The fraudulent activity of counterfeit drug trafficking is developing continually, boosted by a number of environmental factors: inadequate legislative apparatus, the extreme profitability of trafficking, poorly informed populations, shortages of medicine, complex supply chains, lack of regulation and control, corruption, porosity at international borders.

There is a real need to fully understand these issues in order to swiftly match them with adequate solutions.

Like all criminal activities (counterfeiting, trafficking in narcotics or weapons, prostitution, human trafficking, etc.), trafficking of counterfeit medicines takes root where the environment is the most propitious.

Small local traffickers and, a fortiori, the international networks of organized crime never fail to exploit weaknesses in national systems and take advantage of the difficulties encountered by the authorities, international organizations and other players engaged in the prevention and dismantling of trafficking.

The combination of the following factors and their uneven distribution from one country to another explain both why some states and their populations are more exposed than others to this type of crime and why the trafficking of counterfeit drugs is expanding significantly throughout the globe.

• Factor 1: An extremely lucrative activity

A drug is very long and very expensive to produce, (taking into consideration the development of its active principle, the permanent quality controls and multiple health precautions) but its physical appearance is relatively easy to reproduce. This partly explains why medicinal products have specific industrial property rights protecting patents over long periods of time. Unfortunately, it also explains in part why drug infringement has become the favorite counterfeiting activity for mafia and criminal networks: it is extremely easy and cost-effective to produce a forged drug, having only the appearance of an authentic one.

Even the relatively large costs of investment in industrial machines remain accessible to criminal or mafia networks light of the profits they make.

  • « 95% of the value of a drug pays for the grey matter which allowed its development». Jean-François Dehecq, ex-PDG of Sanofi Aventis.
  • The counterfeiting of a blockbuster generates a profit of $500,000 for an initial investment of $1,000 (source IFPMA).
  • Examples of industrial investments made by some counterfeiting networks: 50,000 to 100,000 Euros for moulds and 300,000 to 600,000 Euros for a plastics production line (“Counterfeiting and organized crime” Unifab quarterly report).

• Factor 2: Risks of Punishment are too low

Legislation in most countries does not establish sufficiently severe punishments to deter drug counterfeiters. In many countries, the legislative apparatus deals with the falsification of medicines in the same way as for any other form of counterfeiting, i.e. exclusively as an industrial property violation. Thus, drug-faking offenders often face the same penalties as those that would apply to a counterfeiter of branded T-shirts, DVDs or handbags.

Some countries do have sufficient and appropriate legislation (about 20% according to the WHO), but do not apply it properly.

  • 30% of countries have little or no regulation to effectively combat counterfeit drugs (WHO).
  • ”Petty criminals and especially organized criminals have identified (counterfeiting licit drugs) as a way to making big bucks with lower penalties than those applied to counterfeiting cocaine, crack or heroin” says Lewis Kontnick of Reconnaissance International, a US consulting firm working on counterfeiting issues.

• Factor 3: The lack of transnational jurisdiction and consensus

Nearly the entire fight against trafficking in fake medicines relies on national legislation for legal measures and state authorities for law enforcement.

International reports, conferences and signed agreements, combined with the actions led by transnational agencies and organizations such as Interpol or the WCO, do significantly impede the spread of counterfeit drug trafficking. Yet, the fact that not all countries recognize medicine counterfeiting as a specific crime (in the same way as terrorism or trafficking in false currency for example) blocks the application of these resolutions, and undermines the effectiveness of enforcement actions in the field.

This legal and organizational vacuum often leads to the impunity of drug counterfeiters whose industrialized and highly organized trafficking plays on international discrepancies. (It is not uncommon that the raw materials used in the production of a fake drug come from one country, that the drug is manufactured in a second, that it passes through a third and that the finished product is finally marketed in a fourth or a fifth, etc.).

  • “And with no international agreement to treat medicine counterfeiting as a serious crime, judicial and police cooperation between countries (…) cannot be taken for granted.” (Amir Attaran, Roger Bate and Megan Kendall in “Why and How to Make an International Crime of Medicine Counterfeiting”).
  • In Bogota, in 2001, a seizure of 20,000 counterfeit drugs led to the arrest of 10 traffickers caught red-handed. All were released on bail a few days later (“Making a Killing”).

• Factor 4: Deficient health coverage systems

When the cost of a drug is too high, patients are tempted to try to obtain it a lower cost by any means.

This encourages patients to recklessly put their health at risk.

Thus, in both developed and emerging countries, the intensity of fake medicine trafficking is often inversely proportional to the quality of the health system and the level of reimbursement for health products.

Factor 5: Highly porous borders

Globalization of recent years has multiplied the quantities of goods transiting between countries tenfold. International trade has irreversibly accelerated more quickly than the systems put in place to control the flow of goods.

Therefore, even in countries where adequate legislation exists to combat the illicit trade in fake medicines, the possibilities for customs controls can be weak, consequently reducing even further the risk of prosecution for traffickers.

To make things worse, more and more consignments of illicit or counterfeit drugs are purchased online and delivered by postal cargo, which is very difficult to detect. According to the 2010 EU customs report, 69% of articles intercepted in postal traffic were drugs.

  • The number of counterfeit drugs passing through European borders was multiplied six fold in two years, from just over half a million in 2005 to more than 4 million in 2007. (“Cracking Counterfeit Europe” survey).
  • “These techniques, and the avoidance of direct routes for many shipments, are very similar to those used by drug smugglers – which clearly indicates the type of organizations we are facing”. Laszlo Kovacs, European

Commissioner responsible for Taxation and customs, Union February 8, 2005.

• Factor 6: The anonymity of the internet

Over the last fifteen years, the advent and growing success of the Internet has provided fake medicine traffickers with an ideal marketing tool for the large scale commercialization of their production.

This virtual trade vector greatly favors underground activities as it preserves the anonymity of the parties involved in the transactions and the opacity of financial transfers.

Forged health products are omnipresent on the internet (about 1 drug in 2) and this is a major global concern, despite the effective precautions taken by some countries to prevent diversion and to minimize health risks for their populations.

– 96% of online pharmacies are illegal platforms ( NABP).

– In 2010, one European in five, that is to say the equivalent of 77 million people, admits to purchasing drugs outside the authorized channels that are normally only available on prescription. ( “Cracking Counterfeit Europe” survey).

– Between 2006 and 2007, the number of seizures in postal or express freight, the main distribution channels for counterfeit goods purchased on the Internet, increased by 225% (European customs).

Factor 7: Vulnerable supply chains

Fake drug traffickers find many openings for market intrusion due to the complexity of the supply chains for health products. In developed countries the supply chain between the producer and the consumer is relatively short and for the most part, secure, but this is not true for the emerging countries. Factors such as the length of import supply chains, the number of parties involved, the lack of political will and absence of means of control for health authorities, police and customs all create opportunities for criminal networks to divert drugs and to dissimulate forged products.

It is clear that the proliferation of economic operators in the supply chain facilitates the penetration of fake drugs in the internal market.

In the US, 90% of medicines are distributed by three major distributors, but a secondary network of some 6500 wholesalers is responsible for $9.3 billion worth of medicines. (“Making a Killing”).

  • In the United Kingdom between 2004 and 2007, nine cases were discovered where counterfeit medicines had reached retail pharmacies and the patient. The drugs were recalled. Five other cases were discovered at the wholesale level. (MHRA).
  • A US study found that 39% of samples collected in Cameroon had either no active ingredient, insufficient active ingredients, or wrong ingredients.
  • A survey conducted in 2005 revealed that nearly 30% of drugs in Kenya were counterfeit, and some were nothing more than chalk and water.
  • In 2006, in Great Britain, a major pharmaceutical laboratory decided to expel 18 wholesalers from its distribution network.

• Factor 8: The possibility of parallel import trading (see “Parallel imports”)

Some countries, such as the members of the European Community, authorize parallel drug importation in respect of the principle of the free movement of goods. This gives a drug wholesaler/distributor the possibility to purchase supplies in another Member country in order to benefit from more attractive prices. This is a legal and highly regulated practice in Europe, but it nevertheless raises various issues with regard to drug falsification. Indeed, the importer is authorized to adapt and modify the packaging of the drug, particularly for language issues. This creates an opportunity for Counterfeiters to reuse the original empty packaging for their forged products and distribute them through legal marketing channels.

Finally, parallel imports contribute to increasing the number of intermediaries and the number of steps in the supply chains, making them more vulnerable.

  • In 2010, the market of fake drugs in Europe was estimated at 10.5 billion Euros (“Cracking Counterfeit Europe” survey).
  • “America’s medicines routinely pass through a grey market of middlemen, who buy and sell to one another in frenzied all-hours trading. This minimally-regulated trade has drawn narcotics traffickers and organized criminals, who handily obtained state licenses as drug wholesalers. The result is that the supply we once trusted is now riddled with counterfeit, adulterated, mishandled and expired medicines. What Dr. Harper’s report has identified is that Europe’s parallel trade effectively replicates America’s frenzied medicine auction – and is equally unsafe. ” Katherine Eban, author of ”Dangerous Doses”in European Patient Safety and Pharmaceutical Parallel Trade – a potential public health disaster?

• Factor 9: Populations’ lack of awareness and information

Fake drug trafficking exposes the patient to extreme health risks.

This is why, unlike other forms of counterfeits, the patient is always duped and never an accomplice: he or she is the true victim.

One of the best preventive measures for combatting this traffic is therefore to promote the widest possible access to reliable and objective information on the subject.

  • More than 82% of the French say that if they had known that the drug purchased outside the legal health systems could be counterfeit, they would have not purchased it. (“Cracking Counterfeit Europe” survey).

• Factor 10: Lack of means and training of players in the field

Fake drug trafficking networks use their enormous financial resources to equip themselves with sophisticated technical means for production and logistics and to develop elaborate evasive strategies. Today, product imitations have reached such a high level of perfection that it has become very difficult, sometimes impossible, to visually distinguish a true drug from a fake.

Faced with these devices and the complexity of counterfeit products, stakeholders that are able to fight against this traffic (doctors, pharmacists, customs officers, police) rarely dispose of equivalent resources.
Moreover, they must have high levels of expertise in the required technical skills and methodological know-how to be effective in the daily struggle.

There is a lack of competent international training bodies and of physical or virtual spaces for players in the field to share experience and best practices. This significantly impedes the efficacy of their preventive and enforcement actions.

“The dangerous trade of these drugs cannot be stopped without a collective international effort involving all sectors and stakeholders, including the private sector,  and the strengthening of laboratory test capacities”, Aline Plançon, Director of the Interpol unit against of medical products counterfeiting and pharmaceutical crime (MPCPC).

“The question of the fight against fake medicine is a transversal subject that involves many actors: pharmacists, certainly, but also lawyers, physicians, economists. In occupational terms, it directly or indirectly concerns police agents, customs officials, drug manufacturers and distributors.

By their proximity to patients, pharmacists are the first to consider specific training in this area since it is their core business. But it is absolutely recommended that other faculties include this subject in their training and research curricula from now on, in order to provide technical tools to future professionals.”

Dr. Hélène Degui, Director of the Medico-Pharmaceutical Humanitarian Group (French acronym: CHMP).
PR. François Locher, Dean of the Faculty of Pharmacy, Lyon.

Factor 11: Corruption.

It is often in the countries that are most exposed to the risk of political and bureaucratic corruption that organized criminal activities develop the fastest.

Unfortunately, it is most often in these same countries that health workers or officials responsible for sanctioning trafficking are also underpaid and therefore sensitive to corruption.

Therefore in most of these countries, populations are highly exposed to fake drug trafficking.

  • ”Corruption in health care costs more than money. When an infant dies during an operation because an adrenaline injection to re-start her heart was actually just water, how do you put a price on that? The price of corruption in the health sector results in human suffering.” Huguette Labelle, Chair of Transparency International.
  • Since 1999, more rigorous controls in Britain have helped to reduce losses due to corruption in the health care system by nearly $300 million USD (Transparency International).
  • In the Philippines, a 10% increase in the level of fraud and extortion by health personnel resulted in a 20% decrease in child vaccination. (Transparency International).

Factor 12: Insufficient traceability and authentication of drugs

Traceability, identification, authentication and drug inviolability are key elements in the fight against the trade in fake medicines.

There is a need for effectively designed and universally implemented security devices containing sufficient information to know the compositions of drugs with certainty throughout their production and distribution cycle.

The development of such tools has become a priority not only for manufacturers, distributors, pharmacies and care institutions but also for government agencies, professional organizations and unions.

Technological tools born of private and/or public sector initiatives are now available or are in good progress (Data matrix, RFID, mPedigree, Minilab, Truscan, etc.). Unfortunately, these tools are not yet generalized.

Most of the those devices have proven their effectiveness on a local scale, but many obstacles still inhibit their international use: the costs and logistical consequences of their implementation, political choice and the different strategic implications of each device, debates about their comparative effectiveness, absence of an agreement on a single standard system).

  • In February 2004 the F.D.A. recommended the RFID system. Two years later, in June 2006, it moderated its position, leaving the choice between 2 technologies: RFID or 2D Data Matrix.
  • Since August 2006 GS1 standards for consumer foods are used for pharmaceutical products at the international level.
  • In France since January 1, 2011, all drugs on the market are marked with a new codification, the lot number and the expiry date in the form of a Datamatrix.

• Factor 13: Drug shortages and prices that are too high in emerging countries

Drugs represent a large proportion of health costs, particularly in developing countries, where, according to estimates, one-third of the population does not have ongoing access to essential medicines or cannot buy them.

Prices are affected by globalization and have direct consequences, in particular for developing countries, where 50 to 95% of drugs are paid for by the patients themselves.

Without exaggerating their impact, customs dues may add significant supplements to the drug manufacturer’s price (wholesaler and retailer charges, miscellaneous taxes, etc.). When associated with other additional taxes (VAT, port taxes, etc.) these costs may, in extreme cases, result in doubling the drug manufacturer’s price.

Sometimes customs duties are even applied to medical-necessity drugs, like antibiotics or even vaccines. Alone they may represent 1/5 of the price of the medicine. (Death & Taxes Government: mark-ups on the price of drugs, Philip Stevens and Holly Linfield, IPN, 2010).

However, governments have made some effort: “A 2005 study on average customs duties applied between 1992 and 2003 in more than 150 countries shows that in 85% of these countries, custom dues on medicines (finished products) amounted to no more than 10% of the price This proportion is even higher for active pharmaceutical ingredients and vaccines: respectively 89% and 96% of countries applied duties of 10% or less.» (Julien Reinhard, Berne Declaration health program).

“It is obviously glaringly unjust: today, 90% of the demand for health care and medication lies in developing countries and the WHO estimates that only 10% of these needs are met… while 10% of the global population in the rich countries benefit from 90% of the drug supply…” –  “Le Médicament, parlons-en (Let’s talk about medicines)” from the LEEM, page III-34 – October 2006.

Some laboratories are aware of this reality and have taken measures to provide medical-necessity to the poorest populations.

The topic is treated here in terms of factors favoring the proliferation of fake drugs. It is treated more completely and in “positive” terms in item 4 of the “Prevention” page under “Facilitating access to genuine medicines in developing countries.”