Intellectual Property

A New Resource to Understand and Combat the Counterfeit Pharmaceutical Trade

The Organisation for Economic Co-operation and Development (OECD) recently released Trade in Counterfeit Pharmaceutical Products, one in a series of joint OECD/European Union Intellectual Property Office (EUIPO) reports to enhance understanding of the costs to governments, businesses and individuals of the trade in fake medicines. Counterfeit commerce accounts for a striking 3.3% of all global trade, and this OECD/EUIPO analysis aims to help industry and government devise better solutions to address this growing worldwide problem.

ALEC long ago identified counterfeit pharmaceuticals as a serious problem, adopting model policy Resolution to Combat Counterfeit Pharmaceuticals to highlight the issue among ALEC members. The proliferation of illicit medicines and medical devices exacts significant human and economic costs including:

  • Harm to health due to substandard medicines and medical devices;
  • Lost revenues and damaged reputations suffered by legitimate healthcare firms;
  • Diminished government revenues; and
  • Job losses in the pharmaceutical sector

Trade in Counterfeit Pharmaceutical Products identifies China and India as the main producers of counterfeit medicines, however the United Arab Emirates, Singapore and Hong Kong (and to a lesser extent Yemen and Iran) serve as the main transit points for the illicit trade. Counterfeiters’ success depends on penetrating pharmaceutical supply chains – usually through second tier distributors. Thus far, the supply chains for first tier distributors are generally secure.

Pharmaceuticals are especially attractive to counterfeiters due to high profit margins and ease of avoiding detection and prosecution. Even for those who are caught, the penalties tend to be mild compared to other drug offenses. According to the OECD report, in Brazil, the maximum jail sentence for trademark infringement is one year, compared with 15 years for narcotics trafficking. The drugs most likely to be counterfeited include antibiotics, lifestyle drugs (treatments to improve function rather than to cure a disease) and painkillers, however fake versions of anti-malarials, as well as treatments for cancer, diabetes, epilepsy and cardiovascular disease are also common. The National Institutes of Health (NIH) found that counterfeits are rarely comprised of active pharmaceutical ingredients (API) at therapeutic levels, if they contain API at all, and often contain potentially harmful fillers. More than 95% of counterfeit “products” are shipped via post or using express shipping couriers impeding interdiction.

Typical of lucrative illegal enterprises, international organized crime groups are heavily involved in the trade in medical counterfeits, and the revenues collected support a wide range of illegal activities including human trafficking and global terrorism. More about the links between fake drug profits and other criminal activities can be found in the ALEC article Filtering Out Counterfeits.

The increase in illegal online pharmacies presents a particularly formidable challenge as well as an acute danger to patients. The Food and Drug Administration (FDA) is doing its part to protect the public by compiling a list of illicit websites and cautioning American consumers that “Buying prescription drugs from rogue online pharmacies can be dangerous, or even deadly.” The agency also sends warning letters informing online distributors that they are in violation of US law, however most of the rogue sites are located overseas, limiting the FDA’s ability to counter them.

Trade in Counterfeit Pharmaceutical Products also assesses the international efforts to combat the fake medicine challenge. INTERPOL has established several operations around the world including Operation Pangea which launched in 2008 with just eight countries. This operation has grown to include 123 partner nations. Pangea targets online sales of counterfeit and illicit medicines and medical devices, working to counter the rogue websites and to identify the criminal networks sponsoring them. To date, Pangea is credited with seizing millions of counterfeit items and shutting down tens of thousands of illicit websites.

The World Customs Organization, another entity waging the battle against fake drugs, targets suspect containers for seizure. They observed a discouraging 167% surge in seizures of medical products between 2016 and 2017. The World Health Organization (WHO) also has a mechanism to provide oversight, however they approach the issue from a public health perspective rather than as an intellectual property rights violation. Other measures adopted to thwart pharmaceutical counterfeiters include online pharmacy authentication by displaying a logo on legitimate sites ; the MEDICRIME Convention which provides developing countries with a legal framework for dealing with counterfeit pharmaceuticals; and various proposals to secure the pharmaceutical supply chain.

The counterfeit pharmaceuticals trade is a growing danger to consumers because it debilitates the industries responsible for lifesaving innovation. OECD’s Trade in Counterfeit Pharmaceutical Products is a welcome resource to policy makers and others who want to deepen their knowledge on the threat and the potential solutions to this particularly vexing challenge.

In Depth: Intellectual Property

Innovation and the intellectual property (IP) often underpinning it are crucial drivers of human progress. Innovation saves lives, facilitates human connections that have even sparked revolutions and entertains and enchants people around the globe. Pharmaceuticals, computer operating systems, social networking sites and films are all tangible examples of the intellectual…

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