Mobile drug authentication app needs work

March 23, 2010

Ghanaian entrepreneur Ashifi Gogo has developed a mobile-based technology he believes can help consumers and pharmaceutical companies fight back against drug counterfeiters in developing nations. But experts said his solution needs work.

Gogo, a 28-year-old Dartmouth College engineering graduate, co-founded Sproxil Inc. to end the “menace” of counterfeit drugs in West African countries such as Nigeria, where he said up to 80 percent of the over-the-counter medication bought by consumers is fake.

Gogo said when consumers purchase a drug protected by his trademarked Mobile Product Authentication technology, it comes with a scratch code that provides them with a number they can enter into their cellphone as a text and get an immediate text response back on whether the product they just bought was real or fake (read original story here).

Last month Sproxil announced a partnership with Nigeria’s National Agency for Food and Drug Administration and Control and drug company Biofem Pharmaceuticals Ltd. to employ Sproxil’s anti-counterfeiting technology to cover about a million units. “There are other companies or people who tend to talk about the solution or advocate for it, but I can tell you that nobody else is working this close with a drug regulatory authority to implement this and nobody really has a product on the market yet. We’re the first to do this and we’re really excited about it.”

THE PITCH

The World Health Organization estimated about a third of all the drugs sold to developing nations are fake and last year a report issued by the United Nations Office on Drugs and Crime predicted the global trade in fake pharmaceuticals would hit $75 billion by the end of this year – an increase of 90 percent since 2005.

“It’s growing at a rate that’s much faster than the rate at which genuine pharmaceuticals are growing,” said Gogo, who bootstrapped the business with about $100,000 from business partners, friends and family. In addition Gogo won a $10,000 grant from the Clinton Foundation and another $100,000 from the Washington, DC- based African Diaspora Marketplace, a not-for-profit organization sponsored by U.S. AID and Western Union that provides grants to African American entrepreneurs creating jobs in Africa. “So it shows you the kind of range that we’re dealing with. Best case you’re 1 out of 3; worst case you’re 4 out of 5.”

Alden Zecha, Sproxil’s chief financial officer, said the company pulled in $100,000 in revenues last year and anticipated growing that to about $1 million by the end of 2010. He said the company’s main challenge this year is to raise capital to hire more sales and marketing staff in order for Sproxil to bring in more clients. Zecha said they are seeking to raise $3-4 million from primarily venture capital firms in the U.S. and Africa.

“Our technology can be moved into almost any market very rapidly, but we need a certain amount of capital to be able to do that,” said Zecha, who confided that it’s often difficult to convince foreign investors to fund Africa-focused companies. “Investors don’t seem to understand the African market and are a bit reluctant to look at deals that might involve targeting Africa as the marketplace.”

TAKING IT TO THE EXPERTS

Derek Kerton, principal analyst at the San Jose, California-based wireless consultancy firm The Kerton Group, said the problem of counterfeit drugs is a very real one and Sproxil’s solution is promising, but one that will be tough to reach a broader consumer audience.

Kerton, whose father is an advocate for product safety in the developing world, said counterfeiters mostly take advantage of less-sophisticated consumers and thought Gogo’s mobile-based solution could help level the playing field in that regard.

“By using the Sproxil solution to verify the authenticity of drugs, those at the bottom of the pyramid can fight back at those that would take advantage of them, and assure themselves safer medicines and better health,” said Kerton, who added Sproxil still requires a savvy consumer to be effective. “A quick chat I had today with Indian entrepreneurs revealed little faith that those buying their drugs in the roadside stalls of Delhi would be early adopters of a Sproxil service.”

Regardless Kerton felt it was a noble undertaking by Gogo and wished more mobile telecom developers would pursue more publicly-beneficial applications instead of “first-person shooter” games. “The best apps might not be 3D games on the iPhone, but rather simple SMS programs that make a real difference.”

Cindy Krum, the founder and CEO of Denver, Colorado-based mobile marketing firm Rank Mobile, echoed Kerton’s sentiments about the empowering quality of Sproxil’s technology for consumers, but said she didn’t think the awareness of the counterfeit drug problem had yet reached a level that would encourage mass adoption.

“To see success the project will have to be embraced and evangelized off-line in mass media. People will only use this technology if they understand the risks and trust the results,” said Krum, who also wondered what happens when a consumer discovers the drugs they just bought are fake. “They must be returned, but this can be more difficult when you are dealing only in cash. Would it be mandatory that a retailer accept the returned drugs or could they refuse the return?”

Krum also had concerns about Sproxil’s ability to stay ahead of the counterfeiters, whom she feared may just replicate the technology and add their own bogus scratch-off codes. “People could believe that just the presence of a scratch code is an indication of security, even if they don’t text it in,” she said, suggesting Gogo switch to the same “chip and PIN” technology used by banks and credit card companies to protect consumers at point of purchase. Krum said it would require the consumer texting in two numbers – one from the bottle and one from the receipt – which would only work in tandem. “While this system requires slightly more digital infrastructure, it’s still information that can easily travel over mobile networks, and will be much harder for the counterfeiters to duplicate or work around.”

Krum said Sproxil’s anti-counterfeiting service could also be used by high-end international consumer brands, such as Prada and Gucci, to protect their products. “I think this technology is great, and it sounds like it can be easily adapted to verify lots of products – both high-dollar and more mainstream.”

Jacob Sharony, the founder of Long Island, New York-based Mobius Consulting and who has more than 25 years experience in the telecommunications field, said Gogo has the right idea, but his solution needs to go deeper to address the problem more effectively.

“The current user interface is not so friendly and prone to errors,” said Sharony, referring to the process whereby the consumer is forced to manually enter a code into their cellphone. “I would rather see an app that takes a picture of a 1-D or 2-D bar code – after scratching – with a quick send button.”

Sharony agreed with Krum that the security of Sproxil’s system was an issue and the technology was fairly easy to hack for counterfeiters, as cellphone texting technology is generally not encrypted and delivery can be delayed.

“A secure data link will be more appropriate, but again data services and more sophisticated phones are not ubiquitous in Africa,” said Sharony. “The idea is good, but the solution needs further improvements to be more robust, secure and transparent.”

What do you think of Sproxil’s technology? Will it help thwart drug counterfeiters in developing nations? Would you invest in them? Leave your comments below:

10 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

Thank you to the experts for their comments. We are excited that there is growing interest in our technology and services. I’d like to address some of the questions/concerns raised so that readers may be able to discuss our solutions in more detail.
We set out to design a service that 2 billion people in low-to-medium income countries could easily use. The service has to be as secure as first-world options, and not require a large marketing campaign to retrain 2 billion people. With this in mind, we went with SMS on the mobile phone.
We offer a service not an app – there is no download or install process required. Text messaging is already pre-installed as a GSM standard on the vast majority of GSM phones made in the last decade, including the older second-hand phones often seen in developing nations.
Relatively lower income levels in developing nations means that offering an app to download and install is not scalable – it requires a data plan, which comes with an extra charge to the user. Using barcodes (1D and 2D) could work for those users who have cameraphones with autofocus and mobile internet data plans to upload the scanned barcodes for authentication. Sadly, data plans are not common among the masses outside the developed world. These are some of the reasons that led us to design our solution around a toll-free text message number. Consumers don’t have to worry about costs any longer, and legitimate brand owners are willing to foot the bill.
In our technology design phase, we also looked at a “chip and pin” model, where two codes are entered and jointly authenticated. This could work in countries that have good electronic trade systems, such as South Africa and in some parts of India and China. However, in the cash-based societies where drug counterfeiting is a major problem, one rarely gets a receipt for purchases. Thus, there is no easy way to reliably generate a receipt with a PIN.
We focused on what is already working in these cash-based societies. The prepaid cell phone market has tripled in five years (2001 to 2006). This multi-million dollar market is growing at 80%-90% annually in Asia and Latin America – and that was in 2006, I believe it’s even more exciting now. I contend that the popularity of prepaid phones hinges on the successful prepaid airtime voucher model where consumers buy a voucher with cash (often by the street or in traffic), scratch off a panel, send a code and get airtime to make a phone call. This method has been wildly successful in cash-based societies, and we’re leveraging the success to help solve a grave problem – counterfeit medication – in these same societies. Consumers already know how to scratch and send codes, and hackers have been largely unsuccessful at making fake prepaid voucher cards. The GSM technology we leverage is a great example of “good enough” security – not overly complicated, yet secure enough to power 4 billion phones worldwide.
Awareness on counterfeits is growing. There are now some good online resources for advocacy – the Partnership for Safe Medicines comes to mind. As local enforcement efforts are increased over time, we’ve seen consumers get savvier. We invite foundations and social media houses to help raise awareness on drug quality issues, so that folks at the so-called bottom of the pyramid don’t get fake drugs in exchange for their hard-earned cash.

Prepaid Stats: http://www.pre-comm.com/prepaid_wireless _trend.html

Posted by Sproxil | Report as abusive

Ingenious idea. Urgently needs to be adopted in the world’s leading fake drug markets, The United States and Russia.

Posted by HBC | Report as abusive

My had goes off to the Sproxil founding team; they are trying to make a difference for a very difficult problem.

The experts’ opinions are useless. This is a start-up for god’s sake, working on a couple $100k of capital and they are talking about global presence and scaling to Delhi street vendors. Useless brain farts, we need opinion from experts that still understand the grit and determination that early stage startups require. Those opinions I want to read and those opinions would be of value to entrepreneurs that the world needs to make it a better place.

Posted by tomtzigt | Report as abusive

Kudos Gogo a fellow D and Ghanaian. The idea is very excellent and i think the execution is almost perfect. The experts i guess have demonstrated they have no idea about the african system and it was good to clear things up for them. My only worry is the seemingly ease of duplication and watch out for the greedy cell phone companies they can take you out.

Posted by andrewquao | Report as abusive

I have two thoughts to add here:
1. It may not be necessary that the Customer has a mobile phone. They can send the text message by ‘borrowing’ the shop-keeper’s cell phone, provided they know what’s happening. They can cross-check whether the shop-keeper sent it to the right number if that number is printed on the medicine packet itself. Of course, the shop would charge extra for this service but at least the option exists.
2. Which makes awareness (as everyone has suggested) the key hurdle. Even though I’m from India, I have never worried about the drugs I buy being counterfeit.

Once people are sensitised to the problem, they will feel motivated enough to send that text message, either from their own phone, or through someone else’s.

Posted by Indradeep | Report as abusive

I would like to say that TruTag.com is perhaps going to soon be the definitive solution to this issue of counterfeit medicines.

Posted by Hazael724 | Report as abusive

I’m afraid some of these comments show the niavte of the established world.

Per the comments on “One number on a receipt one number on the “bottle” & Chip and Pin…

First, medication in emerging markets is not sold by the bottle

Second, receipt? What receipt… the counterfeit issues most often occur in open air markets or thru bogus Internet sites…

Know your markets.

Posted by HealthOne | Report as abusive

“There are other companies or people who tend to talk about the solution or advocate for it, but I can tell you that nobody else is working this close with a drug regulatory authority to implement this and nobody really has a product on the market yet. We’re the first to do this and we’re really excited about it.”

Thanks

Posted by MithunSingh | Report as abusive

I feel the technology is good. However, I feel that it will eventually translate to increased cost of medicines even if the text messages are free. I also think that access to cheap, but good quality generics should be promoted especially in the low/middle income countries that this service is targeting rather than on branded medicines. So I wondered if this service will not be promoting products from larger multinationals which can afford to buy the tags at the expense of the health of the public that mainly depend on cheap generics?

Posted by choms124 | Report as abusive

This is a great idea that i personally have been trying to work on as my Masters project in Information Systems.
When u look at Africa, the mobile phone is one of the most technological device that is found almost everywhere and if we capitalize on this, we can be able to make a difference. I believe that to impact Africa the mobile phone must be put to maximum use with mobile applications that run on the basic mobile phones.

Posted by lawrenceiga | Report as abusive