THE whitewashed “scientific” factory looks distinctly out of place on the edge of a peasant village where desperately poor farmers eke out a living selling ears of corn by the roadside.

But the choice of a remote location in the Henan province of China had been deliberate. “Out here, nobody bothers us,” said its owner Gabriel Zhang.

That is because Zhang, a 32-year-old devout Roman Catholic, is engaged in a modern Chinese business: the illegal counterfeiting of pharmaceuticals.

Over the past month Zhang has been involved in negotiations with a UK wholesaler, offering to manufacture fake drugs for people with serious and life-threatening illnesses.

He promised perfect reproductions. “We copy every single detail. We could produce $100 bills but we wouldn’t do that because it is illegal,” he boasted.

To prove that he could produce the lifesaving drugs he provided the wholesaler with counterfeit Viagra which had been manufactured in his factory.

What he didn’t know was that the UK wholesalers were undercover reporters for The Sunday Times investigating a new Chinese counterfeiting scandal. The Viagra turned out to contain “overdose” levels of the active ingredient.

And yet his factory had been preparing to move into the production of drugs for illnesses such as heart disease and cancer where the dosage is critically important.

It is a trend that has alarmed regulators. Many Chinese forgers are switching to the more lucrative market of lifesaving prescription medicines.

Mick Deats, head of enforcement at the UK’s Medicines and Healthcare products Regulatory Agency (MHRA), said it was a profitable business. “Many of the cases we see now are in large quantities, worth more than £1m. The guys that are involved in this want to make large amounts of money. The packaging and the pills look like the real thing but with forensic analysis you see impurities and we often find that the active ingredient is reduced. They are dangerous.”

An investigator working for The Sunday Times set up a false pharmaceutical wholesale company to expose the counterfeiting criminals. After posting an advert on the internet offering to buy drugs, he received a response from Siqi Pharmaceutical, which was selling a cholesterol-reducing medicine as well as Viagra and Cialis, the drugs for male sexual dysfunc-tion. Over a series of e-mails it became clear that the company was a front for Zhang.

The Chinese businessman, who is based in the northern city of Tianjin, agreed to manufacture 200,000 packs a month of three drugs for the wholesaler: Plavix, a blood thinner, Casodex, a hormone treatment for prostate cancer, and Zyprexa, a schizo-phrenia treatment. The potential profits from this trade are huge. The wholesale price for Casodex in Britain is £128 for a pack of 28 pills: Zhang was offering them for less than £5.

Last weekend a reporter posing as the wholesaler’s cousin met Zhang to inspect his production facilities. He was first taken to the city of Luoyang in Henan province where he visited a back room in a print shop that was full of Apple Mac computers. This is where copies of the packaging were made.

To Zhang it was the appearance rather than the contents of the drugs that mattered most. “Producing the pills themselves is relatively easy,” he said, “but if the packaging isn’t good enough you can’t sell it for full price.”

From there Zhang drove the reporter to his factory, which has been making drugs for six years under the name Luoyang Nutrition. Inside were plastic sacks full of Viagra and Cialis – the factory’s stock in trade. The factory workers were maintaining a blister packaging machine ready to begin production for a new overseas order the next week.

Zhang said he traded all over the world and claimed he had one English customer who often took 100,000 fake Viagra pills back to Britain in his suitcase. “He was stopped once by customs,” said Zhang. “He told them they were vitamin tablets and they just waved him through.” Tests last week by Pfizer, the real manufacturer of Viagra, found that the drugs had been “bulked up” with talcum powder and some contained three times the maximum dose of the active ingredient sildenafil.

“Just one of those tablets would have given you an overdose,” said a Pfizer spokeswoman. “There would be increased severity in side effects and the effects in men with existing diseases, such as cardiovascular conditions, may be unpredictable and potentially serious.”

Zhang had earlier claimed: “If you’ve been into a chemist in the UK and bought some Viagra, there’s a chance it might have come from my factory.”

In the past three years there have been nine cases of fake drugs reaching patients. Seizures of these drugs across Europe rose from 500,000 fake tablets in 2005 to 2.7m in 2006.

Two years ago 2,523 packs of fake Lipitor, an anticholesterol drug, were sold in Britain. Figures released under the Freedom of Information Act show that only 359 of those packs were recovered. A similar case last year with the same drug resulted in only seven packs being recovered out of 1,867 that reached the supply chain.

One of the problems appears to be Britain’s reliance on drugs bought through parallel trade – the system in which drugs are bought and sold several times because prices vary between different European countries.

Dr Chris Hiley, head of policy and research at the Prostate Cancer Charity, whose members often use Casodex, said: “These counterfeit drugs are not giving the patient the benefit of the full dose, so effectiveness is compromised.”

Some of the drugs originating in the Far East have been found to contain cement and brick dust, and be coloured with ink from computer printer cartons.

It is not known whether anyone has suffered side effects, but Dr Jonathan Harper, who was hired by the Council of Europe to write a report on the counterfeit trade, believes it is probable that there have already been deaths in the UK caused by fake medicines.

On Friday, Zhang claimed that he had never made any counterfeit pills, although he accepted that he had the machines to do so. He said he had bought his Viagra from a market and had been spinning a tale in conversations with our reporter.

New line for world’s top counterfeiters

There has been a relentless rise in the quality and quantity of counterfeit products from China over the past 10 years. About half of all fake imports into America and the EU now come from there.

Many western manufacturers have moved production to China, helping to lift the quality of the fakes. Some factories have been caught out producing genuine articles during the day and knocking out illegal copies at night.

The counterfeiters are able to turn their hands to just about anything, from car parts to Van Gogh oil paintings. Fake handbags, sunglasses, beauty goods and clothes with designer labels are favourites. The sale of fake drugs from China and other countries is expected to reach £38 billion by 2010, a 92% increase from 2005, according to an American study.

The World Health Organisation estimates that up to 10% of medicines available globally are counterfeits.

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