News

The IPR Center Report

Partners in Action

Volume 2, No. 1 • March 2009

Orient Pacific

The investigation began in March 2007 in the most unlikely of places: a coffee shop at Bangkok’s Suvarnabhumi Airport. Kevin Xu, a Chinese businessman from Beijing, was offering to supply American businessmen with counterfeits of some of the top-selling pharmaceutical products in the world. The list included drugs used to treat cancer, heart disease, avian flu and Alzheimer’s disease.

Xu explained that he could manufacture the pills at his plant in China, then conceal them in drums and transship them through various ports to disguise their origin, just as he was doing for customers in Europe. What Xu did not know was that the “businessmen” were actually undercover ICE special agents from the Office of the Special Agent in Charge (SAC), Houston.

By the conclusion of the meeting, those agents realized Xu would be one of the most significant targets they had ever negotiated with. He was the first criminal they encountered who sought to distribute such a wide variety of counterfeit pharmaceuticals. It was imperative to move swiftly to gather evidence needed to arrest him.

The investigation took on added urgency when counterfeit drugs like the ones Xu supplied to the undercover agents were found to have entered the legitimate wholesale supply chain in the United Kingdom, resulting in record product recalls of Zyprexa, Plavix and Casodex. In July 2007, Xu came to Houston for another meeting and was arrested by ICE and FDA/OCI agents. Xu was indicted on charges of conspiracy, distribution of counterfeit goods and introduction of misbranded pharmaceuticals, and he chose to go to trial.

At a week-long trial in Houston, witnesses included investigators with the United Kingdom’s Medicines and Healthcare products Regulatory Agency (MHRA) as well as major pharmaceutical companies. During the trial, Assistant U.S. Attorney Sam Louis said that Xu was “one of the most significant traffickers in counterfeit pharmaceuticals ever prosecuted.” Louis told the jury Xu owned a factory that produced high-quality counterfeits of mainstream branded pharmaceuticals, and sought to make money by getting those products into the hands of unsuspecting consumers in the United States.

Xu was convicted and sentenced to 78 months in federal prison. He also was ordered to pay roughly $1.4 million dollars in restitution to the pharmaceutical companies whose products he counterfeited. This investigation succeeded as a result of extensive cooperation between ICE SAC Houston; the ICE attachés in Bangkok, Beijing and London; the IPR Center; FDA/OCI; and MHRA. ICE and its partners were able to apprehend Xu and dismantle his criminal network before he was able to penetrate the U.S. supply chain.