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 entry 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}
Date: 2008-12-10
Institutions: European Commission
Subjects: approximation of laws, legal code, medicinal product, pharmaceutical legislation, public health, single market

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COMMISSION OF THE EUROPEAN 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 entry 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} 

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TABLE OF CONTENTS 

1. 

1.1. 

1.2. 

1.3. 

1.4. 

1.5. 

1.6. 

2. 

2.1. 

2.2. 

Procedural issues.......................................................................................................... 7 

Consultation of other Commission Services and agencies .......................................... 7 

Consultation of Member States, fact-finding missions ................................................ 7 

Stakeholder consultation .............................................................................................. 7 

External studies contracted by the Commission .......................................................... 7 

Contacts with third country authorities ........................................................................ 8 

Impact assessment board.............................................................................................. 8 

Problem definition........................................................................................................ 8 

Introduction – “setting the scenery”............................................................................. 8 

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 regards 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) created by counterfeit medicinal products....................... 23 

2.3.2.  Expected development ............................................................................................... 24 

2.4. 

Community competence to legislate and subsidiarity................................................ 27 

3. 

3.1. 

3.2. 

4. 

4.1. 

4.2. 

Objectives................................................................................................................... 27 

General objective ....................................................................................................... 27 

Specific objectives ..................................................................................................... 29 

Policy options............................................................................................................. 30 

Policy options initially looked at and discarded - industry self-regulation................ 30 

Specific objective n°1: Strengthening product protection ......................................... 31 

4.2.1.  Discarded policy options............................................................................................ 31 

4.2.1.1.  “No action” at Community level................................................................................ 31 

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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 ................................................................................................................... 33 

4.2.4.  Overview of policy options for specific objective n°1 .............................................. 34 

4.3. 

Specific objective n°2: Ensuring reliability 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 and supervision of GMP/GDP by means of 

audits .......................................................................................................................... 35 

4.3.3.1.  Policy option n°2/3a: Mandatory regular audits of supplying wholesalers ............... 35 

4.3.3.2.  Policy option n°2/3b: Risk-based audits of supplying wholesalers ........................... 36 

4.3.4.  Policy option n°2/4: Making wholesale activities 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: Stepping up scrutiny of API actors....................................... 37 

4.5.1.  Policy option n°4/1: Authorisation/more inspections in third countries.................... 37 

4.5.1.1.  Policy option n°4/1a: Authorisation (incl. inspection) by EU competent authorities of 
all manufacturers of API, including those in third countries supplying the EU ........ 37 

4.5.1.2.  Policy option n°4/1b: Authorisation of all API manufacturers/importers in the EU . 38 

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....................................................... 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 3rd 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 substance manufacturers by 

medicinal products' manufacturers............................................................................. 38 

4.5.4.  Overview of policy options for specific objective n°4 .............................................. 39 

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5. 

Impact analysis and comparison ................................................................................ 39 

5.1. 

Specific objective n°1: Strengthening product protection measures ......................... 39 

5.1.1.  Broad policy option n°1/1: Obligatory 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 medicines 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 reliability 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 inspection of compliance with GDP....................... 53 

5.2.3.  Policy option n°2/3: Tighten control and supervision of GMP/GDP through audits 54 

5.2.3.1.  Policy option n°2/3a: Mandatory regular audits of supplying wholesalers ............... 54 

5.2.3.2.  Policy-option n°2/3b: Risk-based audits of supplying wholesalers........................... 54 

5.2.4.  Policy option n°2/4: Make wholesale activities 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: Clarification that marketing authorisation 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: Stepping 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: Authorisation (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: Authorisation of all API manufacturers/importers in the EU . 62 

5.4.1.3.  Policy option n°4/1c: Strengthened scrutiny of plants in 3rd countries if level of 

protection poses risks to public health in the EU....................................................... 63 

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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 only 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. 

6.1. 

6.2. 

Conclusion - Final choices of policy options; Impacts on SME (“SME test”).......... 67 

Final choices of policy options .................................................................................. 67 

“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 production and distribution of medicinal products ...... 74 

Annex 2 – Compliance costs for policy options under specific objective n°1 – estimations and 
calculations............................................................................................................................... 77 

Annex 3 - Compliance costs for policy options under specific objective n°2 - estimations and 
calculations............................................................................................................................... 80 

Annex 4 - Compliance costs for policy options under 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 counterfeit in the legal supply 
chain: estimations and calculations .......................................................................................... 90 

Annex 8 - Increase in annual administrative costs ................................................................... 93 

Annex 9 - Summary of responses to the public consultation document .................................. 95 

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List of acronyms 

API 

CoCP 

CoE 

EDQM 

EEA 

EMEA 

GDP 

GMP 

MHRA 

Active pharmaceutical ingredient 

Compilation  of  Community  Procedures  on  Inspections 
and Exchange of Information 

Council of Europe 

European  Directorate  for  the  Quality  of  Medicines  and 
HealthCare of the Council of Europe 

European Economic Area 

European Medicines Agency 

Good Distribution Practices 

Good Manufacturing Practices 

UK  Medicines  and  Healthcare  products  Regulatory 
Agency 

OTC medicines 

“Over-the-counter  medicines”, 
medicinal products 

i.e.  non-prescription 

QP 

RP 

Qualified  Person 
importers) 

(requirement 

for  manufacturers, 

Responsible Person (requirement for wholesalers) 

U.S. FDA 

United States Food and Drug Administration 

WHO 

World Health Organization 

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1. 

PROCEDURAL ISSUES 

A proposal for a Directive of European Parliament 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 which are illegal in view of 
false  identity,  history  or  source  was  announced  in  early  2008  by  Vice-President 
Verheugen.  It  is  scheduled  in  the  Commission’s  agenda  planning  under  ref.  n° 
2008/ENTR/038. 

1.1. 

Consultation of other Commission 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  gain  additional  expertise,  there  were  close 
contacts with the European Medicines Agency (“EMEA”) on this file. 

1.2. 

Consultation of Member States, fact-finding missions 

Apart  from  informal  contacts  with  officials  from  the  competent  authorities  of  the 
Member  States,  the  file  was  discussed  with  Member  States'  representatives  at  the 
Working  Group  of  Enforcement  Officers  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” medicinal products with practitioners, including 
customs authorities. 

1.3. 

Stakeholder consultation 

A stakeholder consultation was held from 11 March 2008 to 9 May 2008 on the basis 
of  a  public  consultation  document.  All  the  standards  laid  down  in  the  “General 
principles  and  minimum  standards  for  consultation  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  report.  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 Commission had contracted, already in 2007, a 
study  looking  into  the  safety  of  the  supply  chain  of  medicinal  products.  The  study 
looks inter alia into aspects of “counterfeit” medicines. The final study is scheduled 
for  autumn  2008.  However,  in  view  of  this  ongoing  work,  it  was  agreed  with  the 

1 
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4 

OJ L 311, 28.11.2001, as amended. 
COM(2002) 704. 
Annex 9. 
http://ec.europa.eu/enterprise/pharmaceuticals/counterf_par_trade/counterfeit_key.htm 

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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 (including 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  were  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  publicly  available  on  the  EUROPA-server6),  the 
IAB stressed the need to 

(cid:121) 

(cid:121) 

(cid:121) 

(cid:121) 

Strengthen  further  the  assessment  of  the impact  on  parallel  traders  of  various 
policy options discussed; 

Look  more  closely  at  interactions  with  other  policy  areas,  such  as  customs 
control, fight against organised crime, awareness campaigns etc.; 

Differentiate more clearly compliance costs from administrative costs; and 

Clarify  how  the  regulation  of  wholesale  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  modelling  of  costs  and  benefits  and  to  provide  an  easy-to-
read overview. 

The author-DG has amended the respective parts 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 sector 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-prescription sector (often referred to 
as “over-the-counter medicines”, “OTC” medicines) 

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7 

http://ec.europa.eu/governance/impact/practice_en.htm 
http://ec.europa.eu/governance/impact/cia_2008_en.htm 
Eurostat (2005). 

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It is crucial to bear  in  mind  from  the outset that the “pharmaceutical sector” in the 
broad  sense  includes  a  variety  of  other  actors,  ranging  from  suppliers  of  medicinal 
products  ingredients  (in  particular  the  active  pharmaceutical  ingredient,  “API”), 
importers,  wholesalers  (including  parallel  traders),  retailers/pharmacies,  and  other 
traders (brokers,  etc.). An overview of these actors, and their role  and  functions, is 
given in Annex 1. 

Concerning  pharmaceuticals,  reduced  safety,  quality,  or  efficacy  can  be  life-
threatening. In this respect, pharmaceuticals 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  that  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  include  the  correct  or  any  active  ingredient  or  include 
ingredients  with  a  lower  quantity  (“identity”).  In  many  cases  such  products  are  not 
manufactured  in  the  declared  sites  (“source”).  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 has revealed that counterfeit medicines have 
become a growing threat to public health over the past few years.  

The Commission has observed the following worrying trends in particular: 

(cid:121) 

A sharp increase in seizures of counterfeit medicines by customs: EU Statistics 
report  the  seizure  of  a  total  of  2 711 410  medicinal  products  (articles)  at  EU 
customs  borders  in  2006.  This  is  an  increase  of  384%  compared  to  2005.9 
Figures  for  2007  confirm  this  trend  with  over  2.5m  counterfeit  medicines 
ceased  at  EU  borders.10  The  responsible  expert-group  of  the  WHO  estimates 
that,  in  industrialised  countries,  counterfeit  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 

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10 

11 
12 

For the purpose of this document, reference shall be made to „counterfeit medicines“ in the larger sense 
otherwise indicated otherwise. 

http://ec.europa.eu/taxation_customs/resources/documents/customs/customs_controls/counterfe

it_piracy/statistics/counterf_comm_2006_en.pdf 
“Counterfeit”  as  defined  in  Council  Regulation  (EC)  No  1383/2003  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  L196,  2.8.2003,  p.  7);
http://ec.europa.eu/taxation_customs/customs/customs_controls/counterfeit_piracy/statistics/in

dex_en.htm 
http://www.who.int/mediacentre/factsheets/fs275/en/ 
Mike Muller, Director of global anti-counterfeiting operations, Eli Lilly, www.scriptnews.com, 27 June 
2008. 

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Example:  In  Bulgaria,  those  investigations  followed  up  by  ordinances  have 

increased from just five (in 2005) to over 15 (in 2007). 

(cid:121) 

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  reached  the  legal  chain  of  supply  to 
patients.  These  medicines  were  prescription  drugs  for  the  treatment  of 
conditions  such  as  heart  disease  and  psychiatric  disorders.  They  contained  a 
significantly lower quantity of the active ingredient than declared.  

Treatment with such medicines could have 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 Tamiflu, which were shipped through Sofia 
airport.  Subsequent  analysis  revealed  that  the  counterfeit  product  contained 
only sugar and no active pharmaceutical ingredient. 

(cid:121) 

A trend towards targeting the classical supply chain: Recently, there has been 
alarming  evidence  that,  besides  the  internet,  counterfeiters  are  increasingly 
targeting  the  licensed  distribution  chain,  including  authorised  wholesalers, 
parallel traders and pharmacies. 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  Healthcare  products  Regulatory  Agency 
(“MHRA”)  reported  a  steady  increase  in  incidents  affecting  the  regular 
distribution  chain.  Since  2004,  there  were  nine  separate  cases  of  counterfeit 
medicines  reaching  patients,  which  necessitated  batch  recalls;  counterfeit 
medicines  were  also  discovered  at  the  wholesale  level  on  a  further  five 
occasions.13 Prior to 2004, counterfeit products in the legal supply chain were 
practically unknown in the UK. 

(cid:121) 

the 

A  blurring  of 
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 necessarily a counterfeit, there is a link as 
a  counterfeit  API  is  most  likely  to  be  also  sub-standard  thus  posing  a  risk  to 
human health. 

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MHRA 
http://www.mhra.gov.uk/home/groups/ei/documents/websiteresources/con2033156.pdf 

Anti-Counterfeiting 

Strategy 

10 

2007-2010 

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Examples:  In  2007/8,  medicinal  products  for  blood-thinning  which  contained 
counterfeit heparin reached patients in the 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  which  could  potentially  be  related  to  the 
administration of heparin and the contaminant.14 Although reports from the EU 
have mentioned only three side-effects and 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 iceberg”. 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  difficult  to  detect  counterfeit  products:  The 
techniques  employed  by  counterfeiters  have  become  so  sophisticated  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  strategy  for  safe,  innovative  and 
accessible medicines, as presented by the Commission in its Communication to the 
Council, the European Parliament and the 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  objective  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  two-fold  risk  for  public  health:  First, 
counterfeits  that  do  not  contain  the  proper  active  ingredient  in  the  proper  quantity 
result in the patient’s condition going untreated. 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 
15 

16 
17 
18 

http://www.fda.gov/cder/drug/infopage/heparin/ 
Wiener,  Deubner,  Holzgrabe:  Composition  and  Impurity  Profile  of  Multisource  Raw  Material  of 
Gentamicin – a Comparison; Pharmeuropa Vol 15, No. 2, April 2003. 
COM(2008) […] final. 
COM(2007)630 final. 
Products  with  correct  ingredients/components  or  with  fake  packaging  may  also  be  considered  as 
counterfeits. 

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Counterfeit medicines: Examples of cases reported in 2006/07, potential threats 
and players involved 

Counterfeit 
Cases 

Heparin 

Rep
orti
ng 
MS 

BE, 
DE 

Medical Indication 

Type of 
counterfeit 

Concrete health threat 

treatment 
clots 

Acute 
blood 
prevention 
thrombosis 

of 
and 
of 

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 

of 
Treatment 
psychiatric 
disorders 
including schizophrenia 
and  bipolar  disorders 
(mental 
illness  with 
alternating  periods  of 
high 
and 
mood 
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% 

addition 
under 

In 
stored 
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. 

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 

was 

Product 
processed 
through customs. 

Metamizole 

BG 

No 
substance. 

Pain  Killer  (for  acute 
and  chronic  pain,  in 
particular  sever  pain 
e.g.  tumour  pain),  in 
particular 
in 
hospitals and clinics 

used 

active 

More than 1000 packs were placed on the market and received patients. 

Persistence of pain. Therefore possible switch to a stronger pain killer, e.g. 
opioids which have a different risk profile and may cause specific 

Indapamide 

BG 

Diuretic, 
hypertensive 
medication 

anti-

was 
Product 
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  considerable:  these 
include  death,  additional  medical  interventions,  and  prolonged  hospitalisation  and 

EN 

12 

   EN 

 
 
long-term disabilities (e.g. after strokes, loss of hearing). There are also related costs 
in the form of treatment, absence from work, etc.19 

Apart from these obvious health risks and their 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  products  through  pharmacies.  The  impacts  on 
public  trust  are  difficult  to  quantify.  They  may  well  be  disastrous  and  could 
potentially become comparable to the consequences during the food-and-feed-crisis 
in the 1990’s. 

Both the public health risk and the loss of trust have major adverse 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: 

(cid:121) 

(cid:121) 

(cid:121) 

(cid:121) 

In  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. 

The  responsible  expert-group  of  the  WHO  estimates  that,  in  industrialised 
countries, counterfeit medicines have a market share of up to 1%.21 

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 jurisdictions” and that the magnitude and 
economic efforts of counterfeiting and piracy are of such significance that they 
compel  strong  and  sustained  action  from  government,  business  and 
consumers.22 

The Council  of  Europe,  in  an  expert  study  published  2006 highlighted the 
increasing  threat  of  counterfeit  –  also  in  the  legal  supply  chain  –  and 
recommended  inter  alia  a  “legislative  framework  at  European  level  dealing 
specifically  with  medicines  counterfeiting”  and  “regulatory  measures 
particularly  applicable 
the  distribution  chain  and 
the  security  of 
packaging/labelling of medicinal products.”23 

to 

(cid:121) 

Finally, 
increasingly highlighted the problem.24 

specialised  pharmaceutical 

literature  has 

repeatedly  and 

19 
20 
21 
22 
23 
24 

Cf. chapter 2.3 
Impacts are considered in depth below (cf. chapter 2.3.) 
http://www.who.int/mediacentre/factsheets/fs275/en/ 
http://www.oecd.org/dataoecd/36/34/39543417.pdf 
Council of Europe, Counterfeit medicines, Survey report (2006) 
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 

13 

   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 awareness (of industry, authorities, pharmacies 
and  end-users,  i.e.  health  professionals  or  patients)  to  weak  control  mechanisms  of 
infringements  of  intellectual  property  (in  the  EU  and  abroad)  and  insufficient 
deterrents in criminal law (in particular in view of organised crime). It is noteworthy 
that  these  are  different  “horizontal”  aspects  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: 

Private action 

Pharma Leg. 

Customs 
action 

Awareness 
raising 

Criminal law 
measures 

International 
cooperation 

Enforcement 

IPR Protection 

It is noteworthy that the Community, as well as Member States and stakeholders are 
currently working in order to address these 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: 

(cid:121) 

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  Enforcement  of  Intellectual  Property 

EN 

14 

   EN 

 
 
 
(cid:121) 

(cid:121) 

Rights  in  Third  Countries,25  currently  working  on  ensuring  that  these 
requirements are properly implemented and applied. 

Cooperation  with  regulators  in  third  countries:  The  Commission  has 
actively contributed to the work of WHO in the framework of the International 
(“IMPACT”).  The 
Medical  Products  Anti-Counterfeiting  Taskforce 
“Principles  and  elements  of  national  legislation  against  Counterfeit  medical 
products”  were  agreed  by 
representatives  of  non-governmental  and 
governmental  institutions  in  a  conference  in  December  2007.  Moreover,  the 
Commission  is  in  regular  contact  with  the  competent  authorities  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 

The  EU  is  a  main  driver  of  a  group  of  countries  working  towards  an  Anti-
Counterfeiting  Trade  Agreement  (“ACTA”).27  This  stand-alone  Treaty, 
which  is  outside  of  WTO,  aims  at  increased  international  co-operation,  best 
practice for enforcement, and a more effective legal framework. It is envisaged 
to finalize negotiations by the end of 2008. 

As regards Community activities at Community level, examples are: 

(cid:121) 

(cid:121) 

(cid:121) 

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 
the  Commission 
Communication on a customs response to counterfeiting and piracy adopted on 
11  October  2005.29  Currently,  the  Commission  is  working  on  establishing 
common risk criteria and standards for security and safety risk analysis for the 
harmonised, strengthened, application of certain customs controls. 

in 

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  criminal  measures  aimed  at  ensuring  the 
enforcement of intellectual property rights.30 

Supporting  new  technologies:  The  Directorate-General  Research  of  the 
European  Commission  has  sponsored  a  project  designated  as  4IPR  (for 
Intellectual  Property  Respect)  to  assist  Brand  Owners  identify  sources  of 
authentication and security devices to protect their products.31 

25 
26 
27 
28 

29 
30 
31 

OJ C 129, 26.5.2005, p. 3. 
http://ec.europa.eu/enterprise/pharmaceuticals/international/intercoopbi.htm#usa 
http://ec.europa.eu/trade/issues/sectoral/intell_property/fs231007_en.htm 
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. 
COM(2005) 479 final. 
COM(2006) 168 final. 
http://www.4ipr.net/ 

EN 

15 

   EN 

                                                 
(cid:121) 

Awareness raising: For example, the Commission has issued, in March 2006, 
the  slimming  medicines 
a  press  release  warning  of  counterfeits  of 
“rimonabant”.32 

As  regards  activities  by  other  stakeholders,  there  is  a  wealth  of  examples  of 
taken.  For  example,  pharmaceutical  companies  are  exchanging 
initiatives 
information in the framework of the non-for-profit Pharmaceutical Security Institute 
(PSI).33 Moreover, several national pharmacy 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  sectoral  pharmaceutical  legislation.  Several 
aspects, which have also been discussed in the public consultation, 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  packaging  of  medicinal  products.  This  major 
weakness has also been highlighted in the public consultation. 

As regards obligatory authenticity/traceability features (hereinafter “safety feature”), 
Member  States  have  introduced  in  the  past  product  codings  of  which  some  were 
motivated inter alia to fight counterfeit. This unilateral action was lawfully possible 
as,  presently,  rules  for  identification  and  authenticity  of  medicinal  products  are 
exempted  from  the  general  rule  of  exhaustiveness  of  Community  legislation  for 
labelling  of  medicinal  products.35  This  policy  has  lead  to  a  high  degree  of 
fragmentation of product coding in the EU. 

32

33 
34 

35 

EN 

http://europa.eu/rapid/pressReleasesAction.do?reference=IP/06/375&format=HTML&aged=1

&language=EN&guiLanguage=en 
http://www.psi-inc.org/index.cfm 
Cf., 
http://www.aponet.de/topthema/0804_amfaelschungen/0804_amfaelschungen_2.html  
Cf. chapter 2.4. 

example, 

for 

in 

16 

Germany: 

   EN 

                                                 
 
Fragmentation of coding requirements for medicinal products in the EEA: 

It  was  repeatedly  highlighted  in  the  public  consultation  that  these  product  coding 
systems are mostly not suited to efficiently 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  distribution  chain,  these 
features  are  often  discarded,  removed,  or  covered  (“manipulated”).  Today,  these 
manipulations  are,  from  the  point  of  view  of  the  pharmaceutical  legislation,  not 
illegal,  provided  this  is  done  under  a  manufacturing  authorisation.  However,  these 
manipulations  remove  the  usefulness  of  safety  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  production  and  supply  chain  at 
various stages:  

EN 

17 

   EN 

 
 
 
Potential sources of counterfeit medicinal products in the legal distribution chain

Counterfeit API 

Counterfeit 
Medicinal 
Product

Counterfeit 
Medicinal 
Product 

Counterfeit 
Medicinal 
Product 

API 
manufacturer 

Medicinal 
products 
manuf. 

Wholesaler I 

Wholesaler 
II 

Dispenser, 
(Pharmacy, 
hospital) 

Sub-
contracted 
manufacturer 

Sub-
contracted 
manuf. 

Patient

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: 

Complexity of distribution chain of medicinal products today: 

Intermediary 
Wholesaler  

Medicinal 
products 
manufacturer 

Parallel 
trader 
UK 

Parallel 
trader 
 DK 

Wholesaler  

Wholesaler  

Third-party 
repackager 

Wholesaler  

Parall
el 
trader 
SE 

Dispenser 
(Pharmacy, 
hospital) 

Patient 

Intermediary 
Wholesaler  

Wholesaler  

Third-party 
repackager 

   EN 

Wholesaler  

Parallel 
trader 
ES 

18 

EN 

 
 
 
The distribution chain is only “as strong as its weakest link”. In order to infiltrate it 
with  counterfeit  products,  it  is  sufficient  that  one  distributor  purchases  from 
unreliable sources. Once the fake product “is 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 and 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  products  which  allegedly  are  not  placed  on  the 
market enter the Community customs territory under transit rules 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  them  to  channel  counterfeit 
products into the legal distribution chain. 

Example:  Counterfeit  drugs  are  frequently  detected  in  T1  transit,  for  example  in 
customs  territory  where  non-Community  goods  are  stored  and  handled.  This  has 
been the case most recently in the UK, Malta and Bulgaria. 

The  scope  of  EU  legislation  on  medicinal  products  includes  the  importation  of 
medicinal  products  into  the  EU.  This  scope  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  the  medicinal  product  into  the 
Community.37 

36 

37 

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. 
Art. 2(3), 40(1) and (3) Directive 2001/83/EC. 

EN 

19 

   EN 

                                                 
Overview: Scope of EU pharmaceutical legislation 

EU customs territory

Placing on the 
market 

Importer 

Manufacturer 

Manufacturer 

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 created “loopholes” in supervision and enforcement, which 
can  be  used  (and  have  been  used)  to  channel  counterfeit  products  into  the  legal 
supply  chain.  Moreover,  other  legal  requirements  (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  was  finally  granted,  counterfeit  medicinal 
products were found. Nevertheless, the case is now in judicial review. 

2.2.2.4.  Products contain counterfeit, or sub-standard API 

The API is the primary factor that determines the safety and efficacy of a medicinal 
product and affects its quality. Practice shows that counterfeit medicinal products are 
also  the  result  of  manipulations  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 medicinal 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 compliance of API play an important role in 

38 
39 

Cf. Art. 51(1)(b) Directive 2001/83/EC. 
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 

20 

   EN 

 
 
                                                 
the  context  of  counterfeit.  Therefore,  compliance  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 manufacturer of active ingredients – both in 
the EU and abroad - is controlled via the manufacturer40/importer41 of the medicinal 
product. Controls by EU competent authorities are rare. In the public consultation, it 
was  stressed  that  even  large  Member  States  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 the public consultation. 

Example: Following the heparin incident (above 2.2.1.), the Chinese authorities for 
medicinal products stressed that “safeguarding 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 authority over the plant concerned.43  

Globalisation of manufacturing and density of supervision by EU authorities 

Medicinal 
products 
manufaturer 

API 
Manufacturer 

API 
Manufacturer 

Importerr 

Placing on the EU market 

Importer 

Medicinal 
products 
manufaturer

API 
Manuf. 

40 
41 
42 
43 

Art. 46(f) Directive 2001/83/EC. 
Art. 51(1)(b) Directive 2001/83/EC. 
The EU market is supplied by approx. 20 000 plants located in third countries, cf. Annex 1. 
Press release of the Chinese State Food and Drug Administration on 26 February 2008. 

EN 

21 

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2.2.2.5.  Importance of enforcement 

With  regard  to  all  four  preceding  underlying  causes,  a  “horizontal”  issue  is  the 
important role of enforcement  activities by  Member States.  Enforcement  is crucial: 
As counterfeit is by definition illegal, counterfeiters are only affected by legislation if 
it is rigorously enforced. Only enforcement ensures that provisions are applied by all 
economic actors. This, in turn, is important as a way to: 

(cid:121) 

(cid:121) 

Ensure the maximum effect of legal provisions; and 

Ensure a level playing field between competitors: 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 enforcing Community rules. However, it would be 
completely  wrong  to  point  only  at  Member  States  for  the  increase  in  counterfeits. 
Rather, it is the Community (through its exhaustive regulatory competence) who has 
to support Member States in this task for three reasons: 

(cid:121)  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 discussed (cf. for example, policy options 
n°2/1 and n°3) seek to clarify legal provisions, thus facilitating enforcement. 

(cid:121) 

(cid:121) 

Secondly, while enforcement is primarily the task of Member States, there are 
a number of Community provisions related 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  manufacturing  plants  by  the  different  national 
competent authorities and to facilitate their cooperation (cf. below, 4.3.2.). This 
aspect  is  particularly  important  in  order  to  avoid  discrepant  approaches  to 
enforcement in Member States which could be exploited by counterfeiters. 

Thirdly,  and  more  generally,  enforcement  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 
increased  supervision  and 
counterfeit 
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 

legal  supply  chain, 

the 

the 

in 

44 

45 

For example, some Member States have established or are considering mobile laboratories at customs 
controls, for an ad hoc chemical analysis of imported API and medicinal products. 
Interestingly, there is a parallel here with the “food-and-feed crisis” in the Community in the 90’s where 
the number of detected infected animals increased with an increase of inspections. 

EN 

22 

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2.3. 

Assessment of baseline – consequences of non-action 

This  chapter  shall  assess  the  baseline,  i.e.  the  consequences  of  non-action.  These 
consequences  are  already  today  considerable  (below  2.3.1.).  It  has  to  be  expected 
that they aggravate further if no Community action is taken now (below 2.3.2.). 

2.3.1.  Costs (direct and indirect) created by counterfeit medicinal products 

It  is  evident  that  robust  figures  of  the  number  of  counterfeit  products  cannot  be 
realistically  attained.  Estimations  can  only  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  that  today,  approx.  1.5m  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 estimation, 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  the  health  sector  in  relation  of 
prevention,  diagnosis  and  treatment  of  disease.  This  involves  issues  of  safety  (for 
example,  toxic  effects)  and  efficacy  (i.e.  non-effect  of  a  fake  medicine).  The  costs 
fall largely into two categories: 

(cid:121) 

(cid:121) 

costs occurring during hospitalisation and resulting in prolonged hospital stays; 

costs  occurring  in  an  ambulatory  setting  for  treating  the  consequences  of  a 
treatment involving counterfeit drugs. 

Indirect costs typically measure the lost productivity potential of patients who are too 
ill  to  work  or  who  die  prematurely.  While  there  are  so  far  no  reported  cases  of 
fatalities  due  to  counterfeit  medicinal  products, 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: 

(cid:121) 

(cid:121) 

Costs  for  recalls  by  the  manufacturer,  including  communications  to  the 
marketplace  and  distributors  and  reimbursement  for  returned  counterfeit 
products; 

Costs  for  destroying  seized  counterfeit  products  which  at  present  fall  on  the 
rightholder. 

With regard to direct and indirect costs, it is noteworthy that, unlike 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  resulting  direct  and  indirect  costs.  Moreover, 
causalities are necessarily speculative. However, on the basis of existing figures and 

46 

Cf.,  in  this  regard,  the  impact  assessment  report  on  the  Commission  proposal  amending  Directive 
2001/83/EC on strengthening and rationalising EU pharmacovigilance, SEC(2008)[…]. 

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23 

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extrapolations,  and  based  on  a  value  of  Quality-Adjusted  Life  Years  of 
60 000 EUR47, it can be assumed that, today, annual costs resulting from counterfeit 
medicinal products in the legal supply chain have direct and indirect societal costs of 
approx. 950m EUR.48 

In  addition,  there  are  numerous  consequences  of  non-action  which  can  only  be 
qualified. This includes in particular: 

(cid:121) 

(cid:121) 

(cid:121) 

Restoring  a  damaged  reputation  of  a  brand/company:  Companies  and  their 
brands  can  suffer  considerably  if  counterfeit  products  enter  the  legal  supply 
chain.  The  public  consultation  has  confirmed  that  this  is  a  major  driver  for 
action of companies. 

Restoring trust amongst distributors: This point also holds for distributors, who 
have to trust on the upstream distribution chain. 

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 incidences has been on a steady increase since 2004. 
For example, 

(cid:121) 

(cid:121) 

while  in  the  UK,  there  were  practically  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 

In  Bulgaria,  those  investigations  followed  up  by  ordinances  have  increased 
from just five (in 2005) to over 15 (in 2007). 

47 

48 
49 

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)). 
Cf. Annex 7. 
One „incidence“ may entail many thousands packs, as was the case in the UK. 

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24 

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Increase of incidences in legal supply chains in some Member States since 2004 

20

15

10

5

0

UK (legal)

BG (legal)

2004

2005

2006

2007

This trend is not surprising, as it confirms the general trend of counterfeit medicines, 
for example: 

(cid:121) 

(cid:121) 

(cid:121) 

The number of “incidences” of counterfeits has risen in Europe from at rates of 
approx. 10 % and reached 220 in 2007 (2002 in 2006);50 

A  trend  can  also  be  confirmed  when  looking  at  the  U.S.,  who  has  a  broadly 
similar  regulatory  and  economic  environment.  Here,  the  trend  has  been  an 
increase from 58 incidences in 200451 to 120 incidences in 200752; 

Industry  estimates  that  the  volume  of  counterfeiting  medicines  increases  by 
20%-100% per year.53 

50 
51 
52 
53 

Industry figures (2008). 
Cf. http://www.fda.gov/oc/initiatives/counterfeit/update2005.html 
Industry figures (2008). 
Mike Muller, Director of global anti-counterfeiting operations, Eli Lilly, www.scriptnews.com, 27 June 
2008. 

EN 

25 

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Increase of incidences in counterfeits since 2004(EU and U.S.)54 

250

200

150

100

50

0

US

EU

2004

2005

2006

2007

Nothing indicates that  the  trend will  reverse. 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: 

(cid:121) 

(cid:121) 

(cid:121) 

The increase of global trade of API and medicinal products; 

The number of actors in the supply chain are going to increase as distribution 
chains are increasingly diverse and sophisticated; and 

The  fact  that  counterfeit  producers  are  increasingly  parts  of  highly-efficient 
network  linked  to  organised  crime,  trade  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 chosen policy options are fully 
applied  as  of  2011,  i.e.  excluding  the  time  span  of  the  legislative  process  and 
transposition/implementation of legislative amendments. Three models (“scenarios”) 
are  looked  at  which  are  based  on  an  “optimistic”,  a  “realistic”  and  a  “pessimistic” 
scenario (cf. Annexes 6, 7). 

Based on these scenarios and a baseline until 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 
55 

Extrapolations from industry sources and U.S. FDA publications. 
Monetised benefits are expected to mount in line with inflation. 

EN 

26 

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2.4. 

Community competence to legislate and subsidiarity 

Community legislation on medicinal 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 protection of public health in the EU. 

Prior to the adoption of the Medicinal Products 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  differences  between  national  laws  obliged  the 
pharmaceutical  industry  to  vary  their  production  and  application  for  marketing 
authorisation according to the Member State for which the products were intended. 
Consequently, the different national rules hindered trade in these products and, as a 
result, had a direct effect on the establishment and functioning of the internal market. 

To  address  this,  it  was  necessary  to  have  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 determines at Community level the rules to be 
complied  with  as  regards  inter  alia  the  authorisation,  manufacturing,  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 the Community can amend the rules. Hence, 
the  criteria  for  examination  of  subsidiarity  as  set  out  in  the  “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  exercises  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  legislation  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 
57 
58 

Most relevant in this file is the authenticity labelling, cf. chapters 2.2.2.1. and 4.3.2. 
OJ C340, 10.11.1997. 
Concerning enforcement, cf. chapter 2.2.2.5. 

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27 

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At  the  outset,  it  must  be  stressed  that  this  objective  does  not  include  distribution 
through  illegal  supply  chains,  such  as  retail  by  beauty  salons,  fitness  centres,  sex-
shops or illegal internet sales. Neither does this objective address the “importation” 
of counterfeit drugs by individuals for their own private use (“suitcase trade”). 

While it is acknowledged that this aspect of public health protection merits attention 
by  industry,  regulators  and  policy  makers,  the  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  distribution  channels  has  very  different 
characteristics: In particular, these distribution channels are anyhow (no matter 
whether the medicine is authentic) illegal. This means that: 

(cid:121) 

(cid:121) 

The actors are acting at the outset in bad faith concerning the legality of their 
activities; and 

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: 

Counterfeit medicine 

Legal distribution chain 
(authorised importers, 
wholesalers; traders) 

Illegal distribution chain (sex-
shops, „suitcase-trade“, illegal 
internet-pharmacies) 

Patient

Patient/consumer 

Addressing illegal supply chains requires a separate problem definition, with separate 
underlying causes, separate objectives and separate policy options. In particular with 
regard  to  the  policy  options,  these  may  relate  to  awareness  rising,  for  example  in 

EN 

28 

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media and schools, enforcement and cooperation 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 originally launched in view 
of  (and  still  focus  mainly  on)  the  combat  of  illegal  supply  chains.  However,  the 
present impact assessment shall focus on the risks of counterfeit 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  general  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 achieve four specific objectives: 

(cid:121) 

(cid:121) 

(cid:121) 

(cid:121) 

Ensuring  that  the  medicinal  product  itself,  as  made  available,  is  sufficiently 
protected  against  counterfeiting  (“Specific  objective  n°1  –  Strengthening 
product protection measures”): EU legislation regulates the characteristics of a 
medicinal  product  placed  on  the  EU  market.  Specific  objective  n°1  aims  to 
ensure that these products are sufficiently distinguishable from fake copies. 

Ensuring that the legal distribution channels 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  distribution  chain  is  not  “infiltrated”  by 
counterfeit  products.  These  aspects  of  wholesale  distribution  are  regulated  at 
EU level. 

Adopting  efficient  and  proportionate  rules  for  transit  of  counterfeit  medicinal 
products through the EU (“Specific objective 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 the clarification the 
substantial impact can differ. 

Ensuring  that  the  active  ingredient  contained  in  the  product  is  not  counterfeit 
(“Specific objective n°4 – Stepping 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  objectives  in  order  to  pursue  the  general 
objective. If only one of the four specific objectives was addressed, the influx would 
occur via the other three. For example: 

(cid:121) 

(cid:121) 

If  only  requirements/inspections  for  wholesalers  are  strengthened,  this  would 
not avoid an influx of counterfeit at the level of API. 

If only the rules (including enforcement) of API were strengthened, this would 
not avoid the influx of counterfeit finished products into the legal supply chain. 

59 

Cf. chapter 2.2.2. 

EN 

29 

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(cid:121) 

(cid:121) 

If  only  the  rules  (including  enforcement)  governing  import  for  export  were 
clarified, this would not address the issue of counterfeit API and the influx of 
counterfeit into the distribution chain. 

If  only  product-related  objectives  were  pursued,  the  risk  arising  from 
counterfeit API would 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: 

The different approaches of the four broad policy-options:

Counterfeit API

Counterfeit 
Medicinal  
Product

Counterfeit 
Medici nal 

Product 

API 
Manufacturer 

Medicin al 
products 

man uf. 

Wholesaler 

Dispenser, 
(Pharmacy, 

hospital) 

Patient

API 
Man ufacturer 

Medicinal 
products 

manuf. 

Moreover,  with  regard  to  the  “horizontal”  issue  of  enforcement  (cf.  2.2.2.5.),  this 
plays a role in all four specific objectives set out above. 

4. 

POLICY OPTIONS 

4.1. 

Policy options initially looked at and discarded - industry self-regulation 

The  policy  option  “industry  self-regulation”  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 

EN 

30 

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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  the  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 sector, which is characterised by many tens of 
thousands of suppliers, importers, manufacturers and distributors (cf. description of 
the  players  in  Annex  1).  Indeed,  responsible  companies  are  already  doing  their 
utmost  to  combat  counterfeiting  of  the  products  they  produce/distribute  (cf.  below 
5.4.3.  concerning  audits,  for  example).  This  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  playing  field  of  competitors  on  the  Community 
market.  It  also  leads  to  differing  levels  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 distortion of competition between the players, it is crucial 
to ensure enforceability 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. This aspect is particularly important in 
the  field  of  medicinal  products,  where  product  quality/safety/efficacy  is  closely 
linked  to  public  health.  In  view  of  the  potentially  disastrous  consequences 
(cf. 2., above),  it  could  be  perceived  very  critically  if  the  Community - who 
exhaustively  regulates  the  placing  of  these  products  on  the  market! – were  to  rely 
solely on self regulation. 

4.2. 

Specific objective n°1: Strengthening product protection 

4.2.1.  Discarded policy options 

4.2.1.1.  “No action” at Community level 

As  exception  to  the  principle  of  exhaustive  Regulation,  Community  legislation  on 
medicinal  products  allows  Member  States  to  lay  down  rules  for  labelling  for  the 
purpose  of  identification  and  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  product  coding.  The  result  is  10  different 
coding systems in the internal market. Moreover, France, Belgium and Greece have 
recently  established  three  differing  systems  for  authenticity  checks  on  the  basis  of 
varying product codes. Several Member States (e.g. Spain) are currently considering 
(unilaterally) reforming their present coding system. These trends are not necessarily 
motivated by the increase in counterfeiting, but by the need to combat reimbursement 
fraud, which leads to considerable losses for social security schemes 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  public  consultation  repeatedly 
highlighted  the  difficulties  created  by  a  lack  of  harmonisation:  the  costs  to  EU 
industry as a result of a lack of harmonisation in this respect are currently estimated 

60 

Cf. Palzer,et.al., Self-Regulation, Co-Regulation, Public Regulation (2004). 

EN 

31 

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to  be  as  high  as  1bn EUR  per  year.  A  further  fragmentation  of  the  rules  and 
techniques for product coding is going 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 actors 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 problem 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 would 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 original. 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  safety  feature  could  be,  for 
example, a RFID tag, a hologram, a colour shift 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  patient  safety  in  general  and  dispensing  of 
medicines  in  in  particular  (from  automated  validity  date  checks,  to  ensuring  each 
patient  receives  hi  or  her  prectiptin  only,  to  supporting  pharmacovigilance).  It  can 
also  support  health  systems  (by  reducing  fraudulent  reimbursement  claims  to 
national  social  insurance  schemes)  and  industry  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 specific  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, would be set out. This approach is taken for 
two reasons: 

(cid:121) 

(cid:121) 

First, technical standards and the range of technical options are evolving very 
fast.  It  would  be  a  mistake  if  details  were  written  “in  stone”  by  the  co-
legislator. This was also highlighted during the public consultation. 

Secondly, account has to be taken of international developments, in particular 
in view of trans-Atlantic economic cooperation and regulatory alignment. The 
U.S. regulator is currently considering safety features. Discussions in the U.S. 

EN 

32 

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are  roughly  at  the  same  stage  as  in  the  EU.61  Against  this  background,  the 
possibility  of  some  flexibility  to  update  technical  provisions  should  be 
maintained. 

Within this broad policy-option, there are various mutually-exclusive 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  medicinal  products  (with  possibility  of 
derogation):  In  this  policy  option,  a  safety  feature  would  be  compulsory  for 
prescription medicinal products only. In addition, 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  medicine  used  by  mental  health 
crisis resolution teams); or 

the marketing authorisation holder designs another manufacturer to 
re-label  a  product  to  address  shortage  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  would  merely  set  some  criteria  to  be 
considered  and  provide  a  legal  basis  to  fix  the  scope  under  Comitology.  The 
criteria would take into consideration the 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  manipulation  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  packaging,  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”  would  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 

33 

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In  analogy  to  the  broad  policy  option  n°1/1,  several  mutually-exclusive  policy 
options in terms of scope are to be considered: 

(cid:121) 

(cid:121) 

(cid:121) 

Policy option n°1/2a: For all medicinal products; 

Policy option n°1/2b:  For  prescription  medicinal products (with possibility of 
derogation); 

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 prod uct 
protection 

N °1/1 
Safety feature, e.g. 

-  hologram 
-  sea l 
-  seria lisa tion 
-  combination of the se.  

or/and 

N°1/2 
Prohibiting manipu lation 
of safety features, i.e. 

- no  re-ope ning 
- no  re-pa cka ging 
- limited over -stick ering. 

N°1/1a 
All products 

or 

N°1/1b 
Prescrip-
tion drug s 
with 
derogation 

or 

N°1/1c
Products 
selected o n 
risk-basedis 
(Comitolo gy) 

N°1/2a
All p roducts 

or 

N°1/2b
Prescriptio n 
drugs with 
derog ation 

or 

N°1/2c
Products 
selected on risk-
basedis 
(Comitolog y)y 

4.3. 

Specific objective n°2: Ensuring reliability of wholesale distribution 

Under  this  specific  objective,  four  policy  options  will  be  discussed.  They  are  not 
mutually exclusive. Within one of the policy-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  actors  who  are  situated  “in-between”  the 
manufacturer  and  the  dispenser,  and  who  clearly  are  not  covered  by  the  term 
“wholesaler” as presently defined. These actors include persons who trade medicinal 
products  “virtually”,  without  handling  them.  This  policy  option  would  mean 
subjecting  these  actors  to  the  relevant  requirements  of  Good  Distribution  Practices 
(“GDP”) and a notification requirement. 

4.3.2.  Policy option n°2/2: Harmonised 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 

34 

   EN 

 
                                                 
are  practically  no  harmonised  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 regular audits of supplying wholesalers 

At present, there is only limited control and 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 broaden the responsibility of the various actors. 
This interaction would be achieved through audits. Audits are assessments of a body 
or  a  person  by  another  party  to  verify  the  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: 

Overview: Policy-option audit of wholesalers

Medicinal 
product 
manfuacturer
/importer

Verification 
of certificate 

A
u
t
h
o
r
i
s
a
t
i
o
n

Wholesaler 
I 

Audit 

I
n
s
p
e
c
t
i
o
n

A
u
t
h
o
r
i
s
a
t
i
o
n

Audit 

Wholesaler 
II 

A
u
t
h
o
r
i
s
a
t
i
o
n

I
n
s
p
e
c
t
i
o
n

Wholesaler 
III 

Retailer/phar
macy 

I
n
s
p
e
c
t
i
o
n

EN 

35 

   EN 

 
 
 
 
 
 
 
It  should  be  noted  that  audits  in  the  pharmaceutical  sector  (manufacturing  and 
distribution) are nothing new. However, they are voluntary and thus do not act as a 
real deterrent to irresponsible actors in the supply chain. 

Audits  are  not  necessarily  performed  by  the  business  partners  themselves.  Instead, 
very  often,  audits  are  performed  by  third  party  auditors,  who  make  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 essentially 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  activities  and  compliance  with  GDP  more 

transparent 

To avoid counterfeit medicinal products being channelled into the distribution chain, 
it  is  crucial  for  wholesalers  to  work  with  reliable  partners.  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, too, similar provisions already 
exist for manufacturers and would be extended to wholesale distributors. 

4.3.5.  Overview policy options for specific objective n°2 

Speci fic objective  n°2 
E nsuring reliability of 
wholesale distribution 

N°2/2
Harmo-
nised 
inspection 
provisions 

and/or 

N°2/1 
Defi nition 
of 
wholesale 
obligations 
for all 
relevant 
actorsIncl
ude 

and/or 

N°2/3 
Audit 

and/or 

N°2 /3a  
a ll 
ac tors 

or 

N°2 /3b 
a ctors 
se lec -
ted on 
risk  
bas is 

N°2/4 
Transpa-
rency of 
compliant 
actors in 
database 

4.4. 

Specific objective n°3: Defining clear obligations for import for export 

Under this specific objective, three mutually-exclusive policy options are discussed. 

EN 

36 

   EN 

 
4.4.1.  Policy  option  n°3/1:  Clarification  to  the  effect  that  marketing  authorisation  is 

required for all imported products 

One  policy  option  would  be  to  make  it  clear  that  all  medicinal  products  brought 
physically  into  the  Community  for  storage/handling  must  have  a  marketing 
authorisation. 

4.4.2.  Policy option n°3/2: Clarification of the legal provisions – applying rules for export 

wholesalers 

One  policy  option  would  be  clarification  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.  imported)  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: Stepping up scrutiny of API actors63 

Under  this  specific  objective,  three  policy  options  are  discussed,  which  are  not 
necessarily mutually exclusive. Within two of these policy-options (authorisation and 
notification), several mutually-exclusive policy options are discussed.64 

4.5.1.  Policy option n°4/1: Authorisation/more inspections in third countries 

4.5.1.1.  Policy option n°4/1a: Authorisation (incl. inspection) by EU competent authorities of 
all manufacturers of API, including those in third countries supplying the EU 

In  the  EU  legislation  on  medicinal  products,  the  manufacturer/importer  of  the 
finished  medicinal  product  is  under  an  obligation  to  use  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 

64 

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. 
Cf. overview in chapter 4.6.4. 

EN 

37 

   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 beyond the current legal 
regime for the manufacturing of medicinal products. 

4.5.1.2.  Policy option n°4/1b: Authorisation of all API manufacturers/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 identical 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 scrutiny of API manufacturer supplying the 
EU  unless  there  is  assurance  that  the  third  country  applies  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  standards  in  a  given  third  country  are  not 
equivalent to those in the EU, inspections are required. 

4.5.2.  Policy option n°4/2: Notification requirements 

4.5.2.1.  Policy option n°4/2a: For all actors (EU and 3rd countries) 

One policy option would be the requirement for EU and third country manufacturers 
and  distributors  of  API  to  notify  their  activities  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  requirement  only  for  EU  manufacturers  and 
importers of API to notify their activities 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 currently 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 requirements 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  pharmaceutical  products  have  to  ensure  that  a 
non-EU  manufacturer  who  supplies  the  EU  has  audited  the  API  manufacturing 
facilities. 

EN 

38 

   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: Strengthening 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 combination of several techniques (concealed, 
open,  forensic)  can  be  an  effective  contribution  to  strengthen  product  protection 
measures.  Some  of  these  safety  features  might  not  be  readable  or  detectable  to  the 
untrained  eye  of  the  patient/medical  practitioner  or  may  require  specific  reading 
devices.  However,  in  these  cases,  verification  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 efficiently under Comitology, would 
allow for a far-reaching product-related protection covering all products. 

65 

An additional impact assessment may then be discuss technical details in more detail. 

EN 

39 

   EN 

 
                                                 
On  the  negative  side,  this  policy  option  would  cover  products  which  have  a  low 
risk-profile  as  they  are  less  costly  than  innovative  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). These 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 between 370m EUR (costs for manufacturers to 
run  serialisation)  and  1 070m EUR  (tamper-proof  feature,  in  particular  design  and 
devising it) for EU manufacturers. 

This policy option would hit in particular the generic and over-the-counter (“OTC”) 
industry for two reasons: 

(cid:121) 

(cid:121) 

Unlike branded/prescription industry, the OTC/generics sectors makes limited 
use of safety features today and would thus be hit stronger with new regulatory 
measures. 

Products  in  these  sectors  are  often  (relative)  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 serialisation) costs for dispensers (i.e. shops 
selling  OTC  medicines  and  pharmacies)  which  would  have  to  be  equipped  with 
verification  installations.  Costs  for  reading  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. This involves issues of competition law and 
business confidentiality. 

However, a harmonised safety feature can bring about important savings for industry. 
These savings relate to the following: 

(cid:121) 

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 
67 

68 

Cf. Annex 2, point 1. 
In  the  framework  of  the  implementation  measures,  an  additional  impact  assessment  may  discuss 
technical details in more detail. 
Cf. Annex 2, point 1. 

EN 

40 

   EN 

                                                 
consultation  has  confirmed  that  a  further  fragmentation  of  the  rules  and 
techniques for product coding has to be expected, leading to further increases 
in  costs,  but  without  any  added  value.  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 situation can thus be described as follows: 

Development of costs (schematic) for fragmented product-related measures

Fragmented product coding

Harmonised approach

2008

2009

2010

2011

2012

2013

2014

2015

(cid:121) 

(cid:121) 

(cid:121) 

Facilitated  recalls:  Certain  safety  features  facilitate  recalls  which  can  be 
rendered more targeted and thus more efficient. 

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  damage  to  the  packaging.  Approx.  1%  of 
products  are  returned  every  year.  Handling  of  returns  is  currently  very 
burdensome  and  costly  for  industry.  Certain  safety  features  could  facilitate 
handling of product returns thus leading to major savings. 

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 restricted, even this limited information should help industry 
to make savings in its expenditure on market research and consumer behaviour. 

In applying these considerations, the annual savings for the pharmaceutical industry 
of a harmonised safety feature can total approx. 2.53bn EUR.69 

69 

Cf. Annex 2, point 1. 

EN 

41 

   EN 

 
 
                                                 
These  figures  show  that  the  high  investments  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 

(cid:121) 

(cid:121) 

(cid:121) 

help  tackling  fraudulent  reimbursement  claims  to  national  social  insurance 
schemes;  

allow better targeting of pharmacovigilance; and 

facilitate logistics and storage by wholesalers and retailers/pharmacies. 

5.1.1.2.  Policy option n°1/1b: Prescription medicines with possibility of derogation 

Social impact/public health and related costs  

As  set  out  above  (4.2.2.),  this  policy  option  would  restrict  safety  measures  to 
prescription  drugs,  including  a  possibility  to  further  exclude  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  medicines  are  less  likely  to  be  targeted  by 
counterfeiters as their price is typically lower. Indeed, there is so far no evidence that 
OTC medicines have been targeted by counterfeiters. Moreover, the risks associated 
with  ineffective  OTC  medicines  are  typically  lower  than  drugs  prescribed  by  a 
doctor. On the other hand, apart from efficacy, counterfeit OTC medicines may still 
be  toxic,  i.e.  posing  a  risk  to  human  health.  In  addition,  there  is  a  risk  that  the 
exclusion of OTC drugs might simply divert 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 between approx. 185m EUR and 535m EUR.71 

It is important to note, that the OTC-sector 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%)  would  be  outside  the  scope  of  these 
measures as well. 

Moreover,  depending  on  the  scope  of  the  derogation,  other  medicinal  products 
manufacturers,  including  generic  manufacturers,  may  be  exempted  thus  avoiding 
compliance costs. 

70 
71 

An additional impact assessment may then discuss technical details in more detail. 
Cf. Annex 2, point 1. 

EN 

42 

   EN 

                                                 
In  terms  of  the  costs  for  pharmacies/retailers,  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-pharmacies  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 health and related costs 

On the positive side, this policy option would allow for a wide degree of flexibility to 
respond  to  changing  patterns  in  counterfeit.  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 long if products are moved into the scope 
of obligatory safety features. 

On  the  negative  side,  a  risk-based  (i.e.  changing)  scope  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  changes,  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 sectors during the public consultation. 

Economic impact on businesses  

As set out above, different manufacturing sectors are disproportionately affected by 
an obligatory safety feature. The flexibility concerning the scope would allow taking 
this  into  account.  For  example,  apart  from  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  excluded  from  the  scope  depending  on  the  risk 
profile.  This  would  remove  compliance  burdens  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 

(cid:121) 

(cid:121) 

the risk-profile of counterfeit is potentially less high; and 

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  products  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  costs  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, which would have to be equipped anyway, 
would remain the same. 

72 
73 

Cf. Annex 2, point 1. 
An additional impact assessment may then be discuss technical details in more detail. 

EN 

43 

   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 complementing the first broad policy option is a 
ban of manipulation of safety features. 

This  broad  policy  option  can  mean  in  principle  that  practices  of  over-labelling  of 
products  is  only  possible  if  safety  features  remain  detectable  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-exclusive policy options discussed: 

5.1.2.1.  Policy option n°1/2a: All products 

Social impact/public health 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  particular  the  research-based  industry  highlighted  the 
importance  of  this  measure,  stressing  that  expensive  safety  features  (holograms, 
micro-printing  etc.)  become  pointless  if  they  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  counterfeit  packaging,  this  could  not  prevent  that 
several thousand packs of medicines had been passed on in the distribution chain. As 
these products had been re-packaged, it was not possible for subsequent distributors 
or the end-users to verify safety features. 

Moreover, apart from the issue of counterfeit, this policy option has several positive 
health-related effects.75 It would also address: 

(cid:121) 

(cid:121) 

(cid:121) 

Errors in repackaging and relabeling and outdated patient information leaflets: 
According to information from the originator industry, between 2002 and 2005, 
700 packs of product faults due to re-packaging and re-labelling were found in 
the  supply  chain.76  With  regard  to  faults  stemming  from  re-packaging,  they 
would be addressed in this policy option. 

Patients  being  confused  by  changes  to  the  packaging:  Changes  of  the 
packaging  cause  in  some  cases  irritation  amongst  patients  which  may  lead  to 
wrong application of a medicinal product. 

The possible inefficiencies of pharmacovigilance and recalls: The re-packaging 
practices  can  render  recalls  by  manufacturers  more  difficult,  as  certain 
identification features have been over-labelled or disposed of. 

Although risks vary in degree, they are inherent in the practices of re-packaging and 
re-labelling. 

74 
75 

76 

Cf. the example under 5.1.2. 
Cf. study “Safe medicines through parallel trade”, Europe Economics (2008), p. 32 ff.; (referred to in 
chapter 1.4. in this report). 
Cf. idem, p. 51. 

EN 

44 

   EN 

                                                 
On  the  negative  side,  it  has  to  be  recalled  that  restrictions  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-packaging in order to ensure a supply of 
medicinal  products  complying  with  national  language  requirements.  During  the 
public  consultation  and  consultation  with  Member  States, 
these  Member 
States/EEA-States stressed repeatedly 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-States, this policy option would amount to a 
major health problem. 

Direct impact on businesses 

Parallel  traders  have  to  re-label  or  re-package  practically  all  the  medicinal  product 
packs in order to comply with national and Community requirements for language of 
the  labelling  and  packaging  sizes.  According  to  this  policy  option,  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 traders 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 Germany, and approx. 2% in Finland.78 

This turnover of parallel trade would, in a first-round-effect, be lost, which raises the 
question  of  second-round/distributional  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: 

(cid:121) 

(cid:121) 

to wholesale distributor in the importation country: To the extent that parallel 
traders are de facto exercising wholesale distribution, revenues would shift to 
wholesale distributors of pharmaceutical products; and 

to the research-based industry: It can be assumed that part of the turnover (and 
profit) generated by the arbitrage of parallel 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 

78 

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. 
Source:  EFPIA,  The  pharmaceutical  industry  in  figures  (2008),  p.  5.  In  the  public  consultation,  these 
figures were largely confirmed. 

EN 

45 

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It is estimated that the parallel trade 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, distributional  and  second-round effects have 
to be considered: 

Concerning  distribution  effects  to  the  benefit  of  wholesale  distributors,  these  may 
increase employment in order to respond to possible increase of demand. However, 
wholesale  distribution  is  less  labour-intensive  than  parallel  trade,  as  it  does  not 
involve  re-labelling  and  re-packaging,  which  is  usually  done  manually.  Apart  from 
wholesalers,  the  shift  of  revenues  to  patent-holding  pharmaceutical  industry  might 
lead to positive effects in employment in this 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 delivers views depending on who financed them. 

It is often argued that the main benefit of parallel is savings 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  difficulty  lies  in  the  quantifying 
the savings: Here, figures are controversial and vary. For example: 

(cid:121) 

(cid:121) 

A study by the London School of Economics contracted by Johnson&Johnson 
concluded,  in  2005,  that  savings  by  parallel  trade  for  health  insurers  are 
approx. 100m EUR in the six main importing countries;81 

On  the  other  hand,  in  a  study  conducted  by  the  Centre  for  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 
80 

81 

82 

DE: 2 000 – 3 000; UK: 3 000 – 5 000; Scandinavia: 1 000 - 1 500. 
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. 
Kanavos,  Costa-Font,  Pharmaceutical  parallel  trade  in  Europe:  stakeholder  and  competition  effects, 
London (2004). 
Enemark,  Møller  Pedersen,  Sørensen,  The  economic  impact  of  parallel  import  of  pharmaceuticals, 
University of Southern Denmark (2006). 

EN 

46 

   EN 

                                                 
(cid:121) 

(cid:121) 

Similarly, a study by the York Health Economics Consortium and financed by 
EAEPC published in 2003 concludes that savings from parallel trade in 2002 in 
UK, Germany, Sweden, Netherlands and Denmark were 631m EUR83 

In the public consultation, Germany has stressed 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 lower prices of parallel imports.84 

While  it  is  generally  acknowledged  that  parallel  trade  allows  for  intra-brand 
competition in patented medicines with savings 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 controlling 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,  

(cid:121) 

(cid:121) 

savings  through  parallel  trade  are  not  directly  passed  on  to  the  patient,  as 
patients  make  only  a  mall  flat-rate  contribution  towards  the  price  of  the 
prescribed medicinal product;86 

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 

(cid:121) 

parallel trade delays product launches in low-price countries;89 and 

83 

84 

85 

86 

87 

88 

West, Mahon, Benefits to payers and patients from parallel trade, York Health Economics Consortium 
(2003). 
Ganslandt,  Maskus,  Parallel  imports  of  pharmaceutical  products  in  the  European  Union  (2002),  The 
research instittue of industrial economics, Working paper No. 546, 2001. 
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). 
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. 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  States  where  the  prices  of  medicines  are  subject  to  State  regulation, 
parallel trade is liable to exert pressure on prices and, consequently, to create financial benefits not only 
for the social health insurance funds, but equally for the patients concerned, for whom the proportion of 
the price of medicines for which they are responsible will be lower” (para. 56). 
Cf. conclusions of AG F. G. Jacobs of 28 October 2004 in case C-53/03 Synetairismos Farmakopoion 
Aitolias & Akarnanias (Syfait) v Glaxosmithkline AEVE, paras. 91-92. 
Cf.  study  “Safe  medicines  through  parallel  trade”,  Europe  Economics  (2008),  p.  51;  (referred  to  in 
chapter 1.4. in this report). 

EN 

47 

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(cid:121) 

parallel trade, albeit welcome for the exchequer and health insurance schemes, 
leads  to  losses  of  the  pharmaceutical  industry  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 traders 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 products 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. However, this aspect may be negligible as 
OTC medicines are not the main target for counterfeiters. 

the  positive  side, 

this  policy  option  would – in  analogy 

On 
to  above 
(cf. 5.1.2.1.) - contribute  to  tackling  counterfeit  by  rendering  safety  features  more 
efficient.  Moreover,  it  would  allow  addressing  the  concerns  of  smaller  Member 
States  concerning  availability.  In  addition,  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 authorisation 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 within the derogations set out 
above  (4.2.2.).  It  is  realistic  to  assume  that  the  remaining  parallel  trade  would  be 
approx.  12.5%  of  value  as  compared  to  today.  This  is  based  on  the  following 
reasoning: 

(cid:121) 

(cid:121) 

(cid:121) 

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-medicines. In practice, parallel traders handle 
OTC-medicines  only  to  respond  to  clients’  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. 

To  this  add  situations  where  re-packaging/re-labelling  would  be  permitted  to 
ensure availability in small markets. The 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%. 

Finally,  under  this  policy  option  the  marketing  authorisation  holder  may 
authorise  a  re-packager  to  manipulate  the  safety  feature  to  address  public 

89 

90 

91 

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). 
Kanavos,  Costa-Font,  Pharmaceutical  parallel  trade  in  Europe:  stakeholder  and  competition  effects, 
London (2004). 
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 

48 

   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  option,  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 products. Thus, reduction of employment in 
first-round effect would be approx. 87.5%. 

With regard  to distribution effects/second-round  effect,  the  reasoning set out  above 
(5.1.2.1.) applies. This means that in second-round effects wholesale 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 possibility - on a risk-basis - to protect 
safety  features  by  prohibiting  their  manipulation.  This  policy  gives  thus  the 
possibility  for  a  targeted  approach.  It  would  allow  for  a  flexible  response  to  trends 
observed by market actors and competent authorities 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 addressed. On the negative 
side, this policy option would only have a restricted 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  can  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  life-saving  characteristics  are  high-price  products  where 
arbitrage  brings  about  relative  higher  margins  for  parallel  traders.  Regarding 
distribution/second-round effect, the reasoning above (5.1.2.1.) applies. 

Employment  in  this  sector  is  proportionate  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 

49 

   EN 

5.1.3.  Comparison of policy options for specific objective n°192, synergies 

In comparing the policy options relating to safety features, it becomes apparent that 
the scope of safety measures should encompass all prescription medicines (i.e. policy 
option  n°1/1b).  While  it  is  true  that  a  risk-based  approach  may  reduce  costs  for 
compliance, it is unlikely to achieve the objective: 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 adapt 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) are 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  option  contributes  better  than  option  n°1/2c  to 
the specific objective to strengthen product safety thereby 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.  Rather,  in  accordance  with  the  Commission 
guidelines  for  impact  assessments,  the  impacts  have  been  presented  with  view  to 
first-round  effect  and  distributional  effects,  thus  allowing  for  an  informed  political 
decision-making.93 

Both broad policy options have synergetic effect, as safety features are of limited use 
if their manipulation is legally possible. 

92 
93 

EN 

Cf. overview under 4.3.4. 
European commission impact assessment guidelines, (SEC(2005)791), with March 2006 update, section 
5.3. 

50 

   EN 

                                                 
Overview regarding the policy choices for the first specific objective: 

EN 

51 

EN 

 
  
 
EN 

52 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5.2. 

Specific objective n°2: Ensuring reliability of wholesale distribution 

5.2.1.  Policy option n°2/1: Include “traders” into the scope of rules for safe distribution 

Social impact/public health 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 bad faith – in trading counterfeit medicinal 
products. 

This should contribute to reducing the influx 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 penetrate the distribution chain 
and often remain undetected afterwards. 

The importance and effectiveness of this policy option has also been highlighted by 
the WHO in its “Principles and Elements for 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 administrative costs) and costs for inspections 
(fees  and  administrative  costs  to  submit  information,  accompany  inspectors,  etc.). 
These  costs  amount  to  1.14m EUR  one-off  costs  (incl.  0.14m EUR  administrative 
costs) plus 0.8m EUR per annum (incl. 0.138m EUR administrative costs).95 

5.2.2.  Policy option n°2/2: Strengthen inspection of compliance with GDP 

a) 

Social impact/public health and related costs  

As set out above (cf. 2.2.2.5.), enforcement and inspection are crucial. 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  (compliance  costs,  including  administrative 
costs) 

Costs  would  rise  in  terms  of  fees  (which  would  be  higher  for  CoCP  compliant 
inspections)  and  administrative  costs  (related  to  paper  work,  accompanying 
inspectors  and  follow-up  information).  This  rise  would  be  approx.  8.27m EUR  per 
year.96 

94 
95 
96 

http://www.who.int/impact/en/. 
Cf. Annex 3, point 1. 
Cf. Annex 3, point 2. 

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53 

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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 regular audits of supplying wholesalers 

Social impact/public health and related costs 

Audits  as  such  do  not  detect  counterfeiting.  However,  audits  do  help  to  single  out 
companies that are untrustworthy and they act as a deterrent to rogue traders wanting 
to enter the business. They represent a kind 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  has  to  be  borne  in  mind  that,  nowadays, 
responsible  traders  already  perform  audits  at  certain  intervals.  Finally,  this  policy 
option is based on a concept of shared third party audits as already 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 increase 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 difficult for the auditing party to assess 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. 

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54 

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5.2.4.  Policy  option  n°2/4:  Make  wholesale  activities  and  compliance  with  GDP  more 

transparent 

Social impact/public health and related costs  

A  database  of  GDP  authorisation  and  inspection  certificates  would  provide  an 
assurance about whether and when a wholesaler has been authorised and inspected, 
and  considered  GDP-compliant  by  the  competent  authority.  Such  a  data  base 
therefore helps to create trust in the distribution 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 does not give relief from the responsibilities set out in the 
relevant legislation. 

Economic impact on businesses (compliance costs, including administrative costs) 

The GDP database would be managed by the 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 administrations 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 thus 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 these 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 costs, relative to the significant difference in 
the  efficacy  of  the  measure,  policy  option  n°2/3a  should  be  preferred  over  option 
n°2/3b. 

98 
99 

Cf. Annex 3, point 4. 
Cf. overview under 4.4.5. 

EN 

55 

   EN 

 
                                                 
There are synergies between the chosen policy options to the extent that the various 
options  mutually  support  each  other.  For  example,  transparency  of  compliant 
wholesalers  do  contribute  to  the  efficient  use  of  resources  for  inspections  by 
administrations. 

EN 

56 

   EN 

 
Overview regarding the policy choices for the second specific objective: 

EN 

57 

EN 

 
  
 
5.3. 

Specific objective n°3: Defining clear obligations for import for export 

5.3.1.  Policy  option  n°3/1:  Clarification  that  marketing  authorisation  is  required  for  all 

imported products 

Social impact/public health and related costs  

On the positive side, this policy option is clear and easily enforceable: Any product 
entering the EU-territory for storage/handling would be illegal if it were not covered 
by a marketing authorisation. 

On  the  negative  side,  it  has  to  be  remembered  that  the  large  majority  of  products 
imported  for  export  do  not  comply  with  EU-legislation  for  marketing  medicinal 
products because of marketing authorisation requirements relating to the product and 
language requirements relating to the packaging. 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  particular  developing  African  countries,  which 
are supplied with medicinal products that transit through the EU. 

Economic impact on businesses (compliance costs, including administrative costs) 

A de facto ban on transit and import-for-export would lead to a loss of revenue for 
mainly two actors: 

(cid:121) 

(cid:121) 

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 diverted into other regions, typically this 
business gets lost for EU-companies; 

Other  operators  engaged  in  import  for  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  statistics.  For  these  reasons,  estimates  and 
extrapolations which are based on: 

(cid:121) 

(cid:121) 

(cid:121) 

statistical information from these air- and seaports concerning transit volume; 

industry opinion and case studies on the revenue generated by this trade; and 

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 
101 

See Annex 4, point 1 for details of all estimations and extrapolations. 
See Annex 4, point 1 for calculations. 

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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, particularly in the Middle East. 

5.3.2.  Policy option n°3/2: Clarification 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 actor 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 channelled into the legal supply chain of the EU, they are 
usually exported to third countries. Protection in these third countries may be lower 
because: 

(cid:121) 

(cid:121) 

(cid:121) 

enforcement  structures  are  weaker  (in  certain  developing  countries,  for 
example); 

authorities  refrain  from  enforcement,  as  they  (erroneously)  regard  incoming 
goods as Community goods; or 

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  handling  medicinal  products  destined  for 
exportation  who  would  face  one-off  costs  of  2.35m EUR  (caused  by  fees  for 
authorisation  and  administrative  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. 

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5.3.3.  Comparison of policy options for specific objective n°3103 

The  two  policy  options  discussed  for  this  specific  objective  have  very  different 
economic  consequences,  which  are  indirectly  proportional  to  their  usefulness  in 
achieving their objective. 

Policy  option  n°3/1,  however,  also  has  negative  effects  for  third  countries,  whose 
supply of medicinal products may depend on transit through/via the EU. 

103 

Cf. overview under 4.5.4. 

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Overview regarding the policy choices for the third specific objective: 

æ 

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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. inspection) by EU competent 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  compliance  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,  inspections  by  EU  competent  authorities  raise 
practical difficulties, as these inspections are resource-intensive and usually require 
knowledge  of  a  foreign  language,  and  partly  expertise  in  foreign  laws  and 
regulations,  as  well  as  some  intercultural  communication  skills.  This  is  particularly 
critical  in  view  of  the  large  number  of  third-country  API  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.  Congress:  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.  Increases  in  costs  would  hit  third-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 (fees and administrative costs) of approx. 
100m EUR (EU-manufacturers 0.3m EUR).105 

5.4.1.2.  Policy option n°4/1b: Authorisation of all API manufacturers/importers in the EU 

Social impact/public health 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 
105 

Report from hearing of FDA Commissioner in Congress subcommittee on 21 April 2008. 
Cf. Annex 5, point 1. 

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manufacturing  is  concerned,  compliance  with  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 inspections and preparatory work) by 18.5m EUR.106 

5.4.1.3.  Policy  option  n°4/1c:  Strengthened  scrutiny  of  plants  in  3rd  countries  if  level  of 

protection poses risks to public health in the EU 

Social impact/public health and related costs 

In  view  of  the  weak  controls  of  API-production  (above  2.2.2.4),  this  policy  option 
would  be  an  important  factor  in  strengthening  safeguards  against  counterfeit,  sub-
standard  API.  It  would  create  an  incentive  for  third  country  authorities  to  step  up 
regulation  and  enforcement  of  GMP  for  exported  API  and  to  bring  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  equivalent  to  those  in  the  EU  would  involve 
administrative costs of approx. 31.8m EUR (details in Annex 5, point 3). 

It  may  also  be  argued  that  another  positive  impact  of  this  policy  option  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 particular in the API-sector, other factors - 
such  as  IP-rights  issues,  wages,  and  qualification  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 the 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. 

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for  example  by  focussing  on  new  participants  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 well 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  third  countries.  To 
this add the distributors in third countries involved in the supply 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  third  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 address 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 manufacturers and –importers would be 4.2m EUR.109 

5.4.3.  Policy option n°4/3: Mandatory audits of API manufacturers by medicinal products 

manufacturers 

Social impact/public health 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  products  -  a  view  which  was  also 
widely confirmed in the public consultation. This holds 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 
108 
109 

To compare, the number of API distributors in the EU is approx. 5 500. 
Cf. Annex 5, point 4. 
Cf. Annex 5, point 4. 

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(cid:121) 

(cid:121) 

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 

Today,  60%  of  all  manufacturers  supplying  the  EU  already  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: 

(cid:121) 

(cid:121) 

(cid:121) 

How many API are purchased by one medicinal products manufacturer; 

How many medicinal products manufacturers purchase the same API; and 

To what extent reliable audits are already performed. 

In  view  of  this,  producers  of  generic  medicines  and  of  OTC  medicines  may  be 
particularly  affected:  While  several  manufacturers  may  purchase  the  same  API,  the 
usually purchase many different API for the product portfolio and produce very few 
(if any) API in-house. Therefore, these producers may be particularly 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 within specific objective n°4110, synergies 

As  with  the  discussion  of  specific  objective  n°2,  the  aim  of  most  policy  options 
discussed  under  specific  objective  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  implement in practice. Particularly with regard 
to policy option n°4/1a, the aim can be achieved 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  third  countries – would  be  counter-
effective,  as  the  scope  would  be  too  large.  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  API  with  reasonable  increase  in  costs  in  the  API 
sector. There are synergies between the chosen policy option to the extent that audit 
and enforcement are two parallel activities which may in practice support each other. 

110 

Cf. overview under 4.6.4. 

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Overview regarding the policy choices for the fourth specific objective: 

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6. 

CONCLUSION  -  FINAL  CHOICES  OF  POLICY  OPTIONS
TEST”) 

111;  IMPACTS  ON  SME  (“SME 

6.1. 

Final choices of policy options 

Assessing  and  comparing  the  policy  options  for  the  four  specific  objectives  reveal 
the following: 

Concerning the specific objective to strengthen product protection, the first broad 
policy  option  of  an  obligatory  safety  feature  means  establishing  a  legal  basis  for 
the  Commission  to  determine  under  Comitology  (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 concrete and detailed criteria for such a 
feature were established in secondary legislation, 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 differentiation 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  products  into  the  scope  which  have  a  low 
risk-profile as they are 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  product  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 counterfeiters “shifting” their activities to other 
profitable  product  groups  within  prescription  products.  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 OTC 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 obligation or voluntary – would not make sense.112  

111 
112 

For an overview over the policy options see above (Chapter 4) and the table below. 
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, who re-package medicines as part of their business 
model.  

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Within  this  broad  policy  option,  the  question  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 some cases, re-pack medicinal products. This 
is  done  by  traders  in  order  to  ensure  availability  in  small  markets  or  in  order  to 
exploit the price differential due to differences in national pricing regulations. To the 
extent that re-packaging and re-labelling implies a manipulation of the safety feature, 
these practices would be strongly impaired. Thus, availability of medicinal products 
in small markets would be reduced which raises public health concerns. 

This would be addressed in the second policy option: this policy option includes in 
the  scope  all  prescription  drugs  but  allows  for  a  derogation  which  permits,  for  in 
particular, addressing issues of availability. 

The third policy option would approach the issue of flexibility 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 flexibility. 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  these  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  reliability  of  wholesale  distribution, 
some  of  the  policy  options  may  apply  cumulatively.  Three  of  the  policy  options 
(wider  scope  to  include  all  actors  in  the  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-surveillance  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  that  the  latter  approach  brings  about 
considerable  legal  uncertainty  while  only  marginally  reducing  costs  for  regulatory 
compliance. Therefore, this impact assessment 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  been  discussed.  Both  policy  options  aim  at 
clarifying the conditions under which medicinal products allegedly 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  marketing  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 impacts on the supply of medicines to third 
countries,  which  often  use  the  Community  customs  territory  as  transit  hub.  The 

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second  (wholesale  exporter)  policy  option  costs  less,  while  being  only  slightly  less 
effective. 

Finally, regarding the specific objective to step up scrutiny of actors handling active 
pharmaceutical ingredients (“API”), within the broad policy 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  difficult  to  subject  these  producers  to  an 
authorisation regime (i.e. the first policy option), as this would 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 administrative costs for these actors, while the indirect scrutiny of 
authenticity/quality  of  imported  API  may  have  inherent  limitations.  Therefore,  the 
third  policy  option  is  favoured:  the  authorisation  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  level  of  protection  for  human  health  for 
products exported to the EU. It is expected that this policy option would in practice 
raise  standards  in  third  countries  without  introducing  an  expensive  and  resource-
intensive  worldwide  mechanism  of  EU-authorisation.  Moreover,  this  policy  option 
would  not  necessarily  place  additional  administrative  costs  on  Community 
manufacturers. 

The  broad  policy  option  “authorisation”  may  be  complemented  by  notifications  of 
actors  not  covered  by  an  authorisation  obligation.  Notifications  are  in  principle  a 
useful  tool  to  render  existing  inspection  schemes  more  targeted,  risk-based  and 
efficient.  Against  this  benefit  the  additional  administrative  costs  generated  by  this 
policy option for EU businesses are acceptable. Within the broad policy option, the 
possibility of including every actor involved in the manufacturing/distribution chain 
of products destined for the EU market has been discussed as one policy option. The 
administrative  costs  for  third  country  actors  would  remain  modest.  However,  this 
large  scope  would  not  effectively  support  targeted  inspections:  the  number  of 
notifying  parties  would  be  too  large  and  thus  render  the  entire  exercise  counter-
productive. The alternative scope would be restricted to companies established in the 
EU.  This  would  still  raise  administrative  costs  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 controls of competent authorities. 

6.2. 

“SME test” 

In its Communication of July 2008 “’Think small first’ – A ‘Small Business Act’ for 
Europe”113,  the  Commission  commits  to  strengthen  its  assessment  of  the  impact  of 
forthcoming 
(so-called 
“SME-test”).  Commission  guidelines  for  the  SME-test  are  still  under  development. 
Nevertheless,  to  reflect  this  Commission  commitment  already  now,  this  chapter 

legislative  and  administrative 

initiatives  on  SMEs 

113 

COM(2008) 394 final. 

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addresses  specifically  the  impact  on  SME  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  manufacturers  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, 
manufacturers,  who 
pharmaceutical sector, are less affected by compliance costs. 

it  can  be  expected 
the 

that  both  OTC  manufacturers  and  generic 
the 
large  share  of  SME-manufacturers 

form 

in 

Moreover, in order to reduce the impact of any measure related to the safety feature, 
it  is  crucial  to  ensure  that  the  implementation  time  of  such  a  safety  feature  is 
sufficiently long. The longer the implementation time of an obligatory safety feature, 
the  cheaper  it  is – in  particular  for  SME – to  comply  with  these  requirements.  This 
logic also holds for distributors/pharmacies who would verify a safety feature. 

6.2.2.  Other chosen policy options 

The impact on SME can be summarised as follows: 

(cid:121) 

(cid:121) 

(cid:121) 

(cid:121) 

(cid:121) 

Policy option n°1/2b/c: Both policy options (the final 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.  

Policy option n°2/1: The actors referred to in this policy options are practically 
all  SME.  They  would  be  hit  by  additional  costs  in  order  to  comply  with  the 
requirements foreseen in this policy option. 

Policy options n°2/2 and n°2/3a: Out of the approx. 20 000 wholesalers in the 
EU,  the  large  majority  are  SME.  In  order  to  mitigate  costs,  the  possibility  of 
third-party audits is foreseen under this policy option. This means that costs for 
audits are shared amongst purchasing wholesale distributors. 

Policy  option  n°3/3:  Exporter/transhipment  companies  usually  fall  within  the 
SME  definition  as  they  are  of  limited  size.  In  order  to  keep  costs  reasonably 
low, the policy option with the least business impact was chosen. 

Policy  options  n°4/1c  and  n°4/3:  As  set  out  in  the  impact  assessment,  these 
costs would mainly concern third country plants. However, in a second round 

EN 

70 

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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  ingredients  from  third  countries.  In  the 
generic  medicines  sector,  approx.  75%  of  manufacturers  fall  within  the 
definition of SME. 

(cid:121) 

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 related to the safety feature, it is crucial 
to  ensure  that  the  implementation  time  of  these  measures  is  sufficiently  long.  The 
longer the implementation time of additional regulatory measures, the easier it is for 
companies – in particular for SME – to render the costs for compliance low. 

EN 

71 

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Overview over impact of final policy choices (applying the baseline of a forecast 2011 to 2020):114 

Compliance costs (over period 2011-2020) in m EUR (first-round 
effect) 

Chosen policy 
options n° 

Med. 
product 
manuf./ 
importers 

Med. 
product 
wholesale 
distributors 

“Traders” 

wholes
alers 
engage
s in 
export 

API manufacturers 

EU 

3rd 
country 

Phar
maci
es 

157 

Impacts on parallel trade 
(first-round effect) 

Benefit 
(objective) 
in m EUR 

Other remarks 

Parallel trade value/volume 
minus 87.5% 

Parallel trade value minus 
50% (volume: minus 30%) 

Between 
9 500 and 
116 000 
(depending 
on 
scenario) 

No decision on technical feature now 
but in Comitology 

No final choice in impact assessment 
report – political appreciation 

Add. costs for database in EC budget: 
0.25m EUR 
Add. costs for database in EC budget: 
0.25m EUR 

1/1b (no decision on 
technical feature now 
but in Comitology) 

Seal 
Serialisation 

1/2b/c (no final 
choice – political 
appreciation) 
1/2b 
(prescription 
drugs) 

1/2c (risk basis) 

2/1 (include 
“traders”) 
2/2 (Inspections) 
2/3a (Audits) 
2/4 (GDP Database) 

3/2 (export 
wholesalers) 
4/1c (3rd country 
equivalenz) 
4/2b (Notification) 
4/3 (Audits) 

TOTAL COSTS 

6 430 
10 700 

336 
6 766< 
11 036 

5.14 

83 
195 

3 

403 

318 

4.2 

281 

5 

403 

4 

318 

157 

114 

It is assumed that costs mount in line with inflation. 

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7. 

MONITORING AND EVALUATION 

The  proposal,  once  adopted,  will  be  implemented  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 medicinal products; and 

•  Any occurrence of undesirable events due to counterfeit medicinal products. 

*** 

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Annex 1 – The actors involved in the production and distribution of medicinal products 

The pharmaceutical sector at large involves many different players, including manufacturers, 
importers,  (upstream)  suppliers,  (downstream)  distributors  and  retailers/pharmacies.  As  the 
policy  options  discussed  may  impact  on  these  players,  the  key  characteristics  shall  be 
described here. 

1. 

Medicinal products manufacturers 

The pharmaceutical industry is one of the best performing high technology industries 
in  Europe.  This  sector  accounts  for  more  than  17%  of  the  EU  Research  and 
Development 
typically 
represents around 15% of sales in any year. 

(R&D)  expenditure.  Pharmaceutical  R&D  spending 

There  are  around  3 700  pharmaceutical  companies  in  the  EU  with  a  combined 
turnover  of  170bn EUR;  they  employ  more  than  634 000  people.115  Of  these 
companies,  

(cid:121) 

(cid:121) 

approx.  1000  are  producing  generic,  i.e.  non-patented,  medicinal  products116; 
and (not necessarily mutually exclusive) 

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 the SME definition of the EU. The large 
majority of these companies produce 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, representing 15% of market share in value (retail price). 40-50% 
of these are generic medicines, 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 (relevant 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 
116 
117 

118 
119 

Eurostat (2005). 
In terms of SME, approx. 5% of these companies have a turnover of >50m EUR per year. 
Based  on  more  aggregated  figures  of  numbers  of  personnel  employed  (“pharmaceuticals,  medicinal 
chmicals, botanical products“) of Eurostat (2004) 
Eurostat (2006). 
European Generic Medicines Association (2006). 

EN 

74 

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A  production  line  life  cycle  is  approx.  20-25  years;  a  packaging  line  life  cycle  is 
approx. 10-15 years. 

While  there  are  no  precise  figures,  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 
ten 
manufacturers  of  medicinal  products  account  for  approximately  80%  of  brand 
medicines sold in Europe. 

is  rather  concentrated.  The 

industry 

top 

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 the substances, considerable 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  medicinal  products,  a  large  part  of  API  is 
produced  by  approx.  4500  API  manufacturers  based  in  third  countries.  These  third 
country manufacturers have approx. 20 000 production lines for API. Some 90% of 
these manufacturers (and the respective production lines) are in India120 and China121 
alone.122,123 

Large  generic  companies  have,  on  average,  around  500-1000  suppliers  of  active 
substances. Smaller generic companies have on average around 200-500 suppliers of 
active substances. Non-generic companies 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 distribution business  have evolved over time. There 
are many different players involved in the distribution chain. 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 intermediaries trading and supplying medicinal products. There are 
around 20 000124 licensed wholesalers and approx. 1 000 unlicensed brokers/traders 

120 
121 
122 
123 
124 

Approx. 1000 manufacturers. 
Approx. 3000 manufacturers. 
Pollak, Fine chemicals – the industry and the business (2007), p. 164. 
Weinmann, Cerrutti, L’industrie pharmaceutique, Les notes bleues de Bercy 2006, n. 303, p.3. 
EMEA 

EN 

75 

   EN 

 
                                                 
of  medicinal  products in the EU, accounting for a turnover of 282 billion EUR  and 
employing approx. 46 000 European workers.125  

Distributors  have  an  important  role  to  play:  they  ensure  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 selling them in high-price countries. 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  bargaining  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  insert),  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 estimated that the annual profits of parallel 
traders  in  the  EU  are  of  the  order  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 Sweden, 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 some exceptions, notably in the UK, the 
large majority of pharmacies are SMEs. 

125 
126 

127 
128 
129 
130 
131 

132 
133 

Eurostat (2005) 
For  the  purpose  of  this  report,  parallel  traders  are  qualified  as  distributors.  Note  that,  in  regulatory 
terms, parallel traders are obliged to obtain a “manufacturing licence” for their activities. 
Case 181/82, Roussel, ECR 1983, 3849. 
Case C-264/01, AOK Bundesverband, ECR 2004, I-2493. 
Approximative shares of relabelling: UK: 85%, Skandinavia: 50%; Germany: 70%. 
Europe Economics, Safe medicines through parallel trade (2008), p. 2. 
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. 
DE: 2 000 – 3 000; UK: 3 000 – 5 000; Scandinavia: 1 000 - 1 500. 
Source:  EFPIA,  The  pharmaceutical  industry  in  figures  (2008),  p.  5.  In  the  public  consultation,  these 
figures were largely confirmed. 

EN 

76 

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Annex 2 – Compliance costs for policy options under specific objective n°1 – estimations 
and calculations 

1. 

Policy option n°1/1a (all products) 

1.1. 

Example of costs for tamper-proof feature: 

The  costs  for  compliance  depend  very  much  on  the  technique  used.  According  to 
industry  estimates,  a  tamper-proof  feature  costs  in  average  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 lines, 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  manufacturers  of  medicinal 
products.  The  costs  for  adapting  a  packaging  line  to  mass  serialisation  are  approx. 
150 000 EUR (f). 

Today,  approx.  40%  of  all  dispensed  packs  (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  estimated  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 lines, 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  manufacturers  of  medicinal 
products.  The  costs  for  adapting  a  packaging  line  to  mass  serialisation  are  approx. 
150 000 EUR (f). 

One-off costs for manufacturers 

dcba
+

*

*

+

e

*

f

=

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 

77 

   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 

ig

5**

+
10

ih

5**

=

371m EUR 

Pharmacies (one-off) 

For pharmacies labour cost of scanning of the products has not been considered, as 
this  would  be  done  when  the  product  is  dispensed  (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  number  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: 

(cid:121) 

(cid:121) 

(cid:121) 

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. 

Facilitated  recalls:  The  100  large  companies  (b)  are  faced  in  average  with 
approx. 2.5 recalls per year (c). The other 3 600 companies 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% 

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  packaging.  Approx.  1%  of  products  are 
returned per year. Handling of these returns is very burdensome and costly for 
industry.  According  to  industry  estimates,  certain  authenticity  features  would 
allow for savings in this area of 1bn EUR (g) per year. 

135 
136 

For the purpose of the calculation, it is assumed that the number of dispensed packs remains stable. 
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 

78 

   EN 

 
                                                 
(cid:121) 

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: 

a

%40*

+

(
ecb

%30***

)

+

(
ed

%30**

)

+

f

g
=+

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-prescription sector. Existing 
compliance  is  approx.  40%.  The  prescription  sector  counts  for  approx.  50%  of 
dispensed packages per year. 

Thus, in applying the calculation above, annual 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 packaging 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 

79 

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Annex 3 - Compliance costs for policy options under specific objective n°2 - estimations 
and calculations 

1. 

Policy option n°2/1 (“Include “traders” into the scope of rules for safe distribution”) 

According to industry sources, it can be assumed that there are approx. 1 000 actors 
in the distribution chain which are not “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 costs. 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-off  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  terms  of  compliance  costs  (e.g.  fees  for 
inspections) and administrative costs. 

fees 

for  a  CoCP-compliant 

Non-CoCP  compliant  GDP-inspections  have  to  be  brought  up  to  CoCP-standards: 
Industry  estimates  that  80%  of  the  current  GDP  inspections  are  not  up  to  this 
inspection  would  be  approx. 
standard.  The 
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  point  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  continue  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) 

[
(
d

−

e

%80*

)

+

(
d

%20*

]
)

+

f

=

23.53m EUR per 

h
3

year 

h
3

*

d

=+ g

31.8m EUR per year 

Increase of annual costs: 8.27m EUR per year 

3. 

Policy option n°2/3a 

137 
138 

Information from industry (EAEPC, FIRP) and competent authorities (MHRA). 
This addresses only the wholesalers licensed already today. The Unlicensed wholesalers are addressed 
under point 1. 

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80 

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In  terms  of  compliance  costs,  the  estimation  is  based  on  the  possibility  of 
third-party-audits.  This  approach  would  contribute  to  the  reduction  of  audits  of  the 
same  plant  by  making  the  results  of  an  audit  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 years 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) 

(
ba
+

)

⎛
⎜
⎝

c
%90**
5

⎞
+⎟
⎠

⎛
⎜
⎝

(
ba
+

)

c
%10**
3

⎞
=⎟
⎠

30.72m EUR 

(
ba
+

)

⎛
⎜
⎝

%90***

ed
5

⎞
+⎟
⎠

⎛
⎜
⎝

(
ba
+

)

%10***

ed
3

⎞
=⎟
⎠

Auditors 

Audited 
party 

4.03m EUR 

Increase of annual cost total: 19.55m EUR 

4. 

Policy option n°2/4 

)

* c

= 

(
ba +
3

48m EUR 

(
ba
+

ed

)
**
3

=

6.3m EUR 

The one-off cost to set up the database (a) would be 1m EUR. Experience with the 
database for GMP-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 duration 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 

a
10

⎛
⎜
⎝

⎞
b
++⎟
⎠

⎛
⎜
⎝

c
3

**
e

f

⎞
=⎟
⎠

0.3m EUR 

139 
140 

141 

Including unlicensed wholesalers. 
Including unlicensed wholesalers. Note, that manufacturers owe by definition a distribution licence and 
are thus not included in this calculation. 
Wages are lower than in the cost model in Annex 8, due to the different characteristics of the work. 

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81 

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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 generates 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 distributed 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 importers), shipping cargo requires a minimum 
weight  which  makes  it  competitive  to  transport  smaller  consignments  by  air.  Land 
transport makes up an almost negligible percentage 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  the  movements:  for  forwarding  agencies, 
airlines, airports, shipping lines and sea ports. 

Figure 

Five main EU Ports 

Source 

A. Sea Transit 

PT: estimated weight of 
pharmaceuticals transhipped 
through from outside the EU (1,000 
tons)144 
AR: average revenue per shipment 
of 10 tons146 

710 

€4,500 

Estimate  based  on  evidence  from  Hamburg, 
applied  to  Rotterdam,  Antwerp,  Hamburg, 
Amsterdam, Le Havre145 

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 

143 
144 
145 

146 

Opinion of Quality Director DHL Excel Supply Chain. It is competitive to transport a consignment of 
under 12 pallets by air. 
Opinion of Quality Director for EMEA: DHL Excel Supply Chain. 
Across the five main ports. 
Choice  based  on  Rotterdam  Port  Authority:  Industry  and  Bulk  Cargo;  TransGlobal  Express;  Global 
Shipping; Antwerp Port Authority. 
Average weight of shipment: 24 pallets at 417kg each. 

EN 

82 

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ports [PT/10*AR] 

Figure 

PT: estimated number of transit 
movements of pharmaceuticals147 

AR: average revenue per 
movement149 

B. Air transit 

Six main EU airports 

14,193 

Source 

Estimate based on evidence from 
UK, applied to Frankfurt, Schiphol, 
Heathrow, Charles de Gaulle, 
Luxembourg, Milan148 

€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 

Figure 

NI = number of unauthorised 
importers 
TC = total transport costs per firm 
per year 

C. Handling and storage 
Whole EU 
3,336 

Source 
MHRA consulting with HMRC152 

€408,150 

Average of 45 transport 

BW = bonded warehouse storage 
revenue per firm per year 

€3,673 

VA = value-added per firm153  

EF = employment per firm 

€716,578 

16 

movements of 5 pallets each per 
year per firm; 60% by air and 40% 
by sea.  
Details in Transit Calculations 
Annex 

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” 

60%  of  European  wholesaler 

industry average. 
60%  of  industry  average:  Annual 
Business Inquiry (2007)  

147 
148 

149 

150 
151 
152 
153 

Across the six main airports. 
Choice  based  on:  De  La  Fuente  Layos  (2005)  “Statistics  in  Focus:  Transport”,  Eurostat  publications; 
and opinion of Quality Director for EMEA: DHL Excel Supply Chain. 
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  agents,  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.  
Medicines and Healthcare products Regulatory Agency, UK. 
10 pallets at average 417kg each. More than 10 pallets not likely to travel by air. 
UK Revenue and Customs. 
Contribution to GNP. Made up of net profit and wages. 

EN 

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Total  revenue  generated  across  all 
importers  

€3,764m  

[TC+BW+VA]*NI 

Total employment lost154  

53,376 

[EF*NI] 

Total for policy option 

Total revenue lost from policy per year  
[A + B + C] 

2. 

Policy option n°3/2 

€4,651m 

It  is  estimated  that  the  number  of  wholesale  exporters  located  in  the  EU  (a)  is 
1 000.155 

The  one-off  costs  relate  to  the  fees  for  the  wholesale  authorisation  (2 000 EUR,  f) 
and the one-off costs administrative costs related to it (g)156: 

g

+

(
*
fa

) =

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: 

(
*
ba

)

+

*
da
3

⎛
⎜
⎝

⎞
e
=+⎟
⎠

40.1m EUR 

154 

155 

156 
157 
158 

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. 
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. 
Cf. Annex 8. 
Industry estimation. 
Cf. Annex 8. 

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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 all API plants in third countries 
are inspected by the EU. 

Administrative costs for 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 

f *

h

=+ g

4.84m EUR 

Third country companies 

Zero 

*
ia

+

**
cba

=

302.4m EUR

Total increase: EU-companies:4.84m EUR; Third county companies: 302.4m EUR 

Increase in annual compliance costs: 

Costs today 

Costs of policy option 

159 

160 

161 

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. 
These  costs  are  not  reproduced  in  Annex  8,  as  they  relate  exclusively  to  the  costs  for  third  country 
manufacturers. 
Taking account of costs for transfer of inspectors. 

EN 

85 

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EU companies 

f

h

%80**
3

=+ j

1.29m EUR 

f

h

*
3

=+ k

1.61m EUR 

Third 
companies 

country 

⎛
⎜
⎝

ia
*
3

+

cba
**
3

⎞
⎟
⎠

%1*

=

1m EUR

⎛
⎜
⎝

ia
*
3

+

cba
**
3

⎞
=⎟
⎠

100.8m EUR

Total increase: EU-companies: 0.3m EUR; 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 are set out in Annex 8. 

One-off costs would thus be: 

(
a

+

d

)

*

b

c
=+

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 

a

b

*%80*
3

=+ d

 1.3 EUR 

(
a

+

)

*

b

d
3

e
=+

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 approx. 20 000 third-country API production line (a), 
i.e. 16 000 API plants, are not subject to regulation and enforcement of Community standard. 

EN 

86 

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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  third-country  API  manufacturers  due  to 
inspections (incl. administrative costs): 

Costs today 

cba
**
3

⎛
⎜
⎝

+

ae
*
3

⎞
⎟
⎠

%20*

=

8.16m EUR 

Costs (policy option) 

cba
**
3

+

ae
*
3

=

40.8m 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-house audit and third party audit; and 

the fact that most audits would be performed 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, according 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 sufficiently all their API-suppliers. Against this, it 
shall  be  assumed  that  60%  of  all  API  supplier  are  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: 

%40** ba
3

33.6m EUR 

162 

163 

These  costs  are  not  reproduced  in  Annex  8,  as  they  relate  exclusively  to  the  costs  for  third  country 
manufacturers. 
Cf. explanation for this rather low sum under point 1. 

EN 

87 

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Increase of costs for the audited are largely to be born by API manufacturers in third 
countries, as EU-based API manufacturer are already audited regularly. 

EN 

88 

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Annex 6 - Increase of counterfeit in the legal supply chain in the future: 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  counterfeit  medicines  detected  in  the  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 medicinal 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 develop 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 stable. 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  counterfeit  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: 

a

2020

n

1
−

= ∑

k

=

0

a

2007

(
1

+

i

r

k

) =

42m packs 

This  would  mean  that,  by  2020,  0.01%  of  all  medicinal  products  dispensed  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: 

a

2020

n

1
−

= ∑

k

=

0

a

2007

(
1

+

i

p

k

) =

192m packs 

This means that, by 2020, 0.05% of all prescription medicinal products dispensed through the 
legal supply chain will have been counterfeit products. 

EN 

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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 the policy options discussed 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 linked to the following scenarios: 

“optimistic scenario”: 

a

2020

n

1
−

= ∑

k

=

0

a

2011

k

( ) =
1

15m packs 

“realistic scenario”: 

a

2020

n

1
−

= ∑

k

=

0

a

2011

(
1.01
+

k

) =

35m packs 

“pessimistic scenario”. 

a

2020

n

1
−

= ∑

k

=

0

a

2011

(
3.01
+

k

) =

183m packs 

(cid:121) 

(cid:121) 

(cid:121) 

Costs: 

At  the  outset,  it  shall  be  stressed  that  the  monetised  benefits  are  expected  to  mount  in  line 
with inflation. 

Direct costs: 

(cid:121) 

Costs  for  hospitalisation  as  consequence  of  treatment  involving  counterfeit 
medicines:  Costs  for  hospitalisation  are  on  average  480 EUR  per  day  in  the  EU164. 
The  causality  between  counterfeit  medicines  and  hospitalisation 
largely 
unexplored. However, as set out above (2.2.), counterfeiters target increasingly life-
saving  drugs  which  are  typically  administered  precisely  in  order  to  avoid 
hospitalisation. Examples of the past include medicines for treatment of: 

is 

– 

– 

– 

thrombosis prevention; 

heart attacks and strokes; 

influenza; 

– 

prostate cancer.165 

164 
165 

WHO (2005). 
Cf. chapter 2.2. 

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Therefore,  it  is  a  rather  conservative  approach  to  assume  for  the  purpose  of  this 
impact  assessment  that  5%  of  the  counterfeit  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 avoidable hospitalisation in 
the EU can be estimated to lie between 1.8bn EUR and 22bn EUR. 

(cid:121) 

Costs occurring in an ambulatory setting for treating the consequences of a treatment 
involving  counterfeit  medicines:  These  costs  are  essentially  based  on  general 
practitioner (“GP”) consultations caused by counterfeit medicines which were toxic 
or of lower or too high efficacy. The average 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 ambulatory 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  health,  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 equal 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  different  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 instance - just as for (prolonged) 
hospitalisation - would be 5% of packs of counterfeit 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  estimated  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-action  based  on  QALY  can  be  estimated  to  lie 
between 7.65bn EUR and 93bn EUR. 

166 

167 

168 
169 

170 

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. 
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. 
Cf. WHO Burden of Disease data, http://www.who.int/healthinfo/bodestimates/en/index.html. 
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. 
Mason et. al., Estimating a monetary value of a QALY from existing UK values of prevented fatalities 
and serious injuries (2006). 

EN 

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Other quantifiable burdens: 

(cid:121) 

(cid:121) 

The  exact  costs  depend  on  the  quantity  of  products  concerned  and  the  depth  of 
percolation  of  the  product  into  the  supply  chain.  With  regard  to  the  former,  it  is 
crucial  to  stress  that  recalls  usually  involve  a  larger  quantity  of  products  than  only 
the counterfeit ones. Industry sources estimate 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 level has direct costs of approx. 10m EUR. This would 
mean that a recall in the entire EEA-area costs business approx. 60–80m EUR. 

Costs  for  destroying  seized  counterfeit  products  which  at  present  fall  on  the 
rightholder. 

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Annex 8 - Increase in annual administrative costs171 

. 

Annual and one-off administrative costs for EU businesses discussed in the policy options 

Policy option in IA (present 
situation or policy option) 

Type of obligation 

2/1 (policy option) 

Notification 

Description of required 
action 

Filling forms  

Annual 
costs/one-
off cost 

One-off 

GDP inspection by competent authorities (CoCP 
compliant) 

Filling forms, accompanying 
inspectors  

GDP inspection by competent authorities (non-
CoCP compliant) 
 GDP inspection by competent authorities (CoCP 
compliant) 

 Filling forms, 
accompanying inspectors  
 Filling forms, 
accompanying inspectors  

Annual 

Annual 

Annual 

One-off 

Annual 

One-off 

Annual 

Annual 

Filling forms  
 Filling forms, 
accompanying inspectors  
 Filling forms, 
accompanying inspectors  
 Filling forms, 
accompanying inspectors  
 Filling forms, 
accompanying inspectors  

Preparing, accompanying 
inspectors 

One-off 

Preparing, accompanying 
inspectors 

Annual 

Preparing, accompanying 
inspectors 

Annual 

Authorisation 

Inspections 

Authorisation of EU incl. inspection 

Inspection 

Inspection  

Authorisation, incl. inspection 

Inspections 

Inspections 

2/2 (present) 

2/2 (present) 

2/2 (policy option) 

3/2 (policy option) 

3/2 (policy option) 

4/1a (policy option) 

4/1a (present) 

4/1a (policy option) 

4/1b (policy option) 

4/1b (present) 

4/1b (policy option) 

4/2b policy option 

Notification of EU manuf./importers 

Submitting information 

One-off 

171 

Wage rate is based on industry consultation with an overhead of 15%. 

Tariff
(€ 
per 
hour)

Time 
(hour) 

Price 
(per 
action or 
equip) 

Freq 
(per 
year) 

Nbr 
of  
entities

Total nbr 
of  
actions 

Total  
cost 
(annually) 

Total  
cost (one-off) 

Target group 

i 

e

i 

e

Traders 

Distributors 

Distributors 

Distributors 

Unlicensed 
Importers 
Unlicensed 
importers 
EU API 
manufacturers 
EU API 
manufacturers 
EU API 
manufacturers 
EU API 
manufacturers 
and importers 

EU API 
manufacturers 
and importers 

EU API 
manufacturers 
and importers 

EU API 
manufacturers, 
importers 

35

4,00

140,0

1.000

140.000 

35

  22,50

787,5

0,33

4.000

1.320

1.039.500 

35

  15,00

525,0

0,33

16.000

5.280

2.772.000 

35

  22,50

787,5

0,33

20.000

6.600

5.197.500 

35

35

4,00

7,00

140,0

1.100

245,0

0,33

1.100

1.089

88.935 

35

  24,00

840,0

1.000

35

  24,00

840,0

0,33

800

35

  24,00

840,0

0,33

1.000

264

330

221.760 

277.200 

154.000 

840.000 

35

  24,00

840,0

12.300

10.332.000 

35

  24,00

840,0

0,33

800

264

221.760 

35

  24,00

840,0

0,33

12.300

4.059

3.409.560 

35

  12,00

420,0

12.000

5.040.000 

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4/2b policy option 

Notification of EU API distributors 

Submitting information 

One-off 

EU API 
distributors 

35

8,00

280,0

5.500

0

0 

1.540.000 

EN 

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Annex 9 - Summary of responses to the public consultation document 

1. 

Introduction 

In response to the public consultation on “Key ideas for better protection of patients 
against  the  risk  of  counterfeit  medicines”172,  the  Commission  received  125 
contributions  from  stakeholders.  Of  these,  100  were  from  industry  (pharmaceutical 
industry, distributors, suppliers of active ingredients, consultants), 15 from citizens, 
patient (groups), and academics, and 10 from health professionals, pharmacists and 
health insurers. 

4  stakeholders  (Eli  Lilly,  Bayer  Healthcare,  SICPA  and  Thornton  &  Ross  Ltd.) 
requested their entire submissions 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 Switzerland, 3 each from Poland and Ireland and 
the Netherlands, 2 each from Malta, and Denmark, 1 each from Austria, Sweden and 
Spain, and 18 from non-European third countries. 10 stakeholder contributions were 
global associations or could not be attributed in terms of region. 

30  national  and  regional  authorities  profited  from  this  stakeholder-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  action  was  needed,  and  that  the  problem  of  counterfeit  is 
increasing exponentially. 

Some respondents considered that the known cases were just the “tip of the iceberg”, 
as  in  particular  wholesalers  and  manufacturers  are  not  keen  on  being  related  to 
counterfeit  by  media  and  the  public.  They  argued  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 “disaster”, very little quantified information 
on  the  extent  of  the  problem  was  given.  One  respondent  (a  wholesaler  association) 
estimated  that  counterfeit  packs  represent  “probably  less  than  1%”  in  one  Member 
State. 

A  few  respondents  reminded  of  the  need  to  stay  rational  and  evidence-based – in 
particular regarding the lawful supply chain. One respondent argued that there is not 

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http://ec.europa.eu/enterprise/pharmaceuticals/pharmacos/docs/doc2008/2008_03/consult_coun

terfeit_20080307.pdf  
http://ec.europa.eu/enterprise/pharmaceuticals/counterf_par_trade/counterfeit_consult_2008.htm  

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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 changes 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 industry and stressed that 
companies have anti-counterfeit strategies in place. In this context, the question was 
raised  why  industry  should  bear  costs  of  counterfeit,  rather  than  the  society  as  a 
whole  (i.e.  the  taxpayer).  It  was  highlighted  that,  today,  costs  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 respondents agreed with the Commission’s assessment of the causes of 
the problem and welcomed the comprehensiveness of the analysis, in particular the 
inclusion 
(“API”) 
quality/authenticity. 

pharmaceutical 

ingredients 

aspects 

active 

of 

of 

In particular, all respondents supported a “joint approach” with a bundle of measures, 
i.e.  the  look  at  different  aspects.  It  was  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 should entail the recall 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 taken as opportunity to point at other, sometimes related 
aspects, such as the definition of “qualified person” (arguing that this person should 
be  a  pharmacist),  the  GDP  guidelines  (requesting  a  modernisation),  pharmacies  as 
buying  groups,  direct  supply  strategies  (arguing  that  they  encourage  alternative 
sourcing, incl. internet purchase), the differing pace in Member States of approval of 
variations,  the  requirements  for  the  “responsible  person”  (concerning  wholesaling) 
and the illegal diversion into the EU of products destined for third country markets 
under favourable price regimes. 

respondents  highlighted  additional  aspects  outside 

Several 
the  scope  of 
pharmaceutical  legislation.  These  included,  for  example,  assisting  third  countries 
with  weaker  regulatory/enforcement  structure  and  a  strengthening  of  criminal  law 
measures against counterfeiters. 

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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 entered a discussion as to whether internet 
pharmacies  should  be  subject  to  a  specific  Community  regulation  and  how.  Others 
recognised that the main problem lies with dubious internet pharmacies 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 prohibition 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 efficiently contribute to the fight against counterfeit, as the 
number of units within a batch can be enlarged 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. Legislation should thus not be too prescriptive 
and further implementing legislation was needed. 

On  the  other  hand,  several  respondents  stressed  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 technologies, the following was observed: 

3.1.1.1  Serialisation 

There was almost unanimity that serialisation is in principle a useful technology to 
combat counterfeit. One respondent stressed that the tobacco industry is considering 
a similar technology. 

On  the  other  hand,  the  multiple  technical  and  legal  difficulties  were  highlighted. 
These would require a long period for implementation. The U.S. example shows this. 
Therefore,  a  stepwise  approach  (for  example,  first  including  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  supported  by  the  research-based  industry,  but 
more critically assessed by the self medication and generics sector who argued that 

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their  products  had  not  been  targeted  by  counterfeiters  in  the  past  and  that  costly 
product protection measures for those products would not bring additional 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 was highlighted that pharmacies may use serialisation to 
facilitate inventory management.  

Consumers should have a possibility to verify serialisation numbers via the phone or 
the internet.  

Many  submissions  highlighted  the  international  developments  for  example  in  the 
U.S. (in particular California) and in Turkey arguing that 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 ownership and transaction of a batch. 

There  were  conflicting  voices  on  the  effectiveness  of  a  pedigree.  While  some 
considered it as useful tool to back-trace (referring, 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 very 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. Several respondents recalled that a pedigree 
may affect negatively the 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 should 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.  Others  criticised  that  efficient  seals  can 
only be verified by experts and that they would give a wrong feeling of safety. It was 
also stressed that the 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”. 

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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  asymmetric  cryptography,  colour-shifting  dosages,  watermark 
technology,  chemical  markers,  flavour  or  aroma-adding,  individual  dosage  level, 
DNA-coding, NIR-spectroscopy, electronic features, excipients tag, etc., etc. 

It  was  stressed  that  seals  were  nothing  new  in  the  pharma  sector  and  common 
practice in the food-and-feed sector. 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  ensure  that  a  layperson  (e.g.  a  patient)  can 
identify the seal. Others, on the contrary, stressed that this would give a false feeling 
of security and that covert seals are preferable. Some highlighted 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  “intelligent”,  risk-based  approach  was  needed  for 
determination of the scope. For example, certain product groups should be primarily 
considered,  such  as  injectables,  expensive  or  high-volume  medicines,  or  biotech 
medicines (which typically do not have a taste or colour). 

The  generics  and  OTC-producer  challenged  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  possibility  of  a  “step-wise 
approach” was considered. 

On  the  other  hand,  some  respondents  stressed  that  a  limited  scope  would  lead  to 
confusion  and  that  it  would  not  allow  exploiting  scale  effects.  Moreover,  it  was 
argued  that  counterfeiters  are  very  flexible  and  that  it  was  difficult  and  even 
unrealistic to forecast a risk profile. The example of pandemic flue shows that risk 
profiles can change rapidly. 

3.2 

Prohibition of manipulation of safety feature 

This  item  of  the  public  consultation  sparked  many  differing  reactions  and  was  the 
only item where views were fundamentally opposed amongst different stakeholders. 

Holders of the original marketing authorisation 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 that a fake product is introduced into an 
(original) pack. 

Many respondents pointed at the impact for re-packaging practices in the EU. This 
would concern, for example, re-packaging to ensure availability in small markets.  

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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  particular  parallel  traders  criticised  that  this 
key idea had been lobbied by the research based industry and would essentially be an 
attempt of putting parallel traders out of business. 

Parallel traders also questioned the link between counterfeit and parallel trade. They 
argued that counterfeiters have no interest to pass via parallel traders who may, in the 
course  of  the  re-packaging,  detect  the  counterfeit  earlier  than  a  wholesaler.  In  this 
respect it was argued that, in fact, parallel traders provide for an additional 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 price 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 OTC patients often wish to read the leaflet before purchasing 
the  product,  that  pharmacists  need  sometimes  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-packaging is required for clinical trials.174 

4. 

Distribution 

4.1 

General remarks 

There  was  widespread  agreement  that  today’s  distribution  system  constitutes  a 
challenge in term of ensuring a counterfeit-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  interim  traders  (“brokers”),  with  little  or  no 
knowledge  of  the  sector  and  the  products  was  criticised.  In  this  respect,  several 
submissions stressed that “medicines supply is only as clean as its dirtiest link”. 

One interesting aspects, which had been raised by some respondents, was the idea to 
render reporting of counterfeit products 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 details and in particular on the question, 
which  concrete  actors  should  be  included.  In  this  context,  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). 

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Some cautioned that a definition would have to be carefully drafted (also in view of 
the  translations  in  the  different  official  languages)  and  that  mere  transporting 
companies  should  not  be  included.  Moreover,  “trade”  (i.e.  transactions)  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  involvement  was  needed,  so  that 
inspections are adapted to the different actors.  

On a different matter, one respondent highlighted that GDP should include rules on 
procurement of medicines. 

4.3 

Strengthen inspections 

Here  too,  the  important  role  of  enforcement  was  highlighted.  In  this  respect  it  was 
emphasized that the adoption of GDP as Directive would have limited impact, as it is 
already satisfactorily implemented in the Member States. 

It was stressed that a better cooperation was needed, including avoiding duplication, 
coordination  by  EMEA,  coordination  at  international  level  and  strengthened 
inspections in third countries. 

There  were  many  suggestion  how  to  render  inspections  more  targeted  and  how  to 
support  them  from  the  perspective  of  the  Community  legislator:  Points  raised 
concerned  inspections  of  customs  warehouses,  revised  Compilation  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 authorities are sometimes understaffed. 

One  submission  stressed  that  wholesaler  certificates  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,  such  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 Justice, have been highlighted.  

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It was stressed that the food sector is considerably more advanced in addressing the 
issue. 

Respondents  highlighted  in  particular  the  need  to  have  clarity  with  regard  to  “free 
zones”  from  the  perspective  of  pharmaceutical  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 exporting 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  storage  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 restricted 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  was  that  Community  provisions  ensuring 
efficient  enforcement  are  too  weak,  in  particular  with  view  to  third  country 
manufacturers. It was highlighted that, at present, the only very few Member States 
inspect outside the EU (these inspect approx. 20 plants per year).  

With regard to checks by third country authorities it was argued that these work often 
with lower standards – in particular concerning exported substances. It was stressed 
that  this  situation  has  created  a  non-level  playing  field.  One  respondent  estimated 
that  a  manufacturer  who  is  Good  manufacturing  practices  (“GMP”)  non-compliant 
saves  approx.  25%  of  production  costs.  This  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 submissions suggested referring to “rogue API”, rather 
than “counterfeit API”. 

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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  team”  for  API.  Moreover,  duplication  of 
controls  by  reliable  third  country  inspections  should  be  avoided  and  cooperation 
strengthened.  This  was  particular  relevant  as  inspections  in  third  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  contribution  of  GMP  to  combat  counterfeit. 
Some considered GMP as “crucial”. They argued that – while GMP-non-compliance 
does  not  make  a  product  a  counterfeit - counterfeit  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  enforcement,  some  respondents  cautioned  that 
manufacturer of medicinal products should continue to be held primarily responsible. 

One  respondent  suggested  that  labelling  of  a  medicinal  product  should  include 
information on API. 

More specifically, on authorisation and notification requirements the following was 
raised: 

•  Authorisation obligation: Many respondents did not explicitly address this point. 
Those who did supported an authorisation obligation in particular for third country 
manufacturer. This would lead to obligatory inspections rather than on inspections 
based on suspected “non-compliance”. 

•  Notification  obligation:  Most  respondents  supported  this  point,  highlighting  that 
France  has  already  introduced  notification  requirement  for  importers  and 
distributors. Also, Italy is going to strengthen unilaterally its rules as of 1 January 
2009.  While  respondents  supported  inclusion  of  distributors  in  the  notification 
requirement, they spoke against a notification 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 disagreed stressing that 
audits did not give an insight in the actual production process. 

Some  submissions  reminded  that  auditors  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. 

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Some  submissions  requested  clear  guidance  as  to  the  content  of  the  audit  and 
qualification  of  the  auditor,  while  others  stressed  the  need  to  maintain  a  flexible 
system, in particular concerning the frequency of audits. 

A few submissions pointed at practical difficulties, 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, currently, shared third-party audits are not very common. In 
order not to increase costs (in particular for SME), duplications of audits should be 
avoided, and an “audit database” was suggested. 

One respondent stressed that package producers should be audited too. 

7. 

Other aspects 

Many respondents commented on the key idea, put forward in the public consultation 
paper,  to  apply  “fingerprint  techniques”  in  order  to  check  the  authenticity  of  the 
product.  While  this  idea  was  in  principle  welcome,  several  submissions  cautioned 
that it could not replace good process and supplier control. It was also stressed that 
technology evolves fast and that no definite technique should be fixed in Community 
legislation. 

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