Counterfeit Medicines and the Role of IP in Patient Safety

Caution! Counterfeit.The threat of counterfeit goods took center stage on June 15th in a hearing convened by Senate Finance Committee Chairman Orrin Hatch (R-Utah). Focusing on trade opportunities and challenges for American businesses in the digital age, Senator Hatch stated:

“The Organization for Economic Co-Operation and Development (OECD) recently released a study that shows that counterfeit products accounted for up to 2.5 percent of world trade, or $461 billion, in 2013.  This is a dramatic increase from a 2008 estimate that showed that fake products accounted for less than half that amount.  Counterfeits are a worldwide problem, but the OECD estimates that the United States is the hardest hit, followed by Italy and France.  Of the estimated $461 billion in counterfeit trade in 2013, goods with registered intellectual property rights in the U.S. represented 20 percent, or $92 billion, of the OECD estimate.”[1]

As the author of the chapter on illicit trade in counterfeit medicines within the OECD report, I worry that global policymakers may be working against each other when it comes to battling counterfeit drugs, especially in the context of intellectual property rights. While the Senate Hearing and the OECD report highlight the importance of strong IP protection in combating the growing threat of counterfeit goods, their efforts coincide with an initiative by the UN Secretary-General that has the potential to greatly worsen the problems of counterfeit pharmaceuticals.   UN Secretary General Ban Ki Moon’s High Level Panel on Access to Medicines proposes “to review and assess proposals and recommend solutions for remedying the policy incoherence between the justifiable rights of inventors, international human rights law, trade rules and public health in the context of health technologies.”[2] The High Level Panel is a thinly veiled attempt to undermine the intellectual property rights architecture that incentivizes pharmaceutical innovation and protects patients from counterfeit medicines.

While patents and other forms of intellectual property rights are widely recognized as fostering pharmaceutical innovation, they also serve to inhibit counterfeiting. The World Health Organization has determined that counterfeiting is facilitated where “there is weak drug regulatory control and enforcement; there is a scarcity and/or erratic supply of basic medicines; there are extended, relatively unregulated markets and distribution chains, both in developing and developed country systems; price differentials create an incentive for drug diversion within and between established channels; there is lack of effective intellectual property protection; due regard is not paid to quality assurance”.[3]

According to INTERPOL estimates, approximately 30 percent of drugs sold worldwide are counterfeit.[4] However, as is the case with many other counterfeit trade statistics, the origins of this figure are somewhat uncertain, as is the methodology used to make the calculation. Perhaps the most widely-cited statistic originates from the World Health Organization, which estimates that 10 percent of the global market for pharmaceuticals is comprised of counterfeits and reports place the share in some developing countries as high as 50-70%.[5]

While difficult to measure, estimates do exist on the extent of the market for counterfeit drugs and the harm done to human health. As noted in my chapter in the OECD report,

“INTERPOL estimates that more than one million people die each year from counterfeit drugs.[6] While counterfeit drugs seem to primarily originate in Asia, Asian patients are also significantly victimized by the problem. A 2005 study published in PLoS Medicine estimate that 192,000 people are killed in China each year by counterfeit medicines.[7] According to work done by the International Policy Network, an estimated 700,000 deaths from malaria and tuberculosis are attributable to fake drugs. [8] The World Health Organization presents a much more modest number noting that malaria claims one million lives annually and as many as 200,000 may be attributed to counterfeit medicines which would be avoidable if the medicines available were effective, of good quality and used correctly.[9] Even this number is double that presented by academic researchers Amir Attaran and Roger Bate who claim that each year more than of 100,000 people around the world may die from substandard and counterfeit medications.[10]” [11]

Given the devastating impact of counterfeit medicines on patients and the importance of intellectual property protection in combating pharmaceutical counterfeiting, it is troubling that the UN High Level Panel seems poised to prevent a series of recommendations that will undermine public health under the guise of enhancing access. Without the assurance of quality medicines, access is meaningless. Moreover, while falsely presenting intellectual property rights as the primary obstacle to global health care, the High Level Panel downplays a host of other factors that prevent developing country patients from getting the drugs they need:  inadequate medical infrastructure, insufficient political will, a shortage of clinical trials in nations where neglected diseases are endemic, poverty, and insufficient market incentives.

If the United Nations is serious about addressing the critical need for access to medicines, the Secretary General must come to terms with the reality surrounding the challenges of access to medicine. Although the international patent system may be in need of improvement, it is overly simplistic to blame drug patents, international trade agreements and the global pharmaceutical industry for the access problem. The problem is far more nuanced and complicated than portrayed by the High Level Panel. As the WHO, OECD and Senator Hatch recognize, intellectual property rights are part of the solution. To truly address the access problem, we must move beyond blaming IPRs and begin the difficult work of grappling with structural deficiencies and poverty.

________________

[1] Hatch, Orin. “Hatch Statement Finance Committee Hearing on Counterfeit Goods & Opportunities for Small Business Exporters in the Digital Age,” United States Senate Committee on Finance, web post, 15 June 2016.

[2] United Nations Secretary-General’s High Level Panel on Access to Medicines. “The Process,” web post, n.d.

[3] World Health Organization. Counterfeit Drugs: Report of a WHO/IFPMA Workshop. WHO/DMP/CFD/92, Geneva: World Health Organization, 1-3 April 1992. (emphasis added)

[4] Southwick, Natalie. “Counterfeit Drugs Kill 1 Mn People Annually: Interpol,”InSIghtCrime, October 24, 2013.

[5] In the context of what the WHO discovered in their analysis of counterfeit pharmaceuticals, consider the follow dated, though likely still rather representative, information. “Between January 1999 and October 2000 alone, 46 confidential reports relating to such drugs were received by WHO from 20 countries. About 60% of these reports came from developing countries whereas the remaining 40% were reported by developed countries. Although, the reports received have not been validated and may not be useful for quantitative purposes, the information clearly shows that the problem exists. The data also reflects that only ? few countries are willing to provide information about cases detected. The drugs counterfeited included antibiotics, hormones, analgesics, steroids, and antihistamines. These drugs form almost 60% of the products reported. In terms of types of counterfeits and their magnitude, the products reported can be grouped into six categories: (1) Products without active ingredients, 32.1%; (2) Products with incorrect quantities of active ingredients, 20.2%; (3) Products with wrong ingredients, 21.4%, (4) Products with correct quantities of active ingredients but with fake packaging, 15.6%; (5) Copies of an original product, 1%; and (6) Products with high levels of impurities and contaminants, 8.5%.” Source: World Health Organization. “General Information on Counterfeit Medicines,” WHO website posting, 2015. Last accessed 18 February 2015.

[6] Southwick, Natalie. “Counterfeit Drugs Kill 1 Mn People Annually: Interpol,”InSIghtCrime, October 24, 2013.

[7] Cockburn, Robert, Paul N. Newton, E. Kyeremateng Agyarko, Dora Akunyili, and Nicholas J White. “The Global Threat of Counterfeit Drugs: Why Industry and Governments Must Communicate the Dangers,” PLoS Medicine, April 2005.

[8]Harris, Julian, Philip Stevens and Julian Morris. “Keeping It Real: Combatting the Spread of Fake Drugs in Poor Countries,” International Policy Network, May 2009.

[9] World Health Organization (WHO). “Substandard and Counterfeit Medicines,” World Health Organization Fact sheet N°275, November 2003.

[10] Gillette, Felix. “Inside Pfizer’s Fight Against Counterfeit Drugs,” Buinessweek, January 17, 2013.

[11] Lybecker, Kristina M. “Illicit Trade in Counterfeit Medicines,” Chapter 4, in OECD Reviews of Risk Management Policies: Illicit Trade Converging Criminal Networks, OECD Publishing, Paris, 18 April 2016, pp.79-122.

The Author

Dr. Kristina Lybecker

Dr. Kristina Lybecker is an Associate Professor of Economics at Colorado College in Colorado Springs. She earned a B.A. from Macalester College, with a double major in Economics and Latin American Studies, and received her Ph.D. in Economics in 2000 from the University of California, Berkeley.

Dr. Lybecker's research analyzes the challenges surrounding intellectual property rights protection in innovative industries: incentivizing pharmaceutical research and development especially on neglected diseases, addressing the difficulties of strengthening intellectual property rights protection in developing countries, battling the problems related to pharmaceutical counterfeiting and the unique nature of protection for biotech therapies. Recent publications have also addressed alternatives to the existing patent system, the balance between pharmaceutical patent protection and access to essential medicines, and the markets for jointly produced goods such as blood and blood products. Kristina has testified in more than a dozen states on the economics of pharmaceutical counterfeiting. She has also worked with US Food and Drug Administration, Reconnaissance International, PhRMA, the National Peace Foundation, the OECD, the Fraser Institute, the Macdonald Laurier Institute, and the World Bank, on issues of innovation, international trade, and corruption.

CLICK HERE to contact Dr. Lybecker.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

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