TAIWAN POLICE NAB COUNTERFEIT PHARMACEUTICALS

UNCLAS SECTION 01 OF 02 TAIPEI 004927

SIPDIS

STATE FOR EAP/RSP/TC AND EB/TPP/IPE

E.O. 12958: N/A
TAGS: KIPR ETRD TBIO SOCI TW ESTH IPR
SUBJECT: TAIWAN POLICE NAB COUNTERFEIT PHARMACEUTICALS

REF: TAIPEI 2143


1. Summary: Taiwan law enforcement has had two significant
counterfeit pharmaceutical cases leading to arrests and
seizures in December. In the first case, Taiwan's IPR Police
busted a ring selling counterfeit drugs on the internet,
arresting two and seizing 5000 pills of counterfeit medicines
smuggled from China. On December 7, police raided a
warehouse in a Taipei suburb, arresting two suspects and
seizing over 500,000 pills of counterfeit medicines that were
also smuggled from China. This was the largest seizure of
counterfeit pharmaceuticals in Taiwan this year, and police
officials consider it a major blow to sales of counterfeit
medications in northern Taiwan. End Summary.

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IPR Police Nab Internet Drug Sellers
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2. Taiwan police investigations of counterfeit
pharmaceutical rings have resulted in two significant raids
and the arrest of four suspects in December. On December 2,
Taiwan's IPR police, the Criminal Investigation Bureau and
Taipei prosecutors led a raid on two locations in central
Taiwan, arrested two suspects, and confiscated 5000 pills of
counterfeit medicines including weight-loss drug Reductil,
erectile dysfunction drugs Viagra and Cialis, and about 1600
unidentifiable pills. The suspects had paid couriers to
smuggle the pills from China and then used the internet to
sell to unsuspecting Taiwan customers at a price
significantly below the market price.

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Biggest Drug Bust in Taiwan Nets Flu Medicine
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3. On December 7, police from four separate units raided a
warehouse in the Taipei suburb of Xizhi, making two arrests
and seizing 550,000 pills of counterfeit medicines including
Viagra, Cialis, Reductil, Stillnox, Zantac, over 120,000
doses of counterfeit flu medication and another 210,000 pills
of undetermined medicines. In addition to the counterfeit
medications, police also found large quantities of packaging
materials, instruction pamphlets, and labels. Police
estimated the street value of the counterfeit drugs was over
NT$300 million (US$9 million). The quality of the
counterfeits was extremely high. Product colors and markings
were identical to the real product and the packaging
contained security features identical to genuine product.
According to the Taipei Prosecutor's office, even company
representatives were unable to determine visually that these
products were counterfeit.


4. According to the police investigation report, the
suspects purchased the counterfeit medicines from suppliers
in China and then smuggled the counterfeit products into
Taiwan through air cargo, sea-freight containers, and the
postal system. Once in Taiwan, the counterfeit drugs would
be packaged and resold to pharmacies, medicine shops and
night-market sellers all over Taiwan. The suspects used
Taiwan's express-delivery companies to make deliveries.
According to a statement from one of the suspects, they had
already begun importing chemicals and were planning to begin
producing some counterfeit drugs in Taiwan. Police believe
that this raid has successfully shut down the biggest
counterfeit pharmaceutical importing operation in Northern
Taiwan.

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Comment: Welcome and Unwelcome Signs
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5. These two raids are welcome signs of the seriousness of
Taiwan's law enforcement agencies determination to crack down
on piracy. The IPR police have been involved in a series of
raids over the past year on criminals using the internet to
sell counterfeit drugs, clothes, watches, and optical media
-- mainly smuggled into Taiwan from China. Other police
units and prosecutors have been actively investigating
counterfeit pharmaceutical sales occurring through
pharmacies, drug shops, and night markets leading to several
arrests. Like many of Taiwan's other manufacturing
industries, the making of counterfeit products seems to have
been outsourced across the Strait. The lack of a mechanism
for cross-Strait law enforcement cooperation makes this kind
of outsourcing even more attractive for counterfeiters.

6. However, the size of the seizure is an unwelcome sign of
the scope of the counterfeit pharmaceutical problem in
Taiwan. Arrests of petty criminals selling small amounts of
fake goods have increased but arrests of larger-scale
counterfeiters is still rare, making the successful Xizhi
raid even more significant. Penalties for dealing in
counterfeit pharmaceuticals were increased in 2004 but
judicial backlogs and lack of expertise lead to lengthy
prosecutions and non-deterrent sentences. One newspaper
reported that the main suspect in the Xizhi case had been
arrested previously for selling counterfeit medicines but was
out on bail awaiting trial.

7. The seizure for the first time in Taiwan of large amounts
of counterfeit flu medication is clearly linked to public
concerns about insufficient stock of Tamiflu to treat Avian
Influenza. Apparently, the counterfeiters know their market.
End Comment.
PAAL