19–006 

112TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 112–537 

COUNTERFEIT DRUG PENALTY ENHANCEMENT ACT 

OF 2012 

JUNE 18, 2012.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. SMITH of Texas, from the Committee on the Judiciary, 

submitted the following 

R E P O R T 

[To accompany H.R. 3668] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on the Judiciary, to whom was referred the bill 

(H.R. 3668) to prevent trafficking in counterfeit drugs, having considered the same, report favorably thereon with an amendment and 

recommend that the bill as amended do pass. 

CONTENTS 

Page 

The Amendment ...................................................................................................... 1 

Purpose and Summary ............................................................................................ 2 

Background and Need for the Legislation ............................................................. 2 

Hearings ................................................................................................................... 3 

Committee Consideration ........................................................................................ 3 

Committee Votes ...................................................................................................... 3 

Committee Oversight Findings ............................................................................... 3 

New Budget Authority and Tax Expenditures ...................................................... 3 

Congressional Budget Office Cost Estimate .......................................................... 3 

Performance Goals and Objectives ......................................................................... 4 

Advisory on Earmarks ............................................................................................. 4 

Section-by-Section Analysis .................................................................................... 5 

Changes in Existing Law Made by the Bill, as Reported ..................................... 5 

The Amendment 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Counterfeit Drug Penalty Enhancement Act of 

2012’’. 

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SEC. 2. COUNTERFEIT DRUG PENALTY ENHANCEMENT. 

(a) OFFENSE.—Section 2320(a) of title 18, United States Code, is amended— 

(1) by striking ‘‘or’’ at the end of paragraph (2); 

(2) by inserting ‘‘or’’ at the end of paragraph (3); 

(3) by inserting after paragraph (3) the following: 

‘‘(4) imports, exports, or traffics in a counterfeit drug,’’; and 

(4) by striking ‘‘through (3)’’ and inserting ‘‘through (4)’’. 

(b) PENALTIES.—Section 2320(b)(3) of title 18, United States Code, is amended— 

(1) in the heading, by inserting ‘‘AND COUNTERFEIT DRUGS’’ after ‘‘SERVICES’’; 

and 

(2) by inserting ‘‘or counterfeit drug’’ after ‘‘service’’. 

(c) DEFINITION.—Section 2320(f) of title 18, United States Code, is amended— 

(1) by striking ‘‘and’’ at the end of paragraph (4); 

(2) by striking the period at the end of paragraph (5) and inserting ‘‘; and’’; 

and 

(3) by adding at the end the following: 

‘‘(6) the term ‘counterfeit drug’ has the meaning given that term in section 

201 of the Federal Food, Drug, and Cosmetic Act.’’. 

(d) PRIORITY GIVEN TO CERTAIN INVESTIGATIONS AND PROSECUTIONS.—The Attorney General shall give increased priority to efforts to investigate and prosecute offenses under section 2320 of title 18, United States Code, that involve counterfeit 

drugs. 

Purpose and Summary 

H.R. 3668 makes certain enhancements to current Federal law, 

which criminalizes trafficking in counterfeit goods or services and 

use of a counterfeit mark on or in connection with such goods or 

services. This legislation expressly identifies the offense of trafficking counterfeit drugs and increases the penalties for persons 

who traffic in counterfeit drugs. This bill requires the Attorney 

General to give increased priority to efforts to investigate and prosecute counterfeit drug cases. 

Background and Need for the Legislation 

Current law prohibits trafficking in counterfeit goods. Section 

2320 of title 18, United States Code, is primarily concerned with 

goods that are trafficked using counterfeit marks or labeling. However, counterfeit drugs are more serious. Counterfeit drugs present 

a real health risk to consumers and are not limited to a financial 

loss to the manufacturer or mark holder. While current law technically includes counterfeit drugs, the law does not expressly prohibit trafficking in counterfeit drugs and carries a maximum penalty of only 10 years. 

In February 2012, drug manufacturer Roche announced that a 

counterfeit form of the cancer drug Avastin had been imported and 

distributed to doctors in the U.S. The counterfeit versions of the 

drug contained a variety of chemicals, ranging from starch and salt 

to solvent chemicals like acetone, but not the active ingredient 

found in the genuine drug. Law enforcement authorities in the 

United States and several foreign countries attempted to locate the 

source of the counterfeit drugs with limited success. It is unknown 

how many patients in the U.S. may have received useless cancer 

treatments when they were administered these counterfeit drugs. 

Even with a 10 year maximum penalty, the actual sentences imposed under the existing counterfeit goods statute are dramatically 

lower. According to the U.S. Sentencing Commission, between FY 

2006 and FY 2010, there were 385 Federal prosecutions for counterfeit goods (18 U.S.C. § 2320). The median sentence was 17 

months; the mean sentence was only 10 months. 

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Hearings 

The Committee on the Judiciary held a hearing on H.R. 3668 on 

March 28, 2012. 

Committee Consideration 

On June 6, 2012, the Committee met in open session and ordered 

the bill H.R. 3668 favorably reported with an amendment, by voice 

vote, a quorum being present. 

Committee Votes 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that there were 

no recorded votes during the Committee’s consideration of H.R. 

3668. 

Committee Oversight Findings 

In compliance with clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the findings 

and recommendations of the Committee, based on oversight activities under clause 2(b)(1) of rule X of the Rules of the House of Representatives, are incorporated in the descriptive portions of this report. 

New Budget Authority and Tax Expenditures 

Clause 3(c)(2) of rule XIII of the Rules of the House of Representatives is inapplicable because this legislation does not provide new 

budgetary authority or increased tax expenditures. 

Congressional Budget Office Cost Estimate 

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, the Committee sets forth, with respect to 

the bill, H.R. 3668, the following estimate and comparison prepared 

by the Director of the Congressional Budget Office under section 

402 of the Congressional Budget Act of 1974: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, Washington, DC, June 14, 2012. 

Hon. LAMAR SMITH, CHAIRMAN, 

Committee on the Judiciary, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 3668, the ‘‘Counterfeit 

Drug Penalty Enhancement Act of 2012.’’ 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Mark Grabowicz, who 

can be reached at 226–2860. 

Sincerely, 

DOUGLAS W. ELMENDORF, 

DIRECTOR. 

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Enclosure 

cc: Honorable John Conyers, Jr. 

Ranking Member 

H.R. 3668—Counterfeit Drug Penalty Enhancement Act 

of 2012. 

As ordered reported by the House Committee on the Judiciary 

on June 14, 2012. 

CBO estimates that implementing H.R. 3668 would have no significant costs to the Federal Government. Enacting the bill could 

affect direct spending and revenues; therefore, pay-as-you-go procedures apply. However, CBO estimates that any effects would be insignificant for each year. 

H.R. 3668 would establish a new Federal crime for trafficking in 

counterfeit drugs. As a result, the government might be able to 

pursue cases that it otherwise would not be able to prosecute. CBO 

expects that H.R. 3668 would apply to a relatively small number 

of additional offenders, however, so any increase in costs for law 

enforcement, court proceedings, or prison operations would not be 

significant. Any such costs would be subject to the availability of 

appropriated funds. 

Because those prosecuted and convicted under H.R. 3668 would 

be subject to criminal fines, the Federal Government might collect 

additional fines if the legislation is enacted. Criminal fines are recorded as revenues, deposited in the Crime Victims Fund, and later 

spent. CBO expects that any additional revenues and direct spending would not be significant because of the small number of additional cases likely to be affected. 

H.R. 3668 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would 

not affect the budgets of State, local, or tribal governments. 

On January 12, 2012, CBO transmitted a cost estimate for S. 

1886, the Counterfeit Drug Penalty Enhancement Act of 2011, as 

reported by the Senate Committee on the Judiciary on December 

8, 2011. The two pieces of legislation are similar and the cost estimates are the same. 

The CBO staff contact for this estimate is Mark Grabowicz. The 

estimate was approved by Theresa Gullo, Deputy Assistant Director for Budget Analysis. 

Performance Goals and Objectives 

The Committee states that pursuant to clause 3(c)(4) of rule XIII 

of the Rules of the House of Representatives, H.R. 3668 makes certain enhancements to Title 18, United States Code, Section 2320 

which criminalizes trafficking in counterfeit goods or services and 

use of a counterfeit mark on or in connection with such goods or 

services. 

Advisory on Earmarks 

In accordance with clause 9 of rule XXI of the Rules of the House 

of Representatives, H.R. 3668 does not contain any congressional 

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earmarks, limited tax benefits, or limited tariff benefits as defined 

in clause 9(e), 9(f), or 9(g) of Rule XXI. 

Section–by–Section Analysis 

The following discussion describes the bill as reported by the 

Committee. 

Sec. 1: Short Title. 

Section 1 provides that the short title of H.R. 3668 is the ‘‘Counterfeit Drug Penalty Enhancement Act of 2012.’’ 

Sec. 2: Counterfeit Drug Penalty Enhancement. 

Section 2 expressly identifies the offense of trafficking counterfeit 

drugs and increases the penalties for persons who traffic in counterfeit drugs. This section also requires the Attorney General to 

give increased priority to efforts to investigate and prosecute counterfeit drug cases. 

Changes in Existing Law Made by the Bill, as Reported 

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

existing law in which no change is proposed is shown in roman): 

SECTION 2320 OF TITLE 18, UNITED STATES CODE 

§ 2320. Trafficking in counterfeit goods or services 

(a) OFFENSES.—Whoever intentionally— 

(1) * * * 

(2) traffics in labels, patches, stickers, wrappers, badges, 

emblems, medallions, charms, boxes, containers, cans, cases, 

hangtags, documentation, or packaging of any type or nature, 

knowing that a counterfeit mark has been applied thereto, the 

use of which is likely to cause confusion, to cause mistake, or 

to deceive, øor¿ 

(3) traffics in goods or services knowing that such good or 

service is a counterfeit military good or service the use, malfunction, or failure of which is likely to cause serious bodily injury or death, the disclosure of classified information, impairment of combat operations, or other significant harm to a combat operation, a member of the Armed Forces, or to national 

security, or 

(4) imports, exports, or traffics in a counterfeit drug, 

or attempts or conspires to violate any of paragraphs (1) øthrough 

(3)¿ through (4) shall be punished as provided in subsection (b). 

(b) PENALTIES.— 

(1) * * * 

* * * * * * * 

(3) COUNTERFEIT MILITARY GOODS OR SERVICES AND COUNTERFEIT DRUGS.—Whoever commits an offense under submstockstill on DSK4VPTVN1PROD with HEARINGS

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section (a) involving a counterfeit military good or service or 

counterfeit drug— (A) * * * 

* * * * * * * 

(f) DEFINITIONS.—For the purposes of this section— 

(1) * * * 

* * * * * * * 

(4) the term ‘‘counterfeit military good or service’’ means a 

good or service that uses a counterfeit mark on or in connection with such good or service and that— 

(A) * * * 

(B) is intended for use in a military or national security application; øand¿ 

(5) the term ‘‘traffic’’ means to transport, transfer, or otherwise dispose of, to another, for purposes of commercial advantage or private financial gain, or to make, import, export, 

obtain control of, or possess, with intent to so transport, transfer, or otherwise dispose ofø.¿; and 

(6) the term ‘‘counterfeit drug’’ has the meaning given that 

term in section 201 of the Federal Food, Drug, and Cosmetic 

Act. 

* * * * * * * 

Æ 

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