeiting

“Consumers who are deceived into believing that they bought a genuine medicine when it was in fact a fake, blame the manufacturer of the genuine product when it fails, creating a loss of goodwill.” 

Loss of Control Over Product Integrity: The first thing that becomes obvious is that Companies and brand holders have lost control of GMP Compliance. Recent findings in 2025 by Food and Drug agencies around the world revealed an alarming number of GMP failures in several Pharma manufacturing sites.

Product theft, diversion and other leakages only prove that manufacturers and brand have little to no control over their distribution and supply chain integrity. Pharma counterfeiters are opportunists; they have  perfected a craft they did not invent. They introduce fake products into the market by exploiting the lack of control and Consumers  unknowingly purchase these counterfeits, believing they are getting genuine items.

Increased Availability of Counterfeits:

As Counterfeiters perfect their crafts it has become even harder to distinguish genuine products from counterfeits, especially since the anticounterfeit solutions are simple and easily copied for example QRcodes, bar codes, holographic stickers and scratch-offs hence stolen goods can be mixed with counterfeit products and sold in bulk.

This practice not only floods the market with fake items but also makes it difficult for agencies fighting the counterfeits and falsified products.

Undermined Brand Trust 

“A well known brand discovers a counterfeit of their product is circulating rapidly. The company decided to suppress the media attention and instead pursue a path of quiet investigation due to to the fear of loss of goodwill”. 

Corporate shame is undoubtedly one of the biggest factors that unitentionally promotes  Counterfeits. Corporations approaching Counterfeit problem like it is a result of Ethical lapses often take this path of avoiding public criticism to prevent reputational damage. 

Companies have argued for decades that whenever consumers encounter subpar products, it damages the reputation of the brand, leading to loss of customer trust and loyalty. This is particularly damage in sectors where safety is paramount, such as pharmaceuticals and electronics. Pharma industry have distanced themselves from  words such as counterfeit, supervisory agencies have been left confused in the battle against counterfeit, Legal experts have witnessed shocking refusal to pursue claims Pharma stakeholders need alternative, and cost effective solutions guaranteed to protect their brands without the heightened  risk of reputational damage.

Economic Impact

“On numerous occasions, companies find their missing products that end up on Amazon, purchasing a few just to enrich their investigations and to confirm their authenticity, and without fail, they turned out to be their very own products, shipped from our facilities, these kinds of leakages cost atleast $2M annually on the  average”

Several companies have reported that some products in the market are identical in branding and finishing to theirs, although they have not yet introduced them into those markets officially. For example; A company manufactures only 100,000 units of a certain product, while it’s yet to distribute them, a quick risk evaluation and market research revealed 100% identical copies of those products circulating in the Market. Another case is a company that saw more of their products circulating in the market than the numbers of unit shipped frrom their facilities.

Evidence suggests that affected companies are prepared to annihilate counterfeits and their perpetrators but there is a problem; How do they address the risk of a public criticism, and potential revenue loss if and when consumers associate their proudct with the negative reputation that comes with counterfeit. Spending tens of millions of dollars per year fighting counterfeits and getting little to no ROI. A loss of revenue and poor fiscal performance are the hallmark.

Instead of following the path with least resistance, the Pharma industry demonstrating leadership by adopting disruptive innovations capable of eliminating counterfeit helps to empower stakeholders beyond the pill.