The multi-billion-pound global trade in bogus medicines is responsible for an estimated half a million deaths a year. As Europe becomes an ever-more lucrative target for counterfeiters, Eric Clark meets the government agents and pharmaceutical company investigators who are taking the fight to the fakers

Half an hour before dawn, the semi-detached house, like the rest of the silent East Midlands town, is in darkness. Two investigators, search warrant at the ready, approach the front door, while a man with a battering ram takes up position. There has already been a 6am briefing session at the local police station, and the raid has a code name - Operation Mexico.

But the investigators about to move into the house are not police officers. They belong to the Medicines and Healthcare Products Regulatory Agency (MHRA) intelligence and enforcement unit, a small specialist group that seeks to keep Britain free of illegal and counterfeit medicines - a multi-billion-pound worldwide trade that is estimated to lead directly to the deaths of more than a half million people a year across the globe.

Today's target is the man behind a website, ostensibly based in Belize but in reality located in this nondescript house and an office in a small modern block a few minutes away. Malik (not his real name), the intelligence officer on the operation, has already made a purchase on the site, buying Kamagra, an Indian version of Viagra, illegal in the UK, using a bogus credit card and phoney mail address to hide his real identity.

'You never know what you are going to find behind closed doors,' Stan, the lead investigator, says. Other recent MHRA raids have uncovered everything from rudimentary machines for pressing baking powder and shoe polish into fake pills to so-called 'miracle cancer cures'.

Fake pharmaceutical drugs - whether sold directly over the internet or infiltrated into the neighbourhood pharmacy or local hospitals - have become a huge and fast-increasing threat. In 2005, 500,000 single doses of fake medicines were discovered across Europe. The following year that number had shot up to 2.5 million.

Worldwide, according to figures collected by the pharmaceutical giant Eli Lilly, customs seized more than three million counterfeit or suspected counterfeit tablets in more than 1,000 separate actions in the two years up to January.

Counterfeit medicines are easy to produce, low risk and vastly profitable. A drug costing a fraction of a penny can be sold for 50 times as much and more. In one MHRA case, 100,000 fake tablets supplied by a Chinese manufacturer for about 25p each were being sold for up to £20 each in the UK, worth £1.6 million in total.

Britain is on the front line, both as Europe's prime target for counterfeiters (medicine prices are high compared with most other EU countries) and as a staging post between producers in the Far East and the medicine-hungry buyers of the United States. But most people in the UK are largely unaware of the scale of the problem: a study last year by the University of London's School of Pharmacy found that only 19 per cent of Britons felt there was a growing risk from counterfeit medicines, compared with 74 per cent of Europeans as a whole.

Although the World Health Organisation (WHO) began collecting data on counterfeit drugs in the early 1980s, until about 10 years ago they were regarded as a problem only in countries such as China. The situation has changed quickly: by 2001 counterfeit versions of major prescription medicines were appearing all over Europe.

The WHO estimates the business to be worth £18 billion, a figure that some forecast will more than double in the next two years, to represent about 10 per cent of all pharmaceutical sales worldwide. The WHO also believes that up to 30 per cent of medicines in Russia and in some countries in Africa, Asia and Latin America are counterfeit.

In wealthy nations the figure is one per cent - but in the UK that equates to more than eight million packs of medicines worth about £425 million a year. Internet security experts believe that nearly 25 per cent of all emails - 15 billion messages a day - are spam advertising drugs. According to the WHO, more than 50 per cent of medicines offered by websites that conceal their physical addresses are fakes.

Mick Deats, a former detective chief super­intendent who heads the MHRA's intelligence and enforcement unit, says, 'There is far less risk [than with cocaine and heroin] and when you look at the money you can make you are going to make more out of this.'

Steve Allen, a former officer with the National Crime Squad (now the Serious and Organised Crime Agency) and senior director of global security at Pfizer, the world's biggest pharmaceuticals company whose drugs Viagra and the cholesterol-reducing Lipitor top lists of counterfeited medicines, says, 'The chances of detection are pretty low and the penalties don't really fit the crime. If you are bringing in cocaine or heroin, you are going to go to prison for the rest of your life. At the moment if you are smuggling in Viagra you may get a slap on the wrist and a fine.'

The trade extends far beyond Viagra and other 'lifestyle' drugs. Virtually all medicines have been counterfeited - increasingly, criminal gangs have moved into lifesaving medicines including antibiotics, antiretroviral drugs for Aids, and expensive cancer and infertility drugs. At the height of the bird-flu scare, fake doses of the antiviral drug Tamiflu were unleashed on to the world market that contained just vitamin C and lactose.

Bogus pharmaceuticals come in all combinations - some with no active ingredient, some with too little active ingredient, others with too much, some with toxic constituents. One seized consignment of phoney Ponstan, a non-steroidal anti-inflammatory, had no active ingredients at all; but it did contain boric acid, a pesticide that can cause renal failure. (The pills' colour came from leaded road paint.) Fake antibiotics have been intercepted that are made of talcum powder, as well as birth-control pills made of rice flour. Other ingredients have ranged from floor polish to rat poison.

The developing world still records the majority of deaths. In China, between 200,000 and 300,000 people are estimated to die each year because of counterfeit or substandard medicines. The WHO estimates that 200,000 of the one million malaria deaths a year would be prevented if all the drugs were genuine.

Fake vaccines killed 2,500 during a meningitis epidemic in Niger in 1995. Eighty-nine children died in Haiti the same year after swallowing paracetamol cough syrup that had been made with cheap, toxic diethylene glycol. In Nigeria in 2003, three children died during open-heart surgery because the adrenaline and suxamethonium, a muscle relaxant, used were fake. Prof Dora Akunyili, the director of the country's food and drug agency, said, 'The evil of fake drugs is worse than the combined scourge of malaria, HIV/Aids, armed robbery and illicit drugs.'

But it is no longer only the developing world that is being duped. In Canada, 58-year-old Marcia Bergeron died just after Christmas 2006 after buying fake Zolpidem, a prescription sleeping pill, on the internet. The pills had been laced with traces of a medley of dangerous metals including uranium, strontium, selenium, arsenic and aluminium.

In 2004 in Chicago, Craig Schmidt, a salesman, bought the anxiety drug Xanax and the painkiller Ultram. He took one of each, and woke up in hospital three weeks later. The 'Xanax', it was found, contained quadruple the usual amount of active ingredient. He suffered a heart attack, coma and brain damage.

The MHRA was set up in 1989 (as the MCA, the Medicines Control Agency) in response to the thalidomide catastrophe in the early 1960s. It is the government regulatory authority responsible for ensuring that all medicines and medical devices work and are safe. As such, it has prime responsibility for action on counterfeiting.

Its 42-strong enforcement division, the biggest in Europe and the second largest in the world after America, comprises an intelligence unit, an operations unit that deals with all investigations, and a prosecutions unit. Mick Deats, its head, previously led the National Hi-Tech Crime Unit (combating computer-based serious and organised crime). The MHRA's powers include investigating and prosecuting, but not arrest - the reason investigators are often accompanied by police.

As well as counterfeits, its 450 cases last year included sales of unlicensed and banned drugs, investigations into clinical trials and unlawful advertising. Although counterfeits feature in only 25 cases a year, they have become more complex, international in scope and resource-intensive. In the past two years investigators have recovered £6 million worth of counterfeit medicines. 'We are not interested in protecting particular brands,' Deats says, 'but in protecting public health.'

Individuals may be charged under the Medicines Act (maximum two years' imprisonment and/or an unlimited fine) or the Trade Marks Act (maximum of 10 years' imprisonment and/or an unlimited fine). There are no proposed changes to the law in the UK despite the growth of drug counterfeiting, although there is likely to be new EU legislation later this year regarding packaging and the tracking of medicine consignments. Deats says the agency will look at the possibility of using the new Fraud Act, which carries a 10-year penalty, though he believes 'the arrangements are adequate at the moment'.

'It's strange for a medicines agency to have financial investigators, specialists who obtain communications data, telephone billings,' Deats says. 'In every case we deal with we're looking at confiscating the money: we trace the assets, restrain them and take them away. We're very pleased to see strong deterrent sentences given but alone that's not good enough.'

At its London headquarters in a featureless black glass-and-concrete tower close to the MI6 headquarters on the Thames, MHRA intelligence operators such as Malik use web-crawling software to continuously search the internet for drugs most likely to be counterfeited at any given time.

There are currently 14 drugs on the 'watch list', which is updated every six months. 'We look for sites with a UK base, selling in sterling - something that brings them into our jurisdiction,' Malik explains. Test purchases are made from suspicious sellers. 'Sometimes the card is ripped off and nothing arrives,' Malik says. 'Or you can get something different from what you ordered, or a drug that's counterfeit or unlicensed.'

Deats adds, 'It's front room and back room with the internet. You'll go to the site and there will be an image of a bloke with a white coat and a stethoscope hanging round his neck; they'll be offering all sorts of medicines. When we go round, it's a garage, filthy dirty, mucky, horrible. There are no people in white coats with stethoscopes.'

With today's East Midlands raid there is no need for the battering ram. A bleary-eyed man of about 40 answers the door and stands shocked, muttering, 'We don't sell it any more,' as first the house and then his offices are searched.

There is a strong smell in one room. 'It's only toke,' he tells police who have joined the search, referring to a herbal smoking mixture he sells on his website. 'It's all legal.'

The offices, a short distance away, are more revealing: in one room, industrial shelving covering a wall is laden with hundreds of packets. Two hours later about 200 have been bagged, ready to be removed for testing. They are not counterfeits, but capsules of BZP - piperazine - a worming treatment sold illegally in clubs and at music festivals to produce amphetamine-type highs.

Until early last year BZP was marketed as a 'legal alternative' to Ecstasy. In the US it is a Schedule 1 drug, the same classification as heroin. Its status in the UK is currently under consideration by the Home Office, but in the meantime, its unlicensed sale without a prescription is illegal.

Investigators also take away a computer disk and a laptop. The police remove magic mushroom growing kits and cannabis paraphernalia.

Rarely are dubious internet sites trading from where they claim to be. In one operation the US Food and Drug Administration found that 85 per cent of the drugs that buyers believed were coming from Canadian pharmacies were actually coming from 27 other countries. In one case, original spam messages originated from an address licensed to someone in Russia, the website server was in China, the credit card payee phone number was in the UK, the card payment was processed in Australia and the drugs were mailed from Chicago.

At least, with the internet, consumers have a choice - buy or leave well alone. Fake drugs that reach pharmacies and hospitals, indistinguishable from the real thing, are a more terrifying reality.

So far in the UK there have been no recorded deaths resulting from fake medicines, though some pharmaceutical insiders believe it is possible that deaths have already occurred here. Graham Satchwell, a former director of security at GlaxoSmithKline and now a private detective specialising in counterfeit medicines, thinks it is 'at least likely'.

'When someone dies from a pre-existing condition, there will always be the assumption that the drugs they have used have been genuine,' he says. 'In such circumstances there is no post-mortem.' Referring to research by Liverpool University showing one in 16 hospital admissions in the UK is the result of adverse reactions to drugs, he asks, 'How many could be due to fake drugs? Did anyone ever say, could the drugs be counterfeit? Was there any system for any health professional to ask? The answer is no.'

In Britain between August 2004 and the end of last year there were nine recalls of counterfeit medicines where there was clear evidence that fakes reached pharmacies and patients (four of them last year). In 2004 there were recalls for Cialis, an erectile-dysfunction drug, and for Reductil, an anti-obesity drug.

The following year, 120,000 packs of Lipitor 20mg tablets were withdrawn when counterfeit stocks bearing a valid batch number were discovered in the legitimate supply chain. Half of all the retrieved stocks were proved to be fake.

Last year 10mg tablets of Zyprexa, an anti­psychotic medication for the treatment of schizophrenia and acute bipolar mania, were withdrawn after a worker, repackaging the tablets (legitimately) for the UK market, became suspicious. The bogus tablets contained only 60 per cent active ingredient; some of these tablets reached patients.

Also last year there were two alerts concerning bogus 75mg tablets of Plavix, an anti-platelet drug given after heart attacks or stroke. In one instance, the fakes had been mixed in with genuine packs.

The temptation for counterfeiters to attack the legitimate chain in preference to selling direct to the public is huge. 'Why sell a single packet to John Smith when I can sell 400,000 to John Smith and Company?' Graham Satchwell asks.

Production is not difficult. 'You really don't need a huge amount of skill,' one pharmaceutical company investigator says. Most counterfeiting takes place in south Asia and the Far East, with China the biggest source. The scale varies from small-time entrepreneurs turning out 100 tablets a day to vast factories. Both producers and distributors have become more expert. 'It's a cat-and-mouse game, permanently escalating,' Thomas Thorp, the manager of government affairs for Eli Lilly, says.

'Ten years ago it might take a counterfeiter six months to copy your product once it had come on the market, and the quality of that counterfeit would probably be very poor. We're now seeing counterfeit product in some markets where we haven't even launched the legitimate one. They are getting more and more sophisticated.' Manufacturers of the anti-malarial drug Atesunate added a hologram to the blister foil to differentiate it from fakes: the counterfeiters followed suit in less than a month.

Nearly a third of all counterfeit drugs confiscated in Europe in 2006 came via the United Arab Emirates where free trade zones can be used to muddy the trail. Dubai is especially favoured because of its position between Asia, Europe and Africa. In July last year more than 500,000 fake Plavix tablets were seized near Dubai airport. Some contained cement powder.

London is a major transit point. London postmarks add reassurance for buyers, and packages carrying them are less likely to attract attention. In one recent case pharmaceutical company investigators found that counterfeits went from the Chinese mainland to Hong Kong, then to the United Arab Emirates and the Bahamas, where individual prescriptions for American internet buyers were filled and put into packets and addressed. These packages then came to the UK where they were stamped and mailed to the US, all to hide tracks and to add credibility.

Because the packaging is what buyers and patients see, enormous effort is put into getting it right. One investigator recalls a raid in China: 'The warehouse was essentially a shack and there was a pill press turning these things out at 1,000 an hour, probably more. It was very dirty with 1950s-style technology. Then you went next door and it was a complete change: a very clean environment with this large, very shiny machine printing the packaging in pristine conditions. The effort they spend on the pill is nothing, but the level of detail they spend on the packaging is phenomenal.'

It is rare for Britain to be used for manufacture, but it does happen. Allen Valentine was jailed for five and a half years in 2004 for making fake Viagra in a factory in Wembley, north-west London. His plant was estimated to be capable of producing 500,000 tablets a day and up to £6 million worth had been sold but could not be traced.

It is little wonder that pharmaceutical companies now devote enormous resources to fighting counterfeiting. Fakes make a mockery of their huge research budgets, damage their reputations, and can hit the bottom line when prescribers turn to competitor products. Eli Lilly alone spends more than $1 million a day combating counterfeiters.

Pfizer, the counterfeiters' number one victim because it is the largest company and because its products include Viagra and Lipitor, has a team of former police officers spread across Europe, including two in the UK. They in turn direct teams of private investigators. 'They're the guys who are going out there,' Pfizer's security director, Steve Allen, says. 'We can conduct surveillance, observations, undercover ops. We've got some clever guys.' Other companies have similar operations.

Pfizer keeps a four-man security team in China 'and they're working flat-out'. Factories are raided and closed down. But, Allen says, 'you can take one down and the next day two more pop up.' These days the same gangs are involved with counterfeiting illegal lifestyle drugs and lifesaving medical drugs, he says. 'We have found in manufacturing plants around the world counterfeit Viagra together with 50-plus kilograms of heroin and Ecstasy tablets. In one we found several thousand counterfeit tablets with three AK-47 assault rifles. These are good indications that the organised criminals are the exact same people that I was targeting when I was with the National Crime Squad.'

There are claims of associations with terrorist groups - in Turkey a cyanide-laced skin cream was linked to an al-Qa'eda operation; in America the FBI linked sales of fake Ivermectin, an anti-parasite medication, to an IRA arms purchasing scheme; and the Canadian authorities linked counterfeit pseudoephedrine to Hizbollah.

Despite the size of the threat, not all pharmaceutical companies are willing to talk about counterfeits. Dr Paul Newton, an expert on tropical medicines and on fake drugs, said in The Lancet, 'There is a serious conflict of interest within the pharmaceutical industry, concerned that making information on specific counterfeits public will reduce public confidence in the product and reduce sales.'

Pharmaceutical companies and health agencies argue that the wrong message could provoke panic and that the whole credibility of the healthcare system could be harmed. Mike Deats agrees: 'It's an emotive subject. If there's an unbalanced message it can frighten patients into not taking medicines that in 99.9 per cent of cases are safe.'

The MHRA and the Royal Pharmaceutical Society collaboratively conduct spot checks at pharmacies and distributors. The number has been stepped up and concentrates on the 'hot list' of much-faked drugs, but the total number of batches examined is still in the low thousands - tiny compared with the 750 million prescription items dispensed in each year.

Pharmacists get advice, such as: 'Look for signs of a removed or switched product label.' As counterfeiters use a solvent such as lighter fuel, there may be a tacky residue or fading or discolouring around the edges of the label.

Europe has a unique problem. With 25 different member states in the EU, there are effectively 25 different pharmaceutical markets, and with governments regulating the price paid for drugs within their country the cost of pharmaceuticals varies widely. As the EU is one borderless free market, products available cheaply in one part of Europe can legally be shifted to another with higher prices. Medicine lends itself to this perfectly.

What it means in practice is that pharmaceutical companies sell drugs to 'cheap' countries in southern and eastern Europe, such as Greece, and see them re-emerge perfectly legally in more expensive ones such as the UK where manufacturers market at higher prices.

More than 140 million medicine packs are parallel-traded like this every year. As much as 25 cent of Britain's NHS prescriptions come via this route, and an estimated 90 per cent of Britain's pharmacies have some product that has come via parallel trade. Hospitals and trusts, encouraged by governments to buy as cheaply as they can, are ready shoppers.

On their journey around Europe, medicines can change hands 20 to 30 times. Because the original packaging and inserts are often in foreign languages, packs and literature are changed. The vast majority of drugs that enter Britain the parallel-trade route are repackaged. Anti-counterfeiting features such as holograms or shifting ink vanish. Security experts worry that if they are not destroyed, original packaging remains available for counterfeiters to use.

Most insiders agree that the cases surfacing are only a small percentage of the total. 'It doesn't have a high police priority,' Thomas Thorp says. 'Because of this, I would suggest we have no understanding of the extent of the problem. Bigger than we think? Absolutely.'

Steve Allen says, 'I personally don't think we are ever going to stop counterfeiting. There is always going to be someone who is going to try to make a buck out of somebody else's hard research and development. The good side of the story is that we're aware of it, we're doing something about it, hiring the best people to tackle it, and we are already having some successes.'

The public in this country seems largely ignorant to the scale of this threat. But as the Global Piracy & Counterfeiting Consultants, an organisation launched by the consumer advocacy group Americas Watchdog, warns, 'Perhaps no one cares about people dying from counterfeit pharmaceuticals in Africa, but this will change when individuals start dying in large numbers in Los Angeles, New York, London or Tokyo.'