Trade in Counterfeit Pharmaceutical Products

Illicit Trade

Illicit Trade

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
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 publichealth, since fake medicines are often not properly formulated and may contain dangerous ingredients. Fakepharmaceuticals include antibiotics, lifestyle treatments, pain killers, anti‑malarial drugs, diabetes treatments
and central nervous system medicines.

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Trade in Counterfeit
Pharmaceutical Products

Trade in Counterfeit Pharmaceutical Products

Consult this publication on line at https://doi.org/10.1787/a7c7e054-en.

Illicit TradeIllicit Trade

Trade in Counterfeit
Pharmaceutical Products

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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.

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Illicit Trade
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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 andpolluting 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 thevolume, magnitude and harmful societal effects of illicit trade in counterfeit medicines. We areconfident 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 thisscourge.

Christian Archambeau,
Executive Director,
EUIPO

Janos Bertok,
Acting Director,
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 ofreports: 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 inCounterfeit Goods (2018) and Trends in Trade in Counterfeit and Pirated Goods (2019). The results arealarming. They show that trade in counterfeit and pirated goods amounted to up to 3.3 % of world trade in2016, 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 onlegitimate competitive advantage of rights holders, and consequently on innovation, employment and longterm 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 andinsights: 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), andMike 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) andsupplemented with regional data submitted by the European Commission's Directorate-General for
Taxation and Customs Union, the US Customs and Border Protection Agency and the US Immigration andCustoms Enforcement. Additional enforcement data were provided by the Pharmaceutical Security
Institute. The authors express their gratitude for the data and for the valuable support of these institutions.

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020

6Acronyms and abbreviations

ACIM

Action against Counterfeit & Illicit Medicines

AED

Advance electronic data

AMR

Antimicrobial resistance

ASOP EU

Alliance for Safe Online Pharmacy in the EU

ASOP Global

Alliance for Safe Online Pharmacies - Global

ATD

Anti-tamper device

CBP

US Customs and Border Protection

DEA

Drug Enforcement Administration

DG TAXUD

European Commission’s Directorate-General for Taxation and Customs Union

EAASMEuropean Alliance for Access to Safe Medicines

EU

European Union

EUIPO

European Union Intellectual Property Office

FDA

Federal Drug Administration

FMD

Falsified Medicines Directive

FTZ

Free trade zone

ICANN

Internet Corporation for Assigned Names and Numbers

ICC

International Chamber of Commerce

ICE

US Immigration and Customs Enforcement

IFPMA

International Federation of Pharmaceutical Manufacturers & Associations

IMF

International mail facility

INTERPOL

International Criminal Police Organization

IOM

Institute of Medicines of the National Academies

IPIntellectual property

IPRIntellectual property rights

IRACM

International Institute of Research against Counterfeit Medicines

MHRA

Medicines and Healthcare products Regulatory Agency

NAPB

National Association of Boards of Pharmacy

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020

7
NMRA

National or regional Medicines Regulatory Authority

OCG

Organised crime groups

OECD

Organisation for Economic Co-operation and Development

OTC

Over-the-counter

PPC

Pay-per-click

PSI

Pharmaceutical Security Institute

R&D

Research and development

RCAP-eRelative comparative advantage for production

RCAT-eRelative comparative advantage for being a transit point

RPSGB

Royal Pharmaceutical Society of Great Britain

TRIPS

Agreement on Trade-Related Aspects of Intellectual Property Rights

UNICEF

United Nations International Children's Emergency Fund

UNICRI

United Nations Interregional Crime and Justice Research Institute

UNIDO

United Nations Industrial Development Organization

UNODC

United Nations Office on Drugs and Crime

VIPPS

Verified Internet Pharmacy Practice Sites

WCO

World Customs Organization

WHO

World Health Organization

WIPO

World Intellectual Property Organization

WTO

World Trade Organization

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020

8

Table of contents

Preface3

Foreword

4

Acknowledgements

5

Acronyms and abbreviations

6

Executive Summary

10

1 Introduction

14

Notes
References

15
15

2 Counterfeit pharmaceuticals: scope and data

16

Definition and scope
Data
Notes
References

16
18
20
21

3 Industry overview

22International trade in pharmaceutical products
IP intensity of the pharmaceutical industry
Notes
References

4 Mapping the scale of the fake pharmaceutical challenge
Scale of the problem
Types of counterfeit pharmaceuticals
Which IP right holders are most affected?
Trade routes for counterfeit pharmaceuticals
Producers and transit points
Notes
References

5 The supply chain: marketing, transport and distribution
Modes of transport
Sales channels

23
25
27
28

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29
31
33
34
37
41
41

42
43
46

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 20209Free trade zones
Notes
References

6 The push factors behind counterfeit pharmaceuticals
Profitability
Low risk of detection
Low risk of prosecution
Weak penalties
References

7 Impact of counterfeit medicines
Impact on individuals
Impact on producers
Impact on governments
Economy-wide effects
Notes
References

8 Efforts to combat counterfeit pharmaceuticals
INTERPOL
World Customs Organization
World Health Organization
Legislative measures
Notes
References

9 Concluding remarks
Next steps

Annex A. Data and methodology
The data
Construction of GTRIC-e for pharmaceuticals
Methodology to identify producers from transit points of counterfeit pharmaceuticals
Notes
References

Annex B. Additional Tables

49
51
51

53
55
55
56
56
57

58
59
59
62
63
66
67

69
69
71
72
74
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77

78
79

80
80
82
84
86
86

87

TablesTable 3.1. Largest 50 pharmaceutical companies, by country of headquarters, 2017
Table 3.2. Size of the largest pharmaceutical companies, 2017
Table 3.3. R&D intensity in the 50 largest pharmaceutical firms, 2017
Table 4.1. The 10 economies most likely to be a provenance of counterfeit pharmaceutical products
Table 4.2. Top ten economies most likely to be a provenance of counterfeit pharmaceuticals imported into theEU
Table 4.3. Main producing economies and transit points for counterfeit pharmaceutical products andmedicines traded worldwide, 2014-2016
Table 4.4. Main producing economies and transit points for counterfeit pharmaceutical products andmedicines exported to the EU, 2014-2016

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020

23
23
27
36
36
38
39

10 
Table 4.5. Top ten countries for the number of arrests of individuals engaged in manufacturing counterfeit
medicines, 2018
Table 6.1. Framework for assessing the attractiveness of counterfeiting pharmaceuticals
Table 6.2. Maximum incarceration for trademark infringement and narcotics trafficking
Table 6.3. Selected features of trademark regimes in Brazil, China, India, Russian Federation and South
Africa, 2016
Table 7.1. Pharmaceutical cases possibly involving organised crime groups, 2013
Table 8.1. Operation Pangea 2008-2018
Table 8.2. Selected Interpol operations involving pharmaceutical products, 2018
Table 8.3. Actions to implement the WHO’s “prevent, detect and respond” approach in tackling substandard
and falsified medicines
Table B.1. Description of the HS 30 product category, pharmaceutical products
Table B.2. RCAP indices for counterfeit pharmaceuticals, 2014-2016
Table B.3. RCAT indices for pharmaceuticals, 2016

40
55
56
57
64
70
70
73
87
90
91

FiguresFigure 3.1. Top 20 exporters of pharmaceuticals, 2014-2016
Figure 3.2. Top 20 importers of pharmaceuticals, 2014-16
Figure 4.1. Top product categories counterfeit or pirated, 2014-2016
Figure 4.2. Number of total incidents by year, 2014-18
Figure 4.3. Most counterfeit types of pharmaceuticals seized by customs, 2014-2016
Figure 4.4. Top five therapeutic categories reported in counterfeiting incidents
Figure 4.5. Top 15 pharmaceutical-producing economies, 2016
Figure 4.6. Top provenance economies for counterfeit pharmaceuticals, 2014-2016
Figure 4.7. Top provenance economies of counterfeit pharmaceuticals imported into the EU, 2014-2016
Figure 4.8. Percentage of arrests by crime, 2018
Figure 5.1. Transport modes for counterfeit pharmaceuticals
Figure 5.2. Transport modes for counterfeit pharmaceuticals exported to EU economies

24
24
30
31
32
32
33
34
35
39
43
44

Boxes
Box 2.1. Diversion and theft of pharmaceuticals
Box 2.2. Pharmaceutical Security Institute (PSI)

18
20

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TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 11

Executive Summary

This report, one in a series of studies by the OECD and the European Union Intellectual Property Office(EUIPO), is designed to enhance understanding of the issues and challenges facing governments,
businesses and society posed by the trade in fake pharmaceutical products.
Illicit markets for counterfeit pharmaceuticals are attractive for counterfeiters, given their high profit
margins, low risks of detection and prosecution, weak penalties, and the ease with which consumers canbe deceived into believing that the counterfeit products are genuine. In 2016, international trade incounterfeit pharmaceuticals reached USD 4.4 billion, threatening public health and safety, while enrichingcriminals and organised crime. This does not include a very large volume of domestically produced andconsumed illicit pharmaceuticals. Counterfeit medicines not only cause economic damage for the sector,
but are also a significant threat to public health, since they are often not properly formulated and may
contain dangerous ingredients.
Over the period 2014-2016, seized counterfeits included medicaments for serious diseases, including
malaria, HIV/AIDS and cancer. They also included antibiotics, lifestyle treatments, pain killers, diabetes
treatments and central nervous system medicines.

What did this research find?
The study compiled and analysed a unique international set of customs seizure data and other enforcement
data, combined with structured interviews with industry, trade and customs experts, to quantify the value,
scope and trends of the trade in counterfeit pharmaceutical products.
It found that the People’s Republic of China, Hong Kong (China), Singapore and India are the main
provenance economies for counterfeit medicines. While China and India are the primary producers of fakemedicines, the United Arab Emirates, Singapore and Hong Kong (China) serve as transit economies. Other
relevant transit points for fake pharmaceuticals include Yemen and Iran.
From these locations, fake pharmaceutical products may be shipped anywhere in the world, although
African economies, Europe and the United States appear to be the main targets.

What are the challenges?
Successful marketing of counterfeits requires counterfeiters to penetrate supply chains which, for the mostpart, are closely monitored by producers and regulators. While the wholesalers that are responsible for
distributing most pharmaceutical products are secure, there are thousands of second-tier distributors thatare more vulnerable to penetration by counterfeiters. Detection of counterfeits requires expert examination,
which can be costly. The ability of counterfeiters to package products in a way that mirrors genuine
products is key to their success, as is their ability to make the products resemble the originals.

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020

12 The use of free trade zones has facilitated trade in counterfeit pharmaceuticals, providing a venue for
packaging and repackaging products in ways that effectively disguise their true origin.
Challenges exist in all countries, but are particularly large in developing countries, where informal
distribution is more widespread and less secure. Challenges for all countries have increased with thedevelopment of rogue on-line pharmacies, which often dispense counterfeit products cheaply. Consumers
have demonstrated a willingness to take risks buying products online, sometimes disregarding theconsequences of purchasing and using products that may not be properly formulated.
Trade in counterfeit medicines has also been fuelled by the explosive growth in the use of the post to ship
products. More than 95% of customs seizures of pharmaceutical products during 2014-16 involved postal
and express mail services, which was well above the average for other products. Inadequate information
on postal shipments makes it difficult to detect and intercept products in national and international trade.
In the case of imports, documentation is generally only available to customs officials in paper form, at thetime of importation and can be easily incorrect.
Governments and industry have been working hand-in-hand to combat counterfeit, substandard andfalsified pharmaceuticals. Actions taken range from legislative measures to enforcement and awarenessraising campaigns. On an international level, many initiatives are underway to tackle the growing problem
of counterfeit pharmaceuticals, including crime-fighting programmes run by INTERPOL and the World
Health Organization.

What are the impacts?
The impacts of counterfeit medicines are felt on many levels:


Damage to the health of individuals or failure to treat their medical needs adequately. Estimatesshow that between 72 000 and 169 000 children may die from pneumonia every year after receiving
counterfeit drugs, and that fake anti-malarial medication might be responsible for an additional 116
000 deaths.

Loss of sales and damage to the reputations of legitimate producers. Companies registered in the
United States are hit hardest by the trade in counterfeits: almost 38% of all seized counterfeit
medicines infringe the intellectual property (IP) rights of firms registered in the United States.
However, other OECD countries are also badly affected (notably Switzerland, Germany andFrance).



Costs and lost revenues to governments and economies. One estimate suggests that the cost to
EU governments of revenues foregone from counterfeit medicines is on the order of EUR 1.7
billion.



Costs of treating patients who have suffered adverse health consequences as a result ofconsuming counterfeit medicines.

Environmental pollution from dirty practices by an unregulated criminal activity involving potentially
toxic chemicals.

Social costs in terms of an increase in organised crime and job losses, which are estimated at morethan 80 000 jobs in the EU pharmaceuticals sector and other sectors that sell goods and services
to it.

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 13

What’s next?
Illicit trade in counterfeit and pirated goods is a significant and growing problem, having risen from 2.5 %of world trade in 2013 to 3.3 % in 2016. Globalisation is opening up new opportunities for criminal networks
to expand the scope and scale of their illicit trade in counterfeit and pirated goods.
The analysis in this report is intended to help both public and private sector decision makers better
understand the nature and scale of the global trade in counterfeit pharmaceuticals, and develop
appropriate, coherent and evidence-based policy responses. Issues requiring urgent attention include
insufficient deterrence due to relatively light penalties, the emergence and role of e-commerce, andframeworks and factors related to misuse of small parcels for trade in counterfeit medicines

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14 

1 Introduction
Illicit trade in counterfeit and pirated goods is a growing and significant problem. Globalisation opens up
new opportunities for criminal networks to expand the scope and scale of their operations in illicit trade incounterfeit and pirated goods. Trade in counterfeits also undermines good governance, the rule of law andcitizens’ trust in government, and can ultimately threaten political stability.
In order to improve the factual understanding of counterfeit and pirated trade and provide evidence forpolicymakers to formulate policies, the OECD and the European Union Intellectual Property Office (EUIPO)
have carried out a series of studies designed to enhance understanding of the issues and challenges
facing governments, businesses and society at large. The last OECD/EUIPO (2019) report found thatimports of counterfeit and pirated goods amounted to up to USD 509 billion in 2016, or around 3.3% of
global trade, and that some provenance economies1 are more important sources of counterfeit and pirated
products than others, either as key producers or strategic points of transit. The counterfeits are shipped byland, sea and air, in both large containers and in small packages, misusing modern logistical solutions
such as small parcels or free trade zones.
This report builds on previous analysis, focusing on the situation in one particular sector: pharmaceuticals.
It is a sensitive and important sector, regulated in many countries out of public health and safety concerns.
Counterfeit medicines imply not only possible economic damages for this sector, but also significant healththreats, since fake medicines are often not properly formulated and may contain dangerous ingredients.
In addition, consumers are not very aware of the problem of counterfeiting of pharmaceuticals and can beeasily deceived into thinking that the products that they are purchasing are genuine. For example, around
90% of Italian consumers who purchased counterfeit pharmaceutical products did so unknowingly,
believing them to be genuine (OECD, 2018a). The analysis in this report will help both public and private
sector decisionmakers better understand the nature and scale of the global trade in counterfeit
pharmaceuticals, and develop appropriate, coherent and evidence-based policy responses.
As with the previous reports, this study provides insights into the current situation as regards counterfeitingin the pharmaceutical industry. It draws on customs seizures data, as well as data from other enforcement
agencies and publicly available information.
The report begins by defining the terms used and the data sources. Chapter 3 provides an overview of thepharmaceutical industry, and then Chapter 4 outlines the volume and scope of the global market for
counterfeit pharmaceuticals. Chapter 5 explores the supply chain, including the modes of transport anddistribution used to trade counterfeit pharmaceuticals. Chapter 6 examines the factors driving this global
trade, while Chapter 7 assesses the impacts – from individuals up to entire economies. Chapter 8
summarises some of the global initiatives underway to combat this serious threat to public health.

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 15

Notes
1

As described in the OECD (2008) and OECD/EUIPO (2016 and 2019) studies, a provenance economy
is an economy detected and registered by any reporting customs agency as a source of any item that has
been intercepted in violation of an IP right, whatever the amount or value concerned. Consequently,
provenance economies include those economies of origin where the actual production of infringing goods
is taking place, as well as those economies that function as ports of transit through which infringing goods
pass prior to the economy of destination.

References
OECD (2018a), Trade in Counterfeit Goods and the Italian Economy: Protecting Italy’s intellectual
property, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264302426-en
OECD/EUIPO (2019), Trends in Trade in Counterfeit and Pirated Goods, Illicit Trade, OECD Publishing,Paris,
https://doi.org/10.1787/g2g9f533-en.

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16 

2 Counterfeit pharmaceuticals: scopeand data

The definition of illicit, falsified, substandard or counterfeit pharmaceuticals
is subject to debate. This chapter clarifies the scope and then provides
background information on the data sources used for this study.

Definition and scope
Before turning to the quantitative analysis of trade in counterfeit pharmaceuticals, it is important to be clear
what we mean by the term “counterfeit pharmaceuticals”.
As in previous OECD studies on trade in counterfeit goods, this study generally looks at tradedpharmaceutical products that infringe trademarks, and refers to them as counterfeit (or fake)pharmaceuticals or medicines. In this context, it stays in line with the definition used by the World Trade
Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights (WTO TRIPS),1 andparallels the approach taken by the World Health Organization (WHO), in which counterfeit
pharmaceuticals are described as “[…] deliberately and fraudulently mislabeled with respect to identity
and/or source” (WHO, 1999). This is the definition of “counterfeit” used in this study.
The definition of illicit, falsified, substandard or counterfeit pharmaceuticals has been debated many times
at several international fora. For example, issues related to the definition of “counterfeit medicines” wereaddressed at both the WTO and the WHO. At the WTO, the TRIPS Council discussed the negative
economic impact that counterfeiting could have on economies, as well as the threats that counterfeit
products could pose to health and safety.2 Some countries noted that a distinction should be made between
IPR infringement and substandard products and cautioned against IP enforcement measures that could
not guarantee products of quality, but would potentially undermine access to affordable medicines.
Counterfeit medicines, including their impact on health and the economy, as well as the need to distinguish

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 17them from generic medicines, were also discussed in the context of the detention of in transit generic
medicines by EU Customs.3 In 2017, citing the confusion surrounding substandard and falsified products
and the protection of intellectual property rights, the WHO adopted new definitions (WHO, 2017a and b).
The new definitions refer to products which are either:

Substandard: Also called “out of specification”, these are authorised medical products that fail tomeet either their quality standards or specifications, or both.



Unregistered/unlicensed: Medical products that have not undergone evaluation and/or approval by
the national or regional regulatory authority for the market in which they are marketed/distributedor used, subject to permitted conditions under national or regional regulation and legislation.

Falsified: Medical products that deliberately/fraudulently misrepresent their identity, composition orsource.

This study takes note of these debates, but is not intended to constitute any sort of new definition ofcounterfeit pharmaceuticals.
Several additional important issues should be kept in mind in the context of the scope of the study, andthe term “counterfeit pharmaceuticals”:
Even though counterfeit medicines are often substandard, it is not their quality that determines
whether or not they are counterfeit. In fact, some traded fake medicines that infringe trademarks
may still have active ingredients, although interviews with enforcement and industry experts
indicate such cases are virtually non-existent.



In many reports quantitative analysis also includes stolen and diverted pharmaceuticals (Box 2.1).
This is because, as for any quantitative analysis on illicit markets, research on trade in counterfeit
medicines is largely data driven. Unfortunately the existing datasets rely on largely incompatible
and different methodologies and taxonomies that in some cases also include stolen and diverted
goods.4 Importantly, stolen and diverted goods enter the market without the consent of IP rightowners, and in many instances they also deceive final consumers. Hence, in many aspects theyclosely resemble counterfeit goods that were produced without the consent of the IP right owner.



Due to data limitations this study does not look at potential or actual patent infringements.

To reiterate, as the main quantification exercise of the share of counterfeits in trade in this study is basedon customs seizure statistics focusing on IPR infringement, stolen or diverted medicines are not includedin this estimate unless they infringe a trade mark, irrespectively of their medical or regulatory properties.

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18 

Box 2.1. Diversion and theft of pharmaceuticals
According to the Pharmaceutical Security Institute (PSI, 2019), illegal diversion occurs when a genuine
pharmaceutical product is approved and intended for sale in one country, but is then illegally interceptedand sold in another country. These actions are often accomplished through the use of false statements
or declarations. At times, drug regulators in the second country have not approved the use of thediverted drug.
Illegal diversion may also occur within the same geographic area, within the same country or city. This
involves diverting discounted medicines from one intended group of consumers to another group buying
medicines in an unregulated open market. For example, in Latin America, illegal diversion occurs whena government purchases drugs at discounted prices for use in state hospitals and these drugs arediverted to open air or "street" markets.
Pharmaceutical theft is defined as the illegal taking of medicines (PSI, 2019). Thefts include burglary,robbery or the embezzlement of goods. The responsible individuals may be insiders such as
employees, or outsiders such as professional thieves. The theft may occur anywhere in the distribution
chain such as at the site of manufacture, freight forwarder, distribution centres, warehouses,
pharmacies, or hospitals.
Importantly, as with cases of counterfeiting, diversion and theft escape the control of the IP right owner.
In addition, diverted and stolen medicines are often stored and transported in poor conditions, whichmight have negative effects on their active ingredients. Moreover, these medicines can be unlawfully
supplied to the public without observing prescription conditions. Consequently, diverted and stolen
drugs can potentially be damaging to consumers’ health. They also contribute to a general “blurring” of
the marketplace.

Data
This study relies on two main sets of data: customs seizures data and other enforcement data. These
datasets are described below.

Customs seizures of fake pharmaceuticals
Following the approach taken in the OECD (2008) and then in the OECD/EUIPO (2016 and 2019) reports,a large volume of analysis in this report is based on data on customs seizures of counterfeit
pharmaceuticals.
Data on customs seizures originate from national customs administrations. This report relies on customs
seizures data received from:

The World Customs Organization (WCO).

The European(DG TAXUD).



United States Department of Homeland Security (DHS), which submitted seizure data from US
Customs and Border Protection (CBP), the customs agency of the United States, and from the US
Immigration and Customs Enforcement (ICE).

Commission’s

Directorate-Generalfor

TaxationandCustoms

Union

The database compiled for this research contains a wealth of information about fake pharmaceuticals thatcan be used for quantitative and qualitative analysis. In most cases the database reports, for each seizure:date of seizure, mode of transport of fake products, departure and destination economies, name oflegitimate brand owner, number of seized products and their approximate value.
TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 19
There are two methods for reporting the value of counterfeit goods: 1) declared value (value indicated on
customs declarations), which corresponds to values reported in the general trade statistics; and 2)
replacement value (price of original goods). The structured interviews with customs officials and thedescriptive analysis of values of selected products conducted in OECD/EUIPO (2019) revealed that thedeclared values are reported in most cases.
Importantly, the DG TAXUD, CBP-ICE and WCO datasets rely on data entries collected and processed bycustoms officers. These data are primarily designed to improve the work of customs, e.g. to prepare risk
profiling processes and share national experiences. As with any other administrative data they need carefulconsideration before use in quantitative analysis. In particular, these data are created by customs and forcustoms. Customs expertise in spotting counterfeit medicines might sometimes be limited due to lack ofresources or training. Indeed, customs seizures of fake pharmaceuticals refer mostly to “common” products(e.g. painkillers or sexual dysfunction treatments), yet other enforcement sources noted that there are othermedicine categories (such as cardiovascular and cancer treatment) that are more targeted bycounterfeiters. Consequently, these other enforcement sources of data, described below, would bevaluable for the rest of the analysis.

Other enforcement data
While customs data provide valuable information on the global trade in counterfeit pharmaceuticals, otherdata sources offer the basis for more reliable and robust analysis of fake medicines.
An additional dataset used in this study comes from the Counterfeiting Incident System (CIS) of thePharmaceutical Security Institute (PSI, see Box 2.2). This database comprises cases of fraudulent
manufacture, mislabelling of drugs and fraudulent packaging. This database originally refers to
enforcement actions carried out by all kinds of enforcement agencies, such as police, health inspection
service, customs, etc.
The database is organised into incidents. An incident is a discrete event triggered by the discovery ofcounterfeit, illegally diverted or stolen pharmaceuticals. An incident is a unique occurrence, and has an
assigned date, time, place and type of pharmaceutical product involved. All reports arriving in the databaseare reviewed to determine if they are related to an earlier incident, which would indicate ongoing criminal
activity. CIS incidents come from a variety of sources, including open media reports, PSI member company
submissions, and public-private sector partnerships.
To summarise, the OECD/EUIPO database on global customs seizures of counterfeit pharmaceuticals andthe CIS enforcement database on incidents counterfeiting, theft and illegal diversion of pharmaceuticalproducts worldwide are based on two completely different types of data collection. However, together they
offer a wealth of valuable insight into the size and scope of the global market of illicit pharmaceuticals, as
studied in the following chapters.

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20 

Box 2.2. Pharmaceutical Security Institute (PSI)The Pharmaceutical Security Institute (PSI) is a non-profit, global organisation established bypharmaceutical companies with a mission to 1) protect public health; 2) share information on the
counterfeiting of pharmaceuticals; and 3) support the initiation of enforcement actions throughappropriate authorities. It comprises the security departments of 25 pharmaceutical companies.
Activities are supported by a secure database to which members report (IOM, 2013). In 2018, theinstitute reported that the number of incidents involving counterfeiting, illegal diversion and theft
incidents rose to an all-time high of 4 405, which was more than double than the 2014 level. North
America accounted for the largest number of seizures (1 750), followed by Asia (1 426). Every region
except Europe have experienced an increase in pharmaceutical crime incidents since 2017, with a totalof 145 countries affected. The contributions made by organisations like PSI to law enforcement are
significant. Security departments in major pharmaceutical firms reportedly gather 80% of the evidence
for criminal prosecution (IOM, 2013).

Notes
The TRIPS Agreement, in its footnote 14, contains a definition of “counterfeit trademark goods”.
These are “goods … bearing without authorization a trademark which is identical to the trademark validly
registered in respect of such goods, or which cannot be distinguished in its essential aspects from such a
trademark …”
1

2

See www.wto.org/english/news_e/news12_e/trip_05jun12_e.htm.

3

See TRIPS Council meeting of 3 March 2009, WTO Document IP/C/M/59, para.122; TRIPS Council
meeting of 8-9 June 2009, WTO Document IP/C/M/60, para.115; TRIPS Council meeting of 27-28 October
2009, WTO Document IP/C/M/61, para.254.
4

Importantly, this does not concern the estimate of the share of counterfeit pharmaceuticals in trade, as
this estimate relies on seizures statistics, focusing on IPR infringement.

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 21

References
IOM (2013), Countering the Problem of Falsified and Substandard Drugs, The National Academies
Press, Washington, www.nap.edu/catalog/18272/countering-the-problem-of-falsified-andsubstandard-drugs.
PSI (2019), “Definition of counterfeiting, theft and illegal diversion”, webpage, Pharmaceutical Security
Institute, Vienna, VA, https://www.psi-inc.org/pharma-crime (accessed on December 5th 2019).
WHO (2017a), Member State Mechanism on Substandard/spurious/falsely-labelled/falsified/counterfeit
Medical Products: Report by the Director-General, Seventieth World Health Assembly, A70/23,
Provisional agenda item 13, World Health Organization,
http://apps.who.int/gb/ebwha/pdf_files/WHA70/A70_23-en.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.
WHO (1999), Counterfeit Drugs. Guidelines for the development of measures to combat counterfeit
drugs. World Health Organization, Geneva, https://apps.who.int/medicinedocs/en/d/Jh1456e/2.1.html.

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020

22 

3 Industry overview

The pharmaceutical industry is an important and growing sector for many
economies. This chapter charts its growth and importance, and describes
the geographical distribution of the major companies. It then outlines thetrends in international trade in pharmaceuticals, and finishes by highlighting
the high intellectual property intensity of the sector.
The pharmaceutical sector is a multi-billion dollar industry, with global sales estimated at USD 1.2 trillion
in 2018, a USD 100 billion increase over 2017 (IQVIA Institute, 2019). Growth in sales, which averaged
6.3% during the 2014-18 period, are expected to average 3-6% per year to 2023, reaching more than USD
1.5 trillion. Growth is seen as being driven by the United States, which is expected to account for 40% of
the market by 2023. Growth in emerging markets is also expected to be strong, with sales in China
approaching the combined sales of the five major European markets (France, Germany, Italy, Spain andthe United Kingdom) by 2023.
The industry also represents a significant share of total employment (between and 0.8 to about 1%) in
countries such as Switzerland, Slovenia and Denmark. Many of these jobs are in research anddevelopment activities (IFPMA, 2017). In the United States, with around 480 000 people in the sector, thepharmaceutical industry represents 0.3% of total employment (OECD, 2018b).
While there are many firms in the industry, the largest companies command an important share of the total
market. The 50 largest firms accounted for USD 653 billion in sales in 2017, which represented slightly
more than half the global sales of all companies (Christel, 2018; IQVIA Institute, 2019). Most of the largest
50 companies were headquartered in OECD countries, 16 were headquartered in the United States, and10 in Japan). Importantly, 27.8% of sales was associated with the firms headquartered in the EU countries(Table 3.1)

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020

 23

Table 3.1. Largest 50 pharmaceutical companies, by country of headquarters, 2017
Country
United States
Switzerland
Japan
United Kingdom
Germany
FranceIrelandIsraelDenmark
Australia
India
CanadaBelgium
Spain
Italy
South Africa
Total

Total sales, including exports
Millions USD
291 543
83 60755 93848 45045 10438 64421 05918 261
16 971
7 522
6 491
5 053
4 663
3 876
3 072
2 591
652 815

Number of companies% of total
44.7
12.8
8.6
7.4
6.9
5.9
3.2
2.8
2.6
1.2
1
0.8
0.7
0.6
0.5
0.4
100

16
2
10
2
5
2
3
1
1
1
2
1
1
1
1
1
50

Source: Christel, M. (2018), “2018 Pharm Exec 50”, http://files.pharmtech.com/alfresco_images/pharma/2018/09/19/b7bd929d-df36-462d-93cebcd8a8237e06/PharmExec_%20Regular%20Issue%20_June2018.pdf.

The top 50 companies varied significantly in size, ranging from less than USD 3 billion in sales, to over
USD 40 billion (Table 3.2). The 10 largest companies accounted for more than 50% of sales of these 50
pharmaceutical companies. Importantly production of pharmaceuticals by these companies does notnecessarily takes place in the economy, in which they are domiciled.

Table 3.2. Size of the largest pharmaceutical companies, 2017
Level of sales(billions USD)

Number of companies% of total sales

41-50
31-40
21-30
11-20
1-10
Total

3
3
4
12
28
50

19.8
15.9
15.9
29.4
19.0
100.0

Source: Christel, M. (2018), “2018 Pharm Exec 50”, http://files.pharmtech.com/alfresco_images/pharma/2018/09/19/b7bd929d-df36-462d-93cebcd8a8237e06/PharmExec_%20Regular%20Issue%20_June2018.pdf.

International trade in pharmaceutical products
With respect to trade, the pharmaceutical products are classified under product category 30 of theHarmonized System.1 This category includes in particular medicines, either in measured doses or packed
for retail sale; and other pharmaceutical goods, such as sterile surgical catgut, suture materials, first aid
boxes and kits, and dental cements and fillings. All goods classified in this category are listed in detail in
Annex B.
In 2013, the global value of export of pharmaceutical products amounted to USD 487 billion, around 2.6%of total world trade in that year. In 2016, it amounted to USD 500 billion, or around 3.2% of total world trade

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020

24 in that year. This means that global trade in the pharmaceutical sector increased both in absolute andrelative terms between 2013 and 2016.
Over the 2014-2016 period, the largest exporters of pharmaceuticals were EU28 countries,2 as well as
Switzerland, the United States, India, China, Singapore, Israel and Japan (see Figure 3.1). Together, these
economies represented more than 92% of the total value of global exports of pharmaceuticals.

Figure 3.1. Top 20 exporters of pharmaceuticals, 2014-2016
Germany
Switzerland
United States
Belgium
United Kingdom
FranceIreland
Italy
Netherlands
India
Denmark
Spain
Austria
CanadaSwedenChina (People's Republic of)Singapore
IsraelHungary
Japan
0%

2%

4%

6%

8%

10%

12%

14%
16%
18%
Share of global exports of pharnaceuticals

Notes: Pharmaceutical products refer to the HS 30 product category as defined by the UN Trade Statistics Division (2019). All goods include inthis product category are presented in detailed in Table C.1 of Annex C.
Source: UN Trade Statistics Division (2019), UN Comtrade Database, United Nations Trade Statistics Division, New York,https://comtrade.un.org.

In the same period, the United States was the leading importer of pharmaceutical products, importing morethan 16% of the total value of global imports of pharmaceutical goods (Figure 3.2). It was followed byseveral EU28 economies (in particular Germany, Belgium, UK, France and Italy), Switzerland, Japan, andChina.

Figure 3.2. Top 20 importers of pharmaceuticals, 2014-16
United States
Germany
Belgium
United Kingdom
Switzerland
FranceJapan
Italy
China (People's Republic of)Netherlands
Spain
CanadaRussiaAustralia
BrazilAustria
Ireland
Saudi Arabia
Poland
Korea
0%

2%

4%

6%

8%

10%

12%

14%
16%
18%
Share of global imports of pharmaceuticals

Notes: Pharmaceutical products refer to the HS 30 product category as defined by the UN Trade Statistics Division (2019). All goods include inthis product category are presented in detailed in Table C.1 of Annex C.
Source: UN Trade Statistics Division (2019), UN Comtrade Database, United Nations Trade Statistics Division, New York,https://comtrade.un.org.
TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 25
Regarding trade balances, one-third of OECD countries are net exporters of pharmaceuticals. In 2015,
Switzerland, Germany and Ireland were the biggest net exporters of pharmaceuticals, with trade surplusesof USD 41 billion, 28 billion and 27 billion respectively (OECD, 2018b).

IP intensity of the pharmaceutical industry
The pharmaceutical industry is relatively IP-intense, which can be measured in terms of both trademark
and patent-intensity. According to the data provided by WIPO (2019), the number of trademark applications
for the goods covered by the Nice product classification 053 was 390 888 in 2016 (compared to 282 311
in 2013). This represents around 4.3% of all world trademark applications registered that year, and madepharmaceuticals (class 05) the 4th most intense industry in terms of trademark applications out of the 34
goods classes covered in the Nice product classification.4
The Chinese intellectual property office received the largest share of trademark applications in thepharmaceutical sector in 2016 (32%), followed by India (13%), the United States (5%) and the European
Union Intellectual Property Office (3.4%).
The number of patent applications for technology classes related to the pharmaceutical industry was
108,964 in 2016 (compared to 80,214 in 2013).5 This represented more than 4% of all world patentapplications and made technologies related to the pharmaceutical industries the 7th most intense in termsof patents out of 35 fields of technology recorded by the WIPO (2019).
The industry has a keen interest in protecting its intellectual property rights as investment in thedevelopment of new products is an expensive undertaking, but key to their long-term success. The costand importance of new products is reflected in the relatively high level of spending on research anddevelopment (R&D), which amounts to nearly USD 150 billion per year (IFPMA, 2017). The R&D processitself is a lengthy one, as it can take 10 to15 years to develop a new medicine or vaccine.

Overall, the pharmaceutical sector is one of the most research intensive, accounting for an
estimated 22% of all total R&D across all industries in 2018, only slightly less than thecomputer and electronics sector.6 The pharmaceutical industry invests up to around 40% of its
gross value added (GVA) in R&D in Japan and the United States. The industry R&D accounts
for 30% of all private R&D in countries like Switzerland and Belgium, and 24-25% in Slovenia
and Denmark (OECD, 2018b). The importance of R&D is also reflected in the high ratio of R&D
expenditures to total sales (TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020

26 
Table 3.3).

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 27

Table 3.3. R&D intensity in the 50 largest pharmaceutical firms, 2017
Firm
PfizerNovartisRoche
Merck & Co
Johnson & Johnson
SanofiGlaxoSmithKline
AbbvieGilead Sciences
Amgen
AstraZeneca
Bristol-Myers Squibb
Eli Lilly
Teva Pharmaceutical Industries
Bayer
Novo Nordisk
Allergan
Shire
Boehringer Ingelheim
TakedaAll others1
Total1

Sales

R&D expenditures

Ratio of R&D expenditures
to salesBillions of USD
45 34541 87541 73235 37034 39734 07828 66827 74325 66221 79519 78219 25818 53218 261
17 54416 97114 90614 44914 26213 577142 945647 152

Billions of USD
7 627
7 823
9 181
7 563
8 360
6 184
4 978
4 829
3 523
3 482
5 412
4 823
4 973
1 848
3 624
2 129
1 599
1 565
3 067
2 937
26 677122 204

%
16.8
18.7
22
21.4
24.3
18.1
17.4
17.4
13.7
16
27.4
25
26.8
10.1
20.7
12.5
10.7
10.8
21.5
21.6
18.7
18.9

Note: 1Excluding two firms, for which data on R&D were unavailable
Source: Christel, M. (2018), “2018 Pharm Exec 50”, http://files.pharmtech.com/alfresco_images/pharma/2018/09/19/b7bd929d-df36-462d-93cebcd8a8237e06/PharmExec_%20Regular%20Issue%20_June2018.pdf.

Notes
1

The Harmonized Commodity Description and Coding System generally referred to as "Harmonized
System" or simply "HS" is a multipurpose international product nomenclature developed by the World
Customs Organization (WCO). It comprises about 5,000 commodity groups; each identified by a six digit
code, arranged in a legal and logical structure and is supported by well-defined rules to achieve uniform
classification. The system is used by more than 200 countries and economies as a basis for their Customs
tariffs and for the collection of international trade statistics. Over 98 % of the merchandise in international
trade is classified in terms of the HS. For more information, see WCO (2019).
2

All findings in this study that refer to the EU, were based on data from time periods before January
2020, hence these findings also include United Kingdom.
3

Nice classification system is a of classifying goods and services for the purpose of registering
trademarks. It is specified by the World Intellectual Property Organization. This number includes thetrademarks applications included in the Nice product classification 05 (Pharmaceutical and veterinary
preparations; sanitary preparations for medical purposes; dietetic food and substances adapted for medical
or veterinary use, food for babies; dietary supplements for humans and animals; plasters, materials for

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020

28 dressings; material for stopping teeth, dental wax; disinfectants; preparations for destroying vermin;fungicides, herbicides).
These data are based on the indicator “Total applications by class (direct and via the Madrid
system)”4

5

Based on the indicator “Patent publications by technology”.

6

See https://www.strategy-business.com/feature/What-the-Top-Innovators-Get-Right?gko=e7cf9.

References
Christel, M. (2018), “2018 Pharm Exec 50”, Pharmaceutical Executive, Vol. 38, Number 6, June, pages
12-23, PharmExec.com, http://files.pharmtech.com/alfresco_images/pharma/2018/09/19/b7bd929ddf36-462d-93ce-bcd8a8237e06/PharmExec_%20Regular%20Issue%20_June2018.pdf.
IFPMA (2017), The Pharmaceutical Industry and Global Health: Facts and Figures 2017, International
Federation of Pharmaceutical Manufacturers & Associations, Geneva, www.ifpma.org/wpcontent/uploads/2017/02/IFPMA-Facts-And-Figures-2017.pdf.
IQVIA Institute (2019), The Global Use of Medicine in 2019 and Outlook to 2023, IQVIA Institute,www.fsk.it/attach/Content/News/6778/o/iqvia_.pdf.
OECD (2018b), Pharmaceutical Innovation and Access to Medicines, OECD Health Policy Studies,OECD Publishing, Paris,
https://doi.org/10.1787/9789264307391-en.
UN Trade Statistics Division (2019), UN Comtrade Database, United Nations Trade Statistics Division,
New York, https://comtrade.un.org/ (last accessed in July 2019)
WIPO (2019), WIPO Statistics Database, World Intellectual Property Office,https://www3.wipo.int/ipstats/index.htm?tab=patent (last accessed in July 2019).

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 29

4 Mapping the scale of the fakepharmaceutical challenge

Pharmaceuticals are particularly vulnerable to counterfeiting. This chapter
looks at the scale of the counterfeiting challenge, drawing on customs
seizures and enforcement action data to track the recent growth inincidents. It also reveals the types of products most commonly
counterfeited, and maps the intellectual property rights holders mostaffected. It then reports on analysis into the main trade routes for fakepharmaceuticals, including making the distinction between countries which
produce the fakes and those which act as transit points on their way to their
final markets.

Scale of the problem
The high IP-intensity of the pharmaceutical industry and strong demand make pharmaceuticals vulnerable
to counterfeiting. This is confirmed by the available data. Between 2014 and 2016, the 2019 OECD/EUIPO
report indicates based on customs seizures that of 97 recorded product categories, pharmaceuticals werethe 10th most counterfeited type of product (OECD/EUIPO, 2019; Figure 4.1).

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020

30 Figure 4.1. Top product categories counterfeit or pirated, 2014-2016
Share of customs seizures

Share of seized value

Footwear (64)
Clothing, knitted or crocheted (61)Articles of leather(42)Electrical machinery and equipment (85)
Watches (91)
Optical, photographic and medical instruments (90)Perfumery and cosmetics (33)

Toys (95)
Jewellery (71)
Pharmaceutical products (30)
0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Note: Figures in parenthesis are Harmonized Systems (HS) codes. See WCO (2019) for a complete list of HS product categories.
Source: OECD/EUIPO (2019), Trends in Trade in Counterfeit and Pirated Goods, https://doi.org/10.1787/g2g9f533-encustoms seizures data of
IP-infringing products.

According to the OECD/EUIPO (2019) study, the value of global trade in counterfeit pharmaceuticals was
up to USD 4.4 billion in 2016. This represents 0.84% of total world-wide imports in pharmaceuticalproducts.
The significant scale of counterfeiting in the pharmaceutical sector can also be seen in other enforcement
data gathered in the PSI dataset. This dataset contains data on 16 240 counterfeiting, illegal diversion andmajor theft incidents over the last five years (2014 to 2018). Figure 4.2 shows the annual totals ofpharmaceutical crime incidents during that period. The chart shows that from 2014 to 2018, total incidents
increased by 102%. Two elements continue to play a central role in these increases: better reporting bygovernment agencies and increased reporting by a larger number of PSI member companies over the last
five years. In terms of members’ reporting, 33% more cases were submitted to the institute for review andassessment in 2018 than in 2014.

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 31

Figure 4.2. Number of total incidents by year, 2014-18
5000
4500
4000

3500
3000
2500

2000
1500
1000

500
0

2014

2015

2016

2017

2018

Note: An incident is a discrete event triggered by the discovery of counterfeit, illegally diverted or stolen pharmaceuticals. As noted in the text,
increased reporting by a larger number of PSI member companies over the last five years has also contributed to this increase.
Source: PSI database. The large scale of counterfeiting in the pharmaceutical sector is confirmed by other studies. The WHO estimated thatthe share of counterfeit, (including those which are of bad quality) on the market ranges from over 10% of total sales in low and middle-income
countries to 1% in developed countries.1 INTERPOL reports estimate that falsified medical products could account for as much as 30% of themarket in some countries in Asia, Africa and Latin America and more than 20% in economies of the former Soviet Union (Tracit, 2019).

Other studies confirm these observations. For example, in a meta-analysis of 96 studies that tested 50
samples or more, comprising over 67 000 samples, Ozawa et al. (2018) estimate that the prevalence of
substandard and falsified medicines in low- and middle- income countries was 13.6%. Among the studies
included in the meta-analysis the highest prevalence of the falsified and substandard medicines was
registered in Africa (18.7%) and Asia (13.7%).
A study carried out by the UNODC in 2013 examining transnational crime in East Asia and the Pacificincludes a close examination of the situation in pharmaceuticals (UNODC, 2013). Forensic testing revealed
that one-third to two-thirds of the samples tested in the region were fraudulent. While counterfeiters could
likely attain a far higher rate of return in developed countries, it is surmised that the low risk of detection
greatly enhances the appeal of the lower-price markets. Interest in lower-priced, high-volume products
also surfaced in a 2017 WHO monitoring report on substandard and falsified medical products (WHO,2017b). Relatively low-priced antibiotics were reported by more countries than any other medicine. The
total number of fraudulent antibiotic reports accounted for 17% of total reports on substandard or falsified
products, a rate exceeded only by anti-malarial treatment (20%) (Tracit, 2018; WHO, 2017b).

Types of counterfeit pharmaceuticals
A closer look at the types of pharmaceutical products that are counterfeited is alarming. Over the period
2014-2016, seized counterfeits included medicaments for various kinds of diseases, including malaria,
HIV/AIDS and cancer (Figure 4.3).
A more detailed review of the customs data shows that counterfeit antibiotics, lifestyle drugs and painkillers
were the most targeted by counterfeiters. Other types of counterfeit pharmaceuticals often seized bycustoms authorities worldwide include those targeting treatment for malaria, diabetes, epilepsy, heartdiseases, allergy, blood pressure, cancer, and stomach ulcers ailments as well as local anaesthetics.

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32 

Figure 4.3. Most counterfeit types of pharmaceuticals seized by customs, 2014-2016
Antibiotics
Sexual impuissance treatment
Painkillers
Anti-malarial
Diabetes treatment
Heart disease treatment
Dietary supplements
Allergy treatment
Blood pressure treatment
Local anaesthetic
Cancer treatments
Stomach ulcers treatment
Eye treatment
Anti-epileptic medication
Anemia treatment
Hyperthyroidism treatment
Skin treatment
0%

5%

10%

15%

20%

25%
30%
35%
40%
Share of the global seized value of fake pharmaceuticals

Source: OECD/EUIPO database.

A more detailed picture can be derived from the PSI dataset, which takes into account a broader range ofcounterfeit medicines, and also includes stolen and diverted pharmaceuticals. These data show that
medicines in the genito-urinary, central nervous system and anti-infective therapeutic categories contained
the largest number of incidents (Figure 4.4).

Figure 4.4. Top five therapeutic categories reported in counterfeiting incidents
Number of incidents, 2018
700
600
500
400

300
200
100
0

Genito-Urinary

CNS

Anti-infective

Cytostatic

Cardiovascular

Source: PSI database.

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 33
Medicines within the genito-urinary therapeutic category continue to be the most frequently targeted bycounterfeiters. Due to increased activity and new sources of information, the counterfeiting of drugs in the
genito-urinary category were detected at a much higher rate in 2018.
The second therapeutic category most frequently targeted by counterfeiters is the central nervous system(CNS), which surpasses anti-infective treatments. Since 2016, CNS drugs have experienced a 57%
increase in counterfeiting incidents. This is consistent with the increased reporting of counterfeit
benzodiazepines and opioid pain medications in North America and Europe.
In addition, the scope of categories of medicines targeted by counterfeiters keeps broadening. Products
found in a single incident ranged from 1 to 71 different drugs. Concerning counterfeiting incidents only, the
PSI reported 533 different products from 15 different therapeutic categories in 2018. This is an 18%
increase in the number of products targeted by counterfeiters over 2017.
According to the industry, the vast majority of counterfeit drugs do not contain the correct active ingredientsin the correct proportions. In addition, many of these counterfeit drugs contain undeclared active
ingredients that might have serious unwanted health consequences. These can pose a very serious threat
to consumer health, ranging from mild to life threatening.

Which IP right holders are most affected?
Which countries are most affected? The OECD/EUIPO database (2019) on customs seizures (see Chapter
3) indicates that US brands were largely the most affected by the trade in counterfeit pharmaceutical goods
over the 2014-2016 period. They were followed by European economies, including United Kingdom,France, Austria, Germany, and Switzerland.
This result is not surprising given that the United States, Switzerland, Germany and France are the largest
producers of pharmaceuticals worldwide (Figure 4.5). According to data provided by the United Nations
Industrial Development Organization’s (UNIDO) Industrial Statistics Database (UNIDO, 2019; see Annex
A for a description of the data), the share of the United States in the global output of pharmaceuticals was
37.6% in 2016, making it the leading producer of pharmaceutical products and medicines worldwide. It
was followed by Switzerland (14%), Germany (8.9%) and France (6.8%).

Figure 4.5. Top 15 pharmaceutical-producing economies, 2016
Share of global output of pharmaceuticals
40%
35%
30%
25%
20%
15%
10%
5%
0%

Source: UNIDO (2019), INDSTAT Database, United Nations Industrial Development Organization, Vienna, https://stat.unido.org/, accessed July
2019.
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34 Trade routes for counterfeit pharmaceuticals
The production of counterfeits is carried out on all continents both on an industrial scale and on a smaller
and less sophisticated scale (WHO, 2017b). The packaging and the medicines are often manufactured
and printed in different countries and then shipped to a final destination where they are assembled anddistributed. For example, fake medicines originating in Asia might be packed in falsified packaging
originating in Africa or the reverse. Products are sometimes concealed or smuggled and declared as
something other than medicines.

Key provenance economies
India remains the main provenance economy of counterfeit pharmaceuticals, being the origin of 53% of
the total seized value of counterfeit pharmaceutical products and medicines worldwide in 2016 (comparedwith 53% for the 2011-2013 period) (Figure 4.6 and OECD/EUIPO, 2017). It was followed by China (30%for the 2014-2016 period versus 33% for the 2011-2013 period), United Arab Emirates (4% in both periods),
and Hong Kong (China) (4% versus 3%).
In terms of the number of global customs seizures, Singapore (17.5%), Germany (7.8%), Switzerland(5.7%), Australia (2.8%) and Egypt (2.5%) are also identified as key provenance economies. Except forGermany, the others were already amongst the top 10 provenance economies for counterfeit
pharmaceutical products and medicines for the 2011-2013 period.
According to the data gathered in the OECD/EUIPO database on global customs seizures, between 2014
and 2016, the top four provenance economies for counterfeit pharmaceuticals traded worldwide are thesame as for the period 2011-2013. This suggests relative stability in the main sources of fake medicines
in global trade.

Figure 4.6. Top provenance economies for counterfeit pharmaceuticals, 2014-2016
Share of global customs seizures

Share of global seized value

India
Singapore
China (People's Republic of)Hong Kong (China)
Germany
Switzerland
Australia

Egypt
New Zealand
CanadaNetherlands
TurkeyChinese Taipei*
Philippines
Seychelles
Thailand
0%

10%

20%

30%

40%

50%

60%

Source: OECD/EUIPO database.

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 35
Key sources: the case of the EU
The range of provenance economies of counterfeit pharmaceuticals imported to the EU is more limited
than worldwide. However, it is interesting to note that the top three provenance economies of fakemedicines and pharmaceutical products imported to the EU are exactly the same as for those tradedworldwide.
In terms of value, India is the main provenance economy of counterfeit pharmaceuticals shipped to theEU, being the origin of 47% of the total value of counterfeit pharmaceutical products and medicines seized
by EU customs authorities (Figure 4.7). It is followed by China (37%) and Hong Kong (China) (8%).
Although a main source of counterfeit pharmaceuticals globally, the United Arab Emirates is not an
important provenance of these type of fake goods for EU economies. The provenance economies ofSingapore, Switzerland, Australia, and Chinese Taipei are more important.

Figure 4.7. Top provenance economies of counterfeit pharmaceuticals imported into the EU, 20142016
Share of global customs seizures

Share of global seized value

India
Singapore
Switzerland
Hong Kong (China)
Australia
China (People's Republic of)
New ZealandChinese Taipei*

Seychelles
ThailandTurkeyKorea
United States
RussiaEgypt
Philippines
0%

10%

20%

30%

40%

50%

60%

Source: OECD/EUIPO database.

Comparing the customs seizures intensities of infringing pharmaceuticals with legal trade intensities foreach provenance economy helps to identify the economies which are most likely to be the places ofmanufacturing of fake pharmaceuticals. The methodology used to calculate these indices is presented in
Annex A. These indices express the likelihood of an economy to be a significant provenance of counterfeit
medicines, and confirm that India, China and Hong Kong (China) are the economies most likely to export
counterfeit pharmaceuticals (Table 4.1). Interestingly this mirrors the case for the 2011-2013 period (seeOECD/EUIPO, 2017).
The share of the United Arab Emirates and Singapore in the global trade of fake pharmaceuticals for the
2014-2016 period appears to have increased since the 2011-2013 period. However, some Middle Eastern
economies such as Yemen, Iran and Lebanon have disappeared from the ranking of the top economies

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36 
most likely to export counterfeit pharmaceutical products. On the other hand, Egypt and some Far East
Asian Economies (Pakistan, Philippines and Indonesia) have entered the top 10 and are now major
potential sources of fake pharmaceuticals in global trade.

Table 4.1. The 10 economies most likely to be a provenance of counterfeit pharmaceutical products
GTRIC-e for pharmaceuticals; average 2014-2016
Provenance economy

GTRIC-eHong Kong (China)
India
China (People's Republic of)United Arab Emirates
Egypt
Philippines
Singapore
Viet Nam
Indonesia
Pakistan
Cameroon
Turkey

1.000
1.000
1.000
0.947
0.838
0.674
0.657
0.631
0.388
0.332
0.332
0.309

Note: A higher score on the GTRIC Index indicates a greater likelihood that the economy in question is a source of counterfeit goods.

The statistics suggest that these top three provenance economies are also the same for the EU (Tables
4.1 and 4.2). The provenance economies most likely to export counterfeit pharmaceutical products to the
EU are indeed India, Hong Kong (China) and China. This list also includes some Far East Asian economies(Philippines, Thailand), Singapore and Switzerland. Russia and Turkey are also ranked among top 10
potential provenance economies of counterfeit pharmaceuticals and medicines for the EU, though theyplay a minor role in the global trade of counterfeit pharmaceuticals. Conversely, while listed as a main
provenance of counterfeit pharmaceutical products in global trade, the United Arab Emirates does notappear to be a major threat for the EU in this sector.

Table 4.2. Top ten economies most likely to be a provenance of counterfeit pharmaceuticals
imported into the EU
GTRIC-e for pharmaceuticals to the EU; average 2014-2016
Provenance economy

GTRIC-eHong Kong (China)
India
China (People's Republic of)Philippines
RussiaSingapore
TurkeyIranThailand
Switzerland
United States

1.000
1.000
0.997
0.996
0.716
0.633
0.599
0.572
0.474
0.300
0.254

Note: A higher score on the GTRIC Index indicates a greater likelihood that the economy in question is a source of counterfeit goods for EU
economies.

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Producers and transit points
While the original database of customs seizures can be used to identify the provenances of counterfeit
pharmaceuticals, some additional analysis needs to be done to chart the trade routes of counterfeit
pharmaceuticals and to distinguish producers and transit points.
Determining the main producing economies of fake pharmaceuticals and the key transit points relies on
two different methodologies:
1. Using customs data to distinguish fake pharmaceutical producing economies from transit
economies. The details of this methodology are given in Annex A. The first section below presents
the results of this process, identifying the main producers and transit points of fake pharmaceuticals
shipped worldwide and those specifically targeting the EU.
2. Using arrest data to identify main distributor and manufacturing countries. PSI has been collecting
information on arrests as an indicator of governments’ commitment to address pharmaceuticalcrime. The PSI has categorised for each country the types of activity the subjects were engaged
in when they were arrested into four categories: point of sales arrests, distributors, manufacturers,
or individual involved in stealing.

Using customs data to distinguisheconomies from transit economies

fakepharmaceutical-producing

Methodology
Using the methodology developed in the OECD/EUIPO (2017) report, the authors developed a quantitative
exercise to determine the producers and transit points of fake pharmaceuticals in global trade. This
exercise first uses the list of the top provenance economies identified by the indices described in Chapter
2. In a second step, the methodology uses two sets of statistical filters to distinguish producers from transit
points among the main provenance economies identified in the first step (see Annex A for more details):2
1. A filter that looks at the production capacities of a given economy in the pharmaceutical sector(Relative comparative advantage for production, RCAP-e indices). This filter is developed basedon the UN INDSTAT production data (see Annex A). The production of pharmaceutical goods andmedicines relies on certain skills and resources and also exhibits certain returns-to-scale
properties. We assume that only economies that have sufficient production capacity for legitimate
pharmaceutical goods and medicines are able to leverage this capacity to produce theircorresponding counterfeits.
2. A filter that checks the degree to which a given economy specialises in re-export ofpharmaceuticals (Relative comparative advantage for being a Transit point, RCAT-e), e.g. throughdevelopment of an advanced logistical infrastructure, or by virtue of its convenient geographicallocation. Where these factors facilitate transit of genuine pharmaceutical products, they can also
facilitate transit of fake pharmaceutical goods and medicines.
The details of the calculation of both indices are presented in Annex A. A complete list of RCAP-e and
RCAT-e indices are presented in Table B.2 and Table B.3, respectively.
Both filters are applied to distinguish the producing economies from the key potential transit points ofcounterfeit pharmaceutical products and medicines traded worldwide. Intuitively, if an economy is not asignificant producer of pharmaceuticals and at the same time is a large re-exporter of these goods inlegitimate trade, then it is likely to be a transit point. Similarly, the main provenance economies ofcounterfeit pharmaceuticals that are significant producers of genuine pharmaceutical products but
insignificant re-exporters are likely to be producers of fake pharmaceutical goods and medicines.

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38 More specifically, if an economy is listed as a top provenance for counterfeit pharmaceuticals (see Table
4.1 and Table 4.2) and has a high RCAP-e index and a low RCAT-e index, it will be classified as a producer.
If it has instead a low RCAP-e index and a high RCAT-e index, it will be classified as a transit point.
This exercise results in a list of producers and a list of transit points. Together with the information on theplace of seizure, this allows maps of trade in fake goods to be developed showing the key producer
economies, main transit points and main destinations of fake pharmaceuticals.

Findings: producers and transit points in the global counterfeit pharmaceuticals
trade
The RCAP and RCAT indices allow the main producers to be distinguished from the main transit points
among the top provenance economies of counterfeit pharmaceutical products and medicines identified inTable 4.1. The details of the calculation of these indices and presented in Annex A.
India, China and some Far East Asian Economies, including Vietnam, Indonesia, Pakistan and thePhilippines, appear to be the main producers of counterfeit pharmaceuticals traded worldwide (Table 4.3).
The role of Singapore is ambiguous given that it has both a large capacity for producing pharmaceuticals
and a large capacity to re-export these products. Given that Singaporean customs have not reported any
seizure of counterfeit pharmaceuticals, structured interviews with industry and enforcement experts wereneeded to conclude it is a transit point for counterfeit pharmaceutical products medicines .
Hong Kong (China) and the United Arab Emirates appear to be the main transit points for fake medicinesand pharmaceutical goods shipped worldwide. They are followed by Egypt, Cameroon and Turkey.

Table 4.3. Main producing economies and transit points for counterfeit pharmaceutical products
and medicines traded worldwide, 2014-2016
Producing economy
India
China (People's Republic of)Philippines
Viet Nam
Indonesia
PakistanTransit point
Hong Kong (China)
United Arab Emirates
Egypt
Cameroon
TurkeySingaporeNote: Economies are listed in order of importance, measured by RCAP and RCAT index values, indicating a greater likelihood that the economy
in question is a producer or a transit point of counterfeit medicines in world trade.

Findings: producers and transit points in the counterfeit pharmaceuticals tradedestined for the European Union
India and China are also identified as the main producers of counterfeit pharmaceuticals and medicines
exported to the European Union (Table 4.4). Some Far East Asian economies, such as the Philippines andThailand, also appear to be important producers/direct exporters of these products to the European Union,
while the role of Singapore remains ambiguous.
Unlike its role in the global trade in fake pharmaceuticals, the United Arab Emirates is not an importanttransit point for counterfeit medicines and pharmaceutical goods shipped to the European Union. However,Hong Kong (China) and Turkey maintain their role as main transit points.
Finally, Iran, Switzerland and the United States are identified as specific transit points for fakepharmaceuticals shipped to the European Union.3 .

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 39

Table 4.4. Main producing economies and transit points for counterfeit pharmaceutical products
and medicines exported to the EU, 2014-2016
Producing economies

Transit points

India
China (People's Republic of)Philippines
ThailandHong Kong (China)
Singapore
TurkeyIranSwitzerland
United States

Note: Economies are listed in order of importance, measured by RCAP and RCAT index values, indicating a greater likelihood that the economy
in question is a producer or a transit point of counterfeit medicines exported to the EU.

Using arrest data to identify main distributor and manufacturing countries
The second method for determining the main producing economies of fake pharmaceuticals and the key
transit points involves using PSI data. Through liaison contacts, member reports and open source reports,
PSI has documented the arrest of 2 253 people involved in counterfeiting, diversion or theft ofpharmaceutical drugs worldwide during 2018. Due to a variety of considerations, including legal
prohibitions against sharing of information, the identity of these arrested people is not always released by
the authorities. Nevertheless, 33% of the reports, or 750 out of 2,253 arrests, contained adequate
information for our analysis, including name, date of birth and/or address.
When examining the activity of those arrested, arrests for the diversion of medicines are slightly higher
than those for counterfeiting (Figure 4.8). The institute notes however that this is a new development andmay indicate that law enforcement worldwide is placing a higher priority on the illegal trade of medicines
in general, not just counterfeits.

Figure 4.8. Percentage of arrests by crime, 2018

Counterfeiting
49%

Diversion
51%

Theft
0%
Note: For a definition of diversion, theft, and counterfeit pharmaceuticals see Chapter 2.
Source: PSI data

Based on the information available, PSI categorised the types of activity the subjects were engaged inwhen they were arrested. This analysis was designed to identify potential weaknesses in the organization
where successful law enforcement interventions could be made. Five categories were identified:

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40 
1. Point of sale arrests: individuals working in pharmacies, hospitals, and those primarily associatedwith Internet sites selling suspected counterfeit or illegally diverted product.
2. Transporting arrests: individuals arrested at international borders and in airports while engaged intransporting counterfeit or diverted shipments.
3. Distributor arrests: wholesalers and individuals arrested at warehouses where counterfeit or
illegally diverted goods were being stored.
4. Manufacturer arrests: arrests made at locations where equipment to manufacture counterfeit
pharmaceutical drugs or labels was present.
5. Theft arrests: individuals involved in stealing pharmaceuticals; generally these were major thefts
valued at more than USD 100 000.
Interestingly, between 2017 and 2018 the PSI has documented increases across all arrest activities, except
for theft. Of particular note are the increased number of manufacturing (+73%) and point of sale (+163%)
arrests recorded.
Distributors of illegal medicines continue to be the top category of arrests and are a particular law
enforcement focus in Asia, Latin America and Europe. The majority of those engaged in the smuggling ofcounterfeit and diverted medicines were arrested in Asia and Eurasia. Overall, the arrests by activity
findings for 2018 indicate that the authorities have continued to focus on major distribution andmanufacturing operations.
Commenting specifically on manufacturing, Table 4.5 indicates that China arrested the largest number ofindividuals engaged in the manufacture of counterfeit medicines. It was followed by Spain, the UnitedStates, India, Pakistan and Indonesia. Note that almost all of these countries (except the United Statesand Spain) were identified as potential producers of counterfeit pharmaceuticals in the methodology
developed by OECD/EUIPO and described in the previous section (see Table 4.1).

Table 4.5. Top ten countries for the number of arrests of individuals engaged in manufacturing
counterfeit medicines, 2018
EconomyNumber of arrests

China
Spain
United States
India
PakistanIndonesia
CanadaColombia
Egypt

233
52
48
38
10
10
7
6
1

Source: PSI data.

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 41

Notes
1

See also www.who.int/news-room/fact-sheets/detail/substandard-and-falsified-medical-products

2

The customs data identifies a set of EU member countries as provenances. However, these data
refer in most cases to the points of entry of fake goods to the EU. Consequently these economies will not
be included in the analysis.
3

The roles of Switzerland and the United States as transit points have been refined throughadditional experts’ interview, and taking into account their specific role as re-exporters.

References
OECD/EUIPO (2019), Trends in Trade in Counterfeit and Pirated Goods, Illicit Trade, OECD Publishing,Paris,
https://doi.org/10.1787/g2g9f533-en.
OECD/EUIPO (2017), Mapping the Real Routes of Trade in Fake Goods, OECD Publishing, Paris,
http://dx.doi.org/10.1787/9789264278349-en.
Ozawa, S. et al. (2018), “Prevalence and estimated economic burden of substandard and falsified
medicines in low-and middle-income countries: A systematic review and meta-analysis”, JAMA
Network Open, 1(4), pp.e181662–e181662.
Tracit (2019), Mapping the Impact of Illicit Trade on the UN Sustainable Development Goals, Tracit, July,
www.tracit.org/uploads/1/0/2/2/102238034/tracit_sdg_july2019_highres.pdf.
UNIDO (2019), INDSTAT Database, United Nations Industrial Development Organization, Vienna,
https://stat.unido.org/ (last accessed in July 2019).
UNODC (2013), Transnational Organized Crime in East Asia and the Pacific: A Threat Assessment,
United Nations Office on Drugs and Crime, Vienna, www.unodc.org/documents/data-andanalysis/Studies/TOCTA_EAP_web.pdf.
WCO (2019), What is the Harmonized System (HS)?, World Custom Organization, Brussels,h/www.wcoomd.org/zh-cn/topics/nomenclature/overview/what-is-the-harmonized-system.aspx.
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.

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42 

5 The supply chain: marketing,transport and distribution

Weak links in fragmented global supply chains allow counterfeiters ofpharmaceuticals to succeed. This chapter analyses the nature of the fakepharmaceutical supply chain and describes the elements which allow thistrade to go largely undetected. This includes a focus on the modes oftransport chosen (small packets sent by post), and the sales channels –including the growing role of the Internet. Finally, it explores the role of free
trade zones in helping counterfeiters to disguise their activities.
Counterfeiters of pharmaceuticals succeed in large part by exploiting weaknesses in supply chains, which
are often fragmented (OECD, 2016). Medicines are prescribed by physicians who rarely come into contact
with the medicines, and are delivered by pharmacists who commonly source from multiple wholesalers(Lybecker, 2008). In the United States, 90% of medicines are distributed by five major wholesalers. The
remaining 10% comprise some 7 000 secondary wholesalers which specialise in purchasing and selling
selected discounted products (OECD, 2016; Lybecker, 2008). The secondary suppliers fill demand incases of spot shortages and also serve as an additional source of revenue for the primary wholesalersthrough pharmaceutical trading (OECD, 2016). The loosely regulated secondary suppliers purchaseexcess stock from wholesalers, pharmacies and sometimes unscrupulous brokers. The products are thenre-sold to other large distributors or retailers (UNICRI, 2012). The secondary distributors acquire drugs at
reduced prices derived from surpluses in production or storage on the part of producers or large distributors
and pharmacies. Their small size allows them to exploit changes in the market and to concentrate on
specific drugs that exhibit high demand at specific times and in specific areas.
Problems can arise when original pharmaceutical products cross the borders of various countries andnumerous importers, retailers and distributors become involved (UNICRI, 2012). The repackaging thattakes place throughout the distribution and shipment process offers opportunities for introducing counterfeit

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 43
medicines into supply channels. The continuous change of hands can mask the provenance of counterfeit
medicines, making tracing almost impossible and making it hard to identify who is making the counterfeit
drugs. Repackaging can undermine the integrity of the products concerned, effectively foiling anticounterfeiting mechanisms, such as product tracking mechanisms, used by the manufacturer of thegenuine products. The counterfeiters disguised the activity by splitting the consignment, sending blister
packs of tablets in one box and flat-packed cartons in which the blisters were to be packaged in another.
Both were labelled as containing mobile phone covers, which was the case; the falsified tablets andpackaging were buried underneath the phone covers. The seized medicine contained no active ingredient.
Industry sources also indicate that counterfeiters engage in deceptive practices, marketing genericproducts as products manufactured by the original proprietary manufacturer. They are also known toremove and sell legitimate products from genuine packaging and replacing the products with counterfeit
items. The legitimate products are then sold on grey markets.

Modes of transport
Mail and courier services are the main modes of transport for counterfeit pharmaceuticals tradedworldwide, with their shares growing between 2011 and 2016 (Figure 5.1). In terms of volume, air is also
an important means of transport in the global trade of fake pharmaceuticals. In terms of value, sea was
the main transport mode for fake medicines and pharmaceutical products during 2011-2013, but was
replaced by road transport and mail and postal services during 2014-2016.

Figure 5.1. Transport modes for counterfeit pharmaceuticalsa) In terms of the total number of customs seizures of fake pharmaceuticals worldwide
2014-20162011-2013
Road/Vehic
le1%
Sea/Vess…

Road/Vehicle
0.2%

Sea/Vessel
0,1%

Air
13%

Air
4%

Mail/Expres
s courier96%

Mail/Expres
s courier82%b) In terms of the global seized value of counterfeit pharmaceuticals
2014-20162011-2013

Air
10%

Sea/Vessel
85%

Mail/Expres
s courier
3%

Road/Vehic
le43%

Road/Vehic
le2%

Mail/Expres
s courier
32%

Source: OECD/EUIPO database.
TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020

Sea/Vessel
1%
Air
24%

44 
In 2014-2016, mail, postal services and express services were the main modes of transport for counterfeit
pharmaceutical goods and medicines exported to EU economies, both in terms of value and volume(Figure 5.2). This was also the case for 2011-2013, and confirms the persistence of the problem of small
parcels in the global trade in counterfeit goods (see OECD, 2018b).

Figure 5.2. Transport modes for counterfeit pharmaceuticals exported to EU economiesa) In terms of the total number of EU customs seizures of counterfeit pharmaceuticals
2014-20162011-2013

Mail/Post/
Express
courier
97%

Mail/Post/E
xpresscourier
95%

Air
3%
Air
5%

Sea/Vessel0%b) In terms of the seized value of counterfeit pharmaceuticals by EU customs
2011-20132014-2016
Road/Vehicle
1%

Mail/Post/
Express
courier51%

Sea/Vessel
12%

Mail/Post/E
xpresscourier
55%

Air
46%

Air
32%

Sea/Vessel
2%
Road/Vehicle

1%
Source: OECD/EUIPO database.

The challenges of small parcels
The growing use by counterfeiters and other illicit traders of small shipments to cloak their activities has
garnered increased attention (OECD/EUIPO, 2018b). Between 2014 and 2016, almost 57% of seizures ofall product categories worldwide concerned postal shipments and 12% express courier. Air transport andsea transport followed, with slightly more than 15% and 10% of seizures respectively (OECD/EUIPO,2019). Together, small parcels carried either by postal or express services account for 69% of customs seizures of
IP-infringing products for the 2014-16 period, compared to 63% for the 2011-13 period (OECD/EUIPO, 2019).
The preference for using the post to send fake products in many instances reflects the fact that while therisk of detection may be low in sea transport, when interdiction occurs, losses on confiscated cargoes can

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 45
be very large (OECD/EUIPO, 2018b). Small shipments, however, allow counterfeiters to lower the potential
losses that result from the discovery of an illicit trade movement as the ability to avoid detection isconsiderably higher, and only small volumes are confiscated each time.
The attractiveness of small shipments for counterfeiters has increased over time, benefitting from the
explosive growth in e-commerce, and the accompanying rise in cross-border transactions by business and,even more importantly, consumers (OECD/EUIPO, 2018b). The sharp increase in items shipped directly
to consumers by parcel post or letter packets has, in effect, ballooned the volume of legitimate trade,flooding the market with a growing number of items. The small shipments are handled primarily by postal
authorities and express mail companies, with the active support of retail platforms such as Alibaba,
Amazon and eBay. The large growth in legitimate trade in effect has likely made it more difficult to detect
the illicit trade. The use of small parcels is well suited to counterfeiters of pharmaceutical products, as
shipments of these products can be quite small, easily fitting in bubble wrap letter packets, as well as small
parcel boxes.
The challenges posed by the growing volume of items have been significantly increased for the customs
authorities responsible for handling items as they cross borders. The information that is available throughship manifests and the like, and the supporting role of customs brokers are absent in small volume trade(OECD/EUIPO, 2018b). In the case of small volume trade involving postal authorities, for example, only
simplified documentation is required when items are sent. The information contained on the documents iscertified by the sender, and is not typically verified, creating broad scope for both legitimate errors as well
as fraud. Moreover, the customs information on postal forms is generally provided in paper form; andtherefore not available electronically. In any case, it is generally only available to customs authorities indestination countries at the time a shipment arrives.
This creates a dilemma for customs as checking for suspicious imports has to be counterbalanced with
the need for fast processing of all imports. A close review of so many small packages would cause
unacceptable delays, and, given the difficulty in identifying counterfeit items, their low value (if containedin parcels or packets) and the relatively small share that they are likely to represent in total trade, theexercise would not be cost-effective. Efforts are being made to enhance the use of electronic forms in thepost, in order to provide information to customs in destination countries in advance of arrival of shipments.
This would facilitate risk assessment, which relies critically on data and other information to be successful.
Problems associated with incomplete, misleading, incorrect or fraudulent information, however, would
remain.
In the United States the STOP Act, enacted in October 2018, requires foreign postal authorities to provide
advance electronic data (AED) on all packages or packets (under 2 kg) containing goods sent to the UnitedStates. The required data include the sender’s name and address, the recipient’s full name, weight andvalue of the package and its contents. The US Postal Service collects the data from the originating postal
operator and passes it on to Customs and Border Protection (CBP) in order to help the CBP to better
monitor and target goods moving by mail. Most foreign postal operators were obliged to transmit AED on
up to 70% of packages by the end of 2018, though the rate for China, Hong Kong and Macau was 100%.
All postal authorities will have to do so for 100% of packages by January 2021. In addition, in April 2019,
the Federal Drug Administration (FDA) and CBP signed an agreement to maximise inspection anddetection capabilities in order to prevent illegal and harmful products – such as unapproved fentanyl
products, counterfeit prescription drugs and fake over-the-counter (i.e. non-prescription) medicines thatlook legitimate – from entering the United States through the nation’s international mail facilities (IMFs)
and ports of entry.1 The two agencies will expand how information is shared to better identify trends which
can target future entries. In fiscal year 2018, FDA staff posted at the IMFs around the country examinedpackages from more than 180 countries. Approximately 90% of the packages screened by the agency
contained products that should not have been entering the country.

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46 In the United Kingdom, since 1 January 2019 the Royal Mail has required shippers to provide electronic
customs data when sending items (other than correspondence) to destinations outside the European
Union (OECD/EUIPO, 2018b). The action was taken to make sure emerging and future legislative, security
and customs requirements in overseas destinations would be met.
The situation with express companies is better, as the companies involved generally provide door-to-door
services that are tracked and traced electronically. In these cases, other information – on the shipper,
product and receiving party – is collected electronically, providing a potentially rich data source that, if
available to customs authorities, would greatly assist in risk assessment. Co-operation on this front has
advanced as express service providers and customs are working together to improve data and informationexchanges. However, it appears that there is considerable scope for improvement as there are, among
other things, privacy issues to be addressed, along with confidentiality concerns. As with postaltransactions, there may be issues concerning the quality of the information as it is generally based on
information provided by the sending party, providing scope for errors and, more importantly, deliberate
misrepresentations or fraud.
The attractiveness of small shipments for bad actors is also affected by the special treatment that such
shipments have been accorded for customs and tax. Under WTO trade facilitation, countries haveestablished de minimis levels on imports, below which tariffs and taxes would not be collected. The
existence and level of thresholds have a number of benefits: for governments, they reduce the scope of
the imported items that need to be processed, freeing up resources for other work; for businesses andconsumers, they simplify the importation of goods, lowering their cost. On the other hand, the reduced
customs surveillance that occurs for items that are exempt from tariffs and taxes could also benefit parties
involved in IP crime, allowing them to operate below the radar.
The challenge of tackling imports of small packages containing counterfeit and other illicit items ismounting. In the case of the United States alone, the volume of parcels and letter packets reached 498
million in 2017, with more than 60% entering in the form of packets. With e-commerce expected to continue
to grow rapidly, the complexity of handling a growing number of potentially mislabelled shipments will grow.

Sales channels
The growing role of the Internet
The Internet is providing an increasingly viable option for distributing pharmaceutical products – both
legitimate and counterfeit – to domestic and international consumers. The ability of sellers to hide theiridentity and misrepresent their products is particularly attractive to counterfeiters, providing criminals witha relatively easy point of entry into even the best regulated markets (WHO, 2017b). There are two distinct
areas to purchase counterfeit pharmaceuticals online: the dark web and the freely accessible surface web.
The pharmaceuticals marketed on the surface web are mainly substance, for which legal controls differ
between jurisdictions (Koenraadt and van de Ven, 2018). A 2016 study estimated the number of online
pharmacies to be in the order of 30 000 to 35 000 in 2015, with an additional 600 launching every month(LegitScript, 2016). These pharmacies are serving a growing number of consumers. Surveys carried out
in the United States, for example, show that the number of people buying medicines online more thanquadrupled in less than a decade, rising to between 19 and 26 million people (WHO, 2017b). Based on asurvey conducted in the Netherlands, (Koenraadt and van de Ven, 2018) estimate that approximately 10%of the Dutch population buys or has bought medicines online. Painkillers dominate the list of the mostpopular purchases (31.8%), followed by weight-loss pharmaceuticals (27%), sedatives and tranquillisers(14.2%) and sexual enhancers (14%). Financial motives, convenience and discretion were cited as themain motives for buying pharmaceuticals online (Koenraadt and van de Ven, 2018).

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 47
A 2017 survey of US consumers (ASOP Global, 2017) revealed that:

Some 27% of respondents were very familiar with online pharmacies, while one-third were notfamiliar. Only 5% of respondents were familiar with available Internet resources to identify safe
online pharmacies.



One-third of respondents had used an online pharmacy to purchase medications for themselves
or someone under their care. Of those individuals, 90% did not consult their healthcare provider
prior to purchase. Those most likely to use the pharmacies were young, upper-income individuals.

Some 40% of respondents mentioned price as a reason for using online pharmacies; another third
indicated that there were insurance issues.



Two in five respondents did not use online pharmacies, while a quarter of consumers did not think
it was a good idea to purchase medicines online.



A majority of respondents (55%) have or would consider purchasing at least one type ofprescription or over-the-counter medication online.

Some 11% of respondents were likely to use a Canadian online pharmacy. Interestingly, the FDA
has reported that 85% of medicines that are sold to Americans by Canadian online pharmacies are
not Canadian.

These statistics are echoed by recent data collected by the Alliance for Online Pharmacy in the EU (ASOP
EU) from an online survey following a five country online educational campaign (France, Germany, Italy,
Spain and the United Kingdom). Consolidated data (which varied from country to country) indicated that
depending on the country, between 35% and 58% of respondents had bought medicine online. Importantly,
between 35% and 65% of customers were not aware that most websites selling medicines online areoperating illegally.
The LegitScript study referenced above indicated that 97% of online pharmacies failed to adhere toapplicable legal requirements, and 92% of those operating illegally were doing so in a blatantly illicit manner(LegitScript, 2016). The United States was found to be far and away the primary focus of the illegal online
drug industry, with 82% of Internet pharmacies in English and a similar percentage, 85%, targeting US
consumers and offering shipment to the United States. A review of the movement of goods in 29 test
purchases revealed that 100% of shipments were carried out using the post; none used courier services.
The vast majority of products came from India, with Germany, Singapore, the United States, Canada andthe United Kingdom also mentioned. The original source of the pharmaceuticals, however, could not be
discerned. Other findings of the report include:None of the test buys that crossed borders were flagged by customs.

Advertisements for illegal websites represented a tiny share of total online advertisements; thosethat were posted disappeared and never reappeared.

The illegal online pharmacies avoided registering their domain names with registrars that enforced
policies prohibiting illegal online pharmacies. Approximately 45%-52% of illicit online pharmacies
were with 10 domain name registrars that either did not have, or did not adequately enforce,
policies prohibiting illegal prescription drug sales.

All five of the major payment networks operate rigorous programmes designed to prevent
purchases related to illegal online drug sellers. Illicit pharmacies, however, often did not identify
themselves as selling prescription drugs to inquiring banks and were usually coded as selling othertypes of products, thereby undermining the payment providers’ efforts.



As criminals seek to expand the use of the Internet they are now using all types of platforms
including social media to reach their audiences

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48 The counterfeiters often promote their business through direct solicitations to potential customers using
email and online advertising. The most popular medicines for sale online are so-called “lifestyle” medicines(EAASM, 2008). At the same time, counterfeiters are taking advantage of a rising “self-prescribing culture”
on the part of individuals. Moreover, online purchases can appeal to consumers because of 1) the speed
and convenience of purchases; 2) the possible lower cost of products; 3) the ability to avoid discussing
sensitive conditions with healthcare professionals, family or employer/authorities; and 4) the frequent
absence of a need for a prescription.
According to the pharmaceutical company Pfizer, over the 2015-18 period, more than 10 000 Facebook
accounts or profiles selling counterfeit Pfizer medications were identified and reported (Reddy, 2018).
Moreover, they referred more than 1 000 Instagram accounts selling counterfeit Pfizer products between
April and October 2018 to Facebook, Instagram’s parent company. The company notes it is working to findand remove drug sales by blocking and filtering terms associated with them, and it quickly shuts down
suspicious accounts that people report to them. It is also working on developing new technology to identify
when someone is trying to sell drugs. Pfizer also reported that in 2017, authorities from 49 countries seized
more than 12 million counterfeit doses of Pfizer products. More than 5 000 vendors were advertising Xanax
for sale on the dark web. The company conducted a pilot programme with law enforcement and bought
138 Xanax samples on the dark web; they tested them and found only seven, or 5%, were authentic. The
Pharmaceutical Security Institute reports that it receives roughly 15 000 to 17 000 cases of counterfeit
drugs reported globally from its members, which include security directors from 35 pharmaceuticalcompanies. The number of new reported cases was 1 178 from 134 countries in 2017, up 7% from 2016.
The bulk of counterfeits appear to be from China, India and the United States.
The scale of online counterfeit trade has been assessed by a number of organisations. The WHO hasestimated that over half of medicines purchased over the Internet from illegal sites that conceal their
physical address are counterfeit.2 A 2008 report by the European Alliance for Access to Safe Medicines
concludes that (EAASM, 2008):


62% of medicines purchased online during the study were fake or substandard

95.6% of online pharmacies researched were operating illegally

94% of websites did not have a named, verifiable pharmacist

84.5% of online pharmacies were virtual (i.e. did not operate brick and mortar establishments)



78.8% of the sites appeared to be violating trademarks



90.3% of websites supplied prescription-only medicines without a prescription.

The experts analysing purchases of online pharmaceuticals to determine their authenticity noted that thevast majority of consumers were unlikely to be able to detect counterfeit products on their own (EAASM,
2008). They concluded that while some counterfeiters made efforts to ship products in ways which would
deceive consumers, others did not; the latter shipped products in the wrong packaging, with incorrect orpoorly copied manufacturer or product logos or unorthodox box size. A few of the products were shipped
merely as loose tablets wrapped inside several sheets of newspaper, while others were delivered inenvelopes or paper folded over to form an insecure, make-shift packet. One delivery was simply anenvelope containing some loose, unidentified tablets inside a small transparent plastic bag.
According to the EAASM, there is evidence that counterfeiters have used Oceania and the Bahamas as
an intermediate destination for fake medicines sent from China and the Middle East (EAASM, 2008). From
there, the products are distributed to Europe and other regions via online traders masquerading as
legitimate pharmacies based in Europe, the United States and Canada.
A report prepared by the National Association of Boards of Pharmacy (NABP) summarises researchcarried out during 2019 which identified more than 11 500 online pharmacies that could not berecommended by the association (NABP, 2019). Nearly a third of these pharmacies offered or facilitated

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 49
the sale of opioids or other. Many of the online pharmacies did not list an address; these pharmacies weremost likely to be selling counterfeit products.
The challenge is illustrated further by a simple web search carried out on a popular lifestyle medicine,which returned 147 million results in 0.38 seconds. The overwhelming majority of sites were believed tobe from unregistered pharmacies (ASOP EU, 2013). To gain insights into the return on counterfeit sales,a project was launched by the EAASM, which involved setting up a bogus online pharmacy in Germany(EAASM, 2012). Over a nine-week period in 2011, the site attracted 360 532 visitors, of whom 182 602
were unique, from 112 countries. Pay-per-click (PPC), in which the web host pays the search engine a feefor each click, proved to be the most effective way to attract traffic (responsible for 95% of visits), followedby email advertising (4%) and banner advertising (sponsored visual advertisement placed on selectedwebsites) (1%). The study concluded that had the website been actually trading, it would have netted EUR
12-35 million per year.
The involvement of criminal organisations in illicit pharmacies has been demonstrated on a number ofoccasions (Guerra and Mackey, 2017). In 2007, US federal law enforcement charged 18 members of the
Affpower organisation for operating an online pharmaceutical distribution network involving domestic andforeign entities. The organisation included 1) merchant websites for the purchase of drugs; 2) affiliatedwebsites that marketed and promoted sales; 3) a network of physicians who issued prescriptions for thepharmaceuticals; (4) a network of pharmacies that dispensed the drugs; and (5) credit card processors toprocess the sales. Affpower's administrative headquarters and customer service department were locatedin Costa Rica while servers that hosted merchant websites were located in Cyprus.3 The owner andoperator of Affpower resided in the United States but had bank accounts in Panama, Cyprus and Costa
Rica, which were used to further the illegal activity. Affpower used a credit card processor in Israel andbank accounts and an accounting firm in Cyprus. The company recruited licensed physicians throughout
the United States and Puerto Rico to review and approve orders for prescriptions illegally. The global
operation generated over 1 million prescription orders in two years, generating more than USD 126 million.
Similar operations were carried out by the Bansal organisation, which sold more than 11 millionprescription pills to more than 60 000 purchasers in the United States, grossing at least USD 8 million injust over a year. The Juan Gallinal network set up sham corporations and used a server in Switzerland.
The network made approximately USD 9.8 million over a three-year period.

Street markets
In some developing countries, street markets are often used to sell medicines. The uncontrolled nature ofsuch sales enables counterfeiters to engage in illicit trade with low risk of detection. In Ghana, for example,
drug inspectors found tablets purporting to be antimalarial medicines in a rural dispensary (WHO, 2017b).
The tablets contained less than 2% of the expected active ingredients. The dispensary had purchased the
medicines from a licensed wholesaler, who had, in turn purchased the falsified medicines at a discounted
price from a travelling salesman, who was selling the product cheaply from the back of a truck. The
wholesaler apparently did not question the legitimacy of the product, which was accepted without any
paperwork.

Free trade zones
Originally established hundreds of years ago as means to facilitate goods in transit by relieving traders ofmany customs formalities that would otherwise apply to goods entering into a country for consumption,
free trade zones (FTZs) have evolved and developed into an important tool for attracting foreign investment
and promoting economic development and growth, particularly in developing countries (OECD/EUIPO,
2018a). The number of zones has expanded rapidly through the years, rising from 79 zones located in 25
economies in 1975 to over 3 500 zones in 130 countries in recent years. For businesses, zones provide
numerous benefits; these can include savings in taxes and customs duties; labour and immigration rules

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50 that are more flexible than those applicable in the customs territory of host countries; lighter regulation andoversight of corporate activities; fewer restrictions on corporate activities; and opportunities to improve the
distribution of goods to diverse markets.
Lightly regulated zones are, however, also attractive to parties engaged in illegal and criminal activities.
These zones have facilitated trade in counterfeit products, smuggling and money laundering, often
providing bad actors a relatively safe environment for carrying out their illicit activities. The problem isaggravated in instances where governments do not police zones adequately; this can occur when zones
are deemed to be foreign entities that are outside the scope of domestic policing activities. It can be further
aggravated when zones are operated by private parties. These parties’ main interests are likely to be infinding ways to expand zone occupancy and provide profitable services to zone businesses. They may
therefore have little direct interest and/or capacity in law enforcement, nor may they have the capacity or
authority for scrutinising zone operations. Even where government authorities are actively involved inoverseeing zone activities, there is evidence that co-ordination between these authorities and zone
operators, particularly those that are private parties, can be weak, providing further scope for bad actors
to exploit zones for their illicit activities.
As noted by the WCO, FTZs are a very important element in global value chains (WCO, 2018). However,from the supply chain security perspective, they still largely remain outside customs control andsupervision; there are in fact not many customs administrations that have a mandate to enforce law within
the zones.
An example of how zones have been used to facilitate trade in counterfeit pharmaceuticals is found in a2006 case involving a number of countries (ICC, 2013). In May 2006, UK customs agents seized eight
pharmaceutical products, seven of which were counterfeit. The products included infringements involving
products made by Merck, Novartis, AstraZeneca, Pfizer and Procter & Gamble (Bogdanich, 2007). The
shipment was in transit from the Oyster Corporation, established in the Sharjah FTZ, Dubai, to Personal
Touch Pharmacy, established in the FTZ of Freeport, Bahamas (ICC, 2013). A search warrant by the Royal
Bahamas Police Drug Unit resulted in the seizure of several counterfeit drugs and uncovered a fulfilment
centre for Internet drug orders placed with an illegal on-line pharmacy based in Canada.
The day after the raid in the Bahamas, suspect pharmaceuticals stored in the Sharjah FTZ were moved toan unrelated facility in the Jebel Ali Free Zone in Dubai, in an attempt to avoid further detection. The
investigation would eventually unravel a complex supply chain of fake drugs that ran from China throughHong Kong, the United Arab Emirates, UK, and the Bahamas, ultimately to be sold online to customers as
Canadian medicines. The Bahamas served as the place where prescriptions were filled and packaged(Bogdanich, 2007). The products would then be sent to the United Kingdom for final shipment to customers
in the United States, with the UK postage intended to enhance the credibility of the products. Individuals
were charged and, in some cases, imprisoned in the three areas involved: Dubai, Bahamas and Canada.
In the case of Canada, the owner of the online pharmacy involved was eventually sentenced to four years
in prison in 2013, when 90% of one shipment was found to contain counterfeit drugs. 4 The person involved
was arrested in the United States following deportation from the Bahamas, while on the way to Canada.
A second case occurred in 2006, in which Pfizer International discovered counterfeit products in the Euro
Gulf Trading Co., located in the Jebel Ali Free Trade Zone (ICC, 2013). A complaint was filed, prompting
an inspection by the General Inspection Department and the Investigations and Smuggling Control Sectionof the Dubai Seaports and Customs Authority. At the warehouss, inspectors found quantities of counterfeit
goods, including pharmaceuticals, along with equipment used to print false production and expiration
dates.

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 51

Notes
1

See www.fda.gov/news-events/press-announcements/fda-and-cbp-bolster-collaboration-protectpublic-health-and-safety.
2

See www.who.int/bulletin/volumes/88/4/10-020410/en/.

3

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.
4

See www.safemedicines.org/2013/01/fake-online-pharmacy-founder-andrew-strempler-guilty-ofmail-fraud-508.html.

References
ASOP EU (2013), Falsified Medicines Costing the Earth, ASOP EU Alliance for Safe Online Pharmacy,
https://eaasm.eu/public/downloads/3wxmE/Falsified+Medicines+costing+the+earth-2.pdf.
ASOP Global (2017), Online Pharmacy Behavior and Perception: Survey Results, ASOP Global,
Washington, https://buysaferx.pharmacy/wp-content/uploads/2017/09/us_sept20171.pdf?mod=article_inline.
Bogdanich, W. (2007), “Counterfeit drugs’ path eased by free trade zones”, New York Times, December
17, New York, www.nytimes.com/2007/12/17/world/middleeast/17freezone.html.
EAASM (2012), Counterfeiting the Counterfeiter, European Alliance for Access to Safe Medicines, Leighon-Sea, https://eaasm.eu/public/downloads/t4GVa/CtC+report+2012.pdf.
EAASM (2008), The Counterfeiting Superhighway, European Alliance for Access to Safe Medicines,
Leigh-on-Sea,
https://eaasm.eu/public/downloads/6CJcZ/455_EAASM_counterfeiting+report_020608(1).pdf.
Guerra, C. and T. K. Mackey (2017), USA Civil and Criminal Prosecutions Associated with Illicit Online
Pharmacies: Legal Analysis and Global Implications, Medicine Access @ Point of Care.
https://doi.org/10.5301/maapoc.0000020
ICC (2013), Controlling the Zone: Balancing Facilitation and Control to Combat Illicit Trade in the World’s
Free Trade Zones, International Chamber of Commerce, Paris,
https://cdn.iccwbo.org/content/uploads/sites/3/2016/11/Combating-illicit-trade-in-FTZs-1.pdf.
Koenraadt, R. and van de Ven, K. (2018), “The Internet and lifestyle drugs: an analysis of demographic
characteristics, methods, and motives of online purchasers of illicit lifestyle drugs in the Netherlands”,
Drugs: Education, Prevention and Policy, 25(4), pp.345–355
LegitScript (2016), The Internet Pharmacy Market in 2016: Trends, Challenges, and Opportunities,
LegitScript, http://safemedsonline.org/wp-content/uploads/2016/01/The-Internet-Pharmacy-Market-in2016.pdf.

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52 
Lybecker, K.M. (2008), “Keeping it real: anticounterfeiting: strategies in the pharmaceutical industry,”
Managerial and Decision Economics, Vol. 29, pp. 389-405.
https://doi.org/10.1002/mde.1405.
NABP (2019), Rogue RX Activity Report, National Association of Boards of Pharmacy, Mount Prospect,
IL, https://nabp.pharmacy/wp-content/uploads/2019/11/Rogue-Rx-Activity-Report-2019.pdf .
OECD (2016), Illicit Trade: Converging Criminal Networks, OECD Reviews of Risk Management Policies,
OECD Publishing, Paris,
http://dx.doi.org/10.1787/9789264251847-en.
OECD/EUIPO (2018a), Trade in Counterfeit Goods and Free Trade Zones: Evidence from Recent
Trends, OECD Publishing, Paris,
http://dx.doi.org/10.1787/9789264289550-en.
OECD (2018b), Pharmaceutical Innovation and Access to Medicines, OECD Health Policy Studies,OECD Publishing, Paris,
https://doi.org/10.1787/9789264307391-en.
OECD/EUIPO (2019), Trends in Trade in Counterfeit and Pirated Goods, Illicit Trade, OECD Publishing,Paris,
https://doi.org/10.1787/g2g9f533-en.
Reddy, S. (2018), “The uphill fight against fake prescription drugs”, Wall Street Journal, 8 October,www.wsj.com/articles/the-uphill-fight-against-fake-prescription-drugs-1539009351.
UNICRI (2012), Counterfeit Medicines and Organised Crime, United Nations Interregional Crime andJustice Research Institute,www.unicri.it/topics/counterfeiting/medicines/report/Ctf_medicines_and_oc_advance_unedited2013.p
df.

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6 The push factors behind counterfeit
pharmaceuticals

Why is the pharmaceutical market so attractive for counterfeiters? This
chapter explores this question, analysing how the profitability of thiscriminal venture – combined with low risk of detection, low risk ofprosecution and weak penalties – have contributed to its steady growth.
The decision of what counterfeit product to produce and which markets to target is driven byfactors related to: 1) the characteristics of the market, which determine market potential; 2)technological and logistical considerations, which determine the feasibility of counterfeiting; and3) the institutional environment, which determines the risks of being caught.

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54 
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 forcounterfeiters.

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 55

Table 6.1. Framework for assessing the attractiveness of counterfeiting pharmaceuticals
Driving factor

Conditions favouring counterfeiting
pharmaceuticals

Situation for pharmaceuticals

Market characteristics
Profitability
Market size
Brand power

High unit profitability and/or large volume
Large potential market
High level of brand recognition

Can be very large, especially if cheap ingredientsare used
Pharma market is large (more than USD 1 trillion)
and growing
Strong brand power

Production, technology and distribution
Investment required

Simple, low cost equipment

Technology required

Not sophisticated; easy to acquire

Logistics

Simple and cheap

Marketing and sale ofproducts

Easy to establish/infiltrate distribution
channels

Ability to conceal
operations
Ability to deceive
consumers

Cost of making crude fakes can be modest; a pillpress may suffice
Production technology, packaging and labelingchallenges vary; can be easy, or a significant
challenge
Shipping costs are low; free trade zones havefacilitated trade in fakes
Difficult to infiltrate principal supply chains; easier
if second tier wholesalers targeted; Internet has
facilitated trade in fakes

Easy to hide illicit operations

Can be easy if operations are on a small scale

Easy to deceive consumers

Easy to deceive visually; anti-counterfeiting
technology can complicate significantly

Institutional characteristics
Legal and regulatory
framework

Weak laws

Enforcement

Weak enforcement

Penalties

Weak sanctions

Complicated situation in many countries makes it
difficult to prosecute
Enforcement levels vary across countries; clevercounterfeiters often succeed in avoiding
enforcement efforts
Criminal sanctions provided for in many countries;
fines are generally a manageable cost of businessin many countries

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

Profitability
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 someproducts 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%.

Low risk of detection
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

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56 
triage suspect products. Moreover, where field testing equipment is available, staff do not always have thetraining 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 thepharmaceuticals. 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 adifferent 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).

Low risk of prosecution
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 throughcomplex 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 thespecialised techniques sometimes needed to investigate pharmaceutical crime. The situation is further
complicated because the international nature of trade in counterfeits often requires cross-borderinvestigation, 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 totrace their point of origin can be significant as the location of evidence necessitates forensic examinationof computers and smartphones, some of which may be in foreign jurisdictions. Language barriers can also
affect cross-border co-operation.

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

Table 6.2. Maximum incarceration for trademark infringement and narcotics trafficking
In years
BrazilCanadaFranceUnitedKingdom

United States

Average

Trademarkinfringement

1

5

4

10

10

6

Narcotics trafficking

1510

10 (or life
sentence in
certain cases)

Up to life
sentence

Up to life
sentence251

Note: 1Life sentence is approximated at 50 years.

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 57
Sources: OECD, 2018c and www.inhouselawyer.co.uk/wgd_question/are-there-criminal-sanctions-for-infringement-of-any-intellectual-propertyrights-and-if-so-what-are-they-and-how-are-they-invoked/#France.

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).

Table 6.3. Selected features of trademark regimes in Brazil, China, India, Russian Federation andSouth Africa, 2016
Item

Brazil

China

India

RussianFederation

South Africa

Statutory damage
Administrative civil fines
Criminal sanctions:imprisonment up to …
Other finesxx< USD 430,000< 5x illicit gain (1)xx< USD 72,000< USD 2,900(2)xx

1 year

7 years (3)3 years

6 years (4)5 years (5)x< USD 2,900< USD 14,000((6)< USD 650 (7)Notes: National currency amounts have been translated into USD, based on average exchange rates in 2016 (see,www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates). (1) If the illicit revenue is less than USD
7 200, or is not known, a fine < USD 36 000 can be imposed. (2) Applicable to legal entities. (3) Applicable to cases which are
deemed to be serious in nature. (4) Applicable when a group of persons or organised group of infringers is involved. (5) For repeat
offenders; first offence is for up to 3 years. (6) Applicable to groups; fine can also be calculated on the basis of an amount equal to
up to 5 years wage or salary, or other income, of a convicted person. (7) For repeat offenders; first offence is up to USD 376.
Source: OECD, 2018c.

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 andJustice Research Institute,www.unicri.it/topics/counterfeiting/medicines/report/Ctf_medicines_and_oc_advance_unedited2013.p
df.
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.

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7 Impact of counterfeit medicines

Why are counterfeit medicines such a problem and who is affected? This
chapter explores in depth the multiple ways in which fake pharmaceuticals
cause damage – to individuals’ health, to the bottom line and reputation of
producers, to government budgets and to the environment.
Counterfeit medicines affect economies in a number of areas:Individuals who fall victim to low quality counterfeit products that may notadequately treat their medical needs.



Legitimate producers, who can lose sales to counterfeiters, and need to take steps
to ensure that counterfeiters do not infiltrate their supply chains, and to mountefforts to combat counterfeiters.



Governments, which are actively involved in managing health care in countries.



Entire economies, in the form of the impact on crime levels, the environment andthe possible effects on jobs and foreign investment.

It is often assumed that high-income countries with strong regulatory systems can effectively exclude
substandard and falsified medical products from their markets, but WHO analysis shows that this is notnecessarily the case, as reports on these products have been submitted by countries in Western Europe
and North America as well as other high-income settings (WHO, 2017b). In an analysis of cases ofcounterfeit incidents involving penetration of legitimate supply chains and reported to PSI CIS databasebetween 2009 and 2011, Mackey et al. (2015) revealed that upper and lower-middle income countries
comprised 93% of all the cases. Analysis of the health consequences of falsified medicines performed byRahman et al. (2018) showed that the 48 reported incidents involving health damage due to falsified
medicines were almost equally distributed among developing (27 cases, 56.3%) and developed countries(21 cases, 43.7%).

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Impact on individuals
Bad quality counterfeit medicines can affect individuals in a variety of ways (WHO, 2017c):
Adverse effects (for example toxicity) from incorrect active ingredients.



Failure to cure or prevent future disease, thereby increasing mortality, morbidity and the prevalenceof disease.

Contributing to the progression of antimicrobial resistance and drug-resistant infections.



A loss of confidence in health care professionals, health programmes and health systems.



Increasing out-of-pocket and health system spending on health care.



Lost income due to prolonged illness or death.



Lost productivity costs to patients and households when seeking additional medical care, theeffects of which are felt by businesses and the wider economy.

As indicated above, people taking counterfeit medicine may be putting their lives at risk. Estimates showthat between 72 000 and 169 000 children may die from pneumonia every year after receiving counterfeit
drugs, and that fake anti-malarial medication might be responsible for an additional 116 000 deaths (WHO,2017c). Renschler et al. (2015) estimate that each year over 120 000 under-five malaria-positive children
may die across 39 sub-Saharan countries due to taking poor-quality anti-malarials, including counterfeit
and substandard pharmaceuticals. In their rather conservative review of the published literature on thehealth consequences of falsified medicines, Rahman et al. (2018) analysed 48 reported incidents in which
falsified medicines caused serious adverse effects to patients. These incidents involved approximately
7 200 casualties, including 3 604 deaths. The results of the study indicate that a similar number of incidents
affect developing and developed countries alike, and the counterfeiters target all types of medications(Rahman et al. 2018).
Forensic tests of suspect samples performed by the pharmaceutical industry also demonstrate thatcounterfeit medicines, in 90% of those cases tested, could cause harm to the patient (Novartis in Society
Report, 2019).
While many incidences of patient harm will likely go undetected, numerous examples have neverthelessbeen recorded.1 For example, a recent UK survey carried out by Sapio research and commissioned by a
private company INCOPRO, concludes that almost one-third (32%) of those who have bought one or morecounterfeit medicines have suffered a health issue as a result (INCOPRO, 2020). There are numerous
other documented cases in which patients have died or suffered harm due to an online purchase. As justone example, in 2013 people died after taking a counterfeit diet pill bought through an online drug seller.
The pill, sold as a weight loss aid through many illicit online pharmacies, is actually a pesticide with lethal
consequences for humans.2

Impact on producers
The impact of counterfeits on legitimate producers are multiple, including lost sales, costs of protecting
brands, loss of reputation, the potential cost of managing the disposal of counterfeits and litigation costs
involving counterfeiters and possibly people who were unknowingly victimised by counterfeits. The
challenges are alluded to in corporate reports, albeit in a general manner. For example, one of the fivelargest pharmaceutical companies – Pfizer – mentioned counterfeiting in its 2019 annual financial report ,although not in its general annual report.

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60 In the financial report, the company includes a section on counterfeit products, containing general
information on the challenges it faces, and noting the efforts it has taken to address the situation (PfizerInc., 2019a; 2019b):“We undertake significant efforts to counteract the threats associated with counterfeit medicines, including,among other things, working with the FDA and other regulatory authorities and multinational coalitions tocombat the counterfeiting of medicines and supporting efforts by law enforcement authorities to prosecutecounterfeiters; assessing new and existing technologies to seek to make it more difficult for counterfeiters tocopy our products and easier for patients and healthcare providers to distinguish authentic from counterfeit
medicines; implementing business practices designed to protect patient health; promoting public policies
intended to hinder counterfeiting; working diligently to raise public awareness about the dangers of counterfeit
medicines; working collaboratively with wholesalers, pharmacies, customs offices, and law enforcement
agencies to increase inspection coverage, monitor distribution channels, and improve surveillance ofdistributors and repackagers, and using data analytics and risk assessment tools to better target the factorsthat give rise to the counterfeiting problem in the first place. However, our efforts and the efforts of others may
not be entirely successful, and the presence of counterfeit medicines may continue to increase.”
Novartis includes an identical paragraph on counterfeits in both its annual report and its annual financial
report, describing the dangers that the practice could have on patients and the firm’s reputation (Novartis
AG, 2019a; Novartis AG, 2019b). It notes that the industry continues to be challenged by the vulnerabilityof distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing
number of markets and over the Internet. It indicates that counterfeiting of their products could result in
substantial reputational and financial harm.
In its most recent annual report, Roche Group includes a section on counterfeiting that details the effects
that fakes can have on patient health (Roche Group, 2019). It indicates that the global trading systemopens up possibilities for introducing counterfeit products into the regular supply chain, and that it
collaborates on international criminal investigations to address problems. The firm uses its internal
analytical skills to examine samples of counterfeiting. Besides identifying the composition of counterfeits,
analyses comprise also the ink on packaging and leaflets, blisters and paper. Counterfeits from different
parts of the world are examined to determine whether they originated from the same source. In 2018, thecompany closed 377 suspected cases of counterfeiting, of which 142 were confirmed.
Merck addresses the challenges associated with counterfeiting in its annual report (Merck & Co., Inc,
2019a):“To combat product-related crime, an internal coordination network covering all functions and businesses (theMerck Anti-Counterfeiting Operational Network) was set up several years ago. In addition, security measures
are in use to protect products against counterfeiting. Innovative technical security solutions and defined
preventive approaches are used to ward off dangers relating to cybercrime and espionage. Measures toprevent risks and to prosecute identified offenses are conducted in all the relevant crime areas in close andtrustworthy cooperation with the responsible authorities. The impact of these risks on business operations
depends on the respective individual case, product-specific factors, the value chain and regional aspects inparticular. Our Corporate Security department is responsible for the overall coordination of all measures in thisarea. Overall, the threat resulting from crime in general is seen as being possible and is classified as a medium
risk.”
Although counterfeiting is not mentioned in its annual financial report it does however document certain
trademark infringement litigation (Merck & Co., Inc, 2019b). The term counterfeit does not appear as suchin either the annual report or the annual financial report of Johnson & Johnson (Johnson & Johnson, 2019a;
Johnson & Johnson 2019b).

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Loss of revenue
The sale of counterfeit products in many instances displaces sales from legitimate pharmaceuticalcompanies. The most recent EU Status Report on Infringement (EUIPO, 2019) estimates that theEuropean pharmaceutical industry3 was losing EUR 9.6 billion in sales due to counterfeits during the period
2012-2016, which represent 3.9% of total sales. In China, unauthorised production of a drug produced byan international pharmaceutical company resulted in a drop in sales to about USD 242 000 (OECD, 2016).
When the counterfeiting ceased in 2003, sales grew to USD 1.2 million. In 2003, the turnover from India’s
pharmaceutical industry was estimated at USD 4.2 billion; of this, counterfeiters produced an estimated
USD 1 billion (OECD, 2016).

Increased costs of security measures
Incorporating anti-counterfeiting technologies into their products and packages raises the costs for
legitimate pharmaceutical manufacturers (OECD, 2016). The costs of introducing a unique identifier for
manufacturers and parallel importers have been estimated by European Commission at EUR 50 to 320
million annually. These costs relate to adapting production and packaging lines and investing in softwaresystems to upload the unique identifier information onto the repository system. The estimation of costs forthe entire sector (including manufacturers, wholesalers, retailers and repositories systems) ranges
between EUR 200 and 800 million.4 Firms incorporate overt, covert and forensic technologies dependingon the risk and sophistication of counterfeiters; many also monitor their products in the markets ofcounterfeit-prone countries and conduct their own investigations into reported counterfeiting incidents. As
noted in a recent report by the Institute of Medicines of the National Academies, multinational
pharmaceutical companies have invested in security departments that work globally with regulators andlaw enforcement agencies. These departments collect 80% of the evidence used in criminal prosecution(IOM, 2013).

Damage to brands
As with other forms of counterfeiting, fake medicines risk damaging a firm’s brand and the products
involved when those products do not meet expectations. Moreover, the firm’s reputation for safety andquality are put at risk, and the firm may be subject to liability if consumers are harmed by counterfeit
versions of their drugs (OECD, 2016).

Undermining innovation
Innovation is key to the success of pharmaceutical companies and to improving health outcomes. In recent
decades, new medicines have improved survival rates and the quality of life for many patients around theworld, while improving treatment of diseases such as HIV and certain cancers (OECD, 2018b). R&D iscentral to innovation; however, it is risk-prone, costly and, as indicated earlier, time consuming, with muchof the risk and costs borne by private enterprises and investors. R&D is promoted in large measure by theprotection of intellectual property rights, without which innovators would be hard pressed to profit from thesizeable investments required to develop new products. Infringement of IP through counterfeiting
undermines innovation by reducing incentives to invest and innovate, and by depriving pharmaceuticalcompanies of revenues, thereby lowering the amount of money available for further R&D (Tracit, 2019).
The impact of counterfeiting on pharmaceutical innovation can be particularly significant for developing
countries (OECD, 2016). Less than 10% of global health research expenditures are directed to conditions
that account for more than 90% of preventable mortality – conditions that are prevalent in developing
economies.

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Impact on governments
Counterfeit pharmaceuticals can result in squandered health resources, not only for individual patients, butalso for international humanitarian organisations, NGOs and national government programmes (OECD,2016). Counterfeiters divert resources away from genuine treatment, robbing limited health budgets ofalready scarce resources. At the same time, counterfeits can mean losses in corporate taxes and VAT,
increased regulatory and enforcement costs for securing the supply chain, and higher health care costs totreat the adverse effects of fake drugs. With respect to taxes, EUIPO (2016) estimates that the cost to EU
governments of revenues foregone from counterfeit medicines was in the order of EUR 1.7 billion.

Greater regulatory and enforcement costs
The total costs of regulatory and enforcement measures in the pharmaceutical area are not generally
available as they are combined in overarching budgets of the agencies involved (OECD, 2016). While
there are tools available to detect counterfeits, they can be costly. Much depends on the nature of thecounterfeit products, which can be classified as follows (IOM, 2013):
Category 1: Completely fraudulent products with unknown content and therapeutic effects
significantly different from the genuine drug.

Category 2: Look somewhat similar to the drug being imitated, but the drug composition is notknown.

Category 3: Look very similar or identical to the genuine product but contain an entirely different
drug, if any.

Category 4: Look very similar or identical to the actual product but contain an alternative drug orsynthetic analogue providing similar therapeutic value to that of the authentic product, and intended
to create repeat business.

Category 5: Visually identical, highly sophisticated copies or synthetic analogues with sometherapeutic value that cannot be detected using most field and laboratory methods.

In some instances, visual inspection will suffice; in others tests may be needed for physical properties suchas disintegration, using reflectance spectroscopy, and refractive index; and chemical tests includingcolorimetry and dissolution, chromatography, spectroscopic techniques and mass spectrometry (IOM,2013). Modern science has opened up immensely powerful and expensive forensic chemistry techniquesthat can give investigators information on the unique fingerprints that manufacturers leave on theirproducts. This analysis can give prosecutors the evidence necessary to link falsified drugs to particularsources. Such analysis, however, can be too costly to apply in a general manner. Forensic chemistry
assays cost between USD 5 000 and USD 15 000 per test on average. While extremely accurate, they are
therefore not practical for routine product quality market surveillance in any country and may be out ofreach entirely in many of the low- and middle-income countries most affected by counterfeiting problems.

Loss of confidence/trust in governments and public health programmes
Genuine harm, even among a small number of patients, can lead to a loss of confidence in government
programmes and health care systems (OECD, 2016). Incidents of therapeutic failure and drug resistancecan destroy the credibility and success of health programmes; counterfeit and substandard medicines will
only undermine consumers’ trust further and can have future knock-on effects, such as the decrease in
the quality of contraceptive pills in Brazil in the late 1990s. IOM (2013) reports that rumours about
contraceptive quality linger, showing the type of long-term damage that can occur.

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Increased health care costs
Counterfeit medicines may also result in higher health care costs, as patients may require additional
treatment to deal with potential adverse effects of ineffective or damaging drugs. Physicians and healthcare providers rarely suspect counterfeit or substandard drugs as the reason for a patient’s poor
therapeutic response. Accordingly, they most frequently respond by ordering more tests or repeating thecourse of treatment (OECD, 2016).

Economy-wide effects
In addition to the direct effects on consumers, producers and governments, counterfeits can have broader,
economy-wide effects in a number of areas, including on the environment, foreign investment and crime.
There may also be impacts on economic performance; EUIPO (2019) reports that counterfeits result in an
estimated EUR 16.5 billion of lost sales and affect more than 80 000 jobs in the pharmaceuticals sector
and other sectors that sell goods and services to it.

Environmental pollution
While the pharmaceutical industry is required to meet environmental protection standards and reduce
chemical waste and other hazardous materials in their production processes, the same does not hold true
for manufacturers of counterfeit drugs, who can reap the financial benefits of dirty production by taking
environmental shortcuts (Tracit, 2019; OECD, 2016). Producers of illicit pharmaceuticals disregard theimpact that chemical compounds may have on the environment, disposing of toxic dyes and chemicals
without regulatory oversight, while ignoring the treatment of wastewater streams (OECD, 2016). Authorities
note that seized counterfeit electronic goods and counterfeit chemicals and pharmaceuticals are
particularly difficult to dispose of in an environmentally friendly manner, as the core ingredients of fakedrugs are in most cases unknown, hence the environmental damage they can pose is also difficult toassess ex ante.

Lost foreign investment
The prevalence of counterfeit medicines on a national market may reduce or discourage foreign
investment, as potential investors judge that their interests will not be protected (OECD, 2016). The
consequences may constitute significant lost opportunities for economic growth and development as well
as for improvements in the national health care system.

Costs of tackling complex criminal networks
Criminal involvement in the manufacture and distribution of counterfeit pharmaceutical products is ofconcern as it provides those involved with a source of revenue to support a wider range of illicit activities
and can undermine confidence in public institutions, such as law enforcement. Investigations haveuncovered significant evidence that organised criminal groups (OCGs) have expanded their illicit activities
into the field of counterfeit medicines (UNICRI, 2012). A 2014 INTERPOL report examines the role of
OCGs in pharmaceutical crime, finding involvement ranging from small clusters of 3 to 10 members, tolarger well-established hierarchical groups and sophisticated international networks with elusive structures(Table 7.1) (INTERPOL, 2014). Analysis by Hall et al. (2017) showed that actors involved in the illicit supply
of medicines “often belong to loosely structured networks. These networks straddle what are often
presented as the dichotomies of licit/illicit, online-offline and global/local.” Often legitimate companies serve
as a shield for trade in counterfeit pharmaceuticals. “Suppliers on all levels can operate under the guise ofa legitimate company and sell illicit medicines for extra income, while using it to expand their network andlaunder profits” (Hall et al., 2017). The increasing use of the Internet to sell counterfeit and illicit medicines
has resulted in growth in the latter form of criminal enterprises. The networks are difficult to target due tothe ease with which they can move and establish new websites, the high level of anonymity offered in thevirtual world, and the difficulty in piecing together the different criminals involved in wide-ranging affiliate
networks.
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Table 7.1. Pharmaceutical cases possibly involving organised crime groups, 2013
RegionAfricaAsia

EuropeOceaniaSouth
America

Case
Nigeria. One person was arrested for smuggling counterfeit medicines from China to Lagos, Nigeria. The illicit
medicines included Coartem, Ibuprofen and Maloxine. The scale of the smuggling operation indicates that there
was involvement of an OCG.
Philippines. Philippine authorities arrested traffickers attempting to ship slimming pills, pain relief medication
and antibiotics which had been shipped from Singapore. Customs authorities confiscated a 40-foot container
loaded with 20 pallets of fake medicines. Connections to a trading company indicates that the case is tied to an
OCG.
Japan. Between 2011 and 2013, an OCG called Azuma-Gumi was running a counterfeit medicine operation
selling Viagra, Cialis and Levitra in Japan. Six people were arrested.
Russian Federation. Russian authorities reported that they had dismantled a counterfeiting operation which
had been ongoing for several years in Russia. Fake medicines such as Herceptin, Meronem, Cefobit, Mantera
and Sulperason were manufactured and distributed by an OCG. Seven suspects were arrested.
New Zealand. Three suspected counterfeiters were arrested with doping substances and Tadalafil in New
Zealand. The three suspects were part of an OCG which distributed fake medicines in the country. The
investigation revealed that the group’s leader was operating a sophisticated ring of distributors and using a pillpress to make tablets, as well as an improvised lab in a garage.
Colombia. Police arrested 21 suspects in an operation in which a total of 89 754 units of fake medicines wereconfiscated. The OCG involved falsified expiration dates and batch numbers of medicines.
Guatemala. Ten people were arrested as part of an operation to take down an OCG. The group had a leader
and operated from a legitimate pharmaceutical company, which was licensed to produce medicines. The OCG
used the company to cover production of illegal medication in order to increase the company’s revenues.

Source: INTERPOL (2014), Pharmaceutical Crime and Organized Criminal Groups: An analysis of the involvement of organized criminal groups
in pharmaceutical crime since 2008, www.reajetus.com/wp-content/uploads/2016/04/Pharma-Crime-Sub-Directorate.pdf

Authorities are also addressing related issues, including corruption within the legitimate pharmaceuticalcommunity and a lack of dedicated national enforcement units to tackle the issue (INTERPOL 2014). The
challenge is heightened by the fact that criminals are increasingly using the Internet to carry out theiractivities and are, in turn, developing sophisticated techniques to avoid detection. Some INTERPOL
member countries face legislative challenges in thwarting those responsible for pharmaceutical crime, as
few countries appear to possess specific legislation to target this type of crime. Furthermore, many
countries cited weak penalties as a contributing factor to the proliferation of criminal networks, who arewilling to continue to take risks as the rewards outweigh the potential penalties.
Key findings from the INTERPOL report are:

Criminals involved in pharmaceutical crime are operating through informal networks, but traditionalorganised crime groups across the globe are also involved throughout the supply chain.

An increase in pharmaceutical crime occurred in some countries during 2008-13, especially inSouth and Central America.

Both informal networks and organised crime groups seem to be trafficking in the same types ofillicit medicines: erectile dysfunction medication; slimming pills; as well as pain and anxiety relief
medication.

An important trend in many countries is the increased use of illicit online pharmacies, operated byboth informal networks and organised criminal groups.



Large amounts of money are involved in the transnational criminal enterprises: one illicit online
pharmacy network earned USD 55 million during two years of operations.



Other crimes, such as money laundering, human trafficking for sexual exploitation and weapons
smuggling, can be tied to criminals involved in pharmaceutical crime.
Cases pursued in the United States provide further insights into the role of criminalorganisations in marketing counterfeit medicines:

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

In April 2019, six people were charged in the US Federal Court with operating a wide-ranging drug
conspiracy that included importation of large amounts of drugs which were then used to produce
counterfeit Xanax pills, using Alprazolam as the main ingredient and binding agents. The illicit
ingredients were purchased on the Dark Web using cryptocurrency, with the counterfeit Xanax
likewise sold on the Dark Web or through conventional illegal drug distribution channels. 5 Ifconvicted on multiple charges (conspiracy to possess with intent to distribute controlled
substances, using or maintaining a drug premises, possession with intent to distribute controlled
substances, possession of a firearm in furtherance of a drug trafficking crime, possession of an
unregistered firearm and conspiracy to commit money laundering) two of the defendants could facelife imprisonment.



In January 2019, the president of a medical company was sentenced to 26 months in prison forconspiring to smuggle misbranded pharmaceuticals into the United States and for the unlicensed
wholesale distribution of prescription drugs. 6 The individual concerned instructed subordinates tosmuggle misbranded prescription drugs and devices into the United States, including oncology
drugs, orthopedic injections, and cosmetic devices. These products were not approved by theFederal Drug Administration (FDA) and did not contain the labels, warnings, and instructions
required by the FDA. In order to smuggle these products into the United States, the company used
false names and false customs forms, and broke large shipments into multiple smaller shipments.
The products were stored in private residences, often in violation of safety regulations requiring thepharmaceuticals to be stored at cool temperatures.

In March 2018, a US federal grand jury returned a 28-count indictment charging four individuals
with mail and wire fraud conspiracy, mail fraud, trafficking in counterfeit goods, introducing
misbranded articles into interstate commerce, distribution of a controlled substance, international
money laundering, and smuggling. 7 The individuals sought to enrich themselves by purchasingfrom overseas suppliers FDA-regulated products that were counterfeit and/or misbranded, illegallyimporting them into the United States from the People’s Republic of China and subsequently sellingthem to US consumers. In an effort to evade detection by law enforcement, the defendants had
the packages shipped to a trans-shipper located in Miami, Florida, who would then re-package
and/or re-label the parcels and send them to defendants in Puerto Rico, where they were
warehoused. The products were then marketed through online stores platforms such as eBay.com
and Bonanzo.com, and then shipped by post to individuals and wholesale buyers. The products
sold included counterfeit and misbranded male-enhancement pills, some of which contained drugs
that the consumers were not aware of and could cause danger to their health, including heart
attacks or strokes. If indicted, the defendants were facing a forfeiture allegation of USD 3.7 million,
six properties or homes, two bank accounts, one Pay Pal account, and three certificates of deposit
plus a maximum possible sentence of 30 years’ imprisonment for the conspiracy charges, 10 years
for trafficking counterfeit goods, and 3 years for introducing and receiving misbranded products ininterstate commerce. One of the defendants also faced up to 20 years in prison for international
money laundering and 20 years for smuggling.



In July and August 2017 and March and June 2018, five individuals involved in a scheme to traffic
steroids were sentenced in the United States.8 From approximately May 2015 until April 2017, theconspirators involved in the scheme manufactured steroid products made from raw materials thatthey purchased overseas and marketed as Onyx steroids using Onyx labels that were also orderedfrom overseas suppliers. The defendants sold the steroids to customers across the United Statesusing email and social media platforms, collected payment through money remitters, such asWestern Union and MoneyGram, and used false identifications and multiple remitter locations topick up the proceeds. Some of the defendants laundered proceeds from the steroid sales througha tanning business, which they owned and operated specifically to launder the proceeds of thesteroid operation.

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

In April 2018, an individual was sentenced to 36 months’ imprisonment for conspiring to distributecounterfeit, misbranded, and adulterated Botox into the United States. The individual concerned
owned and operated a sophisticated wholesale drug distribution business involving individuals in
Canada, Panama and Turkey. The Botox was sourced from Turkey and shipped to doctors in the
United States. The drugs were adulterated because they were not kept at required constant cold
temperatures, and sometimes the drugs were shipped and stored with no refrigeration or insulation.
Further, some of the Botox had counterfeit exterior packaging, and the manufacturing lot numberson the exterior of the drugs’ cartons did not match the lot numbers on the drug vials inside thecartons.



In March 2017, an individual pleaded guilty in the United States to engaging in a conspiracy to
manufacture counterfeit Xanax pills and to launder the proceeds gained by the illegal scheme.9
The parties involved used imported equipment and components to support their operations. The
two counts to which he pleaded guilty were subject to sentences of 5 years and 10 years.

In February 2016, a Pakistani national appeared in court after being extradited to the United States toanswer charges related to the illegal importation and sale of misbranded and unapproved drugs, some ofwhich were further alleged to have been counterfeit or controlled substances, and all of which were
manufactured overseas and shipped to the United States.10 The company involved claimed to be, among
other things, a leading and long-standing exporter of branded and generic pharmaceutical drugs andsurgical products. The illegal drugs imported by the defendants included counterfeit or unapproved
versions of Viagra, Lorazepam, Alprazolam, Diazepam, Zolpidem, and Phentermine. The defendants filled
US drug orders by procuring brand name and generic drugs that they knew to be unapproved for the US
market by the FDA from suppliers whose drug manufacturing facilities were not approved by the FDA andwhose packaging and patient literature for their drugs were also not approved by the FDA. As part of theconspiracy, the defendants, using a series of email addresses, would forward the drug orders to a networkof drug suppliers in Pakistan, India, the United Kingdom, and the People’s Republic of China. To evadedetection by customs authorities the drugs were concealed, in loose format, in plastic vitamin bottles andplastic water bottles. They would also use customs declarations that inaccurately or misleadingly described
the contents of the shipments, or would not use customs declarations altogether. The drugs would often
be shipped in mail parcels without packaging, without labels, and without patient safety leaflets or otherwritten instructions and information. Penalties for these offences range from not more than 3 years infederal prison per count, to not more than 20 years in federal prison, per count. Each count also carries a
penalty of up to USD 250 000.

Notes
1

ASOP Global consolidated research collected over a number of years https://buysaferx.pharmacy/forthe-media/examples-of-people-harmed-by-medications-bought-online/
Banned slimming drug kills medical student: Coroner attacks online dealers who target the vulnerable”
The Daily Mail, United Kingdom (April 22, 2013); available at http://www.dailymail.co.uk/health/article2312986/Sarah-Houston-Banned-slimming-drug-DNP-kills-medical-student-coroner-attacks-onlinedealers-target-vulnerable.html. This medicine was misused. The patient took both anti-depressants and apill marketed as a weight loss aid containing lethal ingredient.
2

3

At the manufacturing and wholesale levels.

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4

Commission Staff Working Document SWD(2015) 189 final
regulation/impact/ia_carried_out/docs/ia_2015/swd_2015_0189_en.pdf

https://ec.europa.eu/smart-

5

See www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/pressreleases/april-23-2019-six-indicted-drug-conspiracy-included-production-and-distribution-powerfulsynthetic.
6

See www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/pressreleases/january-18-2019-medical-company-executive-sentenced-smuggling-18-million-misbrandedpharmaceuticals.
7

See
www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/pressreleases/march-8-2018-four-individuals-indicted-trafficking-counterfeit-goods.
8

See
www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/pressreleases/june-20-2018-fitchburg-woman-and-saugus-man-sentenced-roles-counterfeit-steroidconspiracy;www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/pressreleases/march-30-2018-lynn-man-sentenced-over-10-years-prison-role-counterfeit-steroid-conspiracy;www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/press-releases/july-172017-gloucester-woman-pleads-guilty-her-role-counterfeit-steroid-trafficking-scheme;www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/press-releases/august-282017-shrewsbury-man-pleads-guilty-operating-counterfeit-steroid-scheme.
9

See www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/pressreleases/march-28-2017-oakland-man-pleads-guilty-role-conspiracy-manufacture-counterfeit-drugs.
10

See www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/pressreleases/february-1-2016-pakistani-man-makes-appearance-us-district-court-denver-followingindictment-and.

References
EUIPO (2019), Status Report on IPR Infringement, EUIPO, Alicante https://euipo.europa.eu/tunnelweb/secure/webdav/guest/document_library/observatory/documents/reports/2019_Status_Report_on_IPR_infringement/2019_Status_Report_on_IPR_infringement_en.pdf
EUIPO (2016), The Economic Cost of IPR Infringement in the Pharmaceutical Industry: Quantification ofInfringement in Manufacture of Pharmaceutical Preparations (NACE 21.20), EUIPO, Alicante,
September, https://euipo.europa.eu/tunnelweb/secure/webdav/guest/document_library/observatory/resources/research-andstudies/ip_infringement/study9/pharmaceutical_sector_en.pdf.
Hall, A., Koenraadt, R. and Antonopoulos, G.A. (2017), “Illicit pharmaceutical networks in Europe:organising the illicit medicine market in the United Kingdom and the Netherlands”, Trends in
Organized Crime, 20(3-4), pp.296–315.
INCOPRO (2020), “Counterfeit products are endemic – and it is damaging brand value”, INCOPRO eBook, available at https://www.incoproip.com/reports/counterfeit-products-are-destroying-brand-value.
INTERPOL (2014), Pharmaceutical Crime and Organized Criminal Groups: An analysis of theinvolvement of organized criminal groups in pharmaceutical crime since 2008, INTERPOL, Lyon,
www.reajetus.com/wp-content/uploads/2016/04/Pharma-Crime-Sub-Directorate.pdf.

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68 
IOM (2013), Countering the Problem of Falsified and Substandard Drugs, The National Academies
Press, Washington, www.nap.edu/catalog/18272/countering-the-problem-of-falsified-andsubstandard-drugs.
Johnson & Johnson (2019a), Annual Report: 2018, Johnson & Johnson, New Brunswick,www.investor.jnj.com/annual-meeting-materials/2018-annual-report.
Johnson & Johnson (2019b), Annual Report Pursuant to Section 13 of the Securities Exchange Act of1934 For the Fiscal Year Ended December 30, 2018, Johnson & Johnson, New Brunswick,www.sec.gov/Archives/edgar/data/200406/000020040619000009/form10-k20181230.htm.
Mackey, T.K. et al. (2015), “Counterfeit drug penetration into global legitimate medicine supply chains: a
global assessment”, The American Journal of Tropical Medicine and Hygiene, 92(6_Suppl), pp.59–
67.
Merck & Co., Inc. (2019a), Science: Annual report 2018, Merck & Co., Inc., Kenilworth,www.merckgroup.com/content/dam/web/corporate/non-images/investors/reports-andfinancials/earnings-materials/2018-q4/en/2018-Q4-Report-EN.pdf.
Merck & Co., Inc. (2019b), Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Actof 1934 For the Fiscal Year Ended December 31, 2018, Merck & Co., Inc., Kenilworth,https://s21.q4cdn.com/488056881/files/doc_financials/2018/Q4/2018-Form-10-K-(withoutExhibits)_FINAL_022719.pdf
Novartis AG (2019a), Annual Report 2018, Novartis AG, Basel,
www.novartis.com/sites/www.novartis.com/files/novartis-annual-report-2018-en.pdf.
Novartis, AG (2019b), US Securities & Exchange Commission Form 20-F: 2018, Novartis AG, Basel,
www.novartis.com/sites/www.novartis.com/files/novartis-20-f-2018.pdf.
OECD (2016), Illicit Trade: Converging Criminal Networks, OECD Reviews of Risk Management Policies,
OECD Publishing, Paris,
http://dx.doi.org/10.1787/9789264251847-en.
OECD (2018b), Pharmaceutical Innovation and Access to Medicines, OECD Health Policy Studies,OECD Publishing, Paris,
https://doi.org/10.1787/9789264307391-en.
Pfizer Inc. (2019a), Patients at Our Center: Pfizer 2018 Annual Review, Pfizer, New York,www.pfizer.com/files/investors/financial_reports/annual_reports/2018/assets/pdf/pfizer-2018-annualreview.pdf.
Pfizer Inc. (2019b), Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of1934 For the Fiscal Year Ended December 31, 2018, Pfizer, Inc., New York,
http://d18rn0p25nwr6d.cloudfront.net/CIK-0000078003/6b8a74bb-3702-4c0a-a181-70df2b0e5cfb.pdf.
Rahman, M.S. et al. (2018), “The health consequences of falsified medicines: A study of the publishedliterature”, Tropical Medicine & International Health, 23(12), pp.1294–1303
Renschler, J.P. et al. (2015), “Estimated under-five deaths associated with poor-quality antimalarials in
sub-Saharan Africa”, The American Journal of Tropical Medicine and Hygiene, 92(6_Suppl), pp.119–
126.
Roche Group (2019) Annual Report: 2018, Roche Group, Basel, www.roche.com/dam/jcr:af865dfd-50fb458b-9cac-34097db9d3ec/en/ar18e.pdf.
Tracit (2019), Mapping the Impact of Illicit Trade on the UN Sustainable Development Goals, Tracit, July,
www.tracit.org/uploads/1/0/2/2/102238034/tracit_sdg_july2019_highres.pdf.

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8 Efforts to combat counterfeit
pharmaceuticals

Many initiatives are underway to tackle the growing problem of counterfeit
pharmaceuticals. This chapter summarises the main global efforts,
including crime-fighting programmes run by INTERPOL and the World
Health Organization. It also outlines the various legislative measures inplace to protect consumers and producers from fake medicines.
Governments and industry have been working hand-in-hand to combat counterfeit, substandard andfalsified pharmaceuticals. Some of these efforts have been described earlier in this report. Here we
describe more global initiatives taken by international organisations.

INTERPOL
A number of initiatives are in place at the international level to combat counterfeit and illicit drugs, coordinated by INTERPOL. Operation Pangea has been carried out since 2008, with the number of countries
participating rising from 8 to a record 123 in 2017. 1 The operation targets the online sale of counterfeit andillicit medicines and medical devices. Participating agencies carry out co-ordinated operational activities
against illegal websites during the same week in order to identify the criminal networks behind thetrafficking (Table 8.1). During Pangea XI, which was carried out in 2018, police, customs and healthregulatory authorities from 116 countries targeted the illicit online sale of medicines and medical products,
resulting in 859 arrests worldwide and the seizure of USD 14 million worth of potentially dangerous
pharmaceuticals.2 Almost one million packages were inspected during the week of action, with 500 tonnesof illicit pharmaceuticals seized worldwide. Seizures included anti-inflammatory medication, painkillers,
erectile dysfunction pills, hypnotic and sedative agents, anabolic steroids, slimming pills and medicines fortreating HIV, Parkinson’s and diabetes. More than 110 000 medical devices including syringes, contactlenses, hearing aids and surgical instruments were also seized.

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70 

Table 8.1. Operation Pangea 2008-2018
Year (Pangea
number)Number ofcountries

Quantity

2008 (I)2009 (II)2010 (III)2011 (IV)2012 (V)

10
24
45
81
100

2013 (VI)2014 (VII)2015 (VIII)

100
111
115

2016 (IX)

103

2017 (X)2018 (XI)

123
116

Seizures
Value (millions of
USD)

NA
167 000 items
1 million
2.4 million items
3.75 million
items
9.8 million items
9.4 million items
20.7 million
items
12.2 million
items
25 million items
500 tonnes

Numberof arrests

Number of websites
closed

NA
NA
2.6
6.3
10.5

NA
221
NA
551
80

NA
72
290
13 50018 000

41
31
81

58
237
156

9 000
10 600
2 414

53

393

4 932

51
14

400
859

3 584
3 671

Notes: 1Arrested or under investigation. NA: Not available.
Source: INTERPOL news releases at www.interpol.int/News-and-Events

One of the main trends identified during the decade of Pangea operations is the continuous growth ofunauthorised and unregulated online pharmacies, which are capitalising on increasing consumer demand
worldwide.3 It has also observed that criminals are shipping packages containing smaller numbers of pills
and tablets to try to avoid the more stringent checks which have become routine in many countries.4 In the2018 Pangea operation, authorities in Poland discovered counterfeit contraceptive pills hidden inside DVD
packages, while in Ireland illicit sleeping pills were found concealed inside a hollowed-out book. Criminals
also attempted to evade detection by falsely labelling shipments. In Argentina for example, more than 4
million unmarked ibuprofen pills were seized after they were declared as sample items, and the United
Kingdom recovered some 150 000 powerful sleeping pills in shipments labelled as clothing, bedding andfood.
In addition to the global Pangea campaigns, INTERPOL has overseen a number of regional initiatives tointercept counterfeit pharmaceuticals.5 These include Operation Rainfall, which focused on Asia; Operation
Qanoon, which focused on the Middle East and North Africa; and Operation Heera, which focused on West
Africa. The results of these campaigns for 2018 are shown in Table 8.2.

Table 8.2. Selected Interpol operations involving pharmaceutical products, 2018
Operation
Rainfall
Qanoon
Heera

Number of units seized
295 000
1.4 million
95 800Estimated value(USD)
122 400
1.5 million
3.8 million

Suspects identified
15
39
41

Source: https://www.interpol.int/en/Crimes/Illicit-goods/Pharmaceutical-crime-operations

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World Customs Organization
The WCO manages an IPR, Health and Safety Programme that focuses on capacity building, co-ordinating
efforts of its members and related international organisations, working with the private sector anddeveloping enforcement tools.6 The capacity building includes accreditation of experts, organising regionaland national seminars for customs officers and conducting diagnostic missions that include the review ofnational legislation, analysis of country-specific risks, engagement of rights holders and national competentauthorities. Co-ordinating efforts by all stakeholders through simultaneous enhanced border controls
focuses on improving information sharing in real time among different countries, providing customs officers
with tools and instruments for more efficient risk analysis and targeting, enhancing co-operation with therights holders and learning more about the phenomenon of counterfeiting flows and concealment methods.
Partnership with the private sector focuses on developing real-time access to the commercial data andstrategic information needed to detect counterfeit goods.
In its 2018 report on the situation in illicit trade, the WCO notes that the high volumes and increasingly
sophisticated nature of trade in counterfeit goods were serious concerns, and that organised criminalgroups were heavily involved in disseminating and selling such products (WCO, 2018). It notes further that
the WCO prioritises combating IPR infringements by capturing the attention of customs officers andindustries worldwide and ensuring sufficient vigilance in efforts to combat the counterfeiting. The reportdistinguishes medical products from “IPR products”, which are defined to include clothing and accessories,
cosmetics and electronic appliances. Medical products are defined more broadly to include counterfeit,
genuine products that lack either the appropriate authorization or licences, and products that are
undeclared.

Trends
While seizures of IPR products have declined, seizures of medical products have surged by 167%, risingfrom 2 862 in 2016, to 7 629 in 2017. Seizures of metabolic agents (e.g., steroids, and antidiabetic
products) and urogenital agents (e.g., erectile and kidney dysfunction medicine) top the list. Most of theseizures occurred by intercepting products sent via the post, which accounted for 72% of the total of all
seizures (WCO, 2018). Seizures from vessels, however, accounted for the largest number of items seized,
accounting for close to 75% of the 270.9 million items seized.
An examination of trafficking flows reveals that North America and Western Europe were the top
destinations for fake medical products in 2017, receiving 50% and 26% respectively of the total cases withknown trafficking information (WCO, 2018). According to the available data, 74% of all cases originated in
the Asia-Pacific region, followed by Western Europe (13%). Unlike the Asia-Pacific region, however, thepredominant recipient of Western European cases was Western Europe itself.

Operations
WCO’s operations primarily entail applying risk analysis techniques and targeting across regions. A
significant number of suspect containers are targeted during the pre-operational phase and aresubsequently inspected during the operational phase (WCO, 2018). In June 2017, the WCO carried out
Operation ACIM 2 (Action against Counterfeit & Illicit Medicines), in co-operation with the International
Institute of Research against Counterfeit Medicines (IRACM). The operation mobilised the resources of 18
customs administrations in Africa that conducted simultaneous inspections of consignments potentiallycontaining certain types of counterfeit and/or illicit pharmaceutical products. The operation took place in
18 ports over an eight-day period and was intended to provide a deeper insight into the flow ofpharmaceutical goods entering the African mainland. Accredited experts in IPR offered training in new andpractical targeting techniques to enhance interdiction capabilities. During the operational phase, authorities
intercepted some 258.9 million units of fake medicines across 840 cases.

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72 
WCO also co-ordinated two operations a number of years ago, targeting counterfeits shipped through thepost and courier services (OECD/EUIPO, 2018b). Operation Global Hoax, which took place in 2010,
resulted in the seizure of tens of thousands of counterfeit products, including pharmaceuticals, atinternational mail facilities and express courier depots. Operation Global Hoax II, which took place from
November 2011 to January 2012, also focused on postal and courier channels. More than 30 000 parcels
were detained and over 150 000 counterfeit items seized, including pharmaceuticals.

World Health Organization
In 2012 the World Health Assembly established a mechanism to provide oversight, strong commitment
and political will from member states and the WHO to tackle issues concerning substandard, spurious,
falsely-labelled, falsified or counterfeit medical products (WHO, 2017b). The mechanism brings together
WHO member states in a voluntary, self-governing body. It was formed to increase member statecollaboration on the prevention and control of the areas covered. Efforts were initially hampered bydiscussions over whether protection of public health should include consideration of intellectual property
rights. This was resolved in 2017 when it was decided that the threat to lives and well-being posed bysubstandard and falsified medical products could be dealt with most effectively by focusing exclusively on
issues of public health concern, and that consideration of IPR was outside the scope. The overall aim of
the initiative is to establish an environment that is effective in preventing, detecting and responding to thethreats posed by substandard and falsified products. In support of this, technical work carried out underthe mechanism aims at:identifying factors that drive the emergence of substandard and falsified medical productsdeveloping recommendations for health authorities to detect and deal with substandard andfalsified medical productsdeveloping a national action plan to prevent, detect and respond to substandard and falsified
medical products

creating a global regulatory focal point network

implementing track and trace systems

understanding authentication technologiesreaching a global common understanding on
unregistered/unlicensed and falsified medical products.

thedefinitionsofsubstandard,This has translated into a programme that focuses on:training and supporting a network of nationally designated focal points within national and regional
regulatory agencies who act as a channel of communication between national and global
authorities around medicine qualitydeveloping tools and systems that countries can adapt to make reporting of suspected products
easier and more efficient

supporting countries in appropriate public-health focused investigation and response to incidents
involving substandard and falsified medical productsdeveloping and maintaining a global database of reports relating to the discovery of substandard
or falsified medicines, for use by regulatory agencies globally

analysing global data to provide evidence-based recommendations for appropriate decisionmaking and effective action.

The system includes a Rapid Alerts mechanism, which provides details of confirmed cases that might posea public-health risk to another country. The alerts are intended to help guide post-market surveillance, andsometimes lead to the detection of more falsified products.

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A blueprint for responding effectively to the challenges posed by substandard and falsified medicines, while
not aimed at IP issues, is nevertheless relevant to those issues as one can presume that a large share ofcounterfeit products are also falsified (Table 8.3). The Guidance was developed at the WHO, for use indeveloping national responses.

Table 8.3. Actions to implement the WHO’s “prevent, detect and respond” approach in tacklingsubstandard and falsified medicines
Prevent
Education andawareness

Comprehensive legal
framework

Multi-stakeholder
engagement

Supply chain integrity

There are focused education, media and awareness programmes, for non-health professionals, thegeneral public and civil society groups on substandard and falsified medical products.
The issue of substandard and falsified medical products is integrated as part of the core medical,
pharmacy and regulatory curriculum.
There are legal provisions in place enabling the national medicines regulatory authority (NMRA) to seize,
quarantine, sample, analyse, recall and destroy substandard and falsified medical products.
There are legal provisions in place for the inspection, investigation, enforcement and proportionate
sanctioning of those engaged in the manufacture, distribution, storage, supply and sale of substandard
and falsified medical products.
There is a documented strategy and guidelines in place and implemented relating to the prevention,
detection and response to substandard and falsified medical products.
There is clear and regular communication with civil society groups, health care professional organizations,the pharmaceutical industry and actors within the supply chain, specifically focusing on substandard andfalsified medical products.
There are documented and implemented procedures for regular engagement with the relevant
government departments and agencies, including national pharmacovigilance centres, national poison
centres and national quality control laboratories
A track and trace system with an authentication process has been implemented for medical products.
The supply chain has been mapped from point of manufacture or importation through to public outlets,
pinch points identified and staff trained to identify, report and respond to suspected substandard andfalsified medical products.

Detection

Border control

Reporting systems

Risk-based
inspection andsurveillance

Access tolaboratories andscreeningtechnologies

There are designated ports for the importation and export of medical products, and a regulatory presenceat those ports.
There are documented and implemented procedures for allowing the exchange of information concerningsuspected substandard and falsified medical products between customs, police and the regulatory
agency.
Effective public reporting systems exist, enabling the reporting of suspected substandard and falsified
medical products and adverse drug reactions to the NMRA.
A risk-based strategy is documented and implemented for conducting regular targeted and randommarket surveillance for substandard and falsified medical products within the regulated and unregulated
supply chains.
There is a documented and implemented risk-based inspection programme for those entities engaged in
the manufacture (including relabelling/repackaging), importation, distribution/wholesale and supply/sale ofmedical products.
There is access to an externally accredited national quality control laboratory and documented procedures
are in place and implemented regarding the analysis and reporting of substandard and falsified medical
products.
There is access to field screening equipment (and relevant reference material), which staff have been
trained to use, and procedures are documented and implemented for the use of such equipment.

Response

Alerts and recalls

Regulatory
strengthening

A documented and implemented procedure exists concerning the issuing, receipt and response to Rapid
Alerts concerning substandard and falsified medical products.
A designated and trained focal point(s) within the NMRA has been established to receive and respond toreports of suspected substandard and falsified medical products and has access to the WHO Global
Surveillance and Monitoring System for substandard and falsified medical products.
Regulatory personnel are designated and trained in the response to substandard and falsified medical
products and documented procedures have been established and implemented.
The prevention, detection and response to substandard and falsified medical products has been
embedded in core regulatory responsibilities across departments and government agencies and is

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74 Transparent legal
process
Evidence-based policy
and procedures

included in regulatory assessment indicators.
The use of regulatory or criminal law sanctions is justified and applied in a consistent and proportionate
way. The application and use of sanctions is published by the national or regional regulatory authority.
Each incident involving substandard and falsified medical products has been reviewed with a view to
identifying weaknesses in the system, vulnerabilities in the supply chain and making appropriate changes
to improve the safety of patients.
There is clear use of data from a wide range of sources in developing evidence-based policy andprocedures to prevent, detect and respond to substandard and falsified medical products.

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

Legislative measures
A number of international instruments have been developed to support efforts to combat counterfeit andsubstandard pharmaceutical products, including the MEDICRIME Convention and the EU’s Falsified
Medicines Directive. Similar efforts have also been pursued at the national level, and by industry groups.

MEDICIRIME Convention
The Council of Europe has developed the MEDICRIME Convention, which provides countries with a model
legal framework for dealing with falsified medicines and other types of pharmaceutical crime that threaten
public health (WHO, 2017b). The aim is, in part, to provide a framework that will allow for more international
co-ordination in the investigation of suspect falsified medicines, and in the prosecution of criminals. Under
the convention, which entered into force in January 2016, intentionally manufacturing, supplying, offering
to supply and trafficking of falsified medicines is considered a criminal act. This treaty calls for multilateralcollaboration across nations, disciplines and sectors, and lays the ground for co-operation with andbetween international bodies such as INTERPOL, Europol, UNODC, the WCO and WHO, in order to put
a stop to this international threat to public health. 7 The convention has been ratified by 15 countries. 8

Supply Chain Security
In the European Union, the Falsified Medicines Directive (FMD) is legislation passed by the Council ofEuropean Union and European Parliament in 2011. It aims at increasing the security of the manufacturing
and delivery of medicines across Europe and to protect patients and prevent falsified medicines fromentering the supply chain.9 The Directive 2011/62/EU came into force in January 2013; delegatedregulation of the directive was implemented in February 2019. The directive requires:10a unique identifier and an anti-tampering device on the outer packaging of
medicines
a common, EU-wide logo to identify legal online pharmacies
tougher rules on the import of active pharmaceutical ingredientsstronger record-keeping requirements for wholesale distributors.

Pharmacies, and others who are authorised to supply medicines to the public, will be required toauthenticate products, which means visually checking the anti-tamper device and performing a verificationand decommissioning scan, "at the time of supplying it to the public". 11
With respect to Internet sales, the FMD obliges Member States to make non-prescription products
available “at a distance” via the Internet (EAASM, 2018). Prescription products are not subject to the samerequirement but may be made available in accordance with Member State legislation. Internet retailers are
obliged to display a logo (mentioned above), often referred to as the Common Logo, in order to market
products online. Government agencies overseeing the market are responsible for the registration processof those entities wanting to sell medicines over the Internet, and also inspections to ensure that such
pharmacists or retailers are operating legally and displaying the logo in accordance with the directive. The
logo is encrypted to enable a visitor to the site to click on the logo which then routes through to a list of

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registered sellers (normally pharmacies). The visitor is therefore able to check the validity of the website.
Under the directive, Member States, in co-operation with the EU Commission, are further obliged to
conduct or promote information campaigns aimed at the general public on the dangers of falsified medicinal
products.
In the United States, the Drug Supply Chain Security Act, passed in 2013, outlines steps to build anelectronic, interoperable system to identify and trace certain prescription drugs that are distributed in the
United States.12 The aim is to enhance the FDA’s ability to help protect consumers from exposure to drugs
that may be counterfeit, stolen, contaminated, or otherwise harmful. The system is also aimed at improving
detection and removal of potentially dangerous drugs from the drug supply chain. The act outlines
requirements for manufacturers, repackagers, wholesale distributors, dispensers, and third-party logistics
providers (trading partners). The requirements, development of standards, and the system for producttracing are to be phased in by November 2023. 13 By that time, manufacturers will be required to encode
their products with a unique identifier at the product unit level, and provide for electronic track and trace ofunits.14 The aim is to have complete unit traceability throughout the supply chain by 2023. 15
In Turkey the pharmaceutical track and trace system (ITS) has been used by the Ministry of Health since
January 2010. Every transaction of pharmaceuticals is registered in the ITS, which ensures traceability of
medicines from manufacturing to the final user.

Online pharmacy authentication
The Royal Pharmaceutical Society of Great Britain (RPSGB) has created an Internet pharmacy logo which
is displayed on the front page of participating online pharmacy sites; individuals are linked to a page on
the RPSGB website where they can make checks to assess authenticity of what claims to be a bona fide
registered online pharmacy (EAASM, 2008). The Verified Internet Pharmacy Practice Sites (VIPPS) sealof approval is an international system, operating in parts of the United States, Canada, South Africa andAustralia, which aims to protect online consumers in a similar way to the RPSGB initiative. The VIPPS logo
links consumers to the National Association of Boards of Pharmacy (NAPB) VIPPS site, where informationis stored which helps identify genuine online pharmacies from rogue traders. PharmacyChecker is a freeto-consumer online service which produces reports on the credentials, prices and customer feedback ofonline pharmacies, focusing mainly on the United States and Canada. It is designed to help users identify
reputable and trustworthy businesses. The site publishes a list containing the web addresses and businessnames of what it considers to be disreputable, dishonest and/or illegal online medicine trade sites.
A similar initiative was developed in the EU, where the common logo was introduced for legally operating
online pharmacies and retailers in EU countries as one of the measures to fight against falsified medicines.
The common logo was first introduced by Falsified Medicines Directive.16 It consists of a national flag inthe middle left side of the logo which corresponds to the EU country where the pharmacy or retailer isregistered or authorised, and it leads to the website of the national competent authority listing all legally
operating online pharmacies and retailers in this country.
As a complementary measure, the National Association of Boards of Pharmacy (a non-profit organisation
comprised of state pharmacy regulators in the US, Canada, and the Bahamas) has acquired the top leveldomain name .pharmacy from ICANN (Internet Corporation for Assigned Names and Numbers).17 The.Pharmacy Verified Websites Program is an international system that verifies websites operating or doing
business in the United States, Canada, South Africa, Spain, the United Kingdom, Australia, Ireland, andother countries, which aims to protect online consumers in a similar way to the RPSGB initiative.
Pharmacies wanting to offer the protection and gain the credibility of using a verified top-level domainname .pharmacy have to pass stringent regulatory criteria. Thus if a visitor searches on the web and finds
a .pharmacy website, they can be assured it is genuine and that it is selling medicines in accordance with
the in-country laws.

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76 

Notes
1

See www.interpol.int/en/Crimes/Illicit-goods/Pharmaceutical-crime-operations.

2

See www.interpol.int/en/News-and-Events/News/2018/Illicit-online-pharmaceuticals-500-tonnesseized-in-global-operation.
3

See www.europol.europa.eu/newsroom/news/millions-of-medicines-seized-in-largest-operationagainst-illicit-online-pharmacies.
4

See www.interpol.int/en/News-and-Events/News/2018/Illicit-online-pharmaceuticals-500-tonnesseized-in-global-operation.
5

6

See www.interpol.int/en/Crimes/Illicit-goods/Pharmaceutical-crime-operations.

See
programmes/ipr.aspx.
7

www.wcoomd.org/en/topics/enforcement-and-compliance/activities-and-See https://rm.coe.int/medicrime-convention-questionsanswers-en-2019/1680925cc2.

8

See/conventions/treaty/211/signatures?p_auth=Ur9r4Oos.

www.coe.int/en/web/conventions/full-list/-

9

See www.abpi.org.uk/what-we-do/working-with-government-and-parliament/falsified-medicinesdirective-fmd/.
10

See https://ec.europa.eu/health/human-use/falsified_medicines_en.

11

See www.abpi.org.uk/what-we-do/working-with-government-and-parliament/falsified-medicinesdirective-fmd/.
12

See www.fda.gov/drugs/drug-supply-chain-integrity/drug-supply-chain-security-act-dscsa.

13

See www.fda.gov/drugs/drug-supply-chain-security-act-dscsa/are-you-ready-drug-supply-chainsecurity-act.
14

See www.pharmacytimes.com/publications/issue/2017/november2017/what-are-the-drug-supplychain-security-acts-key-provisions.
15

See https://adents.com/usa-dscsa-serialization-requirements-deadlines.

16

See Directive 2011/62/EU of the European Parliament and of the Council of 8 June 2011.

17

See https://nabp.pharmacy/programs/dotpharmacy/.

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EAASM (2018), Falsified Medicines and the Common Logo – Raising Public Awareness, European
Alliance for Access to Safe Medicines, Leigh-on-Sea, http://fightthefakes.org/wpcontent/uploads/2018/02/Fighting-Facts-By-Member-States-WEB.pdf.
OECD/EUIPO (2018b), Misuse of Small Parcels for Trade in Counterfeit Goods: Facts and Trends,
OECD Publishing, Paris,
https://doi.org/10.1787/9789264307858-en.
WCO (2018), Illicit Trade Report 2017, World Customs Organization, Brussels, www.wcoomd.org//media/wco/public/global/pdf/topics/enforcement-and-compliance/activities-and-programmes/illicittrade-report/itr_2017_en.pdf?db=web

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78 

9 Concluding remarks
This study has compiled and analysed a unique international set of customs seizure data and otherenforcement data, combined with structured interviews with industry, trade and customs experts, toquantitatively assess the value, scope and trends of the trade in counterfeit pharmaceutical products. It
finds that world trade in counterfeit pharmaceuticals accounted for as much as USD 4.4 billion in 2016,
which represents 0.84% of world trade in pharmaceuticals. Furthermore, the range of affected medicines
is growing.
Counterfeiters target a wide and growing range of pharmaceuticals including antibiotic, lifestyle treatments,
cancer treatments, pain killers and anti-malaria drugs. Counterfeiters also target diabetes treatments, andcentral nervous systems medicines.
India and China are the largest identified producers of counterfeit pharmaceuticals. The products areshipped worldwide, with a special focus on African economies, Europe and the United States. In addition,
Singapore and Hong Kong (China) are among the most important transit points for counterfeit products,
mainly exporting them in small parcels to the United States, Europe, Japan and some South American
economies. Other relevant transit points for fake pharmaceuticals include Yemen, the United ArabEmirates and Iran. From these countries, fake pharmaceuticals are reshipped either to African economies
such as Egypt or to Ethiopia by air and sea, or to Europe and the United States, by mail. As law
enforcement and regulatory pressure has increased within China, key aspects of production may bemoving elsewhere, to selected other South-East Asian economies.
Express courier and postal parcels – driven by the rising popularity of e-commerce – are the most popular
ways of shipping counterfeit medicines, significantly complicating the screening and detection processes
and lowering the risk of detection and penalties.
Companies registered in the United States are hit the hardest by this trade in counterfeits, but those inother OECD countries are also strongly affected (notably Switzerland, Germany and France). Almost 38%
of all seized counterfeit medicines infringe the intellectual property (IP) rights of firms registered in the
United States.
Counterfeit medicines have a wide range of negative consequences. Legitimate producers lose sales tocounterfeiters, while governments lose taxes and face long term issues related to managing health care incountries. Importantly, there are of course effects on the individuals who are very often unaware of theissue, and who fall victim to low quality counterfeit products that do not treat their medical needs, and which
can adversely affect their health.
Producers and governments have been active in combatting counterfeiting as it threatens theirconsiderable investment in developing new products, while introducing uncertainty about the effectivenessand value of their products. Producers, for example, have been developing techniques to improve thetracking and tracing of their products, to make it more difficult for counterfeiters to penetrate markets, andthey have worked closely with governments to support efforts to disrupt illicit trade in their products.

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 79

Next steps
This quantitative assessment of trade in counterfeit medicines provides a foundation on which to formulate
policy responses. It also feeds into existing discussions on policies and governance frameworks to counterillicit trade. Issues identified include the lack of deterrent penalties, the emergence and role of e-commerce,
and frameworks and factors related to misuse of small parcels in trade in counterfeit medicines.
The unique dataset of trade in counterfeit medicines developed for this study could also be used in a setof follow-up exercises, such as a more detailed mapping of the trade routes of fake drugs, and the analysisof the impact on governments, industry and consumers. This would provide additional information on theactual harm caused by counterfeiting and could guide the development and strengthening of risk-based
enforcement practice.

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80 Annex A. Data and methodology

The data
The main producing economies of fake pharmaceuticals and the key transit points are determined using
statistical “filters” (see below). This is done based on three sources of information:
data on seizures of counterfeit pharmaceuticals.

international trade statistics on the pharmaceutical sector, and

industrial activity data for the pharmaceutical sector.

An important data limitation should be highlighted in this context. While the quality of data on customs
seizures of infringing pharmaceutical products received from member countries of the EU and from the US
is very high, the data from South American, African, Middle Eastern and Asian customs authorities are of
insufficient quality. Hence the mapping exercise for the EU and the US as destinations is relatively precise,but a precise charting of trade routes and the modes of transport for the other regions is not possible. For
transparency purposes, all data gaps were highlighted throughout the analysis.
In addition, the datasets identify a set of EU member countries as provenances. However, theseidentifications are based on data from the European Commission’s Directorate-General for Taxation andCustoms Union (DG TAXUD), and refer to goods coming from outside the EU that were seized in a different
member state to the country where it entered the EU. This is because DG TAXUD data refer only to imports
to the EU from third countries, and do not include internal EU trade.

Data on seizures of counterfeit goods
The database on customs seizures is the critical quantitative input to this study. It was constructed fromthree separate datasets received from the WCO, from DG TAXUD of the European Commission, and fromthe US Department of Homeland Security. The database includes detailed information on seizures of IPRinfringing goods made by customs officers in 99 economies around the world between 2014 and 2016. For
each year, there are more than 100 000 observations in the database; in most cases one observation
corresponds to one customs seizure.
The database contains a wealth of information about IPR-infringing goods that can be used for quantitativeand qualitative analysis. In most cases the database reports for each seizure: date of seizure, mode oftransport of fake products, departure and destination economies, general statistical category of seized
goods as well as their detailed description, name of legitimate brand owner, number of seized products
and their approximate value.
Concerning valuation of seized goods, there are two principles for reporting the value of counterfeit goods:
1) declared value (value indicated on customs declarations), which corresponds to values reported in thegeneral trade statistics; and 2) replacement value (price of original goods). The structured interviews withcustoms officials and the descriptive analysis of values of selected products conducted in OECD/EUIPO(2016) revealed that the declared values are reported in most cases.

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 81International trade statistics
The trade statistics are based on the United Nations (UN) Comtrade database (landed customs value).
With 171 reporting economies and 247 partner economies (76 economies in addition to reporting
economies), the database covers the largest part of world trade and is considered the most comprehensive
trade database available. Products are registered on a six-digit Harmonized System (HS) basis (see WCO,
2019), and can then be aggregated.
This study uses two different types of trade statistics provided by the UN Comtrade database. First, thecalculations of the General Trade Related Indices (GTRIC) are based on import data. Second, theidentification of potential transit points is based on re-export data. Re-exports are exports of foreign goodsin the same state as previously imported, i.e., that have not acquired domestic origin through processing.
In most economies, import statistics are compiled from the records filed with local customs authorities. Thisis particularly important in the context of this report as data on customs seizures of infringing products
originate from the same source – customs offices at the destination. This reinforces the choice for importstatistics as the reference point for the calculation of the GTRIC indices, as both imports data and seizure
data refer to the same observed incoming trade flows.

Industrial activity data
The identification of potential producer points of fake pharmaceutical goods and medicines is based ondata on industrial activity provided by the UNIDO Industrial Statistics Database (UNIDO, 2019). This study
takes advantage of the cross-country comparability of the data on industrial output and value-added
included in the UNIDO’s Industrial Statistics Activity database (UNIDO, 2019) to distinguish a producing
economy from a potential transit point for the pharmaceutical sector. The database contains sevenprincipal indicators of industrial statistics (number of establishments, number of employees, wages andsalaries, output, value added, gross fixed capital formation, and number of female employees) at the 4digit level of the International Standard Industrial Classification of All Economic Activities (ISIC).
The main producing economies and key transit points for counterfeit pharmaceuticals were identified
following several steps:
1. Economies were ranked according to their propensity to be an economy of provenance forcounterfeit pharmaceuticals. The resulting index is called GTRIC-e. These indices are calculated
in Chapter 4, and economies more likely to export counterfeit pharmaceuticals are presented inTable 4.1.
2. An indicator of the relative comparative advantage for producing pharmaceuticals was calculated
for each economy (RCAP-e) based on UNIDO (2019) data. This is the first “filter” to be used in theanalysis. The methodology is described in the next subsection of this annex.
3. For each economy an indicator of the relative comparative advantage for being a transit point inglobal trade in pharmaceuticals was calculated (RCAT-e) based on re-export data (UN Trade
Statistics Division, 2019). This is the second “filter” to be used in the analysis. The methodology is
described in the next subsection of this annex.
4. Both filters (RCAP-e and RCAT-e indicators) were applied for every economy with a high GTRICe score. This indicates whether the given economy is a producing one, or a potential transit point
for fake pharmaceuticals.
5. Some additional descriptive statistical analysis checked the modes of transport and the size of
shipments on the selected trade routes.
It should be highlighted that the framework presented below relies on a set of methodological assumptions.
For transparency purposes all are spelt out in the text.

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82 Construction of GTRIC-e for pharmaceuticals
The first step was to rank all the known provenance economies by their relative intensity of exporting fakepharmaceuticals. This distinguished the key provenances in trade with fake pharmaceuticals. Each ofthese key points then was investigated further to determine its exact role in trade in fake pharmaceuticalproducts and medicines.
The most intense provenance economies were identified using an index that ranked them according totheir relative propensity to be an economy of provenance for counterfeit pharmaceuticals (GTRIC-e). The
index is based on the data on global customs seizures and data on imports (OECD/EUIPO, 2019). It takes
into account: 1) the absolute value of exports of fake pharmaceuticals from a given economy (in USD);
and 2) the share of fakes in total exports of fake pharmaceuticals from a given economy.
The construction of GTRIC-e directly relied on the methodology introduced in the OECD/EUIPO (2019)study. A detailed description of the methodology used to calculate the GTRIC-e is provided below.
Importantly, two assumptions are made to calculate the GTRIC vectors. The first is that the volume ofseizures of a given product or from a given source economy is positively correlated with the actual intensityof trade in counterfeit goods in that product category or from that economy. The second assumption
acknowledges that this relationship is not linear, as there might be some biases in the detection and seizure
procedures. For instance, the fact that infringing goods are detected more frequently in certain categories
could imply that differences in counterfeiting factors across products merely reflect that some goods areeasier to detect than others, or that some goods, for one reason or another, have been specially targeted
for inspection.
GTRIC-e was constructed in four steps:
1. For each reporting economy, the seizure percentages for provenance economies were calculated.
2. For each provenance economy, aggregate seizure percentages were formed, taking the reporting
economies’ share of sensitive imports as weights.
3. From these, each economy’s counterfeit source factor was established, based on the provenanceeconomies’ weight in terms of global trade.
4. Based on these factors, the GTRIC-e was formed.

Step 1: Measuring reporter-specific seizure intensities from each provenance economy

vepi is economy i’s registered seizures of all types of infringing goods included in a given product categoryp that originate from economy e at a given year in terms of value.

 epi is economy i’s relative seizure intensity (seizure percentage) of all infringing items within the productcategory that originate from economy e, in a given year:

 epi 

vepi

v
e

, such that e  epi  1 i
epi

Step 2: Measuring general seizure intensities of each provenance economy
The general seizure intensity for economy e within the product category p, denotedep , is thendetermined by averaging seizure intensities,  epi , weighted by the reporting economy’s share of world
imports from known counterfeit and pirate origins.1 Hence:

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 83

ep  i  pi  epi
where the weight of reporting economy i is given by pi 

mepi

m
i

epi

with mepi is economy i’s imports of goods in a given product category p from economy e at a given year
in terms of value, so that   1 pipi

Step 3: Measuring partner-specific counterfeiting factors
m ep  imepi is defined as the total registered world imports of all sensitive goods in the product category
p from provenance economy e.

m p  e mep is defined as the total registered world imports of all sensitive goods in the product category
p from all provenance economies.

The share of provenance economy e in world imports of all sensitive goods in the product category p,
denoted s ep , is then given by:s ep 

mep
mp, such that e s ep  1 , p

From this, the economy-specific counterfeiting factor is established by dividing the general seizure intensity
for economy e with the share of world imports from e within the product category p:

Step 4: Establishing GTRIC-e
Gauging the magnitude of counterfeiting and piracy from a provenance economy perspective can be donein a similar fashion as for sensitive goods. Hence, a general trade-related index of counterfeiting for
economies (GTRIC-e) is established along similar lines and assumptions:

The first assumption (A3) is that the intensity by which any counterfeit or pirated article from aparticular economy is detected and seized by customs is positively correlated with the actual
amount of counterfeit and pirate articles imported from that location.



The second assumption (A4) acknowledges that assumption A3 may not be entirely correct. For
instance, a high seizure intensity of counterfeit or pirated articles from a particular provenanceeconomy could be an indication that the provenance economy is part of a customs profilingscheme, or that it is specially targeted for investigation by customs. The importance thatprovenance economies with low seizure intensities play regarding actual counterfeiting and piracy
activity could therefore be under-represented by the index and lead to an underestimation of thescale of counterfeiting and piracy.

As with the product-specific index, GTRIC-e is established by applying a positive monotonic
transformation of the counterfeiting factor index for provenance economies using natural logarithms. This
follows from assumption A3 (positive correlation between seizure intensities and actual infringement
activities) and assumption A4 (lower intensities tend to underestimate actual activities). Considering the
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84 
possibilities of outliers at both ends of the GTRIC-e distribution – i.e. some economies may be wrongly
measured as being particularly susceptible sources of counterfeit and pirated imports, and vice versa –GTRIC-e is approximated by a left-truncated normal distribution as it does not take values below zero.
The transformed general counterfeiting factor across provenance economies on which GTRIC-e is basedis therefore given by applying logarithms onto economy-specific general counterfeit factors (see, forexample, Verbeek, 2000):cf ep  ln(CFep  1)
In addition, it is assumed that GTRIC-e follows a truncated normal distribution with cf ep  0 . Following
Hald (1952), the density function of the left-truncated normal distribution for cf ep is given by

0



g LTN (cf ep )   g (cf ep )  g (cf ep )cf ep
 0

if cf ep  0

if cf ep  0

Where g (cf ep ) is the non-truncated normal distribution for cf ep specified as: 1  cf    2 
ep
cf
 
g (cf ep ) exp   
22   cf2 cf 
1

The mean and variance of the normal distribution, here denoted  cf and  cf , are estimated over the
2



2

transformed counterfeiting factor index, cf ep , and given by  cf and  cf .
This enables the calculation of the counterfeit import propensity index within each product category p(GTRIC-e) across provenance economies, corresponding to the cumulative distribution function of cf ep .

Methodology to identify producers from transit points of counterfeit
pharmaceuticals
Construction of RCAP-e and RCAT-e
Relative comparative advantage for production of a given good (RCAP-e)
The first statistical filter that can be used to tell producers from transit points looks at the production
capacities of a given economy in the pharmaceutical sector. The rationale behind this test is simple:
production activity often relies on certain skills, or resources. It also exhibits certain returns to scale
properties that results in specialisation of this particular economy in the production of pharmaceuticals.
Hence, production of counterfeit medicines and pharmaceutical goods is more likely to occur in a known
provenance economy that specialises in the legitimate production of pharmaceuticals, than in a country
without production capacity in the pharmaceutical sector.

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 85This specialisation of a given trading economy in production of pharmaceuticals is captured by an indicatorof the relative comparative advantage for production (RCAP-e). The indicator looks at the share ofindustrial activity in the pharmaceutical sector with the total industrial activity in a given economy.
Construction of this indicator is based on industry statistics. Importantly, these statistics are based on adifferent taxonomy than the trade statistics, hence a matching exercise was performed (see Box 5). A
detailed description of the methodology used to calculate the RCAP-e is provided below.
Formally, the revealed comparative advantage in production for an economy e in the pharmaceutical sector(RCAP) measures whether this economy produces more pharmaceuticals as a share of its total production
than the “average” country:

RCAPep y ep  p y ep

y  y
e

ep

e

p

ep

where y ep is the output of product p by economy e in a given year.
Relative comparative advantage for being a transit point (RCAT-e)
The relative comparative advantage for being a transit point in global trade (RCAT-e) is the second filter
used to determine the actual role of a provenance economy. This indicator represents the degree to whicha given economy specialises in re-exporting pharmaceuticals, e.g. through development of advanced
logistical infrastructure, or by its convenient geographical location. Consequently, it is assumed that suchfactors that facilitate transiting of genuine pharmaceutical products and medicines will also facilitate transit
of fake pharmaceuticals.
The RCAT-e indicator is calculated by comparing relative volumes of re-export of pharmaceuticals to theshares calculated for other exporting economies. This is done based on re-export data that come from the
UN Comtrade database (UN Trade Statistics Division, 2019).
Formally, the revealed comparative advantage in transit for an economy e within the pharmaceutical sector(RCAP-e) measures whether this economy re-exports pharmaceuticals as a share of its total
manufacturing re-exports than the “average” country:

RCATep 

xep  p xep

x  x
e

ep

e

p

ep

where x ep is re-exports of product p by economy e in a given year.
Application of both filters
A complete list of RCAP-e and RCAT-e indices by economy can be found in Annex B.
Once the statistical filters (RCAP-e and RCAT-e indicators) are constructed, they are applied to distinguishthe producing economies from the key potential transit points. Both filters are applied for every economy
on the top provenance list for counterfeit pharmaceuticals, i.e. economies with a high GTRIC-e score (seeTable 4.1 and Table 4.2).
The rationale for using the filters is as follows: if an economy is not a significant producer of fakepharmaceuticals (i.e. its RCAP is low) and/or is a large re-exporter of this good in legitimate trade ofpharmaceuticals (i.e its RCAT is high), then it is likely to be a transit point.

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86 On the other hand, if this top listed provenance economy of counterfeit pharmaceutical products andmedicines is a significant producer (i.e. has a high RCAP score) or is a small re-exporter (i.e. has a low
RCAT score), it is likely to be a producer of fake pharmaceuticals.
This exercise results in a list of producers and a list of transit points. Together with the information on theplace of seizure, this will allow the development of maps of trade in fake pharmaceuticals, showing key
producers, main transit point and main destination points.

Notes
This is different to the economy’s share of total imports of sensitive goods used to calculate
GTRIC-p.
1

References
OECD/EUIPO (2016), Trade in Counterfeit and Pirated Goods: Mapping the Economic Impact, OECD
Publishing, Paris,
http://dx.doi.org/10.1787/9789264252653-en.

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 87Annex B. Additional Tables

Table B.1. Description of the HS 30 product category, pharmaceutical products
3001 Glands and other organs (extracts, secretions thereof) for
organo-therapeutic uses, dried, powdered or not; heparin and its
salts; other human or animal substances for therapeutic orprophylactic uses n.e.c.

3002 Human blood; animal blood for therapeutic, prophylactic or
diagnostic uses; antisera, other blood fractions, immunologicalproducts, modified or obtained by biotechnological processes;
vaccines, toxins, cultures of micro-organisms (excluding yeasts) etc

3003 Medicaments; (not goods of heading no. 3002, 3005 or 3006)
of two or more constituents mixed together for therapeutic orprophylactic use not in measured doses or in forms or packings forretail sale

300120 Glands and other organs; extracts ofglands or other organs or of their secretions, fororgano-therapeutic uses
300190 Glands and other organs; heparin and its
salts; other human or animal substances prepared fortherapeutic or prophylactic uses, n.e.c. in heading
3001
300211 Blood, human or animal, antisera, other blood
fractions and immunological products; malaria
diagnostic test kits
300212 Blood, human or animal, antisera, other blood
fractions and immunological products; antisera andother blood fractions
300213 Blood, human or animal, antisera, other blood
fractions and immunological products; immunologicalproducts, unmixed, not put up in measured doses orin forms or packings for retail sale
300214 Blood, human or animal, antisera, other blood
fractions and immunological products; immunologicalproducts, mixed, put up in measured doses or in forms
or packings for retail sale
300215 Blood, human or animal, antisera, other blood
fractions and immunological products; immunologicalproducts, put up in measured doses or in forms or
packings for retail sale
300219 Blood, human or animal, antisera, other blood
fractions and immunological products; n.e.c. inheading 3002.1
300220 Vaccines; for human medicine
300230 Vaccines; for veterinary medicine
300290 Toxins, cultures of micro-organisms(excluding yeasts) and similar products
300310 Medicaments; containing penicillins,
streptomycins or their derivatives, for therapeutic orprophylactic uses, (not in measured doses, notpackaged for retail sale)300320 Medicaments; containing antibiotics otherthan penicillins, streptomycins and their derivatives,
for therapeutic or prophylactic uses, (not in measured
doses, not packaged for retail sale)300331 Medicaments; containing insulin, fortherapeutic or prophylactic uses, not packaged forretail sale300339 Medicaments; containing hormones(excluding insulin), (but not containing antibiotics), fortherapeutic or prophylactic uses, not packaged forretail sale300341 Medicaments; containing alkaloids or theirderivatives, containing ephedrine or its salts, fortherapeutic or prophylactic uses, (not packaged forretail sale)

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88 
Table B.1. Description of the HS 30 product category, pharmaceutical products
300342 Medicaments; containing alkaloids or theirderivatives, containing pseudoephedrine (INN) or its
salts, for therapeutic or prophylactic uses, (notpackaged for retail sale)3003 Medicaments; (not goods of heading no. 3002, 3005 or
3006) of two or more constituents mixed together fortherapeutic or prophylactic use not in measured doses or informs or packings for retail sale3004 Medicaments; (not goods of heading no. 3002, 3005 or
3006) consisting of mixed or unmixed products for therapeutic orprophylactic use, put up in measured doses (incl. those in theform of transdermal admin. systems) or packed for retail sale300343 Medicaments; containing alkaloids or theirderivatives, containing norephedrine or its salts, fortherapeutic or prophylactic uses, (not packaged for retailsale)
300349 Medicaments; containing alkaloids or theirderivatives; other than ephedrine, pseudoephedrine (INN)
or norephedrine or their salts; for therapeutic orprophylactic uses, (not packaged for retail sale)300360 Medicaments; containing antimalarial active
principles described in subheading note 2 to this chapter,for therapeutic or prophylactic uses, (not packaged forretail sale)300390 Medicaments; (not containing antibiotics,
hormones, alkaloids or their derivatives), for therapeutic orprophylactic uses, (not packaged for retail sale)
300410
Medicaments;
containing
penicillins,
streptomycins or their derivatives, for therapeutic orprophylactic uses, packaged for retail sale300420 Medicaments; containing antibiotics (other thanpenicillins, streptomycins or their derivatives), fortherapeutic or prophylactic uses, packaged for retail sale300431 Medicaments; containing insulin, for therapeuticor prophylactic uses, packaged for retail sale300432 Medicaments; containing corticosteroid
hormones, their derivatives or structural analogues (butnot containing antibiotics), for therapeutic or prophylactic
uses, packaged for retail sale300439 Medicaments; containing hormones (but not
insulin), adrenal cortex hormones or antibiotics, fortherapeutic or prophylactic uses, packaged for retail sale300441 Medicaments; containing alkaloids or theirderivatives, containing ephedrine or its salts, fortherapeutic or prophylactic uses, packaged for retail sale300442 Medicaments; containing alkaloids or theirderivatives, containing pseudoephedrine (INN) or its salts,
for therapeutic or prophylactic uses, packaged for retailsale
300443 Medicaments; containing alkaloids or theirderivatives, containing norephedrine or its salts, fortherapeutic or prophylactic uses, packaged for retail sale300449 Medicaments; containing alkaloids or theirderivatives; other than ephedrine, pseudoephedrine (INN)
or norephedrine or their salts; for therapeutic orprophylactic uses, packaged for retail sale300450 Medicaments; containing vitamins or theirderivatives, for therapeutic or prophylactic use, packaged
for retail sale300460 Medicaments; containing antimalarial active
principles described in Subheading Note 2 to this Chapter,for therapeutic or prophylactic uses, packaged for retailsale300490 Medicaments; consisting of mixed or unmixed
products n.e.c. in heading no. 3004, for therapeutic orprophylactic uses, packaged for retail sale

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 89
Table B.1 Description of the HS 30 product category, pharmaceutical products
300610 Pharmaceutical goods; sterile surgical catgut, suture materials, tissue adhesives,
laminaria, laminaria tents, absorbable surgical or dental haemostatics, and surgical or dental
adhesion barriers

3006
Pharmaceutical
goods

300620 Pharmaceutical goods; blood-grouping reagents
300630 Pharmaceutical goods; opacifying preparations for x-ray examinations, diagnostic reagents
designed to be administered to the patient
300640 Pharmaceutical goods; dental cements and other dental fillings, bone reconstruction cements
300650 Pharmaceutical goods; first aid boxes and kits
300660 Pharmaceutical goods; chemical contraceptive preparations based on hormones, on otherproducts of heading 2937 or on spermicides
300670 Pharmaceutical goods; Gel preparations designed to be used in human or veterinary medicine
as a lubricant for parts of the body for surgical operations or physical examinations or as a coupling
agent between the body and medical instruments
300691 Pharmaceutical goods; appliances identifiable for ostomy use
300692 Pharmaceutical goods; waste pharmaceuticals

Source: WCO (2019)

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90 

Table B.2. RCAP indices for counterfeit pharmaceuticals, 2014-2016
Provenance economy

RCAP

Algeria
Armenia
Australia
Austria
Azerbaijan
BelarusBelgium
Bosnia and Herzegovina
BrazilCanadaChile
China
Chinese Taipei*
Colombia
Costa Rica
Croatia
Cyprus*Czech Republic
Denmark
Ecuador
Egypt
Estonia
FinlandFormer Yugoslav Republic of Macedonia
FranceGeorgia
Germany
GreeceHong Kong (China)
Hungary
India
Indonesia
Iraq
IrelandIsrael
Italy

0.538
0.324
1.119
1.029
0.015
0.390
2.862
0.583
0.825
0.740
1.157
1.103
0.268
1.091
0.636
2.115
3.455
0.395
5.639
0.550
1.584
0.168
0.749
1.205
1.842
0.964
1.124
0.891
3.683
1.434
1.641
0.361
0.025
17.1173.155
1.286

Provenance economy
Japan
JordanKazakhstan
Kenya
Korea
Kyrgyzstan
Lithuania
Malaysia
MexicoMoldova
Mongolia
Montenegro
Netherlands
New Zealand
Oman
PanamaPeru
Philippines
PolandPortugal
Qatar
Romania
Saudi Arabia
SerbiaSingapore
Slovak Republic
Slovenia
Spain
Sri Lanka
Switzerland
Tanzania
TurkeyUkraineUnited Arab Emirates
United Kingdom
United States

RCAP
1.192
3.179
0.654
0.495
0.466
0.056
0.372
0.168
0.795
0.648
0.712
0.684
0.668
0.356
0.050
0.470
0.505
0.603
0.591
0.582
0.011
0.543
0.227
0.795
2.524
0.137
3.750
1.358
0.099
10.338
0.267
0.466
0.757
0.444
1.168
1.551

Note: A high RCAP index indicates that the share of the pharmaceutical sector in the total output of the corresponding economy is higher than
the average share of this economy in the global manufacturing output. 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 andequitable 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.
Source: Authors’ own calculation based on data from UNIDO (2019).

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020 91

Table B.3. RCAT indices for pharmaceuticals, 2016
Provenance economy
Albania
Algeria
AndorraAntigua and Barbuda
Argentina
Armenia
Aruba
Australia
Austria
Azerbaijan
BahamasBahrainBarbados
BelarusBelgium
BelizeBenin
BermudaBolivia
Bosnia and Herzegovina
Botswana
BrazilBrunei Darussalam
Bulgaria
Burkina Faso
BurundiCabo VerdeCambodia
Cameroon
CanadaChile
China (People's Republic of)Colombia
Costa Rica
Côte d'Ivoire
Croatia
Cyprus*Czech Republic
Denmark
Dominican Republic
EcuadorEgypt
El Salvador
Estonia
Ethiopia
Fiji
Finland

RCAT
0.039
0.001
0.019
0.153
0.445
0.233
0.317
0.379
1.957
0.020
0.008
0.002
3.555
0.161
3.776
0.028
0.053
0.000
0.009
0.426
0.036
0.249
0.003
1.246
0.016
0.002
0.010
0.014
0.008
0.532
0.098
0.101
0.342
0.736
0.015
1.354
3.416
0.541
3.931
0.994
0.062
0.470
0.750
0.176
0.006
0.226
0.558

Provenance economy
Former Yugoslav Republic of Macedonia
FranceFrench Polynesia
Georgia
Germany
GreeceGreenland
GuatemalaGuineaGuyanaHondurasHong Kong (China)
Hungary
Iceland
India
Indonesia
Iran
IrelandIsraelItaly
JamaicaJapan
JordanKazakhstan
Kiribati
Korea
KuwaitKyrgyzstan
Lao People's Democratic Republic
LatviaLebanonLesotho
Lithuania
Luxembourg
Macau (China)
Madagascar
MalawiMalaysia
Malta
Mauritius
MexicoMoldova
Mongolia
Montenegro
Montserrat
MoroccoMozambique

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020

RCAT
0.588
2.219
0.047
1.309
1.903
1.381
0.000
0.865
0.002
0.108
0.070
1.235
1.586
0.579
1.314
0.105
0.063
7.904
3.222
1.707
0.091
0.151
2.808
0.010
0.036
0.092
0.009
0.032
0.000
1.057
0.413
0.010
0.758
0.296
0.009
0.001
0.021
0.035
2.378
0.440
0.166
1.914
0.000
0.600
0.119
0.158
0.005

92 
Table B.3. RCAT indices for pharmaceuticals, 2016 (continued)
Provenance economy

RCAT

MyanmarNamibia
Nepal
Netherlands
New Caledonia
New Zealand
Nicaragua
Niger
Nigeria
NorwayOman
Pakistan
Palau
Palestinian Authority*
PanamaParaguay
Peru
Philippines
PolandPortugal
Qatar
Romania
RussiaRwandaSaint Kitts and Nevis
Saint Lucia
Saint Vincent and the Grenadines
Samoa
Sao Tome and Principe
Saudi Arabia
Senegal

0.000
0.006
0.373
1.612
0.034
0.207
0.036
0.006
0.003
0.224
0.039
0.287
0.012
0.375
4.673
0.183
0.048
0.034
0.599
0.612
0.005
0.582
0.044
0.007
0.003
0.115
0.000
0.003
0.001
0.044
0.179

Provenance economy
SerbiaSeychelles
Sierra Leone
Singapore
Slovak Republic
Slovenia
Solomon Islands
South Africa
Spain
Sri Lanka
Suriname
Swaziland
SwedenSwitzerland
Tanzania
Thailand
Togo
Tonga
Trinidad and Tobago
Tunisia
TurkeyUgandaUkraineUnited Arab Emirates
United Kingdom
United States
Uruguay
Viet Nam
Yemen
ZambiaZimbabwe

RCAT
0.587
0.040
0.000
0.623
0.234
3.652
0.000
0.166
1.424
0.023
0.012
0.004
1.650
7.196
0.012
0.068
0.118
0.011
0.005
0.103
0.183
0.154
0.170
0.086
2.349
0.972
0.557
0.025
0.058
0.002
0.027

Note: A high RCAT index indicates than the share of the corresponding economy in global reexports of pharmaceutical products is higher than
the average share of this economy in global manufacturing reexports. 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 andequitable 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.
Source: Authors’ own calculations based on UN Trade Statistics Division (2019).

TRADE IN COUNTERFEIT PHARMACEUTICAL PRODUCTS © OECD/EUIPO 2020

Trade in Counterfeit Pharmaceutical Products

Illicit Trade

Illicit Trade

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
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 publichealth, since fake medicines are often not properly formulated and may contain dangerous ingredients. Fakepharmaceuticals include antibiotics, lifestyle treatments, pain killers, anti‑malarial drugs, diabetes treatments
and central nervous system medicines.

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+

Trade in Counterfeit
Pharmaceutical Products

Trade in Counterfeit Pharmaceutical Products

Consult this publication on line at https://doi.org/10.1787/a7c7e054-en.

Illicit Trade