6. The push factors behind counterfeit pharmaceuticals

The decision of what counterfeit product to produce and which markets to target is driven by factors related to: 1) the characteristics of the market, which determine market potential; 2) technological and logistical considerations, which determine the feasibility of counterfeiting; and 3) the institutional environment, which determines the risks of being caught. Table 6.1 assesses the situation for pharmaceuticals, based on a general framework and analysis presented in OECD (2008). As shown, the pharmaceutical market can be highly attractive for counterfeiters.

The sale of counterfeit medicines can be highly profitable and highly attractive to organised crime groups, especially when the amount of expensive active ingredients used in the counterfeits are reduced. For some products the active ingredients can account for 80% of the cost of a generic medicine (WHO, 2017b). According to the pharmaceutical company Pfizer, who produced the innovative medicine, Viagra (one of the most counterfeited medicines worldwide), the production of 1 kilogramme of heroin has higher costs and lower street value than the respective costs and profit entailed by the production and distribution of 1 kilogramme of Viagra, meaning that the profit margins for Viagra are much higher (UNICRI, 2012). In one case investigated by the Medicines and Healthcare Products Regulatory Agency (MHRA) in the United Kingdom, 100 000 counterfeit pills imported at the price of about GBP 0.25 each were being sold for up to GBP 20 each, which translates into a profit margin of 7,900%.

In international trade, customs officials are most likely to encounter potentially low-quality medicines before they enter a country, and health care workers are most likely to spot them once they do (WHO, 2017b). It is rare, however, for either of these groups to have access to simple field tests that would help them to triage suspect products. Moreover, where field testing equipment is available, staff do not always have the training or the time to use it correctly.

In an assessment of the regulatory capacity of 26 countries in Africa published in 2010, the WHO concluded that these countries did not generally have the capacity to control the quality, safety or efficacy of the medicines circulating on their markets or passing through their territories. Detection of counterfeit medicine by custom officers is difficult due to the limited time for analysis of the shipments. Additionally, many criminals engaged in pharmaceutical counterfeits use original packaging but manipulate the pharmaceuticals. Of 20 samples of seized suspected counterfeit pharmaceuticals analysed by Dégardin and Roggo (2016), all packaging was found to be authentic with the exception of one vial, which was a different shape and size. In three samples, pharmaceuticals have been found to be genuine and in 17, they have been confirmed to be counterfeits. Five samples consisted of genuine chemical composition but manipulated packaging. In one case chemical content was totally counterfeited. In case of 11 counterfeits, the samples were of genuine origin but the medicines had been diluted with water, with the dilution factors ranging from 1.5 to 200. Half of the samples had a different batch number on the vial than on the box. While the counterfeit was confirmed within one to two days of detection of suspected shipments, one week was needed for the full forensic analysis of the composition (Dégardin & Roggo 2016).

The risk of prosecution for counterfeiting pharmaceuticals is low (WHO, 2017b). Most counterfeits are only detected when they reach retailers or patients and it is frequently difficult to trace them back through complex supply chains, or to prove where criminal activity occurred. Moreover, in most countries, investigation of criminal activity is the work of the police, who may not have extensive expertise in the specialised techniques sometimes needed to investigate pharmaceutical crime. The situation is further complicated because the international nature of trade in counterfeits often requires cross-border investigation, which can be difficult, especially if the criminal parties involved have complex ownership structures and use foreign bank accounts. Difficulties in following paper trails of investigated products to trace their point of origin can be significant as the location of evidence necessitates forensic examination of computers and smartphones, some of which may be in foreign jurisdictions. Language barriers can also affect cross-border co-operation.

In most countries, sentences for falsification of medical products are far less than those applicable to, for example, drug smugglers, who can be imprisoned for lengthy terms and can have the proceeds of their crimes confiscated (WHO, 2017b). Table 6.2 compares information on maximum prison terms in selected countries for trademark infringement and narcotics trafficking (OECD, 2018c).

Table 6.3 shows the sanctions and maximum incarceration periods for trademark infringement in the BRICS countries.

In addition to criminal sanctions, rights holders can sue for damages. Alternatively, as shown in Table 6.3, they can seek compensation through statutory penalties; such penalties are not available in all countries. Other fines can also be applied. In the case of statutory damages, the amounts that can be recovered, when provided for, vary significantly among countries. In the case of the United States, they can reach up to USD 2 million (OECD, 2018).

References

Dégardin, K. and Roggo, Y. (2016), “Counterfeit analysis strategy illustrated by a case study”, Drug Testing and Analysis, 8(3-4), pp.388–397.

OECD (2008), The Economic Impact of Counterfeiting and Piracy, OECD Publishing, Paris. https://doi.org/10.1787/9789264045521-en.

OECD (2018c), Governance Frameworks to Counter Illicit Trade, Illicit Trade, OECD Publishing, Paris, https://doi.org/10.1787/9789264291652-en.

UNICRI (2012), Counterfeit Medicines and Organised Crime, United Nations Interregional Crime and Justice Research Institute, www.unicri.it/topics/counterfeiting/medicines/report/Ctf_medicines_and_oc_advance_unedited2013.pdf.

WHO (2017b), WHO Global Surveillance and Monitoring System for Substandard and Falsified Medical Products, World Health Organization, Geneva, www.who.int/medicines/regulation/ssffc/publications/GSMSreport_EN.pdf?ua=1.

Metadata, Legal and Rights

This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Extracts from publications may be subject to additional disclaimers, which are set out in the complete version of the publication, available at the link provided.

https://doi.org/10.1787/a7c7e054-en

© OECD/European Union Intellectual Property Office 2020

The use of this work, whether digital or print, is governed by the Terms and Conditions to be found at http://www.oecd.org/termsandconditions.