Global drug giant Novartis has confirmed it has begun an “internal investigation” into a five-year deal it signed with a CSIRO spin-off company to buy an anti-counterfeit technology which the CSIRO and its partner knew could be compromised.
Novartis purchased what it was told was a custom-designed invisible “tracer” which would protect millions of ampoules of injectible Voltaren, widely sold overseas but not in Australia, from the threat of the booming blackmarket trade in counterfeit medicines.
But a Fairfax investigation on Thursday revealed that DataTrace DNA Pty Ltd, a joint venture between the CSIRO and public company DataDot Technology Ltd, instead issued Novartis with widely available tracer material it had bought from China and which it was warned was insufficient for a pharmaceutical application.
Alexandra Suvajac, a Novartis Australia spokeswoman, said the company had a number of measures to ensure the safe use of its drugs which were “not compromised by the allegations around the use of this technology”.
“I can confirm we are undertaking an internal investigation of the matter,” she said. “Novartis is aware of the story reported today and cannot comment further on the ongoing investigation.”
The CSIRO has tweeted that “the allegations raised by Fairfax this morning are new to CSIRO. We’re making enquiries to establish the facts.”
Shares in DataDot Technology have been put into a trading halt until Monday.
The company’s company secretary Graham Loughlin requested the halt as a result of “press coverage today of allegations regarding DataTrace DNA Pty Ltd, a subsidiary company”. DataTrace was half-owned by the CSIRO when it sold the anti-counterfeit technology to Novartis, which had sought a method to protect its injectable drugs, manufactured in Egypt, Slovakia and Switzerland.
In a series of assurances to Novartis, DataTrace had assured the drugs giant that the tracer was manufactured under secure conditions in a CSIRO laboratory in Melbourne.
In fact, the company issued it with phosphor-based tracer it had previously purchased from a lighting supplier in China which was considered sufficient only for low-security applications, such as batch and stock control or sorting industrial commodities.
Organised crime gangs have been dumping bootleg medicines in poor economies around the world at enormous profits in recent years. Last year an Interpol task force arrested 80 people after an international taskforce seized 3.75 million units of fake drugs worth $US10.5 million.
Hundreds of people around the world have died from being administered fake medicines.
“If there is a serious counterfeiting threat to the Novartis ampoules, then this code risks being quickly and easily cracked,” the project’s chief scientist, Gerry Swiegers, warned months before the deal was announced to the market. Dr Swiegers had begun work on the project while still a CSIRO employee, and then after a bitter falling-out with the organisation, he had joined DataTrace full-time.
“Serious questions could then be raised, especially if the successful counterfeiting attack resulted in injury or death.”
Mr Loughlin told the market this morning that “these matters require a response from the parent company”, which is DataDot.
“In order for the facts to be assembled and the response to be prepared we request a trading halt in our shares until the market opens on Monday 15th April or until DataDot Technology Limited makes an announcement to the market on this subject, whichever is sooner.”
The CSIRO remains a minority shareholder in DataDot.
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