In a new evidence-based report by the the Organization for Economic Cooperation and Development (OECD), the European Union Intellectual Property Office (EUIPO), and the OECD Task Force on Countering Illicit Trade members, “Illicit Trade: Trade in Counterfeit Pharmaceutical Products” estimated that the worth of counterfeit pharmaceuticals traded in 2016 was $4.4 billion worldwide.
Customs seizure data analyzed in the study, which covers the period 2014-2016, shows that counterfeit antibiotics, lifestyle drugs and painkillers were the most frequently encountered.
However, other medicines like counterfeit cancer treatment medication, diabetes treatment drugs, local anaesthetics, malaria treatment drugs, HIV treatment drugs, and heart disease medication were also seized by customs officials.
The World Health Organization (WHO), one of the sources consulted for this study, estimates that the presence of sub-standard and counterfeit anti-malarial drugs alone in sub-Saharan Africa can add up to 116 000 deaths annually. Tens of thousands more die from other fake and counterfeit medication across the world. In the developing world, the WHO estimates that 1 in 10 drugs sold is “substandard”, falsified, or counterfeit (almost $200 billion a year in trade in fake medicines); where counterfeiting may account to as much as 60% in Third World countries.
According to Christian Archambeau, EUIPO Executive Director, the launch of the study, attended by over 120 people, including top industry professionals, via a virtual video conferencing platform, included some chilling anecdotal evidence from participants.
Speakers related very recent examples of thousands of fake masks being seized by customs, fake COVID-19 testing kits seized in the UK, and fake medicines in online pages promising protection or cure for the new virus. There were also calls from Industry for recommendations to governments of a range of measures to help solve the problem. This is a global problem, needing global solutions….When it comes to IP crime, and fake drugs in particular, the whole of society is a victim.
Chris Martin, co-Chair of the OECD Task Force on Countering Illicit Trade, under the auspices of the OECD High-Level Risk Forum, similarly underscored how criminals and counterfeiters are exploiting for illicit gain the current coronavirus (COVID-19) global health emergency:
The current COVID-19 pandemic has fueled the production and sale of substandard and counterfeit facemasks, and within the past week, U.S. Customs and Border Protection (CBP) [U.S. Department of Homeland Security] has announced seizures of COVID-19 testkits at the Los Angeles International Airport (LAX) International Mail Facility.
Paul Maier, Director, EU Observatory on infringements of IPRs, OHIM, EUIPO, speaking as well at the launch of the study reaffimed how bad actors and criminals gravitate to illicit trade “[if] they can make money, they will do that….they will take advantage of every opportunity.”
EUROPOL has informed communities on how the sale of counterfeit and sub-standard goods on and offline is booming during COVID-19, and how “shortages in the supply of healthcare and sanitary products have created a market for counterfeiters, fraudsters and profiteers.”
Stanislas Barro, Global Head of Anti-Counterfeiting, Novartis, also reinforced the new opportunities for criminal organizations to maximize their illicit profits by exploiting the current global COVID-19 pandemic by plying falsified medicines or counterfeit medical products including related to promising news of possible treatments in total disregard of the health and safety of infected patients.
According to INTERPOL, coronavirus outbreak sparks a new trend in counterfeit medical items as criminals are cashing in on COVID-19: “Law enforcement agencies taking part in Operation Pangea found 2,000 online links advertising items related to COVID-19. Of these, counterfeit surgical masks were the medical device most commonly sold online, accounting for around 600 cases during the week of action. The seizure of more than 34,000 counterfeit and substandard masks, “corona spray”, “coronavirus packages” or “coronavirus medicine” reveals only the tip of the iceberg regarding this new trend in counterfeiting.”
Once again, Operation Pangea shows that criminals will stop at nothing to make a profit. The illicit trade in such counterfeit medical items during a public health crisis shows their total disregard for people’s wellbeing, or their lives, said Jürgen Stock, INTERPOL’s Secretary General.
U.S. Companies Harmed the Most by Counterfeit Pharmaceuticals
Almost 38% of all seized counterfeit medicines infringe the IP rights of firms registered in the US, while other OECD countries—such as the UK, Switzerland, Germany and France—are also significantly impacted.
India and China were identified as the largest producers of counterfeit pharmaceuticals at a global level, with Singapore and Hong Kong appearing as the busiest transit points in the counterfeit pharmaceutical supply chain.
India remains the main provenance economy of counterfeit pharmaceuticals. It was the origin of 53% of the total seized value of counterfeit pharmaceutical products and medicines worldwide in 2016.
China was the origin of 30% of the goods, with the United Arab Emirates and Hong Kong taking 4% each.
Given the severe harms posed to the United States by fake medicines as reflected in the new OECD-EUIPO study, as well as broader impacts emanating from the global trade in counterfeit and pirated goods, in a January 2020 Report to the President of the United States, the Department of Homeland Security (DHS) focused on how illicit goods trafficked to American consumers including through ecommerce platforms and online third-party marketplaces “threaten public health and safety, as well as national security”.
The Harmful Impacts of Illicit Trade
Janos Bertok Acting Director, OECD Public Governance Directorate and EUIPO Executive Director Archambeau also highlighted the wicked harms of illicit trade in the new report:
“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 research will make a major contribution to the understanding of the volume, magnitude and harmful societal effects of illicit trade in counterfeit medicines. We trust 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.”
In recent years, the OECD Task Force on Countering Illicit Trade, in partnership with EUIPO, and other partners, has released other important reports including Trends in Trade in Counterfeit and Pirated Goods [which puts the value of imported fake goods worldwide based on 2016 customs seizure data at USD 509 billion (3.3% of world trade)]; and Illicit Trade Converging Criminal Networks (this report assesses the magnitude, flows and drivers of illicit trade and the illegal economy including: narcotics, human trafficking, wildlife, sports betting, counterfeit medicines, alcohol and tobacco). The OECD Council adopted in October 2019 the Recommendation on Countering Illicit Trade: Enhancing Transparency in Free Trade Zones [the Recommendation aims to assist governments and policy makers in reducing and deterring illicit trade conducted through and inside Free Trade Zones (FTZs)].
It is good to join this important meeting of the OECD Task Force on Countering Illicit Trade (TFCIT), and great that we can leverage today’s IT technologies to participate from all corners of the world.
As the Chair of the Business at OECD Anti-Illicit Trade Expert Group (AITEG), and Chair of the Anti-Illicit Trade Committee (AITC) of the United States Council for International Business (USCIB), let me applaud the Organization for Economic Cooperation and Development (OECD), the European Union Intellectual Property Office (EUIPO), and TFCIT members for launching today’s evidence-based report, “Illicit Trade: Trade in Counterfeit Pharmaceutical Products” – and its alarming findings. Let me also thank our partners who provided invaluable data to this OECD-EUIPO report including the World Customs Organization (WCO), Directorate-General for Taxation and Customs Union of the European Commission (DG TAXUD), U.S. Department of Homeland Security (DHS), Pharmaceutical Security Institute (PSI), World Health Organization (WHO), and others.
In addition to the financial scale (EUR 4 billion) and economic impacts and reputational harm to governments, industry partners, and communities of counterfeit trade worldwide in fake pharmaceuticals, of equal concern are the adverse harms to people’s health and safety when they are misled to buy fake medicines, antibiotics, vaccines to fight malaria, diabetes, cancer, heart disease, HIV, or pandemics through not only misinformation and deception but through outright criminality. In the past few weeks, criminals have exploited people’s fear, well-being, and misery related to the current coronavirus (COVID-19) global health emergency including the sale of counterfeit medicines, medical supplies and equipment (testkits, N95 respirators and surgical masks), and hand sanitizers and other fast-moving consumer goods (FMCG).
I also agree with the plenary comments by OECD Deputy Secretary General Jeffrey Schlagenhauf that at the convergence of globalization, free trade, and illicit economies (“dark commerce”), and transnational security threats such as today’s COVID-19, “we need our pharmaceutical partners more than ever” to innovate and discover pathfinding medicines to cure pandemics and infectious diseases.
Every year, tens of thousands of people pay the ultimate price in sub-Saharan Africa, the developing world, and across communities within OECD member states.
On behalf of our USCIB AITC and Business at OECD AITEG membership, we would also like to support the continued leadership of the OECD TFCIT in fighting illicit trade including counterfeit and pirated goods.
In the past week, Business at OECD AITEG has finalized a paper on “Public-Private Partnerships Critical to Fighting Illicit Trade Across Strategic Markets” which includes our recommendations to the work program of the TFCIT such as countering illicit trade in fake medicines.
Business at OECD AITEG is supportive of OECD work on fake pharmaceuticals, but we would like to encourage it to move beyond quantitative studies so as to produce more qualitative policy guidelines including identifying, analyzing and disseminating effective policy and good practices to assist OECD member states to better regulate illicit trade in pharmaceuticals.
Business at OECD AITEG also supports the TFCIT’s interconnected focus on various illicit threats across source, transit, and destination markets including the following thematic areas:
o Role of E-Commerce and Online Markets in Fueling Illicit Trade. Addressing “Small Parcels” Trade in Contraband and Illicit Commodities.
o Implementation of the OECD Recommendations on Enhancing Transparency in FTZs
o Misuse of Container Ships for Illicit Trade – as a concern closely connected to the implementation of the OECD Recommendations on Enhancing Transparency in FTZs
Targeting corruption and money laundering that help fuel illicit trade must also be an important cross-cutting priority across the work program of the TFCIT.
Finally, we strongly support public-private partnerships and mobilizing greater energies towards collective action to decisively counter illicit trade and disrupt illicit markets in strategic areas including working with TFCIT partners to identify, leverage, and mobilize resources and financial streams to support joint research projects, events, training, and workshops.
Our AITEG recommended actions and further views can be found at the Business at OECD webportal at http://biac.org/policy-groups/ (anti-illicit trade). We also thank the TFCIT co-chairs, the Bureau, and OECD GOV secretariat for circulating further our Business at OECD AITEG paper within the TFCIT, OECD, and EUIPO.
Again, we are very committed to continuing to support the important work of the TFCIT. We applaud its dynamic partnership with EUIPO and others and look forward to advancing the work program in 2020-2021 through working groups, possible jointly hosted events, and innovative and synergistic collaborations on the key thematic areas and priorities of the initiative.
We are all in this together. Stay strong, stay healthy, stay safe!
The Transnational Alliance to Combat Illicit Trade (TRACIT) also participated in the virtual launch of the new OECD-EUIPO study on illicit trade in fake pharmaceuticals. In addition to calling on the OECD Task Force to identify, analyse and disseminate effective policy and good practices to assist OECD member states to better regulate illicit trade in pharmaceuticals, TRACIT also highlighted the importance of combating counterfeit medicines related to the Sustainable Development Goals (SDGs):
Illicit trade in pharmaceuticals undermines UN goals for good health and the ability to treat and prevent disease, particularly for the weakest and most vulnerable in society,” said Jeffrey Hardy, Director-General of TRACIT. “It is imperative to protect patients, healthcare systems and the wider society from the negative impacts of ingesting substandard, falsified, unregistered and unlicensed medical products.
Learn more about the Anti-Illicit Trade Committee (AITC) of the United States Council for International Business (USCIB):
David Luna is President and CEO of Luna Global Networks & Convergence Strategies LLC.
A former US diplomat and national security official, Mr. Luna is a frequent speaker on transnational security threats, international affairs, geopolitical risks, illicit trade and the global illegal economy. Mr. Luna held numerous senior positions with the U.S. Department of State, Bureau of International Narcotics and Law Enforcement (INL), including directorships for national security, transnational crime and illicit networks, and anti-corruption and good governance; and was an advisor to the Secretary’s Coordinator for the Rule of Law. Mr. Luna also served as an Assistant Counsel to the President, Office of the Counsel to the President, The White House; and other positions with the U.S. Department of Labor and U.S. Senate.
Mr. Luna is the new Chair of the Business at OECD Anti-Illicit Trade Expert Group, Chair of the Anti-Illicit Trade Committee of the United States Council for International Business (USCIB), and former President of the OECD Task Force on Countering Illicit Trade; Vice Chair of the World Economic Forum’s Global Agenda Council on Illicit Trade and Organized Crime, Chair, APEC Anti-Corruption and Transparency (ACT) Working Group, and other leadership positions in numerous diplomatic fora. He is also the Director for the Anti-Illicit Trade Institute at the Terrorism, Transnational Crime, and Corruption Center (TraCCC), George Mason University. Mr. Luna is a graduate of the U.S. Army War College and received his B.A. from the University of Pennsylvania and his J.D. from The Columbus School of Law, The Catholic University of America.