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Turning to tech to suss out fake drugs

Big Pharma experiments with nanotechnology to address counterfeiting.

By Jeffrey M. O'Brien, senior editor
Last Updated: February 20, 2009: 12:11 PM ET

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(Fortune Magazine) -- As consumers everywhere look to scale back their discretionary spending, many people are cutting corners in what could turn out to be the worst possible place - their drugs - and falling prey to a dangerous new breed of pharmaceutical counterfeiters. Thanks to a spiraling economy and the loss of health insurance that typically accompanies job loss (not to mention huge profits for perpetrators) the global market for knock-off drugs is expected to reach a staggering $75 billion next year, according to a recent report by The Center for Medicine in the Public Interest. The World Health Organization estimates that 10% of the global pharmaceutical supply is counterfeit, and the number is accelerating, especially in developing nations.

It's not just Viagra. Increasingly, all types of fake pharmaceuticals are infiltrating the supply chain, from medicines for heart disease and diabetes to high cholesterol. This clearly means a drag on profits for Big Pharma companies. But unlike in, say, entertainment or software, the potential ramifications go far beyond the balance sheet. "The consequences are quite severe," says Dean Hart, executive VP of NanoGuardian, a maker of anti-counterfeiting technology. "We always talk about most catastrophic possible [outcome], the loss of life. But many of the counterfeit medications in the marketplace are products for long-term therapy, like high blood pressure and cholesterol, and they're asymptomatic. The deleterious effects won't be seen for many years."

NanoGuardian, a spin-off of Skokie, Ill., nanotechnology company NanoInk, is nearing the final stages of bringing a novel pill verification/protection scheme to market. To date, pharmaceutical companies have mainly addressed counterfeiting with unique tracking identifiers such as RFID tags, bar codes, and hard-to-replicate visual features like holograms - either at the palette level or on product boxes. "All these packaging technologies are important," says Hart. "But when was the last time you went to the pharmacy and got the package that your pills were sent in?" NanoGuardian goes further. Using a type of nanolithography that the company licensed from Northwestern University earlier this decade, NanoGuardian embosses every pill with nano and micron-scale identifiers.

Despite the connotations that often come with the word nano, Hart's company doesn't insert anything into the medication itself. It merely rearranges the make-up of a gel capsule or the coating of a pill. He compares the process to placing a sneaker onto freshly fallen snow. "You can see the tread, but the snow is still there," he says. "You didn't leave part of your sole behind." The so-called NanoEncryption process can mark the pill with, say, a logo that's barely visible to the human eye or a "nanocode" that can only be verified with specialized equipment and can allow the viewer to trace the pill all the way back to its point of manufacture. The complexity of this process makes it nearly impossible for the bad guys to replicate cheaply.

NanoGuardian's process cleared the final FDA approval late last year. Hart says he's working with three major pharmaceutical manufacturers, and while he won't yet name names, he insists that all three will introduce medicine bearing nano-scale information to market sometime this year. To top of page

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