EN    EN EN 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 10.12.2008 
SEC(2008) 2674 
COMMISSION STAFF WORKING DOCUMENT 
 
Accompanying document to the 
Proposal for a 
 
DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 
 
amending Directive 2001/83/EC as regards the prevention of the en try into the legal 
supply chain of medicinal products which are falsified in relation to their identity, 
history or source 
  
Impact Assessment  
{COM(2008) 668 final} 
{SEC(2008) 2675} 
EN 2   EN TABLE OF CONTENTS 
1. Procedural issues.......................................................................................................... 7  
1.1. Consultation of other Commi ssion Services and agencies .......................................... 7 
1.2. Consultation of Member States, fact-finding missions................................................ 7 1.3. Stakeholder consultation .............................................................................................. 7 1.4. External studies contracted by the Commission .......................................................... 7 1.5. Contacts with third c ountry authorities........................................................................ 8 
1.6. Impact assessment board.............................................................................................. 8 2. Problem definition........................................................................................................ 8 2.1. Introduction – “setting the scenery”............................................................................. 8 2.2. Problem identification.................................................................................................. 9 2.2.1. Increase in “counterfeit” medicinal products in the legal supply chain....................... 9 
2.2.2. Underlying causes of the problem as re gards pharmaceutical legislation and its 
enforcement................................................................................................................ 14 
2.2.2.1. Product protection measures are insufficient or inefficient ....................................... 16 
2.2.2.2. Many potential “points of entry”................................................................................ 17 2.2.2.3. Counterfeit products are brought into the EU as “import for export”........................ 19 
2.2.2.4. Products contain counterfeit, or sub-standard API .................................................... 20 2.2.2.5. Importance of enforcement ........................................................................................ 22 2.3. Assessment of baseline – consequences of non-action.............................................. 23 2.3.1. Costs (direct and indirect) create d by counterfeit medicinal products....................... 23 
2.3.2. Expected development ............................................................................................... 24 2.4. Community competence to legislate and subsidiarity................................................ 27 3. Objectives.................................................................................................................. . 27 
3.1. General objective ....................................................................................................... 27  
3.2. Specific objectives ..................................................................................................... 29  
4. Policy options............................................................................................................. 3 0 
4.1. Policy options initially looked at and discarded - industry self-regulation................ 30 
4.2. Specific objective n°1: Strengt hening product protection ......................................... 31 
4.2.1. Discarded policy options............................................................................................ 31 4.2.1.1. “No action” at Community level................................................................................ 31 
EN 3   EN 4.2.1.2. Self-regulation by industry......................................................................................... 32  
4.2.2. Broad policy option n°1/1: Obligatory safety feature on the packaging.................... 32 
4.2.3. Broad policy option n°1/2: Prohibition of manipulation of safety features by the 
distributor ................................................................................................................... 3 3 
4.2.4. Overview of policy options for specific objective n°1 .............................................. 34 
4.3. Specific objective n°2: Ensuring reliab ility of wholesale distribution ...................... 34 
4.3.1. Policy option n°2/1: Include “traders” into the scope of rules for safe distribution .. 34 
4.3.2. Policy option n°2/2: Harmonised inspection provisions............................................ 34 4.3.3. Policy option n°2/3: Tighten control a nd supervision of GMP/GDP by means of 
audits ......................................................................................................................... . 35 
4.3.3.1. Policy option n°2/3a: Mandatory regula r audits of supplying wholesalers ............... 35 
4.3.3.2. Policy option n°2/3b: Risk-based au dits of supplying wholesalers ........................... 36 
4.3.4. Policy option n°2/4: Making wholesale ac tivities and compliance with GDP more 
transparent.................................................................................................................. 36  
4.3.5. Overview policy options for specific objective n°2................................................... 36 4.4. Specific objective n°3: Defining clear obligations for import for export .................. 36 
4.4.1. Policy option n°3/1: Clarification to the effect that marketing authorisation is 
required for all imported products.............................................................................. 37 
4.4.2. Policy option n°3/2: Clarification of the legal provisions – applying rules for export 
wholesalers................................................................................................................. 37 
4.4.3. Overview of policy options for specific objective n°3 .............................................. 37 
4.5. Specific objective n°4: Steppi ng up scrutiny of API actors....................................... 37 
4.5.1. Policy option n°4/1: Authorisation/mo re inspections in third countries.................... 37 
4.5.1.1. Policy option n°4/1a: Authoris ation (incl. inspection) by EU  competent authorities of 
all manufacturers of API, including thos e in third countries supplying the EU ........ 37 
4.5.1.2. Policy option n°4/1b: Author isation of all API manufactur ers/importers in the EU . 38 
4.5.1.3. Policy option n°4/1c: Strengthening scrutiny of plants in 3
rd countries if level of 
protection poses risks to public health in the EU....................................................... 38 
4.5.2. Policy option n°4/2: Notification requirements ......................................................... 38 4.5.2.1. Policy option n°4/2a: For all actors (EU and 3
rd countries)....................................... 38 
4.5.2.2. Policy option n°4/2b: For EU actors .......................................................................... 38 4.5.3. Policy option n°4/3: Mandatory audits  of active substa nce manufacturers by 
medicinal products' manufacturers............................................................................. 38 
4.5.4. Overview of policy options for specific objective n°4 .............................................. 39 
EN 4   EN 5. Impact analysis and comparison ................................................................................ 39 
5.1. Specific objective n°1: Strengtheni ng product protection measures ......................... 39 
5.1.1. Broad policy option n°1/1: Ob ligatory safety feature................................................ 39 
5.1.1.1. Policy option n°1/1a: All products............................................................................. 39 5.1.1.2. Policy option n°1/1b: Prescription medici nes with possibility of derogation............ 42 
5.1.1.3. Policy option n°1/1c: Risk-based scope determined in Comitology.......................... 43 5.1.2. Broad policy option n°1/2: Prohibition of  manipulation of safety features............... 44 
5.1.2.1. Policy option n°1/2a: All products............................................................................. 44 5.1.2.2. Policy option n°1/2b: Prescription products  with possibility of derogation .............. 48 
5.1.2.3. Policy option n°1/2c: Scope determined  under Comitology on a risk-basis.............. 49 
5.1.3. Comparison of policy options for specific objective n°1, synergies.......................... 50 5.2. Specific objective n°2: Ensuring reliab ility of wholesale distribution ...................... 53 
5.2.1. Policy option n°2/1: Include “traders” into the scope of rules for safe distribution .. 53 
5.2.2. Policy option n°2/2: Strengthen in spection of compliance with GDP....................... 53 
5.2.3. Policy option n°2/3: Tighten control a nd supervision of GMP/GDP through audits 54 
5.2.3.1. Policy option n°2/3a: Mandatory regula r audits of supplying wholesalers ............... 54 
5.2.3.2. Policy-option n°2/3b: Risk-based au dits of supplying wholesalers........................... 54 
5.2.4. Policy option n°2/4: Make wholesale act ivities and compliance with GDP more 
transparent.................................................................................................................. 55  
5.2.5. Comparison of policy options for specific objective n°2, synergies.......................... 55 5.3. Specific objective n°3: Defining clear obligations for import for export .................. 58 
5.3.1. Policy option n°3/1: Clarific ation that marketing authoris ation is required for all 
imported products....................................................................................................... 58 
5.3.2. Policy option n°3/2: Clarification of the legal provisions – applying rules for export 
wholesalers................................................................................................................. 59 
5.3.3. Comparison of policy options for specific objective n°3........................................... 60 
5.4. Specific objective n°4: Steppi ng up scrutiny of API actors....................................... 62 
5.4.1. Policy option n°4/1: Authorisation ............................................................................ 62 5.4.1.1. Policy option n°4/1a: Authoris ation (incl. inspection) by EU  competent authorities of 
all manufacturers of API, incl. those in third countries supplying the EU ................ 62 
5.4.1.2. Policy option n°4/1b: Author isation of all API manufactur ers/importers in the EU . 62 
5.4.1.3. Policy option n°4/1c: Strengthened scrutiny of plants in 3
rd countries if level of 
protection poses risks to public health in the EU....................................................... 63 
EN 5   EN 5.4.2. Policy option n°4/2: Notification ............................................................................... 63 
5.4.2.1. Policy option n°4/2a: Notification of EU and third country actors handling API ..... 63 
5.4.2.2. Policy option n°4/2b: Notification on ly of EU actors handling API ......................... 64 
5.4.3. Policy option n°4/3: Mandatory audits of API manufacturers by medicinal products 
manufacturers............................................................................................................. 64 
5.4.4. Comparison of policy options within specific objective n°4, synergies .................... 65 
6. Conclusion - Final choices of policy options; Impacts on SME (“SME test”).......... 67 
6.1. Final choices of policy options .................................................................................. 67 6.2. “SME test” ................................................................................................................ . 69 
6.2.1. Safety features......................................................................................................... ... 70 
6.2.2. Other chosen policy options....................................................................................... 70 7. Monitoring and evaluation ......................................................................................... 73 
Annex 1 – The actors involved in the producti on and distribution of medicinal products ...... 74 
Annex 2 – Compliance costs for policy options u nder specific objective n°1 – estimations and 
calculations................................................................................................................... ............ 77 
Annex 3 - Compliance costs for policy options u nder specific objective n°2 - estimations and 
calculations................................................................................................................... ............ 80 
Annex 4 - Compliance costs for policy options u nder specific objective n°3 - estimations and 
calculations................................................................................................................... ............ 82 
Annex 5 - Compliance costs for broad policy option n°4 - estimations and calculations........ 85 
Annex 6 - Increase of counterfeit in the legal supply chain in the future: estimations and 
calculations................................................................................................................... ............ 89 
Annex 7 – Direct/indirect costs and other costs attributable to counter feit in the legal supply 
chain: estimations and calculations .......................................................................................... 90  
Annex 8 - Increase in annua l administrative costs................................................................... 93 
Annex 9 - Summary of responses to the public consultation document .................................. 95 
EN 6   EN List of acronyms  
  
API Active pharmaceutical ingredient 
CoCP Compilation of Community Procedures on Inspections 
and Exchange of Information 
CoE Council of Europe 
EDQM European Directorate for the Quality of Medicines and 
HealthCare of the Council of Europe 
EEA European Economic Area 
EMEA European Medicines Agency 
GDP Good Distribution Practices 
GMP Good Manufacturing Practices 
MHRA UK Medicines and Health care products Regulatory 
Agency 
OTC medicines “Over-the-counter medicine s”, i.e. non-prescription 
medicinal products 
QP Qualified Person (requirement for manufacturers, 
importers) 
RP Responsible Person (requirement for wholesalers) 
U.S. FDA United States Food a nd Drug Administration 
WHO World Health Organization 
EN 7   EN 1. PROCEDURAL ISSUES  
A proposal for a Directive of European Pa rliament and Council amending Directive 
2001/83/EC1 (“Medicinal Products Directive ”) as regards the prevention of the 
entry into the legal supply chain of medicinal products wh ich are illegal in view of 
false identity, history or source was announced in early 2008 by Vice-President 
Verheugen. It is schedule d in the Commission’s agenda  planning under ref. n° 
2008/ENTR/038. 
1.1. Consultation of other Commi ssion Services and agencies 
Five meetings of the Inter-Service Steering Group were held on the following dates: 
31 May 2007, 3 December 2007, 17 January 2008, 29 February 2008 and 21 May 2008. Representatives from Directorates-General 
SANCO, COMP, TRADE, TAXUD, 
MARKT, INFSO, DEV, RELEX, JLS , EMPL and from the Legal Service, as well as the 
Secretariat-General, were invited. To ga in additional expertise, there were close 
contacts with the European Medicines Agency (“ EMEA ”) on this file. 
1.2. Consultation of Member Stat es, fact-finding missions 
Apart from informal contacts with official s from the competent authorities of the 
Member States, the file was discussed with  Member States' representatives at the 
Working Group of Enforcement Offi cers on 28 April 2008, in the GMP/GDP 
Inspectors Working Group on 22 May 2008 and at the Pharmaceutical Committee on 
20 May 2008. Moreover, DG ENTR undertook three fact-finding missions - to 
Germany, the UK and the Netherlands - to  gain a better understanding of the matter 
and to discuss issues of “counterfeit” medi cinal products with practitioners, including 
customs authorities. 
1.3. Stakeholder consultation 
A stakeholder consultation was held fr om 11 March 2008 to 9 May 2008 on the basis 
of a public consultation document. All th e standards laid dow n in the “General 
principles and minimum standards for c onsultation of interested parties by the 
Commission”2 were met. The main results of the public consultation are addressed in 
sections 2.-5. of the impact assessment re port. A summary of the responses to the 
consultation is annexed to this impact assessment.3 The responses themselves have 
been published on the “pharmaceuticals” website of the Commission.4 
1.4. External studies contracted by the Commission 
To acquire additional expertise, the Co mmission had contracted, already in 2007, a 
study looking into the safety of the suppl y chain of medicina l products. The study 
looks inter alia  into aspects of “counterfeit” medi cines. The final study is scheduled 
for autumn 2008. However, in view of th is ongoing work, it was agreed with the 
                                                 
1 OJ L 311, 28.11.2001, as amended. 
2 COM(2002) 704. 
3 Annex 9. 
4 http://ec.europa.eu/enterprise/pharmaceutical s/counterf_par_trade/counterfeit_key.htm 
EN 8   EN contractor that useful “raw  data” obtained so far would be used for this impact 
assessment report. This applies in particular  to the data referred to in Chapter 5.3.1. 
and Annex 4. 
1.5. Contacts with third country authorities 
In the run-up to the impact assessment, the Commission consulted the authorities of 
several third countries (incl uding the U.S., Canada, Japan,  Russia, China and India) 
as well as with the World Health Organisation (“ WHO ”) and the Council of Europe 
(“CoE ”). The respective contact persons we re specifically invited to submit 
comments during the public consultation. 
1.6. Impact assessment board  
The impact assessment was submitted to the impact assessment board (“ IAB”) for 
scrutiny.5 In its opinion (which is public ly available on the EUROPA-server6), the 
IAB stressed the need to 
y Strengthen further the assessment of the impact on parallel traders of various 
policy options discussed; 
y Look more closely at interactions with  other policy areas, such as customs 
control, fight against organised crime, awareness campaigns etc.; 
y Differentiate more clearly compliance costs from administrative costs; and 
y Clarify how the regulation of wholesal e distributors impacts on importation 
and third-country manufacturing. 
Moreover, in the “quality checklist”, the author-DG was requested to set out more 
clearly the baseline for mode lling of costs and benefits and to provide an easy-to-
read overview. 
The author-DG has amended the respective pa rts of the impact assessment report in 
line with the suggestions. 
2. PROBLEM DEFINITION  
2.1. Introduction – “setting the scenery” 
The pharmaceutical sector is a strategic sect or for Europe as it contributes to public 
health, generates positive effects on the EU  economy and improves the general level 
of welfare. The approx. 3 700 pharmaceutical companies in the EU have a turnover 
of 170bn EUR; they employ more than 634 000 people.7 Of these companies, 
approx. 1000 companies are producing generic,  i.e. non-patented medicinal products. 
Approx. 1 000 companies are active in the non-p rescription sector (o ften referred to 
as “over-the-counter medicines”, “ OTC” medicines ) 
                                                 
5 http://ec.europa.eu/governanc e/impact/practice_en.htm 
6 http://ec.europa.eu/governa nce/impact/cia_2008_en.htm 
7 Eurostat (2005). 
EN 9   EN It is crucial to bear in mind from the out set that the “pharmaceutical sector” in the 
broad sense includes a variet y of other actors, ranging fr om suppliers of medicinal 
products ingredients (in particular the active pharmaceutical ingredient, “ API”), 
importers, wholesalers (incl uding parallel traders), reta ilers/pharmacies, and other 
traders (brokers, etc.). An overview of thes e actors, and their role and functions, is 
given in Annex 1. 
Concerning pharmaceuticals, reduced safe ty, quality, or efficacy can be life-
threatening. In this respect, pharmaceutical s are distinct from many other consumer 
products. 
2.2. Problem identification 
2.2.1.  Increase in “counterfeit” medicinal products in the legal supply chain 
At the outset, it has to be highlighted th at the term “counterfeit medicines” in the 
context of this initiative is not restricted to violations of trade mark rights. Rather, in the context of this initiative “counterfeit”  medicines are medicinal products which 
are false representations with respect to their identity, history or source. Such 
products usually do not incl ude the correct or any activ e ingredient or include 
ingredients with a lower quant ity (“identity”). In many cases such products are not 
manufactured in the declared sites (“so urce”). Such medicines may have been 
diverted in distribution chain thus not fulfilling obligations related to safe transport 
and storage, e.g. by respecting cold  chain requirements (“history”).
8 
A recent analysis of the current situation ha s revealed that counterfeit medicines have 
become a growing threat to public health over the past few years.  
The Commission has observed the follo wing worrying trends in particular: 
y A sharp increase in seizures of counterfeit medicines by customs:  EU Statistics 
report the seizure of a tota l of 2 711 410 medicinal pr oducts (articles) at EU 
customs borders in 2006. This is an  increase of 384% compared to 2005.9 
Figures for 2007 confirm this trend w ith over 2.5m counterfeit medicines 
ceased at EU borders.10 The responsible expert-g roup of the WHO estimates 
that, in industrialised countries, counte rfeit medicines have a market share of 
up to 1%.11 Industry estimates that the volume of counterfeiting medicines 
increases by 20%-100% per year.12 
                                                 
8 For the purpose of this document, reference shall be made to „counterfeit medicines“ in the larger sense 
otherwise indicated otherwise. 
9
 http://ec.europa.eu/taxation_customs/resources/documents/customs/customs_controls/counterfeit_piracy/statistics/counterf_comm_2006_en.pdf 
10 “Counterfeit” as defined in Council Regulation (EC) No 1383/2003 of 22 July 2003 concerning 
customs action against goods suspected of infringi ng certain intellectual property rights and the 
measures to be taken against goods found to have infringed such rights (OJ L196, 2.8.2003, p. 7);
 http://ec.europa.eu/taxation_customs/customs/customs_controls/counterfeit_piracy/statistics/in
dex_en.htm 
11 http://www.who.in t/mediacentre/factsheets/fs275/en/ 
12 Mike Muller, Director of global anti-counterfeiting operations, Eli Lilly, www.scriptnews.com , 27 June 
2008. 
EN 10   EN Example:  In Bulgaria, those investigations followed up by ordinances have 
increased from just five (in 2005) to over 15 (in 2007). 
y A trend towards counterfeiting of life-saving drugs:  Counterfeit medicines in 
the EU used to be mainly ‘lifestyle’ medicines, including erectile dysfunction and weight loss medicines. Now, criminals are increasingly targeting life-saving medicines, including medicines to treat cancer and heart disease, 
psychiatric disorders, and infections.  
Example:
 In 2007, counterfeit medicines reac hed the legal chain of supply to 
patients. These medicines were prescr iption drugs for the treatment of 
conditions such as heart disease and ps ychiatric disorders. They contained a 
significantly lower quantity of the ac tive ingredient than declared.  
 Treatment with such medicines could ha ve fatal consequences. This trend may 
increase, as the main driving factors are high value, high turnover and total 
disregard for patient health. 
Example (to be removed for the final - public - version):  in 2007 Bulgarian 
authorities detected 1 050 packs of Ta miflu, which were shipped through Sofia 
airport. Subsequent analysis revealed  that the counterfe it product contained 
only sugar and no active pharmaceutical ingredient. 
y A trend towards targeting the classical supply chain:  Recently, there has been 
alarming evidence that, besides the inte rnet, counterfeiters are increasingly 
targeting the licensed distribution chai n, including authorised wholesalers, 
parallel traders and pharm acies. A Commission survey amongst Member States 
competent authorities conducted in spring 2007 showed that, out of 13 Member States who had data, seven reported incidences of counterfeit medicinal 
products in the legal supply chain. 
Example:
 The UK Medicines and Health care products Regulatory Agency 
(“MHRA ”) reported a steady increase in incidents affecting the regular 
distribution chain. Since 2004, there were nine separa te cases of counterfeit 
medicines reaching patients, which n ecessitated batch recalls; counterfeit 
medicines were also discovered at th e wholesale level on a further five 
occasions.13 Prior to 2004, counterfeit products in the legal supply chain were 
practically unknown in the UK. 
y A blurring of the line between counterfeit and sub-standard active 
pharmaceutical ingredients (“ API”): The counterfeiting of finished medicines 
is compounded by the risks stemming from  counterfeit and sub-standard API. 
While not every sub-standard API is nece ssarily a counterfeit, there is a link as 
a counterfeit API is most likely to be al so sub-standard thus posing a risk to 
human health. 
                                                 
13 MHRA Anti-Counterfeiting Strategy 2007-2010 
http://www.mhra.gov.uk/home/groups/ei/doc uments/websiteresources/con2033156.pdf 
EN 11   EN Examples:  In 2007/8, medicinal products fo r blood-thinning which contained 
counterfeit heparin reached patients in th e U.S. and in the EU. According to the 
U.S. Food and Drug Administration (“ U.S. FDA ”), at least 81 deaths have 
occurred in the last 15 months whic h could potentially be related to the 
administration of heparin and the contaminant.14 Although reports from the EU 
have mentioned only three side-effects a nd no deaths, the EU could have been 
equally affected. 
 In the early 2000s, numerous deaths and side-effects in the U.S. were 
connected with antibiotics containing gentamicin as an active substance. These 
effects are assumed to be related to faulty manufacture and impurities of the 
active substance.15 
The figures above show only the “tip of the i ceberg”. This is due to the illegal nature 
of counterfeit, which leads to insufficiencies of  official statistics. To this adds that, in 
practice, it has become extremely difficu lt to detect counterfeit products: The 
techniques employed by counter feiters have become so s ophisticated that detection 
of fakes may require chemical analysis of  the product and/or expert judgement of 
highly sophisticated (overt  or covert) safety features on the packaging. 
Addressing this threat is part of the Community stra tegy for safe, innovative and 
accessible medicines, as presented by the Commission in its Communication to the 
Council, the European Parliament and th e European Economic and Social Committee 
on a Renewed Strategy for the Pharmaceutical Sector.16 Addressing these risks is 
also part of the Commission’s strategic obj ective to protect citizens from health 
threats has also been set out in the Commission White Paper “Together for Health: A strategic approach for the EU 2008-2013”.
17 
Indeed, counterfeit drugs represent a tw o-fold risk for public health: First, 
counterfeits that do not cont ain the proper active ingredient in the proper quantity 
result in the patient’s condition going unt reated. Secondly, counterfeits may contain 
toxic materials that result in the patient being poisoned.18 The health risks through 
counterfeit drugs are a major concern. An  overview of some of the counterfeit 
medicinal products detected in the legal supply chain in 2006 and 2007 alone illustrates this: 
                                                
 
14 http://www.fda.gov/cder/drug/infopage/heparin/ 
15 Wiener, Deubner, Holzgrabe: Composition and Im purity Profile of Multisource Raw Material of 
Gentamicin – a Comparison; Pharmeuropa Vol 15, No. 2, April 2003. 
16 COM(2008) […] final. 
17 COM(2007)630 final. 
18 Products with correct ingredients/components or with fake packaging may also be considered as 
counterfeits. 
EN 12   EN  
Counterfeit medicines: Exam ples of cases reported in  2006/07, potential threats 
and players involved 
Counterfeit 
Cases Rep
orting MS Medical Indication Type of 
counterfeit Concrete health threat 
Heparin BE, 
DE Acute treatment of 
blood clots and prevention of thrombosis Counterfeit 
"heparin-like" contaminant added to Heparin Allergic reactions. Possibly caused deaths in 81 cases and side effects 
hundreds of patients. 
Clopidogrel UK Prevention of heart 
attacks and strokes Level of active 
ingredient only 70-80% Thousands of patients received the product. Low level of active substance 
can lead to insufficient protection and subsequent heart or brain strokes. 
Olanzapine UK Treatment of 
psychiatric disorders including schizophrenia and bipolar disorders (mental illness with alternating periods of 
high mood and 
depressions) Level of active 
ingredient 60% Thousands of patients received the product. Treatment with Olanzapine is 
particularly dose-sensitive! In case of under dosing risk of early occurrence of manic episodes. 
Bicalutamide UK Treatment of prostate 
cancer Level of active 
ingredient 75% Inappropriate levels of active ingredient may impair the treatment of 
prostate cancer.. 
Various MT Various  Hundreds of packs relating to several diseases 
Amoxicillin 
(Penicillin) BE Treatment of various 
types of infections, e.g. 
respiratory infections Level of active 
ingredient 75% 
In addition 
stored under inappropriate storage conditions in customs which 
could impair 
active substance Up to hundreds of thousands of packs are likely to have been transited 
through EU. Low level of active substance can lead to sub-potent antibiotic 
levels leading to a persistence of the infection. This can lead to long-term side effects (disabilities) and death  
Oseltamivir BG Treatment of influenza No or low level 
of active 
substance. 
Product was 
processed through customs. More than 1000 packs were identified at customs, no information how 
many products have reached patients. Persistence of infections, potential 
long-term side-effects (disabilities) and death 
Metamizole BG Pain Killer (for acute 
and chronic pain, in particular sever pain e.g. tumour pain), in particular used in hospitals and clinics No active 
substance. More than 1000 packs we re placed on the market and received patients. 
Persistence of pain. Therefore possible sw itch to a stronger pain killer, e.g. 
opioids which have a different ri sk profile and may cause specific 
Indapamide BG Diuretic, anti-
hypertensive 
medication Product was 
declared to be 
slow release but 
was in fact no slow release product 2000 packs have reached patients. No medical effect. Consequences of no 
medical effect of antihypertensive medication can be manifold, e.g. heart 
attacks. 
The table above shows that public health consequences can be consid erable: these 
include death, additional medical interv entions, and prolonged hospitalisation and 
EN 13   EN long-term disabilities (e.g. after strokes, lo ss of hearing). There are also related costs 
in the form of treatment, absence from work, etc.19 
Apart from these obvious health risks and th eir associated costs, there can be more 
far-reaching consequences in terms of the patient's trust in the legal supply chain, in particular the supply of medicinal pr oducts through pharmacies. The impacts on 
public trust are difficult to  quantify. They may well be  disastrous and could 
potentially become comparable to the c onsequences during the food-and-feed-crisis 
in the 1990’s. 
Both the public health risk and the loss of  trust have major ad verse economic impacts 
for industry and social security systems.
20 The assessment that the problem is critical 
has also been confirmed by several expert  groups on national level, Community level 
and international level. For example: 
y In a Commission survey amongst Member States competent authorities  
conducted in spring 2007 showed that, ou t of 13 Member States who had data, 
seven reported incidences of counterfeit medicinal products in the legal supply 
chain. 
y The responsible expert-group of the WHO  estimates that, in industrialised 
countries, counterfeit medicines ha ve a market share of up to 1%.21 
y A report issued by the expert group of the Organisation of Economic Co-
operation and Development  (“OECD ”) confirmed that “a worrisome trend is 
that counterfeits are increasingly being detected as having entered the supply 
chain of some of the most regulated ju risdictions” and that the magnitude and 
economic efforts of counterfeiting and piracy  are of such signif icance that they 
compel strong and sustained action from government, business and consumers.
22 
y The Council of Europe, in an expert study published 2006  highlighted the 
increasing threat of counterfeit – al so in the legal supply chain – and 
recommended inter alia  a “legislative framework at European level dealing 
specifically with medicines counterfe iting” and “regulatory measures 
particularly applicable to the security of the distribution chain and packaging/labelling of  medicinal products.”
23 
y Finally, specialised pharmaceutical literature  has repeatedly and 
increasingly highlighted the problem.24 
                                                 
19 Cf. chapter 2.3 
20 Impacts are considered in depth below (cf. chapter 2.3.) 
21 http://www.who.in t/mediacentre/factsheets/fs275/en/ 
22 http://www.oecd.org/dataoecd/36/34/39543417.pdf 
23 Council of Europe, Counterfeit medicines, Survey report (2006) 
24 Cf. for example: Schäfer , Sicherheitsanforderungen zum Schutz von Produkt und Marke in der 
Pharmaindustrie, Pharm. Ind. 70 Nr. 3, p. 350; Jung , Gefälschte und illegale Arzneimittel – 
Einschätzung der Bedrohungslage und Darstellung aktueller Entwicklungen aus Behördensicht, Pharm. 
Ind. 70, Nr. 5, p. 659. 
EN 14   EN 2.2.2.  Underlying causes of the problem as regards pharmaceutical legislation and its 
enforcement 
The causes of the problem are manifold and relate to a variety of different areas. 
These areas may range from a lack of awaren ess (of industry, authorities, pharmacies 
and end-users, i.e. health professionals or  patients) to weak control mechanisms of 
infringements of intellectua l property (in the EU and abroad) and insufficient 
deterrents in criminal law (in particular in  view of organised cr ime). It is noteworthy 
that these are different “horizontal” as pects of activity which do not relate to 
pharmaceutical legislation as such. Rather, pharmaceutical legislation is one element 
in a multi-facetted effort. The situation can thus be presented as follows: 
 
It is noteworthy that the Community, as we ll as Member States and stakeholders are 
currently working in order to address thes e many different elements. This relates to 
horizontal and sectoral, as well as to Community and international activities. Examples for Community activities in an  international setting  are: 
y Strengthening IPR : The WTO-agreement on trade related aspects of 
intellectual property rights (“ TRIPS ”) provide for requirements of effective 
tools to enforce substantive intellectual  property rights. The Commission is, in 
accordance with its Strategy for the En forcement of Intellectual Property Private action 
International 
cooperation  
 Customs 
action 
Criminal law 
measures Enforcement Awareness 
raising Pharma Leg. 
IPR Protection 
EN 15   EN Rights in Third Countries,25 currently working on ensuring that these 
requirements are properly implemented and applied. 
y Cooperation with regulators in third countries : The Commission has 
actively contributed to the work of WHO in the framework of the International Medical Products Anti-Counterfeiting Taskforce (“ IMPACT ”). The 
“Principles and elements of national le gislation against Counterfeit medical 
products” were agreed by represen tatives of non-governmental and 
governmental institutions in a conference in December 2007. Moreover, the Commission is in regular contact with the competent author ities of the major 
pharmaceutical markets. For example, in May 2008, the Transatlantic Economic Council (“ TEC ”) agreed on conducting joint inspections  by EU 
and U.S. Authorities in order to combat manufacturing of counterfeit 
medicines.
26 
y The EU is a main driver of a gr oup of countries working towards an Anti-
Counterfeiting Trade Agreement  (“ACTA ”).27 This stand-alone Treaty, 
which is outside of WTO, aims at incr eased international co-operation, best 
practice for enforcement, and a more eff ective legal framework. It is envisaged 
to finalize negotiations by the end of 2008. 
As regards Community activities at Community level , examples are: 
y Strengthening enforcement at the outer border by customs : The Council 
has adopted, in 2003, a Regulation aiming at strengthening the customs control 
of food suspected to infringe intellectual property rights.28 The need of strong 
customs enforcement has also been highlighted in the Commission Communication on a customs response to c ounterfeiting and piracy adopted on 
11 October 2005.
29 Currently, the Commission is working on establishing 
common risk criteria and standards for secu rity and safety risk analysis for the 
harmonised, strengthened, applicatio n of certain customs controls. 
y Strengthening and harmonising criminal law : The Commission has adopted, 
on 26 April 2006, an amended proposal for a Directive of the European Parliament and of the Council on crimin al measures aimed at ensuring the 
enforcement of intellectual property rights.
30 
y Supporting new technologies : The Directorate-General Research of the 
European Commission has sponsored a project designated as 4IPR (for 
Intellectual Property Respect) to assi st Brand Owners identify sources of 
authentication and security devi ces to protect their products.31 
                                                 
25 OJ C 129, 26.5.2005, p. 3. 
26 http://ec.europa.eu/enterprise/pharmaceu ticals/international/intercoopbi.htm#usa 
27 http://ec.europa.eu/trade/issues/sect oral/intell_property/fs231007_en.htm 
28 Council Regulation (EC) No 1393/2003 of 22 July 2003 concerning customs action against goods 
suspected of infringing certain intellectual property rights and the measures to be taken against goods 
found to have infringed such rights, OJ L 196, 2.8.2003, p. 7. 
29 COM(2005) 479 final. 
30 COM(2006) 168 final. 
31 http://www.4ipr.net/ 
EN 16   EN y Awareness raising : For example, the Commission has issued, in March 2006, 
a press release warning of count erfeits of the slimming medicines 
“rimonabant”.32 
As regards activities by other stakeholders , there is a wealth of examples of 
initiatives taken. For example, pharmaceutical companies are exchanging 
information  in the framework of the non-for-prof it Pharmaceutical Security Institute 
(PSI).33 Moreover, several national pharm acy associations have launched initiatives 
to raise awareness  amongst health professionals and patients.34 
The Commission has analysed past cases in  order to assess whether the underlying 
causes of the problem also relate to se ctoral pharmaceutical legislation. Several 
aspects, which have also been discussed in  the public consultati on, shall be explained 
below: 
2.2.2.1.  Product protection measures are insufficient or inefficient 
The main underlying cause of the problem is  that, today, it is technically relatively 
easy to fake the inner and outer packag ing of medicinal products. This major 
weakness has also been highlight ed in the public consultation. 
As regards obligatory authenticity/traceability features (hereinafter “ safety feature ”), 
Member States have introduced in the pa st product codings of  which some were 
motivated inter alia  to fight counterfeit. This unila teral action was la wfully possible 
as, presently, rules for iden tification and authenticity of medicinal products are 
exempted from the general rule of exha ustiveness of Community legislation for 
labelling of medicinal products.35 This policy has lead to a high degree of 
fragmentation of produc t coding in the EU. 
                                                 
32
 http://europa.eu/rapid/pressReleasesAction. do?reference=IP/06/375&format=HTML&aged=1
&language=EN&guiLanguage=en 
33 http://www.psi-inc.org/index.cfm 
34 Cf., for example, in Germany: 
http://www.aponet.de/topthema/0804_amfaelschungen/0804_amfaelschungen_2.html   
35 Cf. chapter 2.4. 
EN 17   EN  
 Fragmentation of coding requirements  for medicinal products in the EEA: 
 
It was repeatedly highlight ed in the public consultati on that these product coding 
systems are mostly not suited to efficientl y combat counterfeit products in the legal 
supply chain, as they can be too easily faked. 
To respond to this, some companies have taken action and provide some of their 
products with safety features. However, in  the subsequent dist ribution chain, these 
features are often discarded, removed, or  covered (“manipulated”). Today, these 
manipulations are, from the point of vi ew of the pharmaceuti cal legislation, not 
illegal, provided this is done under a ma nufacturing authorisation. However, these 
manipulations remove the usefulness of sa fety features and are a disincentive for 
industry to develop additional techniques. 
2.2.2.2.  Many potential “points of entry” 
Counterfeit medicinal products  can enter the legal produc tion and supply chain at 
various stages:  
EN 18   EN This overview is in fact overly simplistic:  Today’s distribution system for medicinal 
products is highly complex. In the public  consultation, manufacturers pointed out 
that their products may pass through up to  20 pairs of hand before reaching the 
retailer/pharmacist. While this may be an exaggeration, it is  certainly more realistic 
to describe the distribution chain as follows: 
Patient Dispenser 
(Pharmacy, 
hospital) Com plexity of distribution chain of medicinal products toda y: 
Wholesaler  Medicinal 
products 
manufacturer 
Wholesaler  
Wholesaler  Wholesaler  
 
Parallel 
trader 
UK Parallel 
trader 
 DK Intermediary 
Wholesaler  
 
Parallel 
trader 
ES Third-party 
repackager 
Parall
el 
trader 
SE Wholesaler  
Third-party 
repackager Intermediary 
Wholesaler  
 Counterfeit API Counterfeit 
Medicinal 
ProductCounterfeit 
Medicinal 
Product Counterfeit 
Medicinal 
Product  
PatientSub-
contracted 
manufacturer Sub-
contracted 
manuf. Dispenser, 
(Pharmacy, 
hospital) Wholesaler I  Wholesaler 
II Medicinal 
products 
manuf. API 
manufacturer Potential sources of counterfeit medicinal products in the le gal distribution chain
EN 19   EN The distribution chain is only “as strong as its  weakest link”. In orde r to infiltrate it 
with counterfeit products, it is sufficient that one distributor purchases from 
unreliable sources. Once the fake product “i s in the system” and supplied-on by good 
faith actors, it becomes difficult to detect it. 
2.2.2.3.  Counterfeit products are brought into the EU as “import for export” 
Counterfeit pharmaceuticals are often produced  outside the EU and subsequently 
imported.36 
Owing to the political, legal a nd practical obstacles, it is difficult for regulators and 
enforcing authorities to pursue the producers concerned in third countries. Instead, in 
order to effectively tackle this problem, the point of physical entry  of the product into 
the Community also has to be considered. 
This applies in particular when produc ts which allegedly are not placed on the 
market enter the Community customs territo ry under transit rule s and undergo further 
minor processing (hereinafter “ import-for-export ”).  
Experience shows that once these products  are physically on Community territory 
they can be redirected into the Community and made available there. This state of 
affairs is being exploited by counterfeiters and allows th em to channel counterfeit 
products into the legal distribution chain. 
Example:  Counterfeit drugs are frequently detect ed in T1 transit, for example in 
customs territory where non-Community goo ds are stored and handled. This has 
been the case most recently in the UK, Malta and Bulgaria. 
The scope of EU legislation on medicina l products includes the importation of 
medicinal products into the EU. This sc ope not only includes importation for the 
purpose of placing the product on the market, but also importation for the purpose of 
export, i.e. the physical introduction of th e medicinal product into the 
Community.37 
                                                 
36 With regard to regional provenance, in 2006 31% of  the fake medicines seized at EU borders came from 
India, 31% from the United Arab Emirates and 20% from China. 
37 Art. 2(3), 40(1) and (3) Directive 2001/83/EC. 
EN 20   EN  
Manufacturer 
Manufacturer Importer Overview: Scope of EU pharmaceutical legislation 
Placing on the 
market EU customs territory
 
However, consultation with Member States has shown that there is uncertainty as to 
the precise extent and content of the rules for products imported for the 
purposes of exportation . For example, several provisions on imports seem not 
suited for this constellation.38 
These uncertainties have crea ted “loopholes” in supervisi on and enforcement, which 
can be used (and have been used) to ch annel counterfeit products into the legal 
supply chain. Moreover, other legal requir ements (for example, conditions of 
storage) can be violated. 
Example:  One Member State reported problems in  inspecting activities in T1 transit 
due to legal uncertainties. When access wa s finally granted, counterfeit medicinal 
products were found. Nevertheless, the case is now in judicial review. 
2.2.2.4.  Products contain counterfe it, or sub-standard API 
The API is the primary factor that determin es the safety and efficacy of a medicinal 
product and affects its quality. Practice show s that counterfeit me dicinal products are 
also the result of manipula tions higher up in the value- chain, i.e. at stage of 
production of the API (cf. 2.2.1.). Counterfeit API can have the same consequences 
as counterfeit medicinal products. A medici nal product containing a counterfeit, sub-
standard API is, from the point of view of  public health protection, to be considered 
as a counterfeit medicinal product. 
The manufacturing of API is subject  to Good Manufacturing Practices (“ GMP ”).39 
As highlighted above (cf. 2.2.1.), GMP complia nce of API play an important role in 
                                                 
38 Cf. Art. 51(1)(b) Directive 2001/83/EC. 
39 Currently, the Community GMP for API are guidelines, i.e. non-binding. One could consider turning 
them into binding provisions. This, however, would be merely a question of legal technique  and not 
change the substance. 
EN 21   EN the context of counterfeit. Therefore, comp liance and its scrutiny is crucial. This 
applies in particular to third countries, where the large majority of API are produced. 
Currently, compliance with GMP by the manuf acturer of active ingredients – both in 
the EU and abroad - is controlled via the manufacturer40/importer41 of the medicinal 
product. Controls by EU competent authoritie s are rare. In the publ ic consultation, it 
was stressed that even large Member Stat es only control approx. 20 API plants in 
third countries per year.42 On the other hand, in certain third countries controls are 
weak, and standards - compared to the EU – are low. Moreover, certain third 
countries have only a limited scrutiny of exported API. 
This was confirmed during inspections by the Council of Europe's European 
Directorate for the Quality of Medicines and HealthCare (“ EDQM “), which point to 
a striking difference in GMP compliance between API manufacturers based in the EU and those based outside. This was also  highlighted in th e public consultation. 
Example:
 Following the heparin incident (above 2.2.1.), the Chinese authorities for 
medicinal products stressed that “safeguard ing the legality, safety  and quality of raw 
materials imported for use in pharmaceuticals is the responsibility of the importing 
country” and that they had no au thority over the plant concerned.43  
 
 Medicinal 
products 
manufaturer API 
Manufacturer 
API 
Manufacturer Importerr 
Medicinal 
products 
manuf aturerImporter Globalisation of manufacturing and density of supervision by EU authorities 
API 
Manuf. Placing on the EU marke t 
 
                                                 
40 Art. 46(f) Directive 2001/83/EC. 
41 Art. 51(1)(b) Directive 2001/83/EC. 
42 The EU market is supplied by approx. 20 000 plants located in third countries, cf. Annex 1. 
43 Press release of the Chinese State Food and Drug Administration on 26 February 2008. 
EN 22   EN 2.2.2.5.  Importance of enforcement 
With regard to all four preceding underlyi ng causes, a “horizon tal” issue is the 
important role of enforcement activities by Member States. Enforcement is crucial: As counterfeit is by definition illegal, counter feiters are only affected by legislation if 
it is rigorously enforced. Only enforcem ent ensures that provisions are applied by all 
economic actors. This, in tur n, is important as a way to: 
y Ensure the maximum effect  of legal provisions; and 
y Ensure a level playing field between co mpetitors: if rules are not applied by all 
economic actors, non-compliant firms may have a competitive advantage over those firms that do comply. 
Member States are responsible for enforci ng Community rules. However, it would be 
completely wrong to point only at Member St ates for the increase in counterfeits. 
Rather, it is the Community (through its ex haustive regulatory competence) who has 
to support Member States in this task for three reasons: 
y First, enforcement depends on clear and proportionate rules. These rules are set 
by the Community  (cf. chapter 2.4.). Therefore,  the Community is under an 
obligation to enact rules which are sufficiently clear and unambiguous to allow 
enforcement. Certain policy options disc ussed (cf. for example, policy options 
n°2/1 and n°3) seek to clarify legal pr ovisions, thus facilitating enforcement.  
y Secondly, while enforcement is primarily the task of Member States, there are 
a number of Community provisions relate d to coordination of enforcement by 
the Community. For example, the “Compilation of Community Procedures on Inspections and Exchange of Information” (“ CoCP ”) provides guidelines to 
harmonise inspections of manufactur ing plants by the different national 
competent authorities and to facilitate th eir cooperation (cf. below, 4.3.2.). This 
aspect is particularly important in or der to avoid discrepant approaches to 
enforcement in Member States which could be exploited by counterfeiters. 
y Thirdly, and more generally, enfor cement alone cannot be considered as 
sufficient policy option to address the problems set out above. This is best demonstrated by the fact that Member States have actually stepped up enforcement in recent years.
44 However, rather than putting a stop to 
counterfeit in the legal supply chain, the increased supervision and enforcement has primarily helped in detecting the problem . The number of 
detected counterfeit products seems to rise with the increase in awareness, 
company checks and Member States' control.
45 
                                                 
44 For example, some Member States have established or are considering mobile laboratories at customs 
controls, for an ad hoc  chemical analysis of importe d API and medicinal products. 
45 Interestingly, there is a parallel here with the “f ood-and-feed crisis” in the Community in the 90’s where 
the number of detected inf ected animals increased with an increase of inspections. 
EN 23   EN 2.3. Assessment of baseline – consequences of non-action 
This chapter shall a ssess the baseline, i.e. the consequences of non-action. These 
consequences are already today considerab le (below 2.3.1.). It has to be expected 
that they aggravate further if no Comm unity action is taken now (below 2.3.2.). 
2.3.1.  Costs (direct and indirect) created by counterfeit me dicinal products 
It is evident that robust figures of the number of counterfeit products cannot be 
realistically attained. Estimations can onl y be based on extrapolation from existing 
figures. For example, one could extrapolate the figures available from some Member 
States to the EU: This would mean th at today, approx. 1.5 m packs counterfeit 
medicinal products enter the legal supply chain per year in the EU representing 
approx. 0.005% of all medicinal products made available. In other words, 1 pack of 
out 20 000 packs would be a counterfeit. 
On the basis of this extrapolated estimati on, one can move on and consider the direct 
costs, indirect costs, and other qualifiable burdens: 
A direct cost approach  looks at the costs falling on th e health sector in relation of 
prevention, diagnosis and treatm ent of disease. This involve s issues of safety (for 
example, toxic effects) and efficacy (i.e. non-effect of a fake medicine). The costs 
fall largely into two categories: 
y costs occurring during hosp italisation and resulting in prolonged hospital stays; 
y costs occurring in an ambulatory sett ing for treating the consequences of a 
treatment involving counterfeit drugs. 
Indirect costs  typically measure the lost productivity  potential of pati ents who are too 
ill to work or who die prematurely. While  there are so far no reported cases of 
fatalities due to counterfeit medicinal produc ts, indirect costs stemming from death 
are in principle included in this calculation. 
Finally, there are a number of other quantifiable burdens  to be attributed to 
counterfeit medicines, including: 
y Costs for recalls by the manufactur er, including communications to the 
marketplace and distributors and reim bursement for returned counterfeit 
products; 
y Costs for destroying seized counterfeit products which at present fall on the 
rightholder. 
With regard to direct and indirect costs, it is noteworthy that, unlik e in other fields of 
health economics, such as Adverse Drug Reactions,46 counterfeit is a relatively 
recent phenomenon. There are to date no studies on the quantified public health effects of counterfeit medicines and result ing direct and indirect costs. Moreover, 
causalities are necessarily speculative. Howe ver, on the basis of existing figures and 
                                                
 
46 Cf., in this regard, the impact assessment repo rt on the Commission proposal amending Directive 
2001/83/EC on strengthening and rationalising EU pharmacovigilance, SEC(2008) […]. 
EN 24   EN extrapolations, and based on a value of Quality-Adjusted Life Years of 
60 000 EUR47, it can be assumed that, today, annu al costs resulting from counterfeit 
medicinal products in the legal supply chain ha ve direct and indirect  societal costs of 
approx. 950m EUR.48 
In addition, there are numerous conse quences of non-action which can only be 
qualified. This includes in particular: 
y Restoring a damaged reputation of a brand/company: Companies and their 
brands can suffer considerably if count erfeit products enter the legal supply 
chain. The public consultation has confirme d that this is a major driver for 
action of companies. 
y Restoring trust amongst distributors: This  point also holds for distributors, who 
have to trust on the upstream distribution chain. 
y Restoring trust of patients into the legitimate supply chain: the same reasoning 
applies for patients – damaged trust in the legal supply can have grave 
consequences for revenues of retailers/pharmacies. 
2.3.2.  Expected development 
It has to be stressed that the problem set out above (cf. 2.2.) is expected to aggravate 
further. Indeed, the number of inciden ces has been on a steady increase since 2004. 
For example, 
y while in the UK, there were practical ly no “counterfeit incidences” in the 
lawful supply chain prior to 2004, the number of detected incidences has 
increased from 2 (in 2004) to 5 (in 2007);49 
y In Bulgaria, those investigations fo llowed up by ordinances have increased 
from just five (in 2005) to over 15 (in 2007). 
                                                 
47 For the purpose of this impact assessment, account shall be taken of a recent study assuming a medium 
value of QALY of 60 000 EUR (Mason et. al., Estimating a monetary value of a QALY from existing UK values of prevented fatalities and serious injuries (2006)). 
48 Cf. Annex 7. 
49 One „incidence“ may entail many thousa nds packs, as was the case in the UK. 
EN 25   EN  
Increase of incidences in legal supply chains in some Member States since 2004 
05101520
2004 2005 2006 2007UK (legal)
BG (legal)
 
This trend is not surprising, as it confirms the general trend of counterfeit medicines, 
for example: 
y The number of “incidences” of counterfeit s has risen in Europe from at rates of 
approx. 10 % and reached 220 in 2007 (2002 in 2006);50 
y A trend can also be confirmed when looking at the U.S., who has a broadly 
similar regulatory and economic envir onment. Here, the trend has been an 
increase from 58 incidences in 200451 to 120 incidences in 200752; 
y Industry estimates that the volume of  counterfeiting medicines increases by 
20%-100% per year.53 
                                                 
50 Industry figures (2008). 
51 Cf. http://www.fda.gov/oc/initiatives/counterfeit/update2005.html 
52 Industry figures (2008). 
53 Mike Muller, Director of global anti-counterfeiting operations, Eli Lilly, www.scriptnews.com , 27 June 
2008. 
EN 26   EN  
Increase of incidences in count erfeits since 2004(EU and U.S.)54 
050100150200250
2004 2005 2006 2007US
EU
 
Nothing indicates that the trend will revers e. On the contrary, independently of the 
concrete figure, it is almost certain that there will be an increase of the problem due 
to several reasons: 
y The increase of global trade of API and medicinal products; 
y The number of actors in the supply chai n are going to increase as distribution 
chains are increasingly dive rse and sophisticated; and 
y The fact that counterfeit producers are increasingly parts of  highly-efficient 
network linked to organised crime, tr ade in weapons and illegal drugs and 
smuggling. 
While it is not possible to quantify precisely  a future development, for the purpose of 
this impact assessment, an attempt shall be made to calculate the costs for a baseline of up to 2020. To this end, it is also assumed that the c hosen policy options are fully 
applied as of 2011, i.e. excluding the tim e span of the legi slative process and 
transposition/implementation of legislativ e amendments. Three models (“scenarios”) 
are looked at which are based on an “opt imistic”, a “realistic” and a “pessimistic” 
scenario (cf. Annexes 6, 7). 
Based on these scenarios and a baseline unt il 2020 it is estimated for the purpose of 
this impact assessment that the direct and indirect costs by 2020 are between 9.5bn EUR and 116bn EUR (cf. Annex 7).
55 
                                                 
54 Extrapolations from industry sources and U.S. FDA publications. 
55 Monetised benefits are expected to mount in line with inflation. 
EN 27   EN 2.4. Community competence to legislate and subsidiarity 
Community legislation on medi cinal products placed on the EU market is based on 
Art. 95 EC Treaty. Its aim is to establish an internal market for medicinal products 
while ensuring a high level of protec tion of public health in the EU. 
Prior to the adoption of the Medicinal Pr oducts Directive the provisions laid down by 
law, regulation or administrative action in force in the Member States differed from 
one Member State to another. These diffe rences between national laws obliged the 
pharmaceutical industry to vary their pr oduction and application for marketing 
authorisation according to the Member Stat e for which the products were intended. 
Consequently, the different national rules hi ndered trade in these products and, as a 
result, had a direct effect on the establishment and functi oning of the internal market. 
To address this, it was necessary to ha ve harmonised regulation in place in the 
internal market. It would not have been possible to establish identical rules by each 
Member State individually. The EU legislation on pharmaceuticals, which was introduced in 1965, meets this need. It determ ines at Community level the rules to be 
complied with as regards inter alia  the authorisation, manuf acturing, distribution, 
labelling and packaging of medicinal products. 
These rules are, with few exceptions,
56 exhaustive, i.e. they are not “minimum 
standards”. Member States are not allowed to “add to” these rules. Changes made by Member States to these rules - which are transnational in nature - would conflict with the requirements of the Treaty, as only th e Community can amend the rules. Hence, 
the criteria for examination of subsidiari ty as set out in th e “Protocol on the 
application of the principles of  subsidiarity and proportionality”
57 are fulfilled. 
While this reasoning applies to pharmaceutical legislation , its enforcement  is a 
different matter. Here, Member States are responsible. The Community has merely a 
coordinating function which it exerci ses through implementing guidelines and 
legislation as well as technical  tools, such as databases.58 
3. OBJECTIVES  
3.1. General objective 
The general objective of EU pharmaceutical legi slation is to give concrete form to 
the Treaty’s objective of free movement of goods for medicinal products while 
ensuring a high level of protection of human health. Against this background, the 
general objective is defined as maximising the protection of the legal supply chain 
in the EU against infiltration of counterfeit medicinal products , i.e. that for all 
practical purposes the possibility that medicinal products purchased in the legal 
supply chain in the EU are counterfeit can be practically ruled out. 
                                                 
56 Most relevant in this file is the authenticity labelling, cf. chapters 2.2.2.1. and 4.3.2. 
57 OJ C340, 10.11.1997. 
58 Concerning enforcement,  cf. chapter 2.2.2.5. 
EN 28   EN At the outset, it must be stressed that this objective does not  include distribution 
through illegal supply chains, such as reta il by beauty salons, f itness centres, sex-
shops or illegal internet sales. Neither does this objective addr ess the “importation” 
of counterfeit drugs by individuals for th eir own private use (“suitcase trade”). 
While it is acknowledged that this aspect of  public health protect ion merits attention 
by industry, regulators and policy makers, th e exclusion of these aspects from the 
general objective as defined for the purpose of  this impact assessment is justified as 
the supply of medicines through illegal di stribution channels has very different 
characteristics: In particular, these distribution channels are anyhow (no matter 
whether the medicine is authentic) illegal . This means that: 
y The actors are acting at the outset in ba d faith concerning the legality of their 
activities; and 
y Even the “patient” often knows that the purchase (or importation) of the 
medicine is illegal. 
These aspects fundamentally differentiate this problem from the one addressed and 
discussed in this impact assessment. The situation can be exemplified as follows: 
 
Legal distribution chain 
(authorised importers, 
wholesalers; traders) 
 
 
 
 
 
 
PatientIllegal distribution chain (sex-
shops, „suitcase-trade“, illegal 
internet-pharmacies) 
 
 
 
 
 
Patient/consumer Counterfeit  medicine 
Addressing illegal supply chains requires a separate problem definition, with separate 
underlying causes, separate objectives and se parate policy options. In particular with 
regard to the policy options , these may relate to awareness rising, for example in 
EN 29   EN media and schools, enforcement and cooperatio n of different enforcement authorities 
at national level. 
This is not to say that the Commission is turning a blind eye on these matters. 
Indeed, many of the initiatives  set out above 2.2.2.) were or iginally launched in view 
of (and still focus mainly on) the combat of illegal  supply chains. However, the 
present impact assessment sha ll focus on the risks of count erfeit through legal supply 
chains, i.e. through supply which is still perceived by the patient and the public as a 
whole as “counterfeit-free”. 
3.2. Specific objectives 
In order to be made operational, the ge neral objective needs to be further broken 
down into specific objectives. These more operational objectives are closely related 
and follow the underlying causes for the problem.59 Thus, this impact assessment 
evaluates the policy options to ach ieve four spec ific objectives: 
y Ensuring that the medicinal product itse lf, as made available, is sufficiently 
protected against counte rfeiting (“Specific objective n°1 – Strengthening 
product protection measures”):  EU legislation regulates the characteristics of a 
medicinal product placed on the EU mark et. Specific objective n°1 aims to 
ensure that these products are sufficien tly distinguishable from fake copies. 
y Ensuring that the legal distribution cha nnels of the medicinal product in the EU 
cannot be infiltrated by counterfeit products (“Specific objective n°2 –
 Ensuring reliability in the wholesale distribution”):  As stated above (2.2.2.2.), 
it is crucial to ensure that the dist ribution chain is no t “infiltrated” by 
counterfeit products. These aspects of wholesale dist ribution are regulated at 
EU level. 
y Adopting efficient and proportionate rule s for transit of counterfeit medicinal 
products through the EU (“Specific object ive n°3 – Defining clear obligations 
for import for export”):  Clarification of the legal requirements for products 
imported for export is needed. Depending on the content of th e clarification the 
substantial impact can differ. 
y Ensuring that the active ingredient c ontained in the product is not counterfeit 
(“Specific objective n°4 – Steppi ng up scrutiny of API actors”).  
These specific objectives are not mutually exclusive. Indeed, it is not possible to 
address only one of the four specific obj ectives in order to pursue the general 
objective. If only one of the four specifi c objectives was addressed, the influx would 
occur via the other three. For example: 
y If only requirements/inspections for w holesalers are strengthened, this would 
not avoid an influx of counter feit at the level of API. 
y If only the rules (including enforcement)  of API were strengthened, this would 
not avoid the influx of count erfeit finished products into the legal supply chain. 
                                                 
59 Cf. chapter 2.2.2. 
EN 30   EN y If only the rules (including enforcem ent) governing import for export were 
clarified, this would not address the issu e of counterfeit API and the influx of 
counterfeit into the distribution chain. 
y If only product-related objectives we re pursued, the ri sk arising from 
counterfeit API woul d not be addressed. 
Thus, only the combined pursuit of the four specific objectives can ensure that the 
legal supply chain is properly  protected. This can be best exemplified as follows: 
 
 
Moreover, with regard to the “horizontal ” issue of enforcement (cf. 2.2.2.5.), this 
plays a role in all four sp ecific objectives set out above. 
4. POLICY OPTIONS  
4.1. Policy options initially looked at an d discarded - industry self-regulation 
The policy option “industry self-regula tion” would mean reliance on voluntary 
measures by industry to address the problem. 
The main difficulty of this policy option is that compliance in this case is voluntary 
and it is impossible for competent authorities to enforce these rules. This is a crucial API 
Manufactur er  Counterfeit API Counterfeit 
Medicinal 
ProductCounterf eit 
Medicinal 
Product 
PatientDispenser, 
(Pharmacy, 
hospital ) Wholesal er  Medicinal 
products 
manu f.    
 The different a pproaches of the four broad policy-options:
 
Medicinal 
products 
manuf. API 
Manufacturer 
EN 31   EN aspect which has been highlighted again recently.60 Indeed, recent events (cf. 2.2.1 
above) confirm that the pharmaceutical sector is prone to “rogue traders” who willingly put patients’ lives at risk for th e sake of high revenues. Thus, while self-
regulation may work well in markets that have  an oligopolistic industry structure, it 
is less workable in the pharmaceutical sect or, which is characterised by many tens of 
thousands of suppliers, importers, manufactur ers and distributors (c f. description of 
the players in Annex 1). Indeed, respons ible companies are already doing their 
utmost to combat counterfeiting of the products they produce/distribute (cf. below 
5.4.3. concerning audits, for example). Th is was highlighted in the public 
consultation. However, as set out above (cf. 2.3.2.), in spite of this existing support, the problem is increasing. 
This not only impacts on the level playi ng field of competitors on the Community 
market. It also leads to differing leve ls of protection amongst Member States. 
Therefore, in order to ensure patient safety with regard to all products made available 
to patients, and to avoid a di stortion of competition between  the players, it is crucial 
to ensure enforceabil ity of these rules. 
Finally, and from a more political perspective, there is still an element of distrust in 
Europe as regards self-regulation by industry. Th is aspect is partic ularly important in 
the field of medicinal produc ts, where product quality/saf ety/efficacy is closely 
linked to public health. In view of the potentially disastrous consequences 
(cf. 2., above), it could be perceived ve ry critically if the Community - who 
exhaustively regulates the pl acing of these products on th e market! – were to rely 
solely on self regulation. 
4.2. Specific objective n°1: Stren gthening product protection 
4.2.1.  Discarded policy options 
4.2.1.1.  “No action” at Community level 
As exception to the principle of exhaus tive Regulation, Community legislation on 
medicinal products allows Member States to lay down rules for labelling for the 
purpose of identification a nd authenticity. A policy option would be to rely on 
Member State action in this respect. 
This policy option was discarded at an early  stage: Already today, in Europe there 
are various differing requirements for pr oduct coding. The result is 10 different 
coding systems in the internal market. Moreover, France, Belgium and Greece have recently established three differing system s for authenticity checks on the basis of 
varying product codes. Several Member Stat es (e.g. Spain) are currently considering 
(unilaterally) reforming their present codi ng system. These trends are not necessarily 
motivated by the increase in counterfeiti ng, but by the need to combat reimbursement 
fraud, which leads to considerable losses for social security sche mes in the EU. As a 
result of this fragmentation, companies have to re-adapt the packaging to each national territory of  the Community market. The publ ic consultation repeatedly 
highlighted the difficulties created by a l ack of harmonisation: the costs to EU 
industry as a result of a lack of harmonisa tion in this respect ar e currently estimated 
                                                
 
60 Cf. Palzer ,et.al., Self-Regulation, Co-Regulation, Public Regulation (2004). 
EN 32   EN to be as high as 1bn EUR per year. A fu rther fragmentation of the rules and 
techniques for product coding is go ing to raise cost even more. 
4.2.1.2.  Self-regulation by industry 
Here, the reasoning as set out above (cf. chapter 4.1.) applies: Self-regulation would 
be unenforceable in view of the many act ors in the pharmaceutical market. It would 
thus create a competitive disadvantage vis-à-vis producers who invest in product-
related safety measures. 
4.2.2.  Broad policy option n°1/1: Obligatory safety feature on the packaging 
To address the underlying cause of the pr oblem set out above (cf. 2.2.2.1.), the broad 
policy option is an authenticity/traceability feature (hereinafter referred to as “ safety 
feature ”) of the product. A safety feature woul d make it possible to establish (either 
by the consumer, by a trained eye, by an expert, or with a reading device) whether the outer packaging is origin al. Moreover, it would reveal  any subsequent opening of 
the pack (similar to a seal). Finally, it may facilitate back-tracing the distribution chain of medicines by way of a “pedigree” linked to the safety feature (in the same 
way as the mad cow scare led to a system that electronically tracks animals as they 
move from fields to feed lots to food stores). The sa fety feature could be, for 
example, a RFID tag, a hologram, a colour sh ift feature, a watermark or a chemical 
marker. In addition, it may be combined with product serialisation: Product serialisation is based on a feature (usually a code) on the outer packaging which “individualises” the pack. Each pack has its own individual code. The code is read 
with a reading device which is connected to a central database. The identification 
number of the pack sold by the retailer/ pharmacist is shown in the database as 
dispensed: this ensures that each product is  dispensed only once. It also brings 
additional spill-over benefits as regards pati ent safety in general and dispensing of 
medicines in in particular (from automated validity date checks, to ensuring each 
patient receives hi or he r prectiptin only, to supporting pharmacovigilance). It can 
also support health systems (by reduci ng fraudulent reimbursement claims to 
national social insurance schemes) and i ndustry by facilitating logistics, storage, 
recalls and returns. 
This broad policy option would establish an obligation to affix a safety feature on the 
packaging. However, no final stance on a sp ecific safety feature would be taken in 
secondary EU law. Rather, the policy option would provide a legal basis for 
implementing measures under Comitology or via standards, where precise 
characteristics, including technicalities, w ould be set out. This approach is taken for 
two reasons: 
y First, technical st andards and the range of technical options are evolving very 
fast. It would be a mistake if deta ils were written “i n stone” by the co-
legislator. This was also highlight ed during the public consultation. 
y Secondly, account has to be taken of in ternational developments, in particular 
in view of trans-Atlantic economic c ooperation and regulatory alignment. The 
U.S. regulator is currently considering sa fety features. Discussions in the U.S. 
EN 33   EN are roughly at the same stage as in the EU.61 Against this background, the 
possibility of some flex ibility to update technica l provisions should be 
maintained. 
Within this broad policy-option, there are various mutually-exclu sive policy options 
regarding its scope: 
• Policy option n°1/1a: For all medicinal products:  In this policy option, the safety 
feature would be compulsory for all medicinal products. 
• Policy option n°1/1b: For prescription me dicinal products (with  possibility of 
derogation):  In this policy option, a safety feature would be compulsory for 
prescription medicinal products only. In a ddition, there would be derogations for 
cases where: 
– re-packaging is necessary to ensure  availability in small markets; and 
where 
– re-packaging has been expressly permitted by the original marketing 
authorisation holder: This relates to cases, where 
– health bodies or national authorities repackage for legitimate 
clinical reasons (for example assembling emergency packs containing small amounts of a me dicine used by mental health 
crisis resolution teams); or 
– the marketing authorisation holde r designs another manufacturer to 
re-label a product to address shorta ge of a specific product in a 
Member State. 
• Policy option n°1/1c: For products determined on a risk-basis:
 This policy option 
would leave the product scope open. It w ould merely set some criteria to be 
considered and provide a legal basis to fix the scope under Comitology. The 
criteria would take into consideration th e risk profile i.e. by looking at where  
– counterfeit is particularly likely (in particular in terms of potential 
margins for counterfeiters); and/or 
– the potential damage is particularly high. 
4.2.3.  Broad policy option n°1/2: Prohibition of m anipulation of safety features by the 
distributor 
This broad policy option would complement the broad policy option n°1/1. It 
provides that safety features on the p ackaging, which may be  obligatory (above 
4.2.2.) or voluntary, are not manipulated in the distribution chain between the 
original producer and the final user. “Manipulation” woul d mean removing, 
replacing, or covering (e.g. over stickering) of these features. 
                                                 
61 Cf. http://www.fda.gov/OHRMS/DOCKETS/98fr/E8-5597.htm   
EN 34   EN In analogy to the broad policy option n° 1/1, several mutually-exclusive policy 
options in terms of scope  are to be considered: 
y Policy option n°1/2a : For all medicinal products; 
y Policy option n°1/2b : For prescription medicinal products (with possibility of 
derogation); 
y Policy option n°1/2c : For products determined on a risk-basis, for example in 
view of their life-saving characteristics. 
4.2.4.  Overview of policy options for specific objective n°1 
Specific objective n°1
Strengthening product 
protection  
N° 1/1  
Safety feature , e.g. 
- hologram 
- seal 
- serialisation 
- combination of these.  
N°1/1b 
Prescrip-
tion drugs 
with 
derogation N°1/1a 
All products N°1/2 
Prohibiting manipulation 
of safety features , i.e. 
- no re-opening 
- no re-packaging 
- limited over-stickering. 
N°1/1 c
Products 
selected on 
risk-basedis 
(Comitology) N°1/2a
All products N°1/2b
Prescription 
drugs with 
derogation  N°1/2 c
Products 
selected on risk-
basedis 
(Comitology)y or or or or or/and 
 
4.3. Specific objective n°2: Ensuring re liability of wholesale distribution 
Under this specific objective, four policy options will be discussed. They are not 
mutually exclusive. Within one of the pol icy-option (audit), there are two mutually-
exclusive policy options.62 
4.3.1.  Policy option n°2/1: Include “traders” into the scope of rules for safe distribution 
One policy option is to address those act ors who are situated “in-between” the 
manufacturer and the dispenser, and w ho clearly are not c overed by the term 
“wholesaler” as presently defined. These actors include persons who trade medicinal products “virtually”, wit hout handling them. This policy option would mean 
subjecting these actors to the relevant re quirements of Good Di stribution Practices 
(“GDP ”) and a notification requirement. 
4.3.2.  Policy option n°2/2: Harmoni sed inspection provisions 
One policy option would be to strengthen the Community rules for inspection of 
wholesalers as to their compliance with good distribution practices. At present, there 
                                                
 
62 Cf. overview in chapter 4.4.5. 
EN 35   EN are practically no harmoni sed rules on inspections of compliance with good 
distribution practices. 
This policy option would – by analogy with inspection for good manufacturing  
practices – introduce CoCP for wholesale distribution. 
4.3.3.  Policy option n°2/3: Tighten control and supervision of GMP/ GDP by means of 
audits 
4.3.3.1.  Policy option n°2/3a: Mandatory regula r audits of supplying wholesalers 
At present, there is only limited control a nd interaction between the various actors in 
the manufacturing and distribution chain. Very often, this interaction is restricted to 
the actual business transaction. 
A stronger interaction would help to broade n the responsibility of the various actors. 
This interaction would be achieved through audits. Audits are a ssessments of a body 
or a person by another party to verify th e effectiveness of a quality management 
system. 
Supervision by the competent authorities of  the Member State would be an “add on” 
to this control function. 
This policy option can be best exemplified as follows: 
 Wholesaler 
II 
Wholesaler 
III 
Authorisation 
Inspection Inspection Inspection 
Authorisation Authorisation 
Retailer/phar
macy Audit Audit Overview: Polic y-option audit of wholesalers
Wholesaler 
I Medicinal 
product 
manfuacturer
/importerVerification 
of certificate 
EN 36   EN It should be noted that audits in th e pharmaceutical sector (manufacturing and 
distribution) are nothing new. However, th ey are voluntary and t hus do not act as a 
real deterrent to irresponsi ble actors in the supply chain. 
Audits are not necessarily performed by th e business partners themselves. Instead, 
very often, audits are performed by third party auditors, who ma ke the audit result 
available to a number of economic operators (“ shared third party audit ”). These 
third party auditors would have to be  sufficiently qualified and experienced. 
4.3.3.2.  Policy option n°2/3b: Risk-based audits of supplying wholesalers 
This policy option is essen tially identical to the one above (4.3.3.1.). However, under 
this option, audits would be restricted to situations where the auditor has reason to 
believe that the business partner is not complying with the requirements for GMP. The number of obligatory audits would therefore be limited. 
4.3.4.  Policy option n°2/4: Making wholesale ac tivities and compliance with GDP more 
transparent 
To avoid counterfeit medicinal products bei ng channelled into the distribution chain, 
it is crucial for wholesalers to  work with reliable partne rs. To this end, a publicly-
accessible database of the wholesale authorisations could be considered. It has to be stressed that a database for holders of a manufacturing/import  licence already exists. 
This database would be extended to  wholesalers of medicinal products. 
Moreover, to “reward” GDP compliance, the certificates issued by competent 
authorities could be referred to in the database. Here, t oo, similar provisions already 
exist for manufacturers and would be extended to wholesale distributors. 
4.3.5.  Overview policy options fo r specific objective n°2 
Specific objective n°2 
E nsuring reliability of 
wholesale distribution 
N°2/3 
Audit  N°2/2
Harmo-
nised 
inspection 
provisions N°2/1 
Definition 
of 
wholesale 
obligations 
for all 
relevant 
actorsIncl
ude N°2/4 
Transpa-
rency of 
compliant 
actors in 
database N°2/3a 
all 
actors  N°2 /3b 
actors 
selec-
ted on 
risk 
basis  and/or and/or 
or and/or 
 
4.4. Specific objective n°3: Defining clea r obligations for import for export 
Under this specific objective, three mutually -exclusive policy opti ons are discussed. 
EN 37   EN 4.4.1.  Policy option n°3/1: Clarific ation to the effect that marketing authorisation is 
required for all imported products 
One policy option would be to make it cl ear that all medicinal products brought 
physically into the Community for stor age/handling must have a marketing 
authorisation. 
4.4.2.  Policy option n°3/2: Clarification of the le gal provisions – applying rules for export 
wholesalers 
One policy option would be clarificatio n that the obligations for wholesale 
distributors also apply to  wholesale distributors exporting  medicinal products. These 
rules would apply no matter whether the export wholesale distributor handles 
products placed on the market (incl. impor ted) or merely introduced products (i.e. 
brought into the Community  without being released  for free circulation). 
4.4.3.  Overview of policy options for specific objective n°3 
 
4.5. Specific objective n°4: Steppi ng up scrutiny of API actors63 
Under this specific objective, three po licy options are discussed, which are not 
necessarily mutually exclusive. Within tw o of these policy-options (authorisation and 
notification), several mutually-exclu sive policy options are discussed.64 
4.5.1.  Policy option n°4/1: Authorisation/mo re inspections in third countries 
4.5.1.1.  Policy option n°4/1a: Authorisation (incl. in spection) by EU compet ent authorities of 
all manufacturers of API, including thos e in third countries  supplying the EU 
In the EU legislation on medicinal pr oducts, the manufacturer/importer of the 
finished medicinal product is under an  obligation to us e only API from GMP-
compliant plants. There is no legal obligation for the API manufacturer to obtain authorisation (following inspection) from  a competent Member State authority. 
Instead, Member States inspections are left to the discretion of Member States and 
only carried out where there is suspected non-compliance. 
                                                
 
63 The options discussed under this broad policy option shall only concern amendments to the Medicinal 
Products Directive. Other aspects may concern amending the GMP which would be discussed in a 
separate impact assessment. 
64 Cf. overview in chapter 4.6.4. 
EN 38   EN Policy option n°4/1 makes all foreign and EU API manufacturers subject to an 
authorisation requirement to  be issued (following inspection) by a competent EU 
authority. It should be noted that this policy option would go be yond the current legal 
regime for the manufacturing of medicinal products. 
4.5.1.2.  Policy option n°4/1b: Authoris ation of all API manufactur ers/importers in the EU 
An alternative policy option would be to authorise all manufacturers/importers in the 
EU. The system for API would then be id entical to that for medicinal products. 
4.5.1.3.  Policy option n°4/1c: Strengthening scrutiny of plants in 3rd countries if level of 
protection poses risks to public health in the EU 
A further policy option is to strengthen sc rutiny of API manuf acturer supplying the 
EU unless there is assurance that the third country applie s standards of good 
manufacturing practice at least equivalent  to those laid down by the Community and 
mechanisms for supervisions are at least equivalent to those applied in the Community. In other words, only if the st andards in a given third country are not 
equivalent to those in the EU, inspections are required. 
4.5.2.  Policy option n°4/2: Not ification requirements 
4.5.2.1.  Policy option n°4/2a: For all actors (EU and 3
rd countries) 
One policy option would be the requirement for EU and third country manufacturers 
and distributors of API to notify their ac tivities before starting their operations of 
supplying the EU market. 
4.5.2.2.  Policy option n°4/2b:  For EU actors  
One policy option would be the require ment only for EU manufacturers and 
importers of API to notify their activ ities before starting their operations. 
4.5.3.  Policy option n°4/3: Mandatory audits of  active substance manufacturers by 
medicinal products' manufacturers 
Manufacturers of medicinal products are curren tly expected, in practice, to audit the 
manufacturer from whom they purchase the API. Importers verify whether the third-
country manufacturer has been involved in an audit. 
To strengthen this requirement, the require ments of audit – including shared audit by 
an accredited third person - could be spelled out clearly in the legislation. This would 
also mean that importers of finished pha rmaceutical products have to ensure that a 
non-EU manufacturer who supplies the EU  has audited the API manufacturing 
facilities. 
EN 39   EN 4.5.4.  Overview of policy options for specific objective n°4 
 
5. IMPACT ANALYSIS AND COMPARISON  
The analysis of impacts of the different policy options within each specific objective 
and their comparison is done against the baseline  set out above (cf. 2.3.).  
It has to be stressed that environmental impacts are negligible. Where they play a 
role, they are explicitly highlighted  (for example, chapter 5.1.1.1. and 5.3.1.). 
5.1. Specific objective n°1: Strengtheni ng product protection measures 
5.1.1.  Broad policy option n°1/1: Obligatory safety feature 
As set out above (cf. 4.2.2.), details for a safety feature would be set out under 
Comitology or in standards.65 Generally speaking, safety features can be efficient 
measures to contribute to the general objective. In the public  consultation, it was 
repeatedly highlighted that no  single safety feature is a “magic bullet”. However, it 
was also widely acknowledged that a comb ination of several techniques (concealed, 
open, forensic) can be an effective contri bution to strengthen product protection 
measures. Some of these safety features mi ght not be readable or detectable to the 
untrained eye of the patient/medical practitioner or may require specific reading devices. However, in these cases, verificatio n at retail level allows for detection of 
fake products. This holds in particular for product serialisation features: Authenticity 
of a product would be verified on an ad- hoc basis at the point  of wholesale or 
retail/pharmacy. 
5.1.1.1.  Policy option n°1/1a: All products 
On the positive side
, this option, if implemented e fficiently under Comitology, would 
allow for a far-reaching product-relate d protection covering all products. 
                                                 
65 An additional impact assessment may then be discuss technical details in more detail. 
EN 40   EN On the negative side, this policy option would cover products  which have a low 
risk-profile as they  are less costly than innovativ e drugs and thus typically not 
targeted by counterfeiters. This includes in particular OTC medicines and generic 
products. 
The costs of this option for the pharmaceutical industry  would be considerable66: 
Depending on the technique chosen67, one-off costs are between 1.35bn EUR 
(tamper proof feature) and 11.55bn EUR (product serialisation). Thes e costs relate in 
particular to necessary adaptations to packaging lines, and (in the case of serialisation) setting up an IT-structure. 
To this add annual costs in the range betw een 370m EUR (costs for manufacturers to 
run serialisation) and 1 070m EUR (tamper-p roof feature, in particular design and 
devising it) for EU manufacturers. 
This policy option would hit in particul ar the generic and over-the-counter (“ OTC ”) 
industry for two reasons: 
y Unlike branded/prescripti on industry, the OTC/generics sectors makes limited 
use of safety features today and would thus be hit stronger with new regulatory 
measures. 
y Products in these sectors are often (re lative) low-price products with lower 
margins. 
This aspect is particularly critical as the approx. 40% SMEs in the manufacturing 
sectors are mainly in the generic and OTC sector. 
Retail/pharmacy (one-off costs)
 
To these costs would add (in the case of seri alisation) costs for dispensers (i.e. shops 
selling OTC medicines and pharmacies) wh ich would have to be equipped with 
verification installations. Costs for readi ng devices and IT systems in shops and 
pharmacies can be – depending on the technique used - up to 2 250m EUR.68 This is 
particularly critical for normal retailers (i .e. shops, not pharmacies), who may have 
only a small share of their portfolio  dedicated to medicinal products. 
Moreover, on the negative side , it has to be recalled that, regarding serialisation, the 
data generated may be prone to abuse. Th is involves issues of  competition law and 
business confidentiality. 
However, a harmonised safety featur e can bring about important savings  for industry. 
These savings relate to the following: 
y Replacing national product codings:  As shown above (chapter 2.2.2.1.), a 
harmonised system of safety features  would allow for important savings. 
Industry estimates these savings to be as high as 1bn EUR per year. The public 
                                                 
66 Cf. Annex 2, point 1. 
67 In the framework of the implementation measures, an additional impact assessment may discuss 
technical details in more detail. 
68 Cf. Annex 2, point 1. 
EN 41   EN consultation has confirmed that a furt her fragmentation of the rules and 
techniques for product coding has to be expected, lead ing to further increases 
in costs, but without any added valu e. Thus, while this policy option is 
certainly costly, further fragmentation in  the EU is likely to bring about even 
higher costs in the long term. The situa tion can thus be described as follows: 
 Development of costs (schematic) for fragmented product-related measures
2008 2009 2010 2011 2012 2013 2014 2015Fragmented product coding
Harmonised ap proach
 
y Facilitated recalls:  Certain safety features fac ilitate recalls which can be 
rendered more targeted and thus more efficient. 
y Facilitated handling of product returns:  Apart from recalls, distributors and 
retailers/pharmacists return products for various reasons , such as expiration of 
the expiry date of the product and da mage to the packaging. Approx. 1% of 
products are returned  every year. Handling of re turns is curre ntly very 
burdensome and costly for industry. Certai n safety features could facilitate 
handling of product returns thus  leading to major savings. 
y Better access to data:  As in any market, it is crucial to have reliable market 
data. While access to certain information – depending on the technique chosen - would be restrict ed, even this limited info rmation should help industry 
to make savings in its expenditure on market research and consumer behaviour. 
In applying these considerations, the annua l savings for the pharmaceutical industry 
of a harmonised safety feat ure can total approx. 2.53bn EUR.
69 
                                                 
69 Cf. Annex 2, point 1. 
EN 42   EN These figures show that the high investment s for industry, in particular the one-off 
costs of up to 11bn EUR, would be quickly offset  by the savings achieved with this 
policy option. 
Apart from these savings, there are other potential gains . For example, certain safety 
features 
y help tackling fraudulent reimbursement claims to national social insurance 
schemes;  
y allow better targeting of pharmacovigilance; and 
y facilitate logistics and storage by wholesalers and retailers/pharmacies. 
5.1.1.2.  Policy option n°1/1b: Prescription medici nes with possibility of derogation 
Social impact/public he alth and related costs  
As set out above (4.2.2.), this policy optio n would restrict safety measures to 
prescription drugs, including a possibility to further ex clude certain products thus 
restricting the scope further. 
In terms of efficacy of this policy option, the benefits set out above would only apply 
to prescription medicines. While this reduces  efficacy of the measure, this could be 
justified in view of the fact that OTC medi cines are less likely to be targeted by 
counterfeiters as their price is typically lowe r. Indeed, there is so far no evidence that 
OTC medicines have been targeted by count erfeiters. Moreover, th e risks associated 
with ineffective OTC medicines are typically lower than drugs prescribed by a doctor. On the other hand, apart from ef ficacy, counterfeit OTC medicines may still 
be toxic, i.e. posing a risk to human hea lth. In addition, there is a risk that the 
exclusion of OTC drugs might simply dive rt illegal activities into that sector. 
Economic impact on businesses (compliance costs, including administrative costs)
 
Under this policy option, the OTC sector  (i.e. approx. 1000 companies of the 3700 
EU pharmaceutical companies) would not be  affected by costs. Costs would only 
have to be borne by the non-OTC companies. Their one-off costs would range 
(depending on the technique chosen70) between 1 080m EUR and 8 850m EUR. To 
this would add annual cost betw een approx. 185m EUR and 535m EUR.71 
It is important to note, that the OTC-sect or makes up a large part of the approx. 40% 
SME in the manufacturing sector. Moreover,  the part of the generics sector who 
produces OTC medicines (approx. 12%) w ould be outside the scope of these 
measures as well. 
Moreover, depending on the scope of th e derogation, other medicinal products 
manufacturers, including ge neric manufacturers, may be  exempted thus avoiding 
compliance costs. 
                                                 
70 An additional impact assessment may then discuss technical details in more detail. 
71 Cf. Annex 2, point 1. 
EN 43   EN In terms of the costs for pharmacies/retaile rs, costs would only hit the former. The 
precise costs depend on the technique employed. For example, in the case of 
serialisation, one-off costs for EU-pharm acies for IT installations and reading 
devices would be approx. 157m EUR.72 
5.1.1.3.  Policy option n°1/1c: Risk-based scope determined in Comitology 
Social impact/public he alth and related costs  
On the positive  side, this policy option would allow fo r a wide degree of flexibility to 
respond to changing patterns in counterfe it. On the other hand, it would create 
uncertainty as to the products addressed. Care would have to be taken that an 
implementation time remains sufficiently l ong if products are m oved into the scope 
of obligatory safety features. 
On the negative side , a risk-based (i.e. changing) sc ope brings about considerable 
inefficiencies: A reduced scope is likely to shift the activities of  counterfeiters from 
the “covered” to the “uncovered” scope . In view of the need of a long 
implementation time for regulatory change s, it would not be  possible for the 
regulator to “shift” the scope as swiftly as a counterfeiter. This was also highlighted 
by Member States and some industry s ectors during the pub lic consultation. 
Economic impact on businesses   
As set out above, different manufacturing s ectors are disproportiona tely affected by 
an obligatory safety feature. The flexibil ity concerning the scope would allow taking 
this into account. For example, apart fr om the OTC medicines (see above, policy 
option n°1/1b), a larger bulk of generic medicines (approx. 12% of generics are 
anyhow OITC medicines) could be exclude d from the scope depending on the risk 
profile. This would remove compliance bur dens not only from OTC medicines but 
also from generic producers, who often act under the same circumstances as the 
OTC-sector: Prices are typically lower and margins reduced. This, in turn, means that 
y the risk-profile of counterfeit is potentially less high; and 
y increase of costs for regulatory compliance are particularly critical. 
This aspect is important, as  the bulk of the 40% SMEs in the manufacturing sector 
are active in the OTC-sector and in the generics sector. 
Costs would depend largely on the question which produc ts are covered. For the 
purpose of this impact assessment, it shall be assumed that the scope would be 1/3 of 
all prescription drugs. Thus, one-off cost s for manufacturers (adapting packaging 
lines, necessary IT, etc.) would be in the range73 between 360m EUR and 
2 950m EUR. Annual costs would be in the range between 60m EUR and 
178m EUR. The costs for EU pharmacies, whic h would have to be equipped anyway, 
would remain the same. 
                                                 
72 Cf. Annex 2, point 1. 
73 An additional impact assessment may then be discuss technical details in more detail. 
EN 44   EN 5.1.2.  Broad policy option n°1/2: Prohibition of  manipulation of safety features 
Any safety feature – be it obligatory (cf.  4.2.2.) or voluntary – only makes sense if it 
is not removed or discarded subsequently by actors in the supply chain. To address 
this, the second broad policy option compleme nting the first broa d policy option is a 
ban of manipulation of safety features. 
This broad policy option can mean in prin ciple that practices of over-labelling of 
products is only possible if sa fety features remain detect able and intact. Moreover, 
re-packaging (i.e. exchanging the outer box)  could become unlawful. The extent of 
these consequences depends on the scope of this broad policy option. Regarding the scope, there are three mutually-exc lusive policy options discussed: 
5.1.2.1.  Policy option n°1/2a: All products 
Social impact/public he alth and related costs
 
The positive aspect  of this policy option lies in its contribution to the fight against 
counterfeiting by ensuring that the safety features remains effective. During the 
public consultation, in part icular the research-based  industry highlighted the 
importance of this measure, stressing that  expensive safety features (holograms, 
micro-printing etc.) become pointless if th ey can be subsequently destroyed by an 
actor in the distribution chain. The incidence in 200774 illustrates this: While it is true 
that a re-packager noticed the counterfei t packaging, this could not prevent that 
several thousand packs of medicines had b een passed on in the distribution chain. As 
these products had been re-packaged, it was not possible for subs equent distributors 
or the end-users to verify safety features. 
Moreover, apart from the issue of counterfe it, this policy option has several positive 
health-related effects.75 It would also address: 
y Errors in repackaging a nd relabeling and outdated patie nt information leaflets:  
According to information from the originator industry, between 2002 and 2005, 
700 packs of product faults due to re-p ackaging and re-labelling were found in 
the supply chain.76 With regard to faults ste mming from re-packaging, they 
would be addressed in this policy option. 
y Patients being confused by changes to the packaging:  Changes of the 
packaging cause in some cases irritati on amongst patients which may lead to 
wrong application of a medicinal product. 
y The possible inefficiencies of pharmacovigilance and recalls:  The re-packaging 
practices can render recalls by manuf acturers more difficult, as certain 
identification features have been  over-labelled or disposed of. 
Although risks vary in degree, they are inhe rent in the practices of re-packaging and 
re-labelling. 
                                                 
74 Cf. the example under 5.1.2. 
75 Cf. study “Safe medicines through parallel trade”, Europe Economics (2008), p. 32 ff.; (referred to in 
chapter 1.4. in this report). 
76 Cf. idem , p. 51. 
EN 45   EN On the negative side , it has to be recalled that re strictions of re-packaging would 
cause difficulties for those Member States with smaller national markets (e.g. Malta 
or, for the EEA Iceland) who depend on re-p ackaging in order to ensure a supply of 
medicinal products complying with nati onal language require ments. During the 
public consultation and consultation with Member States, these Member States/EEA-States stressed re peatedly that they strongly depended on practices of re-
labelling and re-packaging in order to ensure supply of pharmaceuticals to their 
markets. For these Member States/EEA-Sta tes, this policy option would amount to a 
major health problem. 
Direct impact on businesses
 
Parallel traders have to re-label or re-p ackage practically all the medicinal product 
packs in order to comply with national and Community requirements for language of 
the labelling and packaging sizes. Accordin g to this policy opt ion, parallel trade 
would thus in practice become impossible.  This was also highlighted by parallel 
traders in the public consultation. 
Parallel trade has a turnover of approx. 3.5-5bn EUR per year. It is estimated that the 
approx. 100 companies77 engaged in parallel trade have  annual profits of  the order of 
400-500 m EUR. Market share of parallel tr aders is approx. 5% in the EU, with 15% 
each in the UK and in Denmark, approx. 13% in Sweden, approx. 10% in the Netherlands, approx. 7-8% in Germ any, and approx. 2% in Finland.
78 
This turnover of parallel trad e would, in a first-round-effect , be lost, which raises the 
question of second-round/dist ributional effects. Here, it  can be assumed that the 
revenue and employment generated so far by parallel traders would be re-distributed 
mainly to two players: 
y to wholesale distributor in the importati on country: To the ex tent that parallel 
traders are de facto exercising wholesal e distribution, revenu es would shift to 
wholesale distributors of pharmaceutical products; and 
y to the research-based industry: It can be  assumed that part of the turnover (and 
profit) generated by the arbitrage of para llel traders would be  re-covered by the 
originator, thus profiting from the absence of intra-brand competition of the patented medicine. The research-based industry, in turn, may increase investment in R&D and production. 
In view of the proportion of share in the value-added chain, it can  be expected that 
patent holding manufacturers would profit most from distributional second-round 
effects. 
Direct impact on employment
 
                                                 
77 DE: approx. 25; UK: approx. 55; Scandinavia: approx. 10 – 15 ; Concerning UK, 14 companies account 
for approx. 50 – 60% turnover (80 – 85% volume) of parallel trade. 
78 Source: EFPIA, The pharmaceutical industry in figures (2 008), p. 5. In the pub lic consultation, these 
figures were largely confirmed. 
EN 46   EN It is estimated that the parallel tr ade sector employs approx. 10 000 persons79 in the 
EU. The bulk of these jobs relates to the re-packaging and re-labelling which is largely manual work. With a prohibition of  these practices, these jobs would, in a 
first-round effect, disappear. Here too, di stributional and sec ond-round effects have 
to be considered: 
Concerning distribution effect s to the benefit of wholes ale distributors, these may 
increase employment in orde r to respond to possible incr ease of demand. However, 
wholesale distribution is less labour-intensive than parallel trade, as it does not 
involve re-labelling and re-packaging, whic h is usually done manually. Apart from 
wholesalers, the shift of revenues to pa tent-holding pharmaceutical industry might 
lead to positive effects in employment in th is sector. However, here too, one has to 
caution that the employees of parallel traders might not necessarily have the mobility and education required by the research-based pharmaceutical sector. 
Impact in terms of innovation, pricing and availability of  medicinal products
 
Reduced parallel trade would have arguably impacts on innovation, pricing and 
availability . These effects depend on an  appraisal of the role of parallel trade in these 
respects. This role is highly controversial. It has been discussed by economists, lawyers and politicians for decades. Viewpoints differ largely. They are even publicly voiced from within the ECJ.
80 Moreover, factual evidence by “independent” 
economic studies is unreliable as it deliv ers views depending on who financed them. 
It is often argued that the ma in benefit of parallel is savi ngs for taxpayers and social 
security schemes in high-price countries. This was also stressed by parallel traders 
and health insurers in the public consultation. The difficu lty lies in the quantifying 
the savings: Here, figures are cont roversial and vary. For example: 
y A study by the London School of Econom ics contracted by Johnson&Johnson 
concluded, in 2005, that savings by parall el trade for health insurers are 
approx. 100m EUR in the six main importing countries;81 
y On the other hand, in a study conducte d by the Centre fo r Applied Health 
Services Research and Technology Assessment in 2006 for the European 
Association of Euro-Pharmaceutical Companies (“ EAEPC ”) concluded that 
direct savings in the main destination Member States (DK, SV, DE, UK) were 
441.5m EUR in 2004;82 
                                                 
79 DE: 2 000 – 3 000; UK: 3 000 – 5 000; Scandinavia: 1 000 - 1 500. 
80 Cf. Conclusions of AG D. Ruiz-Jarabo Colomer of 1 April 2008 in case C-468/06 Sot. Lélos Kai Sia EE 
(and others) vs. GlaxoSmithKline AEVE and Conclusions of AG F. G. Jacobs of 28 October 2004 in 
case C-53/03 Synetairismos Farmakopoion Aitolias & Akarnanias (Syfait) vs. GlaxoSmithKline AEVE. 
81 Kanavos , Costa-Font , Pharmaceutical parallel trade in Euro pe: stakeholder and competition effects, 
London (2004). 
82 Enemark , Møller Pedersen , Sørensen , The economic impact of parallel import of pharmaceuticals, 
University of Southern Denmark (2006). 
EN 47   EN y Similarly, a study by the York Health Economics Consortium and financed by 
EAEPC published in 2003 concludes that sa vings from parallel trade in 2002 in 
UK, Germany, Sweden, Netherlands and Denmark were 631m EUR83 
y In the public consultation, Germany has st ressed that savings for the statutory 
health insurance schemes in Germany were approx. 200m EUR in 2002 and assumed that they reach up to 380m EUR today. 
Moreover, apart from direct savings, it is argued that price decreases of patented 
medicines are largely due to lowe r prices of parallel imports.
84 
While it is generally acknow ledged that parallel trad e allows for intra-brand 
competition in patented medicines with savi ngs for public health insurers, there are, 
however, also important counter-arguments. 
In particular, it has to be recalled that  all high-price countries have regulatory 
mechanisms in place which allow controlli ng the expenditure for medicines. In order 
to achieve lower prices, parallel trade is not necessary, as these prices could normally have been achieved through lower re-imbursement prices anyhow.
85 
In addition,  y savings through parallel trade are not directly passed on to the patient, as 
patients make only a mall flat-rate c ontribution towards the price of the 
prescribed medicinal product;
86 
y parallel trade may lead to dry-outs of  supply and price increases of medicinal 
countries in low-price countries:87 For example, there were several product 
shortages in France in 2005 and in Greece in 2000 and 2001.88 
y parallel trade delays product launches in low-price countries;89 and 
                                                 
83 West , Mahon , Benefits to payers and patients from para llel trade, York Health Economics Consortium 
(2003). 
84 Ganslandt , Maskus , Parallel imports of pharmaceutical produ cts in the European  Union (2002), The 
research instittue of industrial economics, Working paper No. 546, 2001. 
85 Cf. conclusions of AG F. G. Jacobs of 28 October 2004 in case C-53/03 Synetairismos Farmakopoion 
Aitolias & Akarnanias (Syfait) vs Glaxosmithkline AEVE, paras. 99. However, in its recent ruling 
C-468/06 Sot. Lekos kai Sia EE v Glaxosmithkline of 16 September 2008, the Court stressed that, in its view, “it should be noted […] that the control exercised by Member States of over selling prices or the 
reimbursement of medicinal products does not entirely remove the prices of those products from the law 
of supply and demand” (para. 61). 
86 Cf. conclusions of AG F. G. Jacobs of 28 October 2004 in case C-53/03 Synetairismos Farmakopoion 
Aitolias & Akarnanias (Syfait) vs Glaxosmithkline AE VE, paras. 97, 99. However, in its recent ruling 
C-468/06 Sot. Lekos kai Sia EE v Glaxosmithkline of 16 September 2008, the Court stressed that, in its view, “[…] even in the Member St ates where the prices of medicine s are subject to State regulation, 
parallel trade is liable to exert pressure on prices an d, consequently, to create financial benefits not only 
for the social health insurance funds, but equally fo r the patients concerned, for whom the proportion of 
the price of medicines for which they are responsible will be lower” (para. 56). 
87 Cf. conclusions of AG F. G. Jacobs of 28 October 2004 in case C-53/03 Synetairismos Farmakopoion 
Aitolias & Akarnanias (Syfait) v Gl axosmithkline AEVE, paras. 91-92. 
88 Cf. study “Safe medicines through parallel trade”, Europe Economics (2008), p. 51; (referred to in 
chapter 1.4. in this report). 
EN 48   EN y parallel trade, albeit welcome for the exchequer and health insurance schemes, 
leads to losses of the pharmaceutical i ndustry thus reducing its resources to 
innovate and research: it is argued that total industry losses in the six main 
destination countries of parallel import amount to 755.5m EUR per year.90 
The environmental effects  of a major reduction in parallel trade would include less 
waste from re-packaging by parallel trader s of approx. 56m packs a year, and lower 
transport-related costs due to additional movement of products from lower-income 
Member States to higher-income Member States. 
5.1.2.2.  Policy option n°1/2b: Prescription produc ts with possibility of derogation 
On the negative side , this policy option would not address OTC medicines, which 
may not be secured with a safety feature. Ho wever, this aspect may be negligible as 
OTC medicines are not the main target for counterfeiters. 
On the positive side , this policy option would – in analogy to above 
(cf. 5.1.2.1.) - contribute to tackling counterfe it by rendering safe ty features more 
efficient. Moreover, it would allow addre ssing the concerns of smaller Member 
States concerning availability. In additi on, this policy option would provide some 
flexibility for the marketing authorisation holder to authorise third parties to manipulate the safety feature. This flexibility might be needed in instances where re-labelling is necessary for the marketing auth orisation holder to redirect a product to 
another market. 
With regard to the repackaging business
, this business would be reduced by the 
extent it trades prescription medicines and does not fall with in the derogations set out 
above (4.2.2.). It is realisti c to assume that the remain ing parallel trade would be 
approx. 12.5% of value as co mpared to today. This is  based on the following 
reasoning: 
y It is crucial to remember that parallel trade is based on arbitrage of price 
differences. These difference are typically greatest if prices are regulated which 
is usually not the case for OTC-medicine s. In practice, pa rallel traders handle 
OTC-medicines only to respond to clie nts’ wishes for a larger product 
portfolio. Thus, it can be estimated that the turnover value of prescription medicines is approx. 90% of products traded in parallel distribution. 
y To this add situations where re-packa ging/re-labelling would be permitted to 
ensure availability in small markets. Th e ten smallest markets in the EEA have 
approx. 4.7% market share.
91 It shall be assumed that approx 25% of this 
market share is supplied through re-packagers, i.e. approx. 1.2%. 
y Finally, under this policy option the marketing authorisation holder may 
authorise a re-packager to manipulate the safety feature to address public 
                                                                                                                                                         
89 Cf. Danzon , Wang , Wang , The impact of price regulation on launch delay of new drugs – evidence from 
twenty-five major markets in the 1990s, Health Economics 14.269 (2005). 
90 Kanavos , Costa-Font , Pharmaceutical parallel trade in Euro pe: stakeholder and competition effects, 
London (2004). 
91 The ten smallest Member States in the EEA have a market value of approx. 5 600m EUR (at ex-factory 
prices), i.e. approx. 4.7% of the EEA market. 
EN 49   EN health issues (for example, production of  emergency kits or diverting products 
already packaged into other regions). It is difficult to estimate the proportion to 
which these authorisations happen today. A value of 1.3% seems not 
unrealistic. 
Thus, taken together, in this policy opti on, the trade value of parallel trade would 
reduce to approx. 12.5%. 
In terms of employment , the immediate effect would be  a decrease of employment 
by parallel traders. It shall be assumed that the volume is proportionate to value. In 
addition, it is certain that the reduction of labour is proportionate to the reduction in 
volume traded, employment in this sector is  largely based on the manual work of re-
packaging or over-labelling of medicinal pr oducts. Thus, reduction of employment in 
first-round effect would be approx. 87.5%. 
With regard to distribution effects/sec ond-round effect, the r easoning set out above 
(5.1.2.1.) applies. This means that in sec ond-round effects wholesal e distributors and 
patent-holding manufacturers would gain market shares and increase value and 
volume. In this respect, the explanations  set out above (5.1.2. 1.) apply in analogy. 
5.1.2.3.  Policy option n°1/2c: Scope determined  under Comitology on a risk-basis 
This policy option gives the Commission the possi bility - on a risk-basis - to protect 
safety features by prohibiting their manipulation. This policy gives thus the 
possibility for a targeted approach. It woul d allow for a flexible response to trends 
observed by market actors and competent auth orities in the Member States. This is a 
particular advantage in an innovative sector  where risk patterns can change quickly. 
Also the issue of availability in smaller markets could be addre ssed. On the negative 
side, this policy option would only have a rest ricted impact on the problem related to 
the manipulation of safety features insofar as it would not necessarily cover all products. 
Concerning parallel trade
, the impact of this policy option depends on the product 
(groups) identified as high risk groups. In order to take an informed policy-decision, 
for the purpose of this impact assessment it shall be assumed that all (prescription) medicines whose efficacy has lifesaving characteristics would be subsequently 
included in the scope of this restriction. 
In terms of direct business impact, it ca n be assumed that the value of trade 
medicines would reduce by 50%. This rather  high number can be explained by the 
fact that products with lif e-saving characteristics are high-price products where 
arbitrage brings about relative higher margins for parallel traders. Regarding 
distribution/second-round effect, th e reasoning above (5.1.2.1.) applies. 
Employment in this sector is proportiona te to the volume of parallel trade (cf. 
5.1.2.1.). As life-saving products are typically high-price products, it can be assumed 
that a reduction of  parallel trade by 50% would mean a less than proportionate 
reduction of volume, i.e. approx. 30%. In  terms of second-round effects, the 
reasoning set out above (5.1.2.1.) applies. 
EN 50   EN 5.1.3.  Comparison of policy options for specific objective n°192, synergies 
In comparing the policy options relating to sa fety features, it becomes apparent that 
the scope of safety measures should encomp ass all prescription medicines (i.e. policy 
option n°1/1b). While it is tr ue that a risk-based approach may reduce costs for 
compliance, it is unlikely to achieve the obj ective: counterfeiters can too easily adapt 
their activities to changes of the scope of this measure. On the other hand, it is not 
possible for the regulator to amend a list of risk-product (groups) swiftly, since long 
implementation times are needed to ad apt production and packaging lines. 
It is noteworthy that the preferred policy option takes account of the fact that OTC 
producers (of which many are SME’s) ar e not affected by this policy option. 
As regards the second broad policy option, a de-facto  ban of repackaging/re-labelling 
for all products without exception would be counter-productive, as  it would lead to 
severe problems of availability in smaller markets. Therefore, the decision has to be 
made between the policy option n°1/2b and n°1/2c. Both policy options allow for a 
more flexible approach: Policy option n°1/2b has more far-reaching impacts on parallel trade. However, this policy opti on contributes better than option n°1/2c to 
the specific objective to st rengthen product safety ther eby protection public health. 
For the purpose of this impact assessment,  it is not necessary to conclude on a 
recommendation regarding the final choice in this regard. That final choice is always 
left to the College of Commissioners. Ra ther, in accordance with the Commission 
guidelines for impact assessments, the impacts have been presented with view to first-round effect and distribu tional effects, thus allowing for an informed political 
decision-making.
93 
Both broad policy options have synergetic eff ect, as safety features are of limited use 
if their manipulation is legally possible.  
                                                 
92 Cf. overview under 4.3.4. 
93 European commission impact assessment guidelines, (SEC(2005)791), with March 2006 update, section 
5.3. 
 
EN 51   EN Overview regarding the policy choices for the first speci fic objective: 
 
 
EN 52   EN 
 
 
            

 
EN 53   EN 5.2. Specific objective n°2: Ensuring re liability of wholesale distribution 
5.2.1.  Policy option n°2/1: Include “traders” into the scope of rules for safe distribution 
Social impact/public he alth and related costs  
This policy option would make actors in the distribution chain accountable, who 
have up until now not borne any responsibility as they were not legally considered as 
“wholesale distributors”. 
Example:  In the past, these actors - who often have very limited expertise in the 
sector – have been involved – in good or ba d faith – in trading counterfeit medicinal 
products. 
This should contribute to reducing the in flux of counterfeit medicinal products into 
the distribution chain. This chain is “as weak the weakest link”: If one actor is 
irresponsible and/or careless,  counterfeit products can pene trate the distribution chain 
and often remain undetected afterwards. 
The importance and effectiveness of this pol icy option has also be en highlighted by 
the WHO in its “Principles and Elements fo r National Legislation against counterfeit 
medical products”, as endorsed on 12 December 2007.94 
Economic impact on businesses (compliance costs, including administrative costs)  
Compliance costs, including administrative costs, are two-fold: costs for obtaining 
the wholesale authorisation (fees and admini strative costs) and costs for inspections 
(fees and administrative costs to submit information, accompany inspectors, etc.). These costs amount to 1.14m EUR one-off co sts (incl. 0.14m EUR administrative 
costs) plus 0.8m EUR per annum (inc l. 0.138m EUR administrative costs).
95 
5.2.2.  Policy option n°2/2: Strengthen in spection of compliance with GDP 
a) Social impact/public health and related costs  
As set out above (cf. 2.2.2.5.), enforcement a nd inspection are crucia l. This applies in 
particular to wholesalers, as they are often the “point of entry” for counterfeit 
products into the distribution chain. 
b) Economic impact on businesses (complia nce costs, including administrative 
costs)  
Costs would rise in terms of fees (which would be higher for CoCP compliant 
inspections) and administrative costs (r elated to paper work, accompanying 
inspectors and follow-up information). Th is rise would be approx. 8.27m EUR per 
year.96 
                                                 
94 http://www.who.int/impact/en/. 
95 Cf. Annex 3, point 1. 
96 Cf. Annex 3, point 2. 
 
EN 54   EN 5.2.3.  Policy option n°2/3: Tighten control and supervision of GMP/GDP through audits 
5.2.3.1.  Policy option n°2/3a: Mandatory regula r audits of supplying wholesalers 
Social impact/public he alth and related costs  
Audits as such do not detect counterfeiti ng. However, audits do help to single out 
companies that are untrustwor thy and they act as  a deterrent to rogue traders wanting 
to enter the business. They represent a ki nd of self control amongst business partners. 
The usefulness of obligatory audits to avoid “back-to-back” business was also 
stressed during the public consultation. 
Economic impact on businesses (compliance costs, including administrative costs)  
Any estimate of compliance costs has to differentiate between the business that is 
audited and the auditor. Moreover, it ha s to be borne in mind that, nowadays, 
responsible traders already pe rform audits at certain inte rvals. Finally, this policy 
option is based on a concept of shared thir d party audits as al ready practised today 
(above 4.3.3.1.). If shared third-party audit were not accepted, costs would increase accordingly. However, this also means devising ways of ensuring that third-party auditors are qualified and credible. 
On the basis of this assumption, the increas e in annual costs for compliance would be 
17.28m EUR (for the auditing distributor) and 2.3m EUR (for the audited party).
97 
5.2.3.2.  Policy-option n°2/3b: Risk-based audits of supplying wholesalers 
Social impact/public health and costs related thereto  
The difficulty of this policy option would lie  in the legal uncertainties created. In 
particular, it is difficu lt for the auditing party to asse ss when there is a risk of non-
compliant by the audited. As audit would be  mandatory in these cases, this creates 
considerable legal uncertainty. 
Economic impact on businesses (compliance costs, including administrative costs)  
In terms of compliance costs, these depend on the degree to which auditing 
companies have reason to suspect non-compliance. 
In view of the interest of the auditing company to cover-up itself, one can assume 
that the increase in audit activity compared to policy option n°2/3a would be largely the same (90%). 
The increase in annual costs of compliance would fall by 10% as compared to policy 
option n°2/3a (i.e. increase of annual costs by 15.6m EUR for auditing party and 
2.0m EUR for audited party). 
                                                
 
97 Cf. Annex 3, point 3. 
 
EN 55   EN 5.2.4.  Policy option n°2/4: Make wholesale ac tivities and compliance with GDP more 
transparent 
Social impact/public he alth and related costs  
A database of GDP authorisation and in spection certificates would provide an 
assurance about whether and when a wholes aler has been authorised and inspected, 
and considered GDP-compliant by the co mpetent authority. Such a data base 
therefore helps to create trust in the dist ribution chain and ensures the trustworthiness 
of the supplier. To avoid risks of “false assurance”, it has to be clear that the 
information in the database doe s not give relief from the re sponsibilities set out in the 
relevant legislation. 
Economic impact on businesses (compliance costs, including administrative costs)  
The GDP database would be managed by th e EMEA. Entries would be made by the 
national competent authorities. Their costs would be passed on to the wholesalers in 
the form of fees. It is important to note that there is already a database that gives an overview of GMP-compliant manufacturers . This approach would simply be 
extended - as regards legal provisions and technical arrangements - to the wholesalers . 
It can be expected that costs for administra tions will be passed on to the wholesalers. 
One-off costs would be passed on over a period of 10 years. Annual costs for 
industry would t hus be 0.3m EUR.
98 
Impact on Community/EMEA budget  
In view of the experiences with the existing EudraGMP database at Community level 
for manufacturers/importers , the costs for extending thes e IT-arrangement would be 
approx. 500 000 EUR over a time-frame of 2 years. 
5.2.5.  Comparison of policy options for specific objective n°299, synergies 
Policy options n°2/1, n°2/2 and n°2/4 are three very useful and cost-efficient tools to 
enhance enforcement, i.e. to improve and target inspections and controls. In this 
respect, these policy options take account of the fact that, rather than introducing new 
(expensive) rules, comparatively small changes by the legislator can enhance observance of existing  provisions, thereby ensuring a level playing field of regulatory 
provision for all competitors. 
On top of this comes audit. Audit is crucial and has to be the “main pillar” of 
scrutiny. Official inspections by competent authorities are merely a “supplement” to 
this. In view of the slight difference in co sts, relative to the significant difference in 
the efficacy of the measure, policy optio n n°2/3a should be preferred over option 
n°2/3b. 
                                                
 
98 Cf. Annex 3, point 4. 
99 Cf. overview under 4.4.5. 
 
EN 56   EN There are synergies between the chosen polic y options to the exte nt that the various 
options mutually support each other. For example, transparency of compliant wholesalers do contribute to the effici ent use of resources for inspections by 
administrations. 
 
EN 57   EN Overview regarding the policy choices for the second specific objective: 
 
 
EN 58   EN  
5.3. Specific objective n°3: Defining clea r obligations for import for export 
5.3.1.  Policy option n°3/1: Clarification that mar keting authorisation is required for all 
imported products 
Social impact/public he alth and related costs  
On the positive side , this policy option is clear a nd easily enforceable: Any product 
entering the EU-territory for storage/handli ng would be illegal if it were not covered 
by a marketing authorisation. 
On the negative side , it has to be remembered that  the large major ity of products 
imported for export do not comply with EU-legislation for marketing medicinal 
products because of marketing authorisati on requirements relating to the product and 
language requirements relating to the packag ing. This policy option would thus lead 
to a de facto  ban on the import-for-export trade in pharmaceuticals. This, in turn, 
would impact on third countries, in partic ular developing African countries, which 
are supplied with medicinal produc ts that transit through the EU. 
Economic impact on businesses (compliance costs, including administrative costs)  
A de facto  ban on transit and import-for-export w ould lead to a loss of revenue for 
mainly two actors: 
y EU-forwarding agents and, cargo companies,  incl. airlines, and airports: It is 
critical that, in practice, transit shipments via the EU are done by EU 
companies. If transit movements are dive rted into other regions, typically this 
business gets lost for EU-companies; 
y Other operators engaged in import fo r export, incl. storing and handling 
medicinal products. 
The nature of transited goods makes it very  difficult to estimate what proportion of 
pharmaceuticals entering the EU is imported for export: These activities are subject to only minimal customs control. They are not recorded in official trade statistics, let 
alone in official product-related stat istics. For these reasons, estimates and 
extrapolations which are based on: 
y statistical information from these air- and seaports concerning transit volume; 
y industry opinion and case studies on the revenue generated by  this trade; and 
y data on unlicensed wholesalers, and EU import volumes.
100 
In conclusion101, it can be estimated that this policy option would lead to a loss of 
annual revenue for EU-businesses of 4.651bn EUR. 
                                                 
100 See Annex 4, point 1 for details of all estimations and extrapolations. 
101 See Annex 4, point 1 for calculations. 
 
EN 59   EN Environmental impacts  
One may argue that there will be a reduction in transport, which is beneficial to the 
environment. However, a de-facto ban on EU transit trade would not necessarily 
mean a reduction in global shipping. It is more likely that trade would be diverted 
instead to other emerging hubs, pa rticularly in the Middle East. 
5.3.2.  Policy option n°3/2: Clarificati on of the legal provisions – applying rules for export 
wholesalers 
Social impact/public health and costs related thereto  
A positive impact  is a control of the economic ac tor handling products independently 
of whether the products are intended to be placed on the market or exported. 
Another positive “side-effect”  of this policy option concerns the protection of third 
country residents from counterfeit (und incorrectly stored) products: Even if 
counterfeit products are not ch annelled into the legal supply chain of the EU, they are 
usually exported to third countries. Protec tion in these third countries may be lower 
because: 
y enforcement structures are weaker (in certain developing countries, for 
example); 
y authorities refrain from enforcement,  as they (erroneously) regard incoming 
goods as Community goods; or 
y customs focus on bulk, imports, while goods may be “transited-on” by direct 
mail to the patient. 
While this aspect is not the main purpose of  this initiative, it is nevertheless a 
positive side-effect. This is even truer in the light of the global challenge presented by counterfeit medicinal products. 
Economic impact on businesses (compliance costs, including administrative costs)
 
The direct business costs of meeting the requirements of this policy would fall upon 
the 1 100 or so unlicensed actors hand ling medicinal products destined for 
exportation who would face one-off cost s of 2.35m EUR (caused by fees for 
authorisation and administrati ve costs related thereto) and annual costs (relating to 
costs for additional qualified personnel and administrative costs) of approx. 
40.1m EUR.102 
                                                 
102 Annex 4, point 2 . 
 
EN 60   EN 5.3.3.  Comparison of policy options for specific objective n°3103 
The two policy options discus sed for this specific objec tive have very different 
economic consequences, which are indirect ly proportional to th eir usefulness in 
achieving their objective. 
Policy option n°3/1, however, also has ne gative effects for third countries, whose 
supply of medicinal products may depend on transit through/via the EU. 
                                                 
103 Cf. overview under 4.5.4. 
 
EN 61   EN Overview regarding the policy choices for the third specific objective: 
æ 
 
EN 62   EN  
5.4. Specific objective n°4: Stepping  up scrutiny of API actors 
5.4.1.  Policy option n°4/1: Authorisation 
5.4.1.1.  Policy option n°4/1a: Authorisation (incl. in spection) by EU compet ent authorities of 
all manufacturers of API, incl. those in third countries supplying the EU 
Social impact/public health and costs related thereto  
In view of the difficulties with co mpliance experienced by third country 
manufacturers, this policy option would be a useful tool to achieve compliance with 
GMP, and to enhance the safety and efficacy of API not only when manufactured in the EU but also abroad. However, inspec tions by EU competen t authorities raise 
practical difficulties, as these inspections are resource-intensive  and usually require 
knowledge of a foreign language, and part ly expertise in foreign laws and 
regulations, as well as some intercultural communication skills. This is particularly 
critical in view of the la rge number of third-country AP I plants supplying the EU 
(approx. 20 000). 
This assessment is confirmed by looking at the U.S., where this policy option has 
been discussed recently in U.S. Congr ess: the U.S.-FDA opposed this approach, 
pointing out that U.S.-FDA inspections of China's API facilities alone would take 
over 30 years.
104 
Moreover, local authorities – provided that  the standards are sufficiently high and 
applied correctly – have easier access to plants and more efficient possibilities for sanctions. 
Economic impact on businesses (compliance costs, including administrative costs)
 
Economic impact on businesses relates to  authorisation and the subsequent 
inspections, which usually take place every three years. While there is no authorisation requirement in the EU at present, many EU-based API manufacturers 
are inspected regularly. Incr eases in costs would hit th ird-country manufacturers in 
particular, as they would face an increase in one-off costs (fees and administrative 
costs relating to authorisation) of  approx. 302.4m EUR (EU-manufacturers 
4.84m EUR) and increase in annual costs (f ees and administrative costs) of approx. 
100m EUR (EU-manufacturers 0.3m EUR).
105 
5.4.1.2.  Policy option n°4/1b: Authoris ation of all API manufactur ers/importers in the EU 
Social impact/public he alth and related costs  
The arguments set out for policy option n°4/1a  apply. However, the usefulness of this 
policy option would be more limited, as it would only address EU actors, while the 
bulk of API are currently being produced in  third countries. As far as third-country 
                                                 
104 Report from hearing of FDA Commissioner in Congress subcommittee on 21 April 2008. 
105 Cf. Annex 5, point 1 . 
 
EN 63   EN manufacturing is concerned, compliance wi th GDP would be monitored “via” the 
importer, i.e. the importer is only authorised  if he verifies the CMP compliance of the 
manufacturer abroad. 
Economic impact on businesses (compliance costs, including administrative costs)  
Costs to be borne by EU-businesses would consist essentially of one-off 
administrative costs and fees of 59.5m EUR ( one-off costs) and an increase of annual 
administrative costs (mainly for inspec tions and preparatory work) by 18.5m EUR.106 
5.4.1.3.  Policy option n°4/1c: Strengthen ed scrutiny of plants in 3rd countries if level of 
protection poses risks to public health in the EU 
Social impact/public he alth and related costs  
In view of the weak controls of AP I-production (above 2.2.2.4) , this policy option 
would be an important factor in strengt hening safeguards against counterfeit, sub-
standard API. It would crea te an incentive for third count ry authorities to step up 
regulation and enforcement of GMP for expo rted API and to br ing it up to a level 
that is acceptable in the Community. 
Economic impact on businesses (compliance costs, including administrative costs)  
The public consultation and consultations  with Member States experts have 
confirmed that approx. 80% of the plants in  third countries are not subject to proper 
rules and enforcement. 
Making these plants subject to rules equiva lent to those in the EU would involve 
administrative costs of approx. 31.8m EU R (details in Annex 5, point 3). 
It may also be argued th at another positive impact  of this policy op tion is that it 
improves the competitive position of the EU  API-manufacturer in relation to third 
country manufacturers. While it is true that  EU-based API manufacturers have found 
it hard to compete with non-EU-based API manufacturers, the issue of GMP-
compliance is a relatively minor aspect. In pa rticular in the API-sector, other factors - 
such as IP-rights issues, wages, and qualific ation of staff - are far more important. 
Nevertheless, this policy option may have a (minor) part to play in creating a level 
playing field with EU API manufacturers. 
5.4.2.  Policy option n°4/2: Notification 
5.4.2.1.  Policy option n°4/2a: Notification of EU and third country actors handling API 
Social impact/public health and costs related thereto  
A notification does not in itself address th e underlying causes of the problem set out 
above (2.2.2.4.). However, a notification is a helpful tool to render the existing 
mechanisms of risk-based inspections (cf. above 2.2.2.4.) more efficient: A notification allows the competent authority to screen potential non-compliant firms, 
                                                
 
106 Cf. Annex 5, point 2 . 
 
EN 64   EN for example by focussing on new participan ts in the sector or by focussing on 
participants with a certain risk-profile. 
A notification requirement for all actors handling API worldwide for the purpose of 
placing them on the EU market might thus we ll contribute to a facilitated and more 
targeted risk-based surveillance. 
However, it may not be realistic to assume that competent authorities have the 
resources to even screen (let alone assess ) the many notifications that have to be 
expected: Today, there are approx. 4 800 API manufacturers in th ird countries. To 
this add the distributors in third countries involved in the suppl y of the EU market, 
which may be in the range of 30 000.107 
Social impact/public health and costs related thereto  
One-off costs would be 1.7m EUR for thir d country actors, and 4.2m EUR for EU 
actors.108 
5.4.2.2.  Policy option n°4/2b: Notification only of EU actors handling API 
Social impact/public health and costs related thereto  
A notification procedure would contribute  to achieving the objective, as it would 
facilitate targeted inspections. It would a ddress the present situation where the actors 
within the EU are not known and thus inspections are less efficient. On the negative 
side, this policy option is less useful, as it  is aimed only at EU-based actors (cf. 
above 5.4.1.2.) 
Economic impact on businesses (compliance costs, including administrative costs)  
One-off costs for EU API manufacturer s and –importers would be 4.2m EUR.109 
5.4.3.  Policy option n°4/3: Mandator y audits of API manufacturers by medicinal products 
manufacturers 
Social impact/public he alth and related costs  
As shown above (cf. 5.2.3.1.), audit is a crucial technique  to ensure trust and co-
responsibility in the supply chain of medicinal produc ts - a view which was also 
widely confirmed in the public consultation. This hol ds even more true  in the field of 
API where, as shown above (cf. 2.2.2.4.), the manufacturer ensures the safety of the 
finished medicinal product. 
Economic impact on businesses (compliance costs, including administrative costs)  
Audits would be conducted as a shared third party audit (cf. above 4.5.3., 4.3.3.1.). 
The submissions in the public  consultation stressed that: 
                                                 
107 To compare, the number of API distri butors in the EU is approx. 5 500. 
108 Cf. Annex 5, point 4. 
109 Cf. Annex 5, point 4. 
 
EN 65   EN y The around 11 300 importers would have to ensure that an  audit had been 
carried out on their behalf. Even if the audits are in fact done by the supplier, it 
has to be assumed that their suppliers “pass on” the costs of the audits; and 
y Today, 60% of all manufacturers s upplying the EU al ready audit their 
API-suppliers in a reliable manner. 
In view of these facts, annual costs for industry (manufacturers and importers) would 
increase by 33.6m EUR. 
It has to be stressed that this sum is going to spread unevenly amongst the medicinal 
products manufacturer, depending on: 
y How many API are purchased by one medicinal products manufacturer; 
y How many medicinal products manufact urers purchase the same API; and 
y To what extent reliable a udits are already performed. 
In view of this, producers of generic medicines and of OTC medicines may be 
particularly affected: While several manu facturers may purchase the same API, the 
usually purchase many different API for th e product portfolio and produce very few 
(if any) API in-house. Theref ore, these producers may be pa rticularly affected by this 
policy option. This is an important aspect, as most of the generic/OTC producers are 
SMEs. 
5.4.4.  Comparison of policy options wi thin specific objective n°4110, synergies 
As with the discussion of specific object ive n°2, the aim of most policy options 
discussed under specific obj ective n°4 is to make surveillance, enforcement and 
inspections more efficient. However,  policy options n°4/1a and n°4/1b are 
disproportionate and too difficult to implemen t in practice. Particularly with regard 
to policy option n°4/1a, the aim can be ach ieved more quickly, more cheaply, and in 
a more pragmatic way, by means of policy option n°4/1c. Within policy option n°4/2, 
two mutually-exclusive policy options were  presented. The discussion shows that a 
notification of all actors – including those in thir d countries – would be counter-
effective, as the scope would be too la rge. Therefore, policy option n°4/2b is 
preferable. Policy option n°4/3 (audit) is an efficient tool to ensure compliance with 
good manufacturing practice of AP I with reasonable increa se in costs in the API 
sector. There are synergies between the chosen policy option to the extent that audit and enforcement are two parallel activitie s which may in practice support each other. 
                                                
 
110 Cf. overview under 4.6.4. 
 
EN 66   EN Overview regarding the policy choices for the fourth sp ecific objective: 
 
 
EN 67   EN 6. CONCLUSION - FINAL CHOICES OF POLICY OPTIONS111; IMPACTS ON SME  (“SME  
TEST ”) 
6.1. Final choices of policy options 
Assessing and comparing the po licy options for the four sp ecific objectives reveal 
the following: 
Concerning the specific objective to stre ngthen product protection , the first broad 
policy option  of an obligatory safety feature  means establishing a legal basis for 
the Commission to determine under Comitol ogy (or with standards) criteria and 
technicalities for an efficient safety feature (or a combination of them) such as a seal, 
a serialisation code, or a tamper-proof device. It is necessary to refer these 
implementing powers to the Commission: If c oncrete and detailed criteria for such a 
feature were established in secondary legislat ion, the necessary flexibility in a sector 
which evolves extremely quickly would get lost. Moreover, this approach gives the 
Commission the possibility to  ensure global convergence and synergies. Finally, a 
flexibility is needed to assess more in depth which safety feature (or which combination of them) is most effective and cost-efficient and allows considering an appropriate differentiati on for specific risks. 
With regard to the scope  of this broad policy measure there are various mutually-
exclusive options to be considered. Of these, the policy option to include all 
products  - without having regard to their risk -profile - into the scope should not be 
followed. This approach would include pr oducts into the scope which have a low 
risk-profile as they ar e typically not targeted by counterfeiters. This  aspect is critical, 
as costs for regulatory compliance can be high. 
Still on the scope, it would be equally wrong to have a merely risk-based approach 
based on implementing measures by the Commission . This measure would merely 
“shift” counterfeit activities into produc t groups which are not covered by specific 
product-related safety features. It would not be possible for the regulator to follow-up 
these changes of the risk -profile swiftly enough. 
Therefore, the preferred policy option is to  include in the scope all prescription 
medicines . This addresses the risk of counterfeit ers “shifting” their activities to other 
profitable product groups w ithin prescription produc ts. It would leave OTC-
medicines out of the scope, as these are typically no high-risk products. Moreover, it 
would reduce regulatory burden from the OT C sector, which consists of many SME. 
Concerning the second broad policy option , it is evident that safety features , in 
order to be efficient, must not be manipulated  by actors situated “in-between” the 
originator and the last actor  in the distribution chain /the patient. Otherwise, any 
safety feature - be it a regulatory obligat ion or voluntary – would not make sense.112  
                                                 
111 For an overview over the policy options see above (Chapter 4) and the table below. 
112 It is in particular not realistic to oblige manufacturers to render the technique  of a safety feature 
accessible to other actors in the distribution chain, w ho re-package medicines as  part of their business 
model.  
 
EN 68   EN Within this broad policy option, the quest ion is again the scope: Three possible 
scopes have been identified in the impact assessment. 
Within this broad policy option, as a first policy option, a general ban of 
manipulation of the safety  feature for all products  is considered. This would affect 
those distributors who re-label and, in so me cases, re-pack medicinal products. This 
is done by traders in order to ensure availa bility in small markets or in order to 
exploit the price differential due to differen ces in national prici ng regulations. To the 
extent that re-packaging and re-labelling imp lies a manipulation of the safety feature, 
these practices would be strongly impaired. Thus, availability of  medicinal products 
in small markets would be reduced wh ich raises public health concerns. 
This would be addressed in the second po licy option: this polic y option includes in 
the scope all prescription drugs but allows for a derogation  which permits, for in 
particular, addressing is sues of availability. 
The third policy option would a pproach the issue of flexib ility by providing merely a 
legal basis for the Commission to decide under Comitology  on a risk-basis which 
products are within the scope of the broad policy option. 
Both the second and the third policy option allow for flexib ility. The difference is the 
impact in parallel trade. For the purpose of the impact assessment it is not necessary 
to take a definite decision between thes e two options. Rather, it is up to the 
Commission as political actor to propose, in view of the arguments brought forward, 
an approach to the co-legislator. 
Concerning the specific objective to ensure reliab ility of wholesale distribution , 
some of the policy options may apply cumulatively. Three of the policy options (wider scope to include all actors in th e distribution chain, harmonised inspection 
provisions, database of compliant firms) are essentially improvements of Community 
law in order to facilitate control and inspections. All three options have been 
identified in the impact assessment report as efficient and effective measures to 
pursue the specific objective. The remaining policy option, audits, is in principle a 
useful means to ensure auto-surveilla nce by economic actors. The question is 
whether audits should be obligatory for all actors or only for actors selected on a risk 
basis. The impact assessment shows th at the latter approa ch brings about 
considerable legal uncertainty while only marginally reducing costs for regulatory compliance. Therefore, this impact assessm ent report supports obligatory audits for 
all actors in the supplying chain. 
As to the specific objective to define the obligations for import for export , two 
mutually exclusive policy options have b een discussed. Both policy options aim at 
clarifying the conditions under which medicinal products al legedly not destined for 
the EU market are brought into the EU customs territory for storage or minor 
handling. The business impact in terms of compliance costs varies considerably. The 
first policy option (requirement of marke ting authorisation) leads to important 
revenue-losses for EU-based freight companies, storage-companies and companies engaged in the “forwarding” of goods under certain customs procedures. Moreover, this policy option may have far-reaching imp acts on the supply of medicines to third 
countries, which often use the Community  customs territory as transit hub. The 
 
EN 69   EN second (wholesale exporter) policy option costs less, whil e being only slightly less 
effective. 
Finally, regarding the specific objective to step up scrutiny of actors handling active 
pharmaceutical ingredients (“API”) , within the broad polic y option “authorisation”, 
various mutually-exclusive policy options have been discussed. The assessment had 
to take in particular into account that most API producers are established in third countries. Therefore, it is in practice di fficult to subject these producers to an 
authorisation regime (i.e. the first policy option), as this woul d imply an inspection 
of the plant (or, at least, of certain documentation). On the other hand, submitting only the EU manufacturers/importers to authorisation (i.e. second policy option) 
brings about high administrati ve costs for these actors, wh ile the indirect scrutiny of 
authenticity/quality of imported API may ha ve inherent limitations. Therefore, the 
third policy option is favoured: the authoris ation requirement in third countries is 
only triggered if it is established that the regulatory framework in the respective third country does not ensure a comparable le vel of protection for human health for 
products exported to the EU. It  is expected that this po licy option would in practice 
raise standards in third c ountries without introducing an  expensive and resource-
intensive worldwide mechanism of EU-aut horisation. Moreover, this policy option 
would not necessarily place additional administrative costs on Community 
manufacturers. 
The broad policy option “authorisation” ma y be complemented by notifications of 
actors not covered by an authorisation oblig ation. Notifications are in principle a 
useful tool to render existing inspectio n schemes more targeted, risk-based and 
efficient. Against this benefit the additi onal administrative cost s generated by this 
policy option for EU businesses are acceptabl e. Within the broad policy option, the 
possibility of including ever y actor involved in the manuf acturing/distribution chain 
of products destined for the EU market ha s been discussed as one policy option. The 
administrative costs for third country actors would remain modest. However, this large scope would not effectively suppor t targeted inspections: the number of 
notifying parties would be too large and t hus render the entire  exercise counter-
productive. The alternative scope would be re stricted to companies established in the 
EU. This would still raise administrative co sts for EU businesses, but would be an 
equally effective measure to facilitate risk -based inspections and official controls. 
Finally, audits of API producers are, just as  for distributors of medicinal products, an 
important element of control amongst business partners, which can only be 
supplemented by risk-based contro ls of competent authorities. 
6.2. “SME test” 
In its Communication of July 2008 “’Think sm all first’ – A ‘Small Business Act’ for 
Europe”
113, the Commission commits to strengthen its assessment of the impact of 
forthcoming legislative and administra tive initiatives on SMEs (so-called 
“SME-test”). Commission guidelines for th e SME-test are stil l under development. 
Nevertheless, to reflect this Commissi on commitment already now, this chapter 
                                                 
113 COM(2008) 394 final. 
 
EN 70   EN addresses specifically the impact on SM E and discusses how the chosen policy 
options take into account the peculiarities of SME. 
The impact assessment shows that the main compliance costs are with the 
manufacturers of medicinal products who have to comply with safety features. 
Therefore, this aspect shall be looked  at specifically (below, 6.2.1.). The other 
chosen policy options are going to ne discussed under 6.2.2. 
6.2.1.  Safety features 
The policy option n°1/1b  concerns in particular ma nufacturers of prescription 
medicines. In the EU, approx. 30% of these companies fall within the definition of 
SME. 
Within this “SME share”, the majority of companies are manufacturers of generic 
medicines. These SME are going to profit from the possibility to pursue a risk-
adapted approach. This risk-adapted approach  relates to a variety of safety features, 
and in particular to the need  to “individualise” packages. 
Therefore, it can be expected that  both OTC manufact urers and generic 
manufacturers, who form the large share of SME-manufacturers in the 
pharmaceutical sector, are less a ffected by compliance costs. 
Moreover, in order to reduce th e impact of any measure rela ted to the safety feature, 
it is crucial to ensure that the implemen tation time of such a safety feature is 
sufficiently long. The longer the implementati on time of an obligatory safety feature, 
the cheaper it is – in particular for SME – to comply with these requirements. This logic also holds for distri butors/pharmacies who would verify a safety feature. 
6.2.2.  Other chosen policy options 
The impact on SME can be summarised as follows: 
y Policy option n°1/2b/c:
 Both policy options (the fina l choice is left open) affect 
exclusively parallel traders. With very  few exceptions, practically all of the 
approx. 100 parallel traders in the EU are SME.  
y Policy option n°2/1:  The actors referred to in this policy options are practically 
all SME. They would be hit by additiona l costs in order to comply with the 
requirements foreseen in this policy option. 
y Policy options n°2/2 and n°2/3a:  Out of the approx. 20 00 0 wholesalers in the 
EU, the large majority are SME. In orde r to mitigate costs, the possibility of 
third-party audits is foreseen under this  policy option. This means that costs for 
audits are shared amongst purch asing wholesale distributors. 
y Policy option n°3/3:  Exporter/transhipment companies usually fall within the 
SME definition as they are of limited si ze. In order to keep costs reasonably 
low, the policy option with the l east business impact was chosen. 
y Policy options n°4/1c and n°4/3:  As set out in the impact assessment, these 
costs would mainly concern third country plants. Howe ver, in a second round 
 
EN 71   EN effect, additional costs are likely to be passed on to the EU manufacturers of 
medicinal products. This would affect in particular producer of generic 
medicines, who purchase most active ingr edients from third countries. In the 
generic medicines sector, approx. 75% of manufacturers fall within the 
definition of SME. 
y Policy option n°4/2b:  Approx. 70-80% of all API manufacturers and importers 
are SME. While SME are thus mainly hit by the costs of this policy measure, it 
has to be stressed that costs remain modest. 
In order to reduce the impact of any measure re lated to the safety feature, it is crucial 
to ensure that the implemen tation time of these measures is sufficiently long. The 
longer the implementation time of additional re gulatory measures, the easier it is for 
companies – in particular for SME – to render the costs for compliance low. 
 
EN 72   EN Overview over impact of final policy choices (a pplying the baseline of a forecast 2011 to 2020):114 
Compliance costs (over period 2011-2020) in m EUR (first-round 
effect) 
API manufacturers Chosen policy 
options n° Med. 
product 
manuf./ 
importers Med. 
product 
wholesale 
distributors “Traders” wholes
alers 
engage
s in 
export EU 3rd 
country Phar
maci
es Impacts on parallel trade 
(first-round effect) Benefit 
(objective) 
in m EUR Other remarks 
1/1b ( no decision on 
technical feature now but in Comitology )         No decision on technical feature now 
but in Comitology  
 Seal 6 430         
 Serialisation 10 700      157   
1/2b/c ( no final 
choice – political appreciation )         
 1/2b 
(prescription drugs)        Parallel trade value/volume 
minus 87.5% 
 1/2c (risk basis)        Parallel trade value minus 
50% (volume: minus 30%) No final choice in impact assessment 
report – political appreciation  
2/1 (include 
“traders”)   5.14       
2/2 (Inspections)  83        
2/3a (Audits)  195        
2/4 (GDP Database)  3       Add. costs for database in EC budget: 
0.25m EUR 
3/2 (export wholesalers)    403     Add. costs for database in EC budget: 
0.25m EUR 
4/1c (3rd country 
equivalenz)      318    
4/2b (Notification)     4.2     
4/3 (Audits) 336         
TOTAL COSTS 6 766< 
11 036 281 5 403 4 318 157  Between 
9 500 and 
116 000 
(depending 
on 
scenario) 
 
                                                 
114 It is assumed that costs mount in line with inflation. 
 
EN 73   EN  
7. MONITORING AND EVALUATION  
The proposal, once adopted, will be impl emented in close cooperation with all 
stakeholders concerned. To this end, the Commission - and the EMEA - have already 
established valuable fora and are planning to use them in the future. 
The policy will also be monitored under the auspices of the Pharmaceutical 
Committee, in which the competent authorities meet on a regular basis. 
In order to measure progress,  in particular with regard  to improvements in product 
safety, the Commission intends  to continuously assess: 
• The development on the market with regard  to counterfeit medi cinal products; and 
• Any occurrence of undesirable events due  to counterfeit medicinal products. 
*** 
 
EN 74   EN Annex 1 – The actors involved in the produc tion and distribution of medicinal products  
The pharmaceutical sector at la rge involves many different play ers, including manufacturers, 
importers, (upstream) suppliers, (downstream) distributors and retailers/pharmacies. As the 
policy options discussed may im pact on these players, the ke y characteristics shall be 
described here. 
1. Medicinal products manufacturers 
The pharmaceutical industry is one of th e best performing high technology industries 
in Europe. This sector accounts for more  than 17% of the EU Research and 
Development (R&D) expenditure. Phar maceutical R&D spending typically 
represents around 15% of  sales in any year. 
There are around 3 700 pharmaceutical compan ies in the EU with a combined 
turnover of 170bn EUR; they employ more than 634 000 people.115 Of these 
companies,  
y approx. 1000 are producing generic, i. e. non-patented, medicinal products116; 
and (not necessarily mutually exclusive) 
y approx. 1 000 are active in the non-prescription sector. 
While only estimations exist, it can be assumed that approx. 40%117, i.e. approx. 
1500 pharmaceutical companies fall within th e SME definition of the EU. The large 
majority of these companies produc e generic and/or OTC medicines. 
While the EU has an export surplus of approx 35bn EUR, it is also a major import 
market with an import value of approx. 150bn EUR. 82% of imports of medicinal 
products come from the U.S. and Switzerland.118 
It is worth highlighting the large volume of traded medicinal products: Approx. 
29.7bn packs are traded in the EU per year. 50% of these packs are non-prescription 
(OTC) medicines, representi ng 15% of market share in value (retail price). 40-50% 
of these are generic medicine s, which account for approx. 20 % of the market share in 
value terms.119 
The OTC-market accounts for approx. 10 % in value of the total generic 
pharmaceutical market. 
In terms of packaging lines (r elevant for questions of new safety features), there are 
15 000 packaging lines operating for the EU market. Approx. 10 000 lines operate in 
the generics sector; 3000 of them  in the non-prescription sector. 
                                                 
115 Eurostat (2005). 
116 In terms of SME, approx. 5% of these companies have a turnover of >50m EUR per year. 
117 Based on more aggregated figu res of numbers of personnel empl oyed (“pharmaceuticals, medicinal 
chmicals, botanical product s“) of Eurostat (2004) 
118 Eurostat (2006). 
119 European Generic Medicines Association (2006). 
 
EN 75   EN A production line life cycle is approx. 20-25 y ears; a packaging line life cycle is 
approx. 10-15 years. 
While there are no precise fi gures, it is assumed that there are approx. 7 000 plant 
sites located within the EU. There are around 8 000 plants outside the EU which 
supply the Community market. 
The branded pharmaceutical industry is rather concentrated. The top ten 
manufacturers of medicinal products acc ount for approximately 80% of brand 
medicines sold in Europe. 
2. Importers of medicinal products 
There are approx. 11 300 importers of  medicinal products in the EU.  
3. Manufacturers of active ingredients (“suppliers”) 
The core of medicinal products is the active pharmaceutical ingredient (“ API”). API 
are produced by the medicinal products manufacturer or by the special chemicals industry. Depending on the complexity of th e substances, consider able know-how is 
needed in order to produce active substances. 
Today, there are approx. 700 companies in the EU, with 1 000 plants supplying the 
pharmaceutical sector with API. These companies employ approx. 80 000 people 
across Europe. 
In particular with regard to generic me dicinal products, a larg e part of API is 
produced by approx. 4500 API manufacturers based in third count ries. These third 
country manufacturers have approx. 20 000 pr oduction lines for API. Some 90% of 
these manufacturers (and the respective production lines) are in India
120 and China121 
alone.122,123 
Large generic companies have, on averag e, around 500-1000 s uppliers of active 
substances. Smaller generic companies ha ve on average around 200-500 suppliers of 
active substances. Non-generic comp anies have fewer such suppliers. 
4. Distributors 
The distribution business for pharmaceuticals is  highly sophisticated. This is due, in 
particular, to the need to ensure a constant supply to retailers and special needs, such 
as cooling. The features of the distribu tion business have evolved over time. There 
are many different players i nvolved in the distribution ch ain. Moreover, the number 
of intermediaries that trade medicinal products without actually handling them has 
been growing continuously: For example, today, in the UK alone, there are many 
hundreds of these intermediari es trading and supplying me dicinal products. There are 
around 20 000124 licensed wholesalers and approx.  1 000 unlicensed brokers/traders 
                                                 
120 Approx. 1000 manufacturers. 
121 Approx. 3000 manufacturers. 
122 Pollak , Fine chemicals – the industry and the business (2007), p. 164. 
123 Weinmann , Cerrutti , L’industrie pharmaceutique, Les notes bleues de Bercy 2006, n. 303, p.3. 
124 EMEA 
 
EN 76   EN of medicinal products in the EU, accounting for a tu rnover of 282 billion EUR and 
employing approx. 46 000 European workers.125  
Distributors have an importa nt role to play: they en sure a constant supply of 
medicinal products. On small markets, this  can sometimes include re-labelling and 
changing of leaflets to comply  with language requirements. 
One particular form of distribution126 is “parallel trade” . Parallel traders exploit the 
differences in prices in different Member  States by purchasing medicinal products in 
low-price countries and selli ng them in high-price countri es. These price differences 
are often a result of the various regulatory measures taken by Member States or 
social security schemes to contain expenditure on pharmaceuticals. As far as Member States are concerned, these measures do not infringe the fundamental freedom of free movement of goods as such.
127 As far as social security schemes are 
concerned, these have significant barg aining power on the demand side, and the 
relevant competition rules do in principle not apply to them.128 
In order to comply with the regulatory requirements (in particular regarding the 
language of the labelling and package in sert), medicinal products are usually 
re-labelled (approx. 60% of all parallel-traded products ) or re-packaged (approx. 
40% of all parallel-traded products).129 In practically all cases the leaflet is 
exchanged. Parallel traders handle approx. 140 million packs per year.130 They have 
a turnover of approx. 3.5 – 5bn EUR. It is esti mated that the annual profits of parallel 
traders in the EU are of the orde r of 400-500 m EUR. There are around 
100 companies131 engaging in parallel trade in the EU, employing approx. 10 000132 
persons. Market share of parallel traders is approx. 5% in the EU, with 15% each in 
the UK and in Denmark, approx. 13% in Sw eden, approx. 10% in the Netherlands, 
approx. 7-8% in Germany, and approx. 2% in Finland..133 
With few exceptions, parallel traders usually  fall within the definition of SME. 
5. Retailers/pharmacies  
Pharmacies typically retail the medicinal products for prescription drugs. There are 
approx. 150.000 pharmacies in the EU. With so me exceptions, notably  in the UK, the 
large majority of pharmacies are SMEs. 
                                                 
125 Eurostat (2005) 
126 For the purpose of this report, pa rallel traders are qualified as distributors. Note that, in regulatory 
terms, parallel traders are obliged to obtain  a “manufacturing licence” for their activities. 
127 Case 181/82, Roussel , ECR 1983, 3849. 
128 Case C-264/01, AOK Bundesverband , ECR 2004, I-2493. 
129 Approximative shares of relabelling: UK: 85%, Skandinavia: 50%; Germany: 70%. 
130 Europe Economics, Safe medicines through parallel trade (2008), p. 2. 
131 DE: approx. 25; UK: approx. 55; Scandinavia: approx. 10 – 15 ; Concerning UK, 14 companies account 
for approx. 50 – 60% turnover (80 – 85% volume) of parallel trade. 
132 DE: 2 000 – 3 000; UK: 3 000 – 5 000; Scandinavia: 1 000 - 1 500. 
133 Source: EFPIA, The pharmaceutical industry in figures (2 008), p. 5. In the pub lic consultation, these 
figures were largely confirmed. 
 
EN 77   EN Annex 2 – Compliance costs for policy option s under specific objective n°1 – estimations 
and calculations  
1. Policy option n°1/1a (all products) 
1.1. Example of costs for ta mper-proof feature: 
The costs for compliance depend very much  on the technique used. According to 
industry estimates, a tampe r-proof feature costs in av erage approx. 0.06 EUR per 
each of the 29.7bn packs dispensed per year.  
Annual costs are thus 1 069m EUR. To this add the adaption of the packaging lin es, which have to print the feature on the 
packaging. While there have been numerous  conflicting sources from within industry 
on the estimated numbers of packaging lines  in the EU, it can be estimated that 
approx. 15 000 packaging lines ( e) are operated by EU manuf acturers of medicinal 
products. The costs for adapting a packagi ng line to mass serialisation are approx. 
150 000 EUR ( f). 
Today, approx. 40% of all dispensed pack s (and the respective packaging lines) 
already contain an advanced  tamper-proof feature. 
One-off costs for a tamper-proof feature are thus 1.35bn EUR. 
1.2. Example of costs for serialisation: 
Manufacturers (one-off costs)
134 
The setting-up of the database is es timated to cost approx. 3m EUR ( a) for a firm 
with a large portfolio (approx. 2 500, b) and approx. 1.5m EUR ( c) for a firm with a 
small portfolio (approx. 1 200, d) of medicinal products. 
To this add the adaption of the packaging li nes, which have to print the serialisation 
number on the packaging. As set out above (point 1.1.) it can be estimated that 
approx. 15 000 packaging lines ( e) are operated by EU manuf acturers of medicinal 
products. The costs for adapting a packagi ng line to mass serialisation are approx. 
150 000 EUR ( f). 
One-off costs for manufacturers 
=++ fedcba * * * 11.55bn EUR 
Manufacturers (annual costs)  
Running costs are in particular  devising serial number, its  packaging, and printing 
devices, etc. Costs to implement and run a serialisation number would be approx. 
0.02 EUR ( g) per pack during the first 5 years of  operations. These costs reduce to 
                                                 
134 All estimations are based on industry information submitted during the public consultation. 
 
EN 78   EN 0.005 EUR ( h) per pack in the post first 5 years. Each year, 29.7bn packs ( i) are 
dispensed in the EU. 
Annual costs for manufacturers  (over period of 10 years):135 
=+
105** 5** ih ig371m EUR 
Pharmacies (one-off)  
For pharmacies  labour cost of scanni ng of the products has not  been considered, as 
this would be done when the product is di spensed (for example, while the patient 
pays the product). 
On the control side, a scanner to read the serialisation number costs approx. 
1 500 EUR per item (incl. software) ( e). It is assumed that  30% of all 150 000 EU 
pharmacies ( g) are already equipped with a scanner136. 
=%70**ge 157.5m EUR 
Shops (one-off):  
There is limited information about the num ber of retailers selling OTC medicines. 
Estimations range as high as 1.5m. As none  of these retailers  is equipped with 
scanners today, one-off costs would be approx. 2.25bn EUR. 
Savings:  
y Fragmentations of product coding  require companies to adapt the packaging to 
each national territory of the Community market. In the public consultation the difficulties created by a lack of harmonisation were repeatedly highlighted: Costs created by a lack of harmonisation in this respect are estimated to be 
presently as high as 1bn EUR per year (
f) for EU industry. 
y Facilitated recalls:  The 100 large companies ( b) are faced in average with 
approx. 2.5 recalls per year ( c). The other 3 600 comp anies account for approx. 
100 recalls per year ( d). The handling and losses of a recall are calculated by 
industry to be 2m EUR ( e) per recall. Industry estimates, that certain 
authenticity features allow for savings of the handling of 30% 
y Facilitated handling of product returns:  Apart from recalls distributors and 
retailers/pharmacists return products for various reasons , such as expiration of 
the product and damages of the packag ing. Approx. 1% of products are 
returned per year. Handling of these retu rns is very burdensome and costly for 
industry. According to industry estimates , certain authentici ty features would 
allow for savings in this area of 1bn EUR ( g) per year. 
                                                 
135 For the purpose of the calculation, it is assumed th at the number of dispen sed packs remains stable. 
136 During the public consultation, it was highlighted that many pharmacies use already today scanner 
technique. This holds in particular for Germany (25 000 pharmacies), which uses scanning techniques 
for invoicing medicinal products. 
 
EN 79   EN y A better access to data:  As in any market, it is crucial to have reliable market 
data. Today, industry spends approx. 800m  EUR per year to obtain market data 
(a). For the sake of this calculation, it shall be assumed that certain safety 
features could reduce these costs by 40%. 
Savings: 
() ( )=++ + + gf ed ecb a %30** %30*** %40* 2.53bn EUR 
2. Policy option n°1/1b (prescription only) 
2.1 Example of costs for tamper-proof feature: 
About 3 000 of the packaging lines are used  in the non-prescrip tion sector. Existing 
compliance is approx. 40%. The prescription sector counts for approx. 50% of dispensed packages per year. 
Thus, in applying the calculation above, a nnual costs would be approx. 534.6m EUR; 
one-off costs would be approx. 1.08bn EUR. 
2.2 Example of costs for serialisation: 
The costs for databases would not concern producers for OTC medicines: Thus, costs 
would only hit the approx. 2 000 producers with large portfolio and 700 producers 
with small portfolio. Costs for adapting pack aging lines would relate only to approx. 
12 000 non-OTC packaging lines. One-off costs would thus be 8 850m EUR. 
Running cost regarding non-OTC would be, in analogy to above (6.2.) 185.5m EUR. 
Regarding costs for pharmacies, etc., these would be essentially identical. However, 
retail shops would not be affected. 
 
EN 80   EN Annex 3 - Compliance costs for policy options under specific objective n°2 - estimations 
and calculations  
1. Policy option n°2/1 (“Include “t raders” into the scope of ru les for safe distribution”) 
According to industry sources, it can be a ssumed that there are approx. 1 000 actors 
in the distribution chain which are no t “wholesaler” as currently defined ( a). 
One-off costs for these players compose of  the administrative costs for notification 
(cf. Annex 8), which are 140 000 EUR ( c) 
In addition, there are one-off compliance cost s. They concern in particular alignment 
with the relevant provisions of the GDP, such as maintaining a quality system and 
record-keeping. It can be estimated that these one-o ff costs are approx. 5 000 EUR 
(b). 
One-off cost for EU-industry: 
=+cba* 5.14 m EUR 
2. Policy option n°2/2 
Strengthened enforcement means costs in te rms of compliance costs (e.g. fees for 
inspections) and administrative costs. 
Non-CoCP compliant GDP-inspections have  to be brought up to CoCP-standards: 
Industry estimates that 80% of the curre nt GDP inspections are not up to this 
standard. The fees for a CoCP-comp liant inspection would be approx. 
4 000 EUR ( d), i.e. 1 300 EUR ( e) more per inspection than a non-compliant 
inspection.137 This fee is higher than that in po int 1., as installations are typically 
more complex. Present administrative costs ( f) and future administrative costs ( g) are 
set out in Annex 8. It is assumed that inspections cont inue to be done in average 
every 3 years. There are 20 000 wholesalers in the EU ( h).138 
Increase of annual compliance costs for distributors 
Situation today  Policy option (100% of inspections 
at CoCP-standard) 
() ( )[] =+ + − f d edh%20* %80*323.53m EUR per 
year =+gdh*331.8m EUR per year 
Increase of annual costs: 8.27 m EUR per year 
3. Policy option n°2/3a 
                                                 
137 Information from industr y (EAEPC, FIRP) and comp etent authorities (MHRA). 
138 This addresses only the wholesalers licensed alread y today. The Unlicensed wholesalers are addressed 
under point 1. 
 
EN 81   EN In terms of compliance costs, the esti mation is based on th e possibility of 
third-party-audits. This approach would cont ribute to the reduction of audits of the 
same plant by making the results of an a udit available to a number of interested 
companies. There are 21 000 wholesalers139 (a) and approx. 15 000 manufacturing 
plants ( b) supplying medicinal products for the EU  market. Approx. 90% of them are 
audited insufficiently frequently: every 5 y ears instead of every 3 years, which would 
be an appropriate interval. The costs for purchasing a third party audit are approx. 
4 000 EUR ( c). Costs for the audited are essentially costs for providing information 
etc. It is estimated that this requires 15 man-hours ( d) with an average wage of 
35 EUR ( e). 
Compliance costs – audit of suppliers, including supplying manufacturers 
 Situation today (90% of companies audited 
every 5 years; 10% of companies audited 
every 3 years) Policy option (100% of 
companies audited every 3 
years) 
Auditors () ()=⎟
⎠⎞⎜
⎝⎛++⎟
⎠⎞⎜
⎝⎛+
3%10**
5%90** cba cba 
30.72m EUR ()
3*cba+= 
48m EUR 
Audited 
party () ()=⎟
⎠⎞⎜
⎝⎛++⎟
⎠⎞⎜
⎝⎛+
3%10***
5%90*** edba edba
4.03m EUR ()=+
3** edba 
6.3m EUR 
Increase of annual cost total: 19.55m EUR 
4. Policy option n°2/4 
The one-off cost to set up the database ( a) would be 1m EUR. Experience with the 
database for G MP-compliance shows that annual costs to run the database ( b) would 
be 100 000 EUR. There are 21 000 wholesalers140 in the EU ( c), which are inspected 
approx. every 3 years. The dura tion of updating the database ( d) is approx. 0.5h ( e), 
with an average labour cost of 29 EUR per hour ( f).141 
The annual costs which would be borne by industry are thus 
=⎟
⎠⎞⎜
⎝⎛++⎟
⎠⎞⎜
⎝⎛fecba**3 100.3m EUR 
                                                 
139 Including unlicensed wholesalers. 
140 Including unlicensed wholesalers. Note, that manufacturers  owe by definition a distribution licence and 
are thus not included in this calculation. 
141 Wages are lower than in the cost model in Annex 8, due to the different characteristics of the work. 
 
EN 82   EN Annex 4 - Compliance costs for policy options under specific objective n°3 - estimations 
and calculations  
1. Policy option n°3/1 
The “import for export” business generate s revenues for the cargo business and the 
handling and warehouse business. 
While the majority of general cargo is transported by sea, the transport of finished 
pharmaceuticals likely to be more evenly dist ributed between sea and air. This is due 
to the fact that many pharmaceutical products  are relatively light and sensitive to 
storage conditions (relating to temperature)  and time spent in transit, for which air 
travel is better suited. Pharmaceuticals are also high-value goods and insurance 
issues make it less risky for them to be  transported by air. In addition (this is 
particularly applicable to individual im porters), shipping cargo requires a minimum 
weight which makes it competitive to tran sport smaller consignments by air. Land 
transport makes up an almost negligible pe rcentage of the transit of pharmaceuticals 
between non-EU countries through the EU.142 
For this reason it is assumed that for the large-scale transit of pharmaceuticals, 50 per 
cent travel by air and 50 per cent by sea.  For transport relating to individual 
importers for export, who are more likely to move smaller amounts, 60 per cent is 
assumed to travel by air and 40 per cent by sea.143 
Transit volumes and revenues have been estimated separately for air and sea for the 
main hub air- and seaports in the EU. The revenue figures for both shipping and 
flying include all revenue generated by th e movements: for forwarding agencies, 
airlines, airports, shipping lines and sea ports. 
A. Sea Transit 
Figure Five main EU Ports Source 
PT: estimated weight of 
pharmaceuticals transhipped through from outside the EU (1,000 tons)
144 710 Estimate based on evidence from Hamburg, 
applied to Rotterdam, Antwerp, Hamburg, Amsterdam, Le Havre
145 
AR: average revenue per shipment 
of 10 tons146 €4,500 Typical sea route (Laos to Brazil) via EU of 
transited pharmaceuticals;  opinion of Quality 
Director for EMEA: DHL Excel Supply Chain 
Cost from TransGlobal Express and 
PharmaExport 
Includes total revenue to all stakeholders 
(couriers, shipping lines, seaports) which would be lost. 
Total revenue generated across all €319m 
                                                 
142 Opinion of Quality Director DHL Excel Supply Chain.  It is competitive to transport a consignment of 
under 12 pallets by air. 
143 Opinion of Quality Director for EMEA: DHL Excel Supply Chain. 
144 Across the five main ports. 
145 Choice based on Rotterdam Port Authority: Industry and Bulk Cargo; TransGlobal Express; Global 
Shipping; Antwerp Port Authority. 
146 Average weight of shipment: 24 pallets at 417kg each. 
 
EN 83   EN ports [PT/10*AR] 
 
B. Air transit 
Figure Six main EU airports Source 
PT: estimated number of transit 
movements of pharmaceuticals147 14,193 Estimate based on evidence from 
UK, applied to Frankfurt, Schiphol, Heathrow, Charles de Gaulle, 
Luxembourg, Milan
148 
AR: average revenue per 
movement149 €39,963 Typical route from India to 
Nigeria, based on evidence from 
MHRA150  
Average weight of 4,170kg per 
movement151  
Total revenue generated across all airports [PT*AR] €567m  
 
C. Handling and storage 
Figure Whole EU Source 
NI = number of unauthorised 
importers 3,336 MHRA consulting with HMRC152 
TC = total transport costs per firm 
per year €408,150 Average of 45 transport 
movements of 5 pallets each per 
year per firm; 60% by air and 40% 
by sea.  
Details in Transit Calculations 
Annex 
BW = bonded warehouse storage 
revenue per firm per year €3,673 Total of €12,252,794 revenue lost 
across all 3,336 firms, based on 
53% of all import-for-export 
pharmaceuticals being stored in 
warehouses. 
Costs from DTZ Consulting and 
Research (2005) “Benchmark study: Antwerp, Le Havre, 
Rotterdam” 
VA = value-added per firm153  €716,578 60% of European wholesaler 
industry average. 
EF = employment per firm 16 60% of industry average: Annual 
Business Inquiry (2007)  
                                                 
147 Across the six main airports. 
148 Choice based on: De La Fuente Layos (2005) “Statis tics in Focus: Transport”, Eurostat publications; 
and opinion of Quality Director for EMEA: DHL Excel Supply Chain. 
149 This is the total revenue generated by the movment. It is based on quotes from couriers (DHL; 
TransGlobal Express) and transport industry experts (PharmaExport; EMEA Supply Chain) and 
consists of all revenue to couriers, forwarding ag ents, airlines and airports (including handling and 
processing charges). It was not possible to separate the figure into these various components, but it is 
sufficient to represent the total loss of transport revenue resulting from the policy.  
150 Medicines and Healthcare products Regulatory Agency, UK. 
151 10 pallets at average 417kg each. More than 10 pallets not likely to travel by air. 
152 UK Revenue and Customs. 
153 Contribution to GNP. Made up of net profit and wages. 
 
EN 84   EN [TC+BW+VA]*NI €3,764m  
 Total revenue generated across all 
importers  
  
  
  
Total employment lost154  53,376 [EF*NI] 
 
Total for policy option 
Total revenue lost from policy per year  
[A + B + C] €4,651m 
2. Policy option n°3/2 
It is estimated that the number of w holesale exporters lo cated in the EU ( a) is 
1 000.155 
The one-off costs  relate to the fees for the wh olesale authorisation (2 000 EUR, f) 
and the one-off costs administrative costs related to it ( g)156: 
()=+ fag * 2.35m EUR 
In terms of annual costs , a Responsible Person (“ RP”) would be required at the 
importation site. A RP’s annual salary ( b) is approx. 35 000 EUR.157 
The fee for wholesaler inspections ( d) is 4 000 EUR. GDP inspections are schedules 
for every three years. To this  add the administrative costs ( e).158 
The annual costs are therefore as follows: 
() =+⎟
⎠⎞⎜
⎝⎛+ edaba3** 40.1m EUR 
                                                 
154 It is assumed that only employment will be lost among importers, not at ports or airports given small 
ratios of pharmaceuticals to all other cargo. 
155 Based on the assumption that one third of the economic actors referred to under point NI in policy 
option n°3/1 have not wholesaler authorisation. 
156 Cf. Annex 8. 
157 Industry estimation. 
158 Cf. Annex 8. 
 
EN 85   EN  
Annex 5 - Compliance costs for broad policy option n°4 - estimations and calculations  
1. Policy option n°4/1a 
Costs for authorisation (incl. the necessary inspection)  
There are approx. 20 000 API production lines159 (a) in 3rd countries and 700 manufactures 
with approx. 1 000 API production lines ( f) in the EU. 
Accompanying inspectors160 takes approx. 24 man-hours ( b) at costs of approx. 5 EUR per 
hour ( c) in third countries – a rate justified by the fact that the large majority of these 
companies are established in India and China. To this add administrative costs in the EU (cf. Annex 8, 
g). 
Fees for authorisation are 4 000 EUR for within the EU ( h) and would be approx. 15 000 for 
plants outside the EU161 (i). 
Costs for subsequent inspections  
The frequency of inspections would be approx. every 3 years. Fees for inspections are 
assumed to be similar to fees for authorisation. 
It is assumed that, today 80% of all EU-API plants and 1% of a ll API plants in third countries 
are inspected by the EU. 
Administrative costs fo r EU companies today ( j) and with the policy option ( k) are in Annex 
8. For administrative costs for non-EU companies, refer to above. 
Increase in one-off costs: 
 Costs today Costs of policy option 
EU companies Zero =+ghf* 4.84m EUR  
Third country companies Zero = + cbaia ** * 302.4m EUR
Total increase: EU-companies:4.84m E UR; Third county companies: 302.4m EUR 
Increase in annual compliance costs: 
 Costs today Costs of policy option 
                                                 
159 The number of production lines is essentially more relevant than the number of companies, as audits 
and inspections are usually made on the basis of active ingredient (i.e. its production line), not physical 
plant. 
160 These costs are not reproduced in Annex 8, as they relate exclusively to the costs for third country 
manufacturers. 
161 Taking account of costs fo r transfer of inspectors. 
 
EN 86   EN EU companies =+jhf
3%80**1.29m EUR  =+khf
3*1.61m EUR  
Third country 
companies =⎟
⎠⎞⎜
⎝⎛+ %1*3**
3* cbaia1m EUR =⎟
⎠⎞⎜
⎝⎛+3**
3* cbaia100.8m EUR
Total increase: EU-companies: 0.3m E UR; Third county companies: 100m EUR 
2. Policy option n°4/1b 
Costs for authorisation (incl. the necessary inspection)  
There are approx. 1 000 API production lines ( a) and 11 300 importers in the EU ( d). 
Fees for authorisation are 4 000 EUR ( b). 
Administrative costs ( c) for authorisations ar e set out in Annex 8. 
One-off costs would thus be: 
() =++ cbda * 59.532m EUR 
Costs for subsequent inspections  
The frequency of inspections would be approx. every 3 years. Fees for inspections are 
assumed to be similar to fees for authorisation. 
It is assumed that, today 80% of all EU-API  production lines but none of the importing sites 
are inspected by EU competent authorities. 
Administrative costs for EU companies today ( d) and with the policy option ( e) are in Annex 
8. For administrative costs for non-EU companies, refer to above. 
Increase in annual compliance costs: 
Costs today Costs of policy option 
=+db a
3*%80* 1.3 EUR  ()=++ebda
3*19.8m EUR  
Increase in annual costs: 18.5m EUR 
3. Policy option n°4/1c 
Third-country manufacturers: It is assumed that approx. 80% of the a pprox. 20 000 third-country API production line (
a), 
i.e. 16 000 API plants, are not subject to regul ation and enforcement of Community standard. 
 
EN 87   EN Accompanying inspectors162 would take approx. 24 man-hours ( b) at costs of approx. 5 EUR 
per hour ( c). The frequency of inspections would be approx. every 3 years. To this add the 
fees for inspections by officials in the relevant third country (fees ( e) are approx. 2 000 EUR). 
Increase of annual compliance costs for th ird-country API manufacturers due to 
inspections (incl. administrative costs): 
Costs today =⎟
⎠⎞⎜
⎝⎛+ %20*3*
3** aecba8.16m EUR  
Costs (policy option) =+3*
3** aecba40.8m EUR  
Increase in costs: 31.84m EUR 
4. Policy options n°4/2a and n°4/2b 
With regard to third country actors supplying the EU , notification by the approx. 34 500 third 
country manufacturers would cost them approx. 5 EUR per hour163 and take approx. 10h. 
Costs would thus be 1.7m EUR. 
There are approx. 700 manufactures ( a) and 11 300 importers of API in the EU ( d). 
Administrative costs are 4.2m EUR (cf. Annex 8). 
5. Policy option n°4/3 
Costs for a shared third party audit are in average approx. 12 000 EUR ( a). This figure takes 
into account: 
– the price differences between in-hou se audit and third party audit; and 
– the fact that most audits would be pe rformed in third countries (i.e. additional 
costs for transfer etc.) 
There are approx. 21 000 API production lines ( b) which would have to be audited every 
three years. Note that, accordin g to industry information, audit is already widely undertaken. 
Industry suggests that, already today, 60% of all manufacturers (third country and EU), who 
place medicines on the EU market, audit suffici ently all their API-suppliers. Against this, it 
shall be assumed that 60% of all API supplier ar e sufficiently audited. With regard to third 
country manufacturers, they usually pass on costs for audit to the EU importer. On the basis 
of this, it can be estimated that  
Additional annual costs for auditing  (EU-) manufacturers and importers: 
3%40**ba33.6m EUR 
                                                 
162 These costs are not reproduced in Annex 8, as they relate exclusively to the costs for third country 
manufacturers. 
163 Cf. explanation for this rather low sum under point 1. 
 
EN 88   EN Increase of costs for the audited are largel y to be born by API ma nufacturers in third 
countries, as EU-based API manufactu rer are already audited regularly. 
 
EN 89   EN  
Annex 6 - Increase of counterfeit in the legal supply chain in the fu ture: estimations and 
calculations  
It is not possible to quantify how many counterfeit medicines enter the legal supply chain in 
the EU. Estimations could be based on extrapolations from national figures. 
In view of the figures of count erfeit medicines detected in th e Member States in 2007, and 
taking into account that these were 30% of all counterfeit packs detected , one could argue that 
there were in 2007 approx. 1.5m counterfeit medi cinal products in the legal supply chain in 
the EU ( a2007), i.e. approx. 0.005% (i.e. 1 product out  of 20 000) of all medicinal products. 
On the basis of these figures, one could de velop a baseline for the timeframe until 2020: 
The “optimistic” baseline  of non-action shall be that these are all the counterfeit medicinal 
products in the legal supply chain and that this figure remains st able. In view of the de-facto 
increase of the volume of the market, this baseline is de-facto  a decrease in counterfeit in the 
legal supply chain. 
This means that, as of 2008 until 2020, 19.5m packs  in the legal supply chain will have been 
counterfeit. 
The “realistic” baseline  assumes an increase of counter feit medicinal products by 10% per 
year ( ir) compared to the previous year.  
One can thus model the realistic scenario for 2020 ( a2020) the total number of counterfeit 
packs made available until then through the legal distribution chain as follows: 
()=+ =∑−
=k
rn
ki a a 11
02007 2020 42m packs  
This would mean that, by 2020, 0.01% of all medicinal products disp ensed via the legal 
supply will have been counterfeit. 
A “pessimistic” baseline  scenario” of non-action shall be an increase by 30% per year ( ip). A 
pessimist scenario for 2020 ( a2020) would be: 
()=+ =∑−
=k
pn
ki a a 11
02007 2020 192m packs  
This means that, by 2020, 0.05% of all pres cription medicinal products  dispensed through the 
legal supply chain will have been counterfeit products. 
 
EN 90   EN Annex 7 – Direct/indirect costs and other costs attributable to counterfeit in the legal 
supply chain: estimations and calculations  
On the basis of the estimations above (Annex 6), one can establish the costs associated to non-
action.  
These costs depend as to whether the “optimistic ”, the “realistic” or the “pessimistic” baseline 
apply (cf. Annex 6).  
It has to be stressed that th e policy options discusse d in this impact assessment which aim at 
attaining the objective would only be effective once adopted by the co-legislator, transposed 
by Member States applied by economic operators , and enforced by competent authorities. 
This can be expected as of 2011.  
Therefore, the costs are linke d to the following scenarios:  
y “optimistic scenario”: ()= =∑−
=kn
ka a 11
02011 2020 15m packs  
y “realistic scenario”: ()=+ =∑−
=kn
ka a 1.011
02011 2020 35m packs  
y “pessimistic scenario”. ()=+ =∑−
=kn
ka a 3.011
02011 2020 183m packs  
Costs:  
At the outset, it shall be stress ed that the monetised benefits are expected to mount in line 
with inflation.  
Direct costs : 
y Costs for hospitalisation as conseque nce of treatment involving counterfeit 
medicines:  Costs for hospitalisation are on average 480 EUR per day in the EU164. 
The causality between counterfeit medi cines and hospitalis ation is largely 
unexplored. However, as set out above (2.2 .), counterfeiters targ et increasingly life-
saving drugs which are typically admini stered precisely in order to avoid 
hospitalisation. Examples of the past  include medicines for treatment of: 
– thrombosis prevention; – heart attacks and strokes; – influenza; 
– prostate cancer.
165 
                                                 
164 WHO (2005). 
165 Cf. chapter 2.2. 
 
EN 91   EN  Therefore, it is a rather conservative a pproach to assume for the purpose of this 
impact assessment that 5% of the count erfeit packs in the lawful supply chain 
prolonged hospitalisation in average by 5 days. This means that the projected 
baseline until 2020 of costs of non-action with  regard to avoidabl e hospitalisation in 
the EU can be estimated to lie between 1.8bn EUR and 22bn EUR . 
y Costs occurring in an ambul atory setting for treating the consequences of a treatment 
involving counterfeit medicines:  These costs are essent ially based on general 
practitioner (“ GP”) consultations caused by counter feit medicines which were toxic 
or of lower or too high efficacy. The averag e hourly wage rate for a GP across the 
EU is 31 EUR.166 One can assume that 20% of all counterfeit medicinal packs in the 
legal supply chain require additional ambulat ory treatment by a GP of 3 sessions of 
20 minutes each. This means that the projected baseline until 2020 of costs of non-action with regard to avoidable medical  treatment by a GP in the EU can be 
estimated to lie 
between 93m EUR and 1.1bn EUR . 
Indirect costs : 
To quantify and monetise impacts on human hea lth, the concept of Quality-Adjusted Life 
Years (“ QALYs ”), which is widely employed for estimating the cost-effectiveness of 
pharmaceuticals, shall be used.167 QALYs combine effects on life expectancy and quality of 
life within a single measure, with 1 QUALY being e qual to one year of life expectancy in full 
health. Note, that Disability-Adjusted Life Years (“ DALYs ”) are a similar concept and 
represent a combined measure of  lost years of life and lost quality of life resulting from 
disease. For the purpose of this assessment the value of DALY shall be considered as similar 
to the QALY.168 
There are no studies available on the average change of QALY due  to counterfeit medicines. 
This would be anyhow difficult, as very differe nt medicines are affected. In recent impact 
assessments of the Commission related to wrong prescriptions, an average change of QALY 
for each instance of –0.170 was assumed on the basis of case studies.169 Concerning 
counterfeit medicines, it shall be assumed that the relevant in stance - just as for (prolonged) 
hospitalisation - would be 5% of packs of counter feit medicines in the legal supply chain. For 
the purpose of this impact assessment, account shall be taken of a recent study assuming a 
medium value of QALY of 60 000 EUR.170 
On the basis of these assumptions, it can be es timated that the indirect costs of counterfeit 
medicines based on QALY are approx. 765m EUR per year. This means that the projected 
baseline until 2020 of indirect costs of non-act ion based on QALY can be estimated to lie 
between 7.65bn EUR and 93bn EUR . 
                                                 
166 Based on OECD and Eurostat. Cf. also Impact Assessment Report on Commission proposal for a 
Directive amending Directive 2001/83/EC on information to patients (SEC(2008) […]) , Annex 2, point 
A1.32. 
167 Cf. Impact Assessment Report on Commission proposal for a Directive amending Directive 
2001/83/EC on information to patients (SEC(2008) […]) , Annex 2, point A1.17 ff. 
168 Cf. WHO Burden of Disease data, http://www.w ho.int/healthinfo/bodestimates/en/index.html. 
169 Cf. Impact Assessment Report on Commission proposal for a Directive amending Directive 
2001/83/EC on information to patients (SEC(2008) […]) , Annex 2, point A1.17 ff. 
170 Mason et. al., Estimating a monetary value of a QAL Y from existing UK values of prevented fatalities 
and serious injuries (2006). 
 
EN 92   EN Other quantifiable burdens:  
y The exact costs depend on the quantity of products concerned and the depth of 
percolation of the product into the supply ch ain. With regard to the former, it is 
crucial to stress that recalls  usually involve a larger qu antity of products than only 
the counterfeit ones. Industry sources estimat e that for one Member State of the size 
of the UK the recall of 30 000 products of three different batch-numbers which have 
reached the retail/pharmacy le vel has direct costs of a pprox. 10m EUR. This would 
mean that a recall in the entire EEA -area costs business approx. 60–80m EUR. 
y Costs for destroying seized counterfei t products which at present fall on the 
rightholder. 
 
EN 93   EN Annex 8 - Increase in annual administrative costs171 
. 
Annual and one-off administrative costs for EU businesses discussed in the policy options 
 Tariff
(€ 
per 
hour) 
Time 
(hour) Price 
(per 
action or 
equip) Freq 
(per 
year) Nbr 
of  
entitiesTotal nbr 
of  
actions Total  
cost 
(annually) Total  
cost (one-off) 
Policy option in IA (present 
situation or policy option) Type of obligation Description of required 
action Annual 
costs/one-
off cost Target group i e i e             
2/1 (policy option) Notification Filling forms  One-off Traders 35  4,00  140,0  1.000    140.000 
2/2 (present) GDP inspection by com petent authorities (CoCP 
compliant) Filling forms, accompanying 
inspectors  Annual Distributors 35  22,50  787,5 0,33 4. 000 1.320 1.039.500   
2/2 (present) GDP inspection by competent authorities (non-
CoCP compliant)  Filling forms, 
accompanying inspectors  Annual Distributors 35  15,00  525,0 0,33 16. 000 5.280 2.772.000   
2/2 (policy option)  GDP inspection by competent authorities (CoCP 
compliant)  Filling forms, 
accompanying inspectors  Annual Distributors 35  22,50  787,5 0,33 20. 000 6.600 5.197.500   
3/2 (policy option) Authorisation Filling forms  One-off Unlicensed 
Importers 35  4,00  140,0  1.100    154.000 
3/2 (policy option) Inspections  Filling forms, 
accompanying inspectors  Annual Unlicensed 
importers 35  7,00  245,0 0,33 1.100 1.089 88.935   
4/1a (policy option) Authorisation of EU incl. inspection  Filling forms, 
accompanying inspectors  One-off EU API 
manufacturers 35  24,00  840,0  1.000    840.000 
4/1a (present) Inspection  Filling forms, 
accompanying inspectors  Annual EU API 
manufacturers 35  24,00  840,0 0,33 800 264 221.760   
4/1a (policy option) Inspection   Filling forms, 
accompanying inspectors  Annual EU API 
manufacturers 35  24,00  840,0 0,33 1.000 330 277.200   
4/1b (policy option) 
Authorisation, incl. inspection Preparing, accompanying 
inspectors One-off EU API 
manufacturers and importers 35  24,00  840,0  12.300    10.332.000 
4/1b (present) 
Inspections Preparing, accompanying 
inspectors Annual EU API 
manufacturers 
and importers 35  24,00  840,0 0,33 800 264 221.760   
4/1b (policy option) 
Inspections Preparing, accompanying 
inspectors Annual EU API 
manufacturers and importers 35  24,00  840,0 0,33 12. 300 4.059 3.409.560   
4/2b policy option 
Notification of EU manuf./importers  Submitting information One-off EU API 
manufacturers, importers 35  12,00  420,0  12.000    5.040.000 
                                                 
171 Wage rate is based on industry consultation with an overhead of 15%. 
 
EN 94   EN 4/2b policy option Notification of EU API distributo rs Submitting information One-off EU API 
distributors 35  8,00  280,0  5.500 0 0 1.540.000 
 
EN 95   EN Annex 9 - Summary of responses to the public consultation document  
1. Introduction 
In response to the public  consultation on “Key ideas for better protectio n of patients 
against the risk of counterfeit medicines”172, the Commission received 125 
contributions from stakeholders. Of thes e, 100 were from industry (pharmaceutical 
industry, distributors, suppliers of active ingredients, consultants), 15 from citizens, patient (groups), and academics, and 10 fr om health professionals, pharmacists and 
health insurers. 
4 stakeholders (Eli Lilly, Bayer Hea lthcare, SICPA and Thornton & Ross Ltd.) 
requested their entire submi ssions to be treated confidentially. The other stakeholder 
responses have been published on the “pharmaceuticals - website” of the European Commission.
173 
Of the 125 stakeholder contributions, in terms of regions, 20 contributions were 
received from EU-wide associations, 30 from Italy, 14 from the UK, 9 from 
Germany, 4 each from France and Switzer land, 3 each from Poland and Ireland and 
the Netherlands, 2 each from Malta, and De nmark, 1 each from Austria, Sweden and 
Spain, and 18 from non-European third coun tries. 10 stakeholder contributions were 
global associations or could not be  attributed in terms of region. 
30 national and regional author ities profited from this st akeholder-consultation to 
inform the Commission of their views on the matter. 
2. General remarks 
2.1 Relevance 
The initiative was unanimously welcomed by virtually all respondents who stressed 
that urgent and decisive ac tion was needed, and that the problem of counterfeit is 
increasing exponentially. 
Some respondents considered that the known cas es were just the “tip of the iceberg”, 
as in particular wholesalers and manufact urers are not keen on being related to 
counterfeit by media and the public. They ar gued that the problem  is larger than 
anticipated and that discovery of cases is  often pure luck. While it was repeatedly 
stressed that the situation could lead to “d isaster”, very little quantified information 
on the extent of the problem was given. On e respondent (a wholesaler association) 
estimated that counterfeit packs represen t “probably less than 1%” in one Member 
State. 
A few respondents reminded of the need to stay rational and ev idence-based – in 
particular regarding the lawf ul supply chain. One responden t argued that there is not 
                                                 
172
 http://ec.europa.eu/enterprise /pharmaceuticals/pharmacos/docs/do c2008/2008_03/c onsult_coun
terfeit_20080307.pdf   
173 http://ec.europa.eu/enterprise/ pharmaceuticals/counterf _par_trade/counterfe it_consult_2008.htm   
 
EN 96   EN necessarily increase in counterfeits , but increase in surveillance , including in the 
lawful supply chain. 
While some respondents stressed that health  considerations override the interest to 
mitigate compliance costs, others warned of an increase in bureaucracy and administrative burden. In this respect, it was opined that change s should not lead to 
an overhaul of the existing legal systems (rather, adapting some technical provisions) 
and that implementation times should be sufficiently long. 
Some contributions highlighted the need to avoid unharmonised approaches across 
the EU. Others recalled that increased costs may be passed on to patients in second-
round effects. 
Various respondents highlighted the costs of counterfeit for industr y and stressed that 
companies have anti-counterfeit strategies in  place. In this context, the question was 
raised why industry should be ar costs of counte rfeit, rather than  the society as a 
whole (i.e. the taxpayer). It was highlight ed that, today, cost s for destruction of 
counterfeit and recall of these products are in practice borne by the trademark owner. 
The link to organised crime was stressed by several respondents. 
2.2 Causes of problem 
Practically all respond ents agreed with the Commissi on’s assessment of the causes of 
the problem and welcomed the comprehensiven ess of the analysis, in particular the 
inclusion of aspects of activ e pharmaceutical ingredients (“
API”) 
quality/authenticity. 
In particular, all respondents  supported a “joint approach ” with a bundle of measures, 
i.e. the look at different aspects. It wa s highlighted that U.S. FDA is following the 
same “multi layer” approach. 
Finally, there was nearly unanimity that enforcement is a crucial element in the fight 
against counterfeit. This s hould entail the reca ll of licenses for non-compliant firms, 
penal sanctions, tighter checks at the outer borders of the EU and better information-
sharing of customs authorities. 
2.3 Other aspects 
The public consultation was take n as opportunity to point at  other, sometimes related 
aspects, such as the definition of “qualifie d person” (arguing that this person should 
be a pharmacist), the GDP guidelines (reque sting a modernisation), pharmacies as 
buying groups, direct supply st rategies (arguing that th ey encourage alternative 
sourcing, incl. internet purchase), the diffe ring pace in Member States of approval of 
variations, the requirements for the “res ponsible person” (concerning wholesaling) 
and the illegal diversion into  the EU of products destined for third country markets 
under favourable price regimes. 
Several respondents highlighted additi onal aspects outside the scope of 
pharmaceutical legislation. These included, for example, assisting third countries 
with weaker regulatory/enforcement struct ure and a strengthening of criminal law 
measures against counterfeiters. 
 
EN 97   EN Many respondents pointed at the risks stemming from the unlawful  supply chain, in 
particular internet pharmacies not complying with the requirements in the respective EU Member State(s). Some respondents ente red a discussion as to whether internet 
pharmacies should be subject to a specifi c Community regulation and how. Others 
recognised that the main problem lies with  dubious internet pha rmacies established 
in third countries which are de facto  accessible for EU-patients from within the EU 
but not controllable by Member States. 
Some submissions raised possible links with the ongoing files “information to 
patients” and “pharmacovigilance”. 
3.
 Product protection measures and pr ohibition of their manipulation 
3.1 Safety features 3.1.1 Technology 
Regarding the present system of batch numbers, there was widespread agreement 
that batch numbers do not effi ciently contribute to the fight  against counterfeit, as the 
number of units within a batch can be en larged and the number be replaced easily. 
On the other hand, the vast majority of  respondents pointed out that it would be 
premature, ineffective and even counter-productive to “prescribe” in secondary 
legislation (i.e. in a Directive adopted by the European Parliament and the Council) a 
specific safety/authenticity feature for medicinal products. The multitude of 
techniques and the need for flexibility was highlighted. Some respondents argued that the choice of a technology should be left  completely to the manufacturer and that 
any technology has to be risk-adapted. Legisl ation should thus not be too prescriptive 
and further implementing legislation was needed. 
On the other hand, several respondents st ressed the importance to act quickly, as 
Member States are taking unilateral measures  which would create considerable costs. 
Finally, it was opined that any system would require thorough review after some 
years as well as a fall-back mechanism if it fails. 
Turning to more concrete technol ogies, the following was observed: 
3.1.1.1 Serialisation 
There was almost unanimity that serialisa tion is in principle a useful technology to 
combat counterfeit. One respond ent stressed that the toba cco industry is considering 
a similar technology. 
On the other hand, the multiple technical and legal difficulties were highlighted. 
These would require a long pe riod for implementation. Th e U.S. example shows this. 
Therefore, a stepwise approach (for ex ample, first includi ng certain high-risk 
products) would have to be considered (see below). On the other hand, some 
companies recalled that this approach would remove economies of scale. 
Importantly, serialisation was highly suppor ted by the research-based industry, but 
more critically assessed by th e self medication and generi cs sector who argued that 
 
EN 98   EN their products had not been targeted by count erfeiters in the past and that costly 
product protection measures for those products  would not bring addi tional benefits to 
the patient. Wholesalers and pharmacies showed a rather positive reaction to the concept of serialisation. This is crucial, as serialisation requires the involvement of 
many different actors. 
Concerning verification, it wa s highlighted that pharmacies  may use serialisation to 
facilitate inventory management.  
Consumers should have a possibility to veri fy serialisation numbers via the phone or 
the internet.  
Many submissions highlighted the international developments for example in the 
U.S. (in particular Californi a) and in Turkey arguing th at now was the ideal moment 
to build up a global harmonised approach. 
Some submissions highlighted the data protection and competition issues which 
serialisation would rise. 
3.1.1.2 Pedigree 
Pedigree is a record of past owne rship and transaction of a batch. 
There were conflicting voices on the eff ectiveness of a pedigree. While some 
considered it as useful tool to back-trace (re ferring, for example, to similar aspects in 
the fresh meat sector), others argued that  a pedigree does not add much to fight 
counterfeit. 
In any case, it was widely stressed that a pedigree is a very complex solution and can 
only be considered as long-term aim – in  particular if the system was to be 
automated. The U.S. example shows that ve ry long implementation time is needed in 
order to address technical and financial obstacles. 
Moreover, the high costs, which would be particularly burdensome for OTC-
producers and SME, were highlighted. Seve ral respondents recalled that a pedigree 
may affect negatively th e throughput in warehouses. 
Moreover, competition concerns were raised. The question as to who would have 
access to the pedigree database was characterised as “crucial”. 
It was stressed that, in any case, use shoul d be made of existing standards, such as 
the GS1 standard. 
3.1.1.3 Others, incl. seal 
Many submissions discussed the feasibility, effectiveness and efficacy of a seal in 
any form. Some criticised the concept of a seal as overly simplistic or “naïve”, 
adding costs without increasing security. Othe rs criticised that efficient seals can 
only be verified by experts a nd that they would give a wr ong feeling of safety. It was 
also stressed that th e place where the seal is affixed (i.e. the product itself, the inner 
or the outer packaging) was crucial: A situation should be  avoided where one “tracks 
cardboard, not product”. 
 
EN 99   EN On the other hand, a multitude of different concepts were presented which allegedly 
render counterfeit either impossible or uneconomical. These techniques included digital signature by asymmetr ic cryptography, colour-s hifting dosages, watermark 
technology, chemical markers, flavour or aroma-adding, individu al dosage level, 
DNA-coding, NIR-spectroscopy, electronic f eatures, excipients tag, etc., etc. 
It was stressed that seals were noth ing new in the pharma sector and common 
practice in the food-and-feed s ector. It was also highlighted that, in practice, a blister 
is a simple seal and that bottles  often bear a seal “per se”. 
Some respondents stressed the need to en sure that a layperson (e.g. a patient) can 
identify the seal. Others, on the contrary, st ressed that this would give a false feeling 
of security and that covert seals are preferable. Some hi ghlighted that a combination 
of various technologies was needed. 
The possibility of temperature-sensitive seals was considered to address also 
shortcomings in the cooled supply chain. 
3.1.2. Scope 
Many respondents discussed the scope of a safety feature. The large majority of 
respondents highlighted that an “intelligen t”, risk-based approach was needed for 
determination of the scope. For example, certain product groups should be primarily 
considered, such as injectables, expens ive or high-volume medi cines, or biotech 
medicines (which typically do no t have a taste or colour). 
The generics and OTC-producer challeng ed the argument that OTC products are 
equally affected by the problem. It was also argued that vaccines should be excluded 
in view of their peculiar distribution regime. The possi bility of a “step-wise 
approach” was considered. 
On the other hand, some respondents stress ed that a limited scope would lead to 
confusion and that it would not allow e xploiting scale effects. Moreover, it was 
argued that counterfeiters ar e very flexible and that  it was difficult and even 
unrealistic to forecast a risk profile. The ex ample of pandemic flue shows that risk 
profiles can change rapidly. 
3.2 Prohibition of manipulat ion of safety feature 
This item of the public consultation sp arked many differing r eactions and was the 
only item where views were fundamentally  opposed amongst different stakeholders. 
Holders of the original marketing authorisat ion stressed that it was vital that safety 
features (such as serialisation number or seals) which are affixed on the packaging 
cannot be removed or changed subsequently. They stressed that any effort in this 
respect was futile if the safety feature can  be subsequently manipulated. Moreover, 
without a sealed package, there was a risk th at a fake product is introduced into an 
(original) pack. 
Many respondents pointed at the impact fo r re-packaging practices in the EU. This 
would concern, for example, re-packaging to ensure availability in small markets.  
 
EN 100   EN Moreover, respondents highlighted that parallel  traders have to re -package or at least 
open the outer packaging in  order to comply with the language and packaging 
regimes in the destination country. In particul ar parallel traders cr iticised that this 
key idea had been lobbied by the research ba sed industry and would essentially be an 
attempt of putting parallel traders out of business. 
Parallel traders also questi oned the link between counterfeit  and parallel trade. They 
argued that counterfeiters have no interest to pass via para llel traders who may, in the 
course of the re-packag ing, detect the counterfeit earlie r than a wholesaler. In this 
respect it was argued that, in fact, parallel tr aders provide for an a dditional safety net.  
It was also argued that if safety features are contained on the packaging, parallel 
traders should be allowed to reproduce them and to reaffix them or to add their own 
safety features. In response to this, it was stressed that it was not realistic to require 
an originator to share safety-technologies with the many potential parallel traders. 
In view of the potential negative impact  on parallel trade, several respondents, 
including health insurers and some Member States authorities, highlighted its 
important role in ensuring intra-brand pri ce competition for patented medicines thus 
leading to savings for health insurers and/ or the exchequer. It was also argued that 
parallel traders are important to ensure  a sustainable wholesale of medicines. 
It was also stressed that OT C patients often wish to read the leaflet before purchasing 
the product, that pharmacists need sometim es to open the pack and that the 
possibility for patients with arthritic fingers to open packs should not be impaired. Finally, it was stressed that re-packagi ng is required for clinical trials.
174 
4. Distribution 
4.1 General remarks 
There was widespread agreement that t oday’s distribution system constitutes a 
challenge in term of ensuring a counterfei t-free supply chain: There is a multitude of 
participants involved with an increasingly long distribution chain that changes often. 
In particular, the high number of interi m traders (“brokers”), with little or no 
knowledge of the sector and the products wa s criticised. In th is respect, several 
submissions stressed that “medicines supply is only as clean as its dirtiest link”. 
One interesting aspects, which had been ra ised by some respondents, was the idea to 
render reporting of counterfeit produ cts obligatory for wholesalers. 
4.2 Including more actors in scope of wholesalers 
Against the background of these general comments, this measure was unanimously 
supported. The question focussed more on deta ils and in particular on the question, 
which concrete actors should be included. In this cont ext, distributors who only 
export, and brokers in third countries, were discussed. 
                                                 
174 Note, however, that medicinal product for clinical trials are not within the scope of the Community 
Code for medicinal products (Article 3(3) Directive 2001/83/EC). 
 
EN 101   EN Some cautioned that a definition would have to  be carefully drafte d (also in view of 
the translations in the different official  languages) and that mere transporting 
companies should not be included. Moreover,  “trade” (i.e. tran sactions) within a 
company should not be covered. 
It was outlined that not all actors can be subject to the same obligations and that a 
classification system for the different degrees of involve ment was needed, so that 
inspections are adapted to the different actors.  
On a different matter, one respondent highl ighted that GDP should include rules on 
procurement of medicines. 
4.3 Strengthen inspections 
Here too, the important role  of enforcement was highlight ed. In this respect it was 
emphasized that the adoption of GDP as Dire ctive would have limite d impact, as it is 
already satisfactorily implemented in the Member States. 
It was stressed that a bett er cooperation was needed, incl uding avoiding duplication, 
coordination by EMEA, coordination at in ternational level and strengthened 
inspections in third countries. 
There were many suggestion how to render inspections more targeted and how to 
support them from the persp ective of the Community le gislator: Points raised 
concerned inspections of customs ware houses, revised Compila tion of Community 
Procedures on Inspections and Exchange of Information (“ CoCP ”) addressing, albeit 
in a flexible manner, wholesalers, obligatory CoCP also in third states, sunset clauses 
for GDP licenses and the possibility to restrict certain medicines to certain 
wholesalers and vice-versa . 
It was stressed that administrative costs have to be considered and that, already 
today, inspecting competent author ities are sometimes understaffed. 
One submission stressed that wholesaler ce rtificates should be better protected 
against counterfeit. 
4.4 GDP Database 
This idea, too, was almost unanimously welcome as it would facilitate verification 
and bring an end to today’s practice where wholesale licenses are simply copied to 
support alleged compliance. 
Comments focussed on practical matters, su ch as who manages the GDP database 
and feeds it with data. 
One submission suggested including in  the database results of audits. 
5. “Import for Export” Here too, there was widespread support for the assessment of the problem and the 
measures envisaged. Existing difficulties, in particular in view of the recent case-law 
of the European Court of Jus tice, have been highlighted.  
 
EN 102   EN It was stressed that the food sector is c onsiderably more advan ced in addressing the 
issue. 
Respondents highlighted in particular the need  to have clarity w ith regard to “free 
zones” from the perspective of pharm aceutical law and rules regarding the 
interactions with customs. “Import” and “transit” should be defined for the purpose 
of pharmaceutical legislation. 
Concerning substantial requirement, several respondents highlighted that a full batch 
analysis was not necessary if the exporti ng country had a functioning regulatory and 
surveillance system.  
Several respondents recalled that large companies import their own products for 
export. They argued that, as there is a pharmaceutical quality system, re-testing should not be required. 
Some respondents recalled that in practice,  today, certificates from third country 
authorities are requested for imported consignments. 
The importance to ensure correct storag e conditions in customs warehouses was 
highlighted. 
6.
 Active Pharmaceutical Ingredients (API) 
6.1 General remarks 
Regarding safety and authenticity, virtually  all but one submission confirmed that the 
concerns set out in the public consultation document were justified and that the issue 
of counterfeit must not be rest ricted to the finished product.175 
While one submission highlighted the need to also consider excipients, another 
submission called for an exclusion of herbal substances from this debate. 
6.2 API and enforcement, in particular in third countries 
The unanimous view of the respondents wa s that Community provisions ensuring 
efficient enforcement are too weak, in pa rticular with view to third country 
manufacturers. It was highlighted that, at present, the only very few Member States 
inspect outside the EU (these insp ect approx. 20 plants per year).  
With regard to checks by thir d country authorities it was argued that these work often 
with lower standards – in particular con cerning exported substances. It was stressed 
that this situation has created a non-leve l playing field. One respondent estimated 
that a manufacturer who is Good manufacturing practices (“ GMP ”) non-compliant 
saves approx. 25% of production costs. Th is situation is aggravated by strong 
competition in the active substances industry as well in the field of generic medicines. 
                                                
 
175 To characterise further the large approach, some subm issions suggested referring to “rogue API”, rather 
than “counterfeit API”. 
 
EN 103   EN Some contributions argued that imports of API from countries with lower GMP 
standards should be banned and called for more aggressive and stronger 
enforcement. EMEA should get involved in inspections through coordination of 
work-sharing programs amongst Member States authorities. One submission 
contemplated a “European inspections t eam” for API. Moreover, duplication of 
controls by reliable thir d country inspections should be avoided and cooperation 
strengthened. This was particular relevant as inspections in th ird countries is not 
easily feasible for small Member States.  
With regard of the quality of inspections, it  was highlighted that these have to focus 
more on counterfeit aspects and that they should be based on a physical visit of the 
plant, rather than a check of documentation. 
There were different appraisals of the c ontribution of GMP to combat counterfeit. 
Some considered GMP as “crucial”. They  argued that – while GMP-non-compliance 
does not make a product a counterfeit - coun terfeit API are usually also severely 
GMP non-compliant. On the other hand, one submission argued that impaired quality 
has nothing to do with counterfeit. 
Against the general claim of better enfor cement, some respondents cautioned that 
manufacturer of medicinal pr oducts should continue to be held primarily responsible. 
One respondent suggested that labelli ng of a medicinal product should include 
information on API. 
More specifically, on authorisation and no tification requirements the following was 
raised: 
• Authorisation obligation:  Many respondents did not expl icitly address this point. 
Those who did supported an authorisation ob ligation in particular for third country 
manufacturer. This would lead to obligatory inspections rather than on inspections based on suspected “non-compliance”. 
•
 Notification  obligation: Most respon dents supported this po int, highlighting that 
France has already introduced notifica tion requirement for importers and 
distributors. Also, Ital y is going to strengthen unilateral ly its rules as of 1 January 
2009. While respondents supported inclusion of distributors in the notification 
requirement, they spoke against a notif ication of each imported consignment. 
6.3 Audits 
Most respondents confirmed that  audit is a very useful tool to increase compliance 
and to avoid “back-to-back” business. Only  one respondent disagr eed stressing that 
audits did not give an insight in the actual production process. 
Some submissions reminded that audito rs may be influenced by economical 
considerations. To address this, audits should be done  by independent, qualified 
personal and Member State authorities should  be somehow involved in the audit, for 
example through certification or accreditation. 
 
EN 104   EN Some submissions requested clear guidan ce as to the content of the audit and 
qualification of the auditor, while others stressed the need to maintain a flexible system, in particular concer ning the frequency of audits. 
A few submissions pointed at practical difficu lties, such as access to the closed part 
of the drug master file. It was also stressed that the audited should agree to the audit. 
It was highlighted that, curre ntly, shared third-party audi ts are not very common. In 
order not to increase costs (in particular for SME), duplic ations of audits should be 
avoided, and an “audit database” was suggested. 
One respondent stressed that packag e producers should be audited too. 
7.
 Other aspects Many respondents commented on the key idea,  put forward in th e public consultation 
paper, to apply “fingerprint techniques” in  order to check the authenticity of the 
product. While this idea was in principl e welcome, several submissions cautioned 
that it could not replace good process and supplier control. It was also stressed that 
technology evolves fast and th at no definite te chnique should be fixed in Community 
legislation.