April 3, 2025
There’s always been a black market for counterfeit goods. This underground economy once thrived in the shadows, fueled by consumer demand, global trade and the ever-advancing digital landscape. From 2017-2019, top 10 lists of the most impacted sectors did include pharmaceuticals, but pharma lagged behind luxury goods, electronics and even sneakers. The pandemic, however, changed that. A mysterious and deadly public health emergency, the ensuing economic distress and a misinformation-driven panic that rendered the manufacture and access of high-quality essential medicines and health products extremely difficult created the perfect storm. As a result, counterfeit pharmaceuticals are now being accessed with the push of a button, with little attention to the dangers these products pose to both the public and the pharmaceutical industry. In 2023, one government source estimated the value of counterfeit pharmaceuticals alone to be $4.4 billion annually. And the WHO estimates that over 10% of medications worldwide are either subpar or fake, replacing the term “counterfeit” with “substandard” or “falsified” to expand the definition. Most recently, the approval of GLP-1s for weight loss has turned what was a smoldering fire to a three-alarm blaze.
What do you need to know about this growing crisis of black-market drugs—and how does it impact pharmaceutical companies? Read on to learn more, plus how Escalent’s global health and life sciences team can help pharma companies track counterfeit issues and educate customers about the dangers of counterfeit drugs.
Understanding the Different Types of Counterfeit Pharmaceuticals: Black Market vs. Gray Market Medications
Pre-Covid, most pharma counterfeiting concerns were presumed to be of the black-market variety, but in recent years, the addition and proliferation of gray market medications has become an increasing concern globally. Black market medications are clearly illegal; few well-meaning buyers would seek to purchase or use these products without serious reservations. However, legitimate pharmaceutical products that are produced and/or distributed via unauthorized channels—that is, gray market medications—may have been formulated legitimately, but aren’t subject to quality control measures. These substandard medications may:
- Contain little to none of the active ingredient(s) listed on the label or contain toxic pollutants (mercury, arsenic, rat poison, cement, etc.)
- Be incorrectly labeled in terms of dosages
- Be expired or incorrectly stored
- Be repackaged with similar but inaccurate labeling (often not detectable without microscopic examination)
- Be unregistered (not evaluated or approved in the country of purchase)
The use of these substandard products poses great risks. Of course, there are the potential health risks to patients from ingesting toxic additives or taking the wrong dosage, for example. In some cases, irreparable organ damage or even death ensues. Some well-meaning healthcare providers have attempted to help their patients by procuring these products for them at a lower cost but may unknowingly be causing them even greater harm.
The unchecked sale and misuse of counterfeit antibiotics contribute significantly to the rise of antibiotic-resistant bacteria. When patients self-medicate with improperly sourced antibiotics, they may use the wrong doses or incomplete treatments, fostering the development of superbugs that no longer respond to conventional therapies. This is harmful not only to the patients themselves, but to the public at large.
Finally, counterfeit medications can lead to misdiagnoses or inadvertent non-treatment, as patients assume they are taking legitimate drugs when, in fact, their condition is untreated. This can result in disease progression and more severe health outcomes.
Three Ways the Rise of Black and Gray Market Drugs Impact Pharma Companies
- Revenue loss to pharma companies: Public health aside, there are sound business reasons for reining in the proliferation of subpar products. When patients purchase drugs through unauthorized channels, they bypass the regulated, legal market, causing revenue losses for companies that invest billions in drug research, development and distribution.
- Reputation damage to the pharma ecosystem: When substandard drugs circulate, it damages the trust patients place in legitimate pharmaceutical brands. Even though companies are not directly responsible for the distribution of counterfeit products, they bear the reputational cost. Patients may lose faith in the efficacy and safety of branded medications, leading to reduced sales and increasing skepticism about the entire pharmaceutical ecosystem.
- Reduction in pharma innovation: The economic impact of counterfeit drugs has broader implications for the pharmaceutical industry’s capacity to innovate. As revenues decrease, pharma companies may scale back their investments in market research and development, stalling the production of new, life-saving medications. Because governments and regulatory agencies face significant difficulties in policing the black and gray market medications, pharmaceutical companies may need to invest more heavily in anti-counterfeiting technologies, legal battles and partnerships with international regulators to address the growing threat, thereby also decreasing potentially available innovation monies.
Tackling the Unregulated Medication Crisis: How Pharma Companies Fight Back
Unfortunately, both patient needs and technology move faster than the laws and enforcement of those laws intended to protect. For instance, to protect patients who need medication which may temporarily be in short supply, Congress approved compounding in 1997 to allow for these and other legitimate patient needs to be met (that is, creating bespoke formulations containing approved but not identical active ingredients into the same or different delivery method). But due to the unprecedented demand for GLP-1s (combined with eligibility and price issues), for example, that allowance has been exploited to provide high-demand products to those for whom the medications may not be indicated under FDA guidelines. Although many legitimate compounders exist to provide for patients’ needs, bad actors have taken advantage of legal loopholes and profited by engaging in the distribution of subpar products. By using these subpar products, patients are exposing themselves, the public and pharmaceutical manufacturers to risk without awareness of the potential harm involved. Fortunately, the FDA recently declared that the shortage of GLP-1s is resolved. With this stabilization, the FDA has updated some of its policies, leading to a phase-out of these compounded versions over the coming months.
In addition, pharmaceutical companies like Eli Lilly have launched advertising campaigns warning patients about the dangers of unapproved weight-loss drugs. These campaigns emphasizing the importance of verifying the safety and origin of medications.
Although the rise of black and gray market medications is a complex challenge that has far-reaching consequences for public health and the pharmaceutical industry, these recent steps taken to fortify public safety policies should strengthen the resolve of the industry to fight the good fight.
Learn how Escalent is providing research and strategic support to help our clients combat the illegal and unsafe use of non-FDA approved products.
Want to learn more? Let’s connect.
Caryl Kahn
Senior Insights Director, Health & Life Sciences
Caryl Kahn is a senior insights director with Escalent's Health & Life Sciences group. She's a lifetime healthcare researcher with experience in many aspects of the business – primarily as a senior moderator at various market research suppliers, as well as a major management consulting company. In addition to stints as an independent moderator, she has held positions as an analyst at a quantitative market research supplier, a quant/qual analyst at a pharmaceutical company, an in-house researcher at a pharma advertising agency, and as an adjunct professor of marketing at a local university.
