Ethical dispensing

According to Curtis Cluff, CEO of Envy Medical, ‘Because each of our executives have seen this issue in many forms in the past, we are very tuned-in to the potential for problems. Much of the issue of diversion is fueled by the temptation to save a couple of dollars, or make a couple of extra dollars at the risk of quality or reputation. We simply won’t do that, and we won’t deal with any individual or partners who will. We recognise that it starts right here with us and then is extended by identifying international distribution partners with the highest ethical values.’

Staying on top of where products are sold takes a concerted effort on the part of the manufacturer to be actively involved in the process. ‘We keep a very close watch on the flow of our product by the use of lot-code tracking, and subtle label differences by region to identify when products may be being diverted from one country or region to another, or if a fake product is being made and sold as if it were ours. For example, we recently discovered a facial device copy manufacturer operating in Asia, and worked with our IP litigation firm to quickly serve notice to the offending company, who promptly complied with our cease and desist. The quality of the devices they were making were very poor, but that was not readily apparent to a buyer at first,’ says Cluff.

The same holds true for skincare products, whether cosmetic, over-the-counter, or prescription. Cluff adds, ‘If you are being offered a deal from someone other than the actual manufacturing company, and it seems too good to be true, it should be a big red flag. Those who buy without checking with the company that is supposed to stand behind the product, do so at their own peril. If someone tells you they have a product for sale at deep discounts, or a product that is exactly the same as a branded product, the best advice for the sake of your customers and your reputation is to walk away.’

Chain of custody

According to Cluff, ‘We have developed superior products at an attractive price and we support that pricing structure globally, which substantially limits the opportunities for arbitrage dealings in the grey markets. One of the ways the manufacturers unwittingly contribute to the issue is by supporting significantly different pricing in different countries. Individuals and even entire companies will materialise to buy the product lower in one country, and then sell it higher in another country. This practice is one of the major factors for seeing a product that is made in the US or the EU, and sold into another country, then flowing back into the US or the EU. The retailer or medical practice buying it may not see the risks, but they are real.’

For example, what assurances does the buyer really have that the product is genuine and undamaged? Cluff says that the products may have travelled half way across the world and the buyer and end‑user would have no way of tracing the chain of custody. It may have been left out in the blazing sun or freezing cold on a dock somewhere for long periods of time, which can compromise the quality of the product or the efficacy of the actives. ‘The product may also be past its expiration date, and it may have been returned, opened, or rejected by the originally intended customer for unknown reasons. The risks to the buyer are real, and simply not worth it,’ he adds.

Horror stories of what really goes on in many corners of the world are rampant. Yet even in the US, these tales are all too common. As Headley explains, ‘The sale of products through an unauthorised, unofficial or unintended channel has the potential to damage brand integrity, erode distributor loyalty, reduce clinic profitability, and can put end-user customers at great risk. It is widely known that products containing high levels of actives have a finite shelf‑life, and any exposure to light, air, dust, heat, or cold can alter the formulation, breed bacteria and contaminate the product.’

For example, one sales manager of a leading physician-dispensed cosmeceutical brand uncovered a doctor who purchased a few hundred dollars worth of her products, and next placed a few thousand dollar order, and then jumped to a $50000 order. She saw the figures and became curious, and paid the doctor an impromptu visit with his sales rep, asking to see his inventory. To her surprise, after he made a number of lame excuses, there was not one product to be found on the premises. Clearly, this doctor was exporting goods under the radar, and the end result was that his account was shut down and an investigation ensued. The fines ultimately levied on this clinic far exceeded any profits made from siphoning off goods for sale overseas.

‘In one instance with one of my previous employers, we uncovered a company in another country that was actually taking the products they had purchased, and squeezing them into new bottles with their labels in an open warehouse, by hand. Besides the obvious legal issues, the conditions were far from good manufacturing practice standards, risking contamination of the product that could cause harm to anyone buying it,’ says Cluff.