The threat of counterfeiting looms large, especially for industries such as healthcare, pharmaceuticals, and medical devices. At TrueMed, we’re deeply committed to helping our clients stay ahead of this issue by identifying early warning signs of counterfeit products entering the market. One of the earliest and most reliable indicators? Product diversions.
What is Product Diversion?
Product diversion occurs when authentic products are sold through unauthorized distribution channels or in regions not intended by the brand owner. Although the goods themselves are genuine, their path to market is unapproved, which can jeopardize the brand’s reputation. This lack of oversight not only undermines the company’s control over its distribution network but also opens the door to potential risks, such as diminished product quality and increased vulnerability to counterfeiting.
There are several ways product diversion can occur:
- Overproduction by manufacturers: A contract manufacturer may produce more units than ordered, then siphon the excess into unauthorized markets.
- Distributor surplus sales: A distributor may purchase more products than necessary and sell off the surplus through unauthorized or grey market channels.
- Distributor targets for additional profit: due to different pricing per different markets, diversion may bring huge additional profits for the distributors.
While diverted goods are real, the lack of control and oversight exposes both brands and consumers to the greater threat of counterfeit products entering the same channels.
Why Product Diversion Matters
At first glance, diversion may not seem like a critical issue—they involve real, authentic products, after all. However, diversions often serve as the earliest warning signs of a much larger problem: counterfeiting.
Product diversion weakens a brand’s control over its supply chain, opening the door for counterfeiters to step in. They see unauthorized distribution channels as an opportunity to produce and sell fake versions of the product, often making even larger profits by cutting corners on quality and safety.
This shift from selling real diverted products to counterfeit ones is a troubling trend that we’ve seen repeatedly with our clients. Unauthorized markets and channels become a fertile ground for counterfeit products, and once the criminals see success with diverted goods, they move quickly to replace them with fakes.
The Domino Effect: Diversion Leading to Counterfeiting
The logic for counterfeiters is straightforward: once they see that diverted, real products can sell in unauthorized channels, they begin to calculate how much more they can earn by manufacturing and distributing fake versions instead. This shift often occurs rapidly, with fake products entering the market shortly after an increase in diversion.
This is more than a financial problem—it can pose significant risks to consumers’ health, particularly in industries like pharmaceuticals, where counterfeit products can be deadly. In fact, product diversion often creates confusion in the supply chain, and when fake goods are introduced, they erode consumer trust and loyalty (Packaging Europe).
How TrueMed Helps Identify the Early Signs
At TrueMed, we use cutting-edge technology to help our clients detect product diversions before counterfeiters can infiltrate the market. By monitoring product flows and unauthorized sales channels, we help brands take proactive steps to secure their supply chains. Our clients have consistently reported that noticing an uptick in unauthorized sales is often followed by the appearance of counterfeit products in the same markets.
By identifying and addressing diversion early, companies can protect their brand, revenue, and, most importantly, the safety of their consumers.
The Bottom Line
If you’re seeing signs of diversion in your distribution network, consider it an early warning signal. Diversion doesn’t just undermine your control—it opens the floodgates for counterfeiters. At TrueMed, we work with brands to identify diversion early and prevent the escalation to counterfeit products.
If you’re ready to safeguard your products and stay ahead of potential diversion and counterfeiting threats, reach out to TrueMed today.