Trade in Counterfeit Pharmaceutical Products
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Illicit Trade Trade Illicit Trade in Counterfeit Pharmaceutical Products This report, one in a series of studies by the OECD and the European Union Intellectual Property Office (EUIPO), enhances understanding of the issues and challenges facing governments, businesses and society Illicit Trade posed by the trade in fake pharmaceutical products. Illicit markets for fake pharmaceuticals are attractive for counterfeiters, given the high profit margins, low risks of detection and prosecution, weak penalties, and the ease with which consumers can be deceived into believing that the counterfeit products are genuine. Counterfeit medicines not only cause economic damage for the sector, but are also a significant threat to public Trade in Counterfeit health, since fake medicines are often not properly formulated and may contain dangerous ingredients. Fake pharmaceuticals include antibiotics, lifestyle treatments, pain killers, anti‑malarial drugs, diabetes treatments Pharmaceutical Products and central nervous system medicines. Trade in Trade Counterfeit Pharmaceutical Products Pharmaceutical Counterfeit Consult this publication on line at https://doi.org/10.1787/a7c7e054-en. This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases. Visit www.oecd-ilibrary.org for more information. ISBN 978-92-64-42698-6 9HSTCQE*ecgjig+ Illicit Trade Trade in Counterfeit Pharmaceutical Products 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. The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. Note by Turkey The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the “Cyprus issue”. Note by all the European Union Member States of the OECD and the European Union The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus. Please cite this publication as: OECD/EUIPO (2020), Trade in Counterfeit Pharmaceutical Products, Illicit Trade, OECD Publishing, Paris, https://doi.org/10.1787/a7c7e054-en. ISBN 978-92-64-42698-6 (print) ISBN 978-92-64-60697-5 (pdf) Illicit Trade ISSN 2617-5827 (print) ISSN 2617-5835 (online) European Union Intellectual Property Office ISBN 978-92-9156-273-2 (print) ISBN 978-92-9156-274-9 (pdf) Catalogue number TB-01-20-184-EN-C (print) Catalogue number TB-01-20-184-EN-N (pdf) Photo credits: Cover Illustration © Jeffrey Fisher. Corrigenda to publications may be found on line at: www.oecd.org/about/publishing/corrigenda.htm. © 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. 3 Preface Globalisation, trade facilitation, and the rising economic importance of intellectual property are all drivers of economic growth. However, they have also created new opportunities for criminal networks to expand the scope and scale of their operations, free-riding on intellectual property and polluting trade routes with counterfeit goods. The consequences for the economy and for citizens are serious. Trade in counterfeit goods not only damages economic growth but also undermines good governance, the rule of law and citizens’ trust in government, and can ultimately threaten political stability. In addition, in some cases, such as that of fake pharmaceuticals, counterfeit goods can have serious health and safety implications for citizens. We are confident that this new evidence will make a major contribution to the understanding of the volume, magnitude and harmful societal effects of illicit trade in counterfeit medicines. We are confident that the results about both the economic harm caused by this threat and its damaging impact on health will urge policy makers to shape effective solutions to combat and deter this scourge. Christian Archambeau, Janos Bertok, Executive Director, Acting Director, EUIPO OECD Public Governance Directorate TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 4 Foreword Illicit trade in fake goods is a significant and growing threat in a globalised and innovation-driven economy, undermining good governance, the rule of law and citizens’ trust in government. It not only has a negative impact on the sales and profits of affected firms and on the economy in general, but also poses major health and safety threats to consumers. To provide policy makers with solid empirical evidence about this threat, the OECD and the EU Intellectual Property Office (EUIPO) joined forces to carry out a series of analytical studies that deepen our understanding of the scale and magnitude of the problem. The results have been published in a set of reports: Trade in Counterfeit and Pirated Goods: Mapping the Economic Impact (2016), Mapping the Real Routes of Trade in Fake Goods (2017), Trade in Counterfeit Goods and Free Trade Zones: Evidence From Recent Trends (2018), Why do countries Export Fakes (2018), Misuse of Small Parcels for Trade in Counterfeit Goods (2018) and Trends in Trade in Counterfeit and Pirated Goods (2019). The results are alarming. They show that trade in counterfeit and pirated goods amounted to up to 3.3 % of world trade in 2016, up from 2.5 % in 2013; when considering only the imports into the EU, they amounted to up to 6.8 % of imports, compared with 5 % three years earlier. Counterfeiters operate swiftly in the globalised economy, misusing free trade zones, taking advantage of many legitimate trade facilitation mechanisms and thriving in economies with insufficient governance standards. Trade in counterfeit and pirated goods is a dynamic and constantly changing phenomenon. Continuous measurement efforts are needed to monitor this risk. This report presents updated figures on the scale, scope and magnitude of trade in counterfeit pharmaceuticals, based on a statistical analysis of a unique database of half a million seizures of counterfeit goods. Structured interviews with trade and customs experts also contributed to the analysis. This report builds on previous analyses, focusing on the situation in one particular sector: pharmaceuticals. Counterfeits imply not only possible economic damages for this sector, but also significant health threats, since fake medicines are often not properly formulated and may contain dangerous ingredients. Counterfeit medicines have included medicaments for serious diseases, including malaria, HIV/AIDS and cancer. The scale is huge – in 2016, international trade in counterfeit pharmaceuticals reached USD 4.4 billion. This report responds to major policy concerns. The first is the negative effect that counterfeit trade has on legitimate competitive advantage of rights holders, and consequently on innovation, employment and long- term economic growth. The second one is the damaging impact of crime and illicit trade activities on good governance, public health and safety. TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 5 Acknowledgements This report was prepared by the OECD Public Governance Directorate together with the European Union Intellectual Property Office (EUIPO). At the OECD this study was conducted under the Task Force on Countering Illicit Trade (TF-CIT). The study was shared with other OECD committees with relevant expertise in the area of trade, health policy and innovation. The report was prepared by Piotr Stryszowski, Senior Economist and Florence Mouradian, Economist at the OECD Directorate for Public Governance jointly with Michał Kazimierczak, Economist at the European Observatory on Infringements of Intellectual Property Rights of the EUIPO and Nathan Wajsman, Chief Economist, EUIPO. The authors wish to thank the OECD experts, who provided valuable knowledge and insights: Morgane Gaudiau and Nikolai Malyshev from the OECD Public Governance Directorate, Valérie Paris and Martin Wenzl from the OECD Directorate for Employment, Labour and Social Affairs, and Susan Stone from the OECD Trade Directorate. The authors would also like to thank experts from the OECD member countries and participants of several seminars and workshops for their valuable assistance provided. A special expression of appreciation is given to Stanislas Barro from Novartis, Cecilia Fant from the Pharmaceutical Security Institute (PSI), and Mike Isles from the Alliance for Safe Online Pharmacy (ASOP). Raquel Páramo, Fiona Hinchcliffe and Andrea Uhrhammer provided editorial and production support. The database on customs seizures was provided by the World Customs Organization (WCO) and supplemented with regional data submitted by the European Commission's Directorate-General for Taxation and Customs Union, the US Customs and Border Protection