DUBAI, United Arab Emirates -- Along a seemingly endless row of identical gray warehouses, a lone guard stands watch over a shuttered storage area with a peeling green and yellow sign: Euro Gulf Trading.
Three months ago, when the authorities announced that they had seized a large cache of counterfeit drugs from Euro Gulf's warehouse deep inside a sprawling free-trade zone here, they gave no hint of the raid's global significance.
But an examination of the case reveals its link to a complex supply chain of fake drugs that ran from mainland China through Hong Kong, the United Arab Emirates, Britain and the Bahamas, ultimately leading to an Internet pharmacy whose American customers believed they were buying medicine from Canada, according to interviews with regulators and drug company investigators in six countries.
The seizure highlights how counterfeit drugs move in a global economy, and why they are so difficult to trace. And it underscores the role played by free-trade zones - areas specially designated by a growing number of countries to encourage trade, where tariffs are waived and there is minimal regulatory oversight.
The problem is that counterfeiters use free trade zones to hide - or sanitize - a drug's origin, or to make, market or relabel adulterated products, according to anti-counterfeiting experts.
"Free trade zones allow counterfeiters to evade the laws of the country because oftentimes the regulations are lax in these zones," said Ilisa Bernstein, director of pharmacy affairs at the U.S. Food and Drug Administration. "This is where some of the Internet sellers work," she added.
Dubai is particularly attractive to counterfeiters because of its strategic location on the Persian Gulf between Asia, Europe and Africa. Records show that nearly a third of all counterfeit drugs confiscated in Europe last year came from the United Arab Emirates.
"Three or four years ago, Dubai did not even appear on the radar screen," said an investigator for a major American drug company who is based in China and requested anonymity because he did not have authority to speak for his employer.
Dubai is vulnerable because of the huge volume of goods that moves through its free-trade areas, and because of what is perceived by some in the pharmaceutical industry to be a murky line of authority for rooting out counterfeits there. "It is not clear that the normal Dubai customs authorities have jurisdiction," said Rubie Mages, a director of global security for Pfizer.
The authorities in Dubai do show a willingness to act when drug company investigators tip them to possible counterfeits, as they did in the raid announced earlier this year. "Dubai has taken a big step in fighting the counterfeiters," said Ahmed Butti Ahmed, director general of Dubai customs.
But significant quantities of fake drugs are still getting through, international health officials say. And as countries create more free zones, counterfeiters have more options. "What happens is they move around," said Bernstein of the FDA. Sometimes, in an attempt to avoid detection, they move products between free zones.
"It's not just the UAE trade zones that are a problem, but free zones around the world," said Steve Allen, a senior investigator for Pfizer, who was in Dubai early this month to talk to customs officials.
One problem area, counterfeiting experts say, is the Colon Free Trade Zone, situated next to the Panama Canal.
In June, the Panamanian authorities raided a warehouse there that was used by an Australian, George Adams, to run his Internet pharmacy business. No charges were filed in connection with that raid, but about $50,000 in drugs were seized, Adams said. Several months earlier, Adams had been arrested for trying to sell counterfeit Viagra. He said he was "set up" and denies any wrongdoing.
Allen, of Pfizer, said his latest concern involves counterfeit shipments passing through Jordan and Mauritius, an island east of Africa.
In July, the authorities in Dubai said fake drugs from Mauritius had been seized at a free zone next to the Dubai airport. There were more than half a million pills of counterfeit Plavix, a blood-thinning drug made by the French company Sanofi-Aventis.
The Dubai health authorities say they do not know who made it.
Some pills, a government official said at the time, contained cement powder.