April editorial - counterfeiting and pharmaceutical products

Seeking effective remedies for the growing epidemic of counterfeit pharmaceutical products 

During the course of 2016 the European Observatory on Infringements of Intellectual Property Rights (‘Observatory’) released several studies on the economic costs of IP rights’ infringement. The task of the Observatory is indeed to improve the understanding of IP rights and the negative consequences of infringement upon such rights.
The studies on the economic costs of infringement were carried out in nine sectors which are considered intensive in the registration and use of IP, ie: cosmetics and personal care; clothing, footwear and accessories; sports goods; toys and games; jewellery and watches; handbags; recorded music; spirits and wine; and, last but not least, pharmaceuticals.
The sectorial report on pharmaceuticals was published on 29 September 2016. The full report can be found on the website of the Observatory (at https://euipo.europa.eu/tunnel-web/secure/webdav/guest/document_library/observatory/resources/research-and-studies/ip_infringement/study9/pharmaceutical_sector_en.pdf).
The aim of these types of report is to provide empirical data on the costs of IP infringement. It takes into account the direct costs (effects in terms of lost sales and loss of employment), as well as indirect costs, including reduced sales and job losses in other sectors (eg sectors that supply to the pharmaceutical sector) and impact on public finances due to the losses in tax revenues.
The report reveals that in 2013 the production within the EU of pharmaceuticals was worth EUR 284 billion at wholesale prices. Employment in the sector was good for 1.1 million people in the EU. The principal countries involved in the production and trade of pharmaceuticals in the EU appear to be Germany, Ireland, France, and Italy.
The report contains data on a EU-wide level, as well as per EU country. From an EU-wide perspective the estimated total direct effect in terms of sales lost due to counterfeiting is €10.2 billion. When legitimate manufacturers and traders are confronted with lesser sales, this will of course have an impact on employment. As to the indirect effect, the report adds a further estimated €7.1 billion loss of sales in other sectors. The report estimates the total loss of employment at no less than 90,900 jobs in the EU. Finally, it is estimated that the total loss for public finances amounts to €1.7 billion.
Taking the above into account, it is important to continue the fight against counterfeiting. This is particularly so in the pharmaceutical sector, where not only economic interests are at stake but also possible health issues for patients and consumers alike. In this respect the Convention on the counterfeiting of medical products and similar crimes involving threats to public health of the Council of Europe (also known as the Medicrime Convention) is a step forward. The Medicrime Convention dates back to 2011 and already at that point in time emphasized that the pharmaceutical sector increasingly faced the problem of counterfeiting, among other things, because of the relatively low risk of detection and prosecution of trade in counterfeit products on the one hand, and the potential of high financial gains on the other.
The Medicrime Convention has so far been ratified by a handful of EU Member States, ie Spain, Hungary, Belgium, and France. The principal countries involved in the production and trade of pharmaceuticals in the EU, as established in the Observatory report have unfortunately not yet ratified.
The Medicrime Convention can however be a helpful tool in combatting counterfeit trade in pharmaceutical products, in that it not only provides criminal sanctions, but also preventive measures and protection of victims in a uniform and harmonized fashion. Furthermore, it promotes both cooperation between different authorities of the same Member States as well as international cooperation. For instance, it contains a provision according to which Member States shall consult each other to determine the proper venue for prosecution in case several Member States have jurisdiction. It could then be agreed that one Member State will be the sole prosecutor, thus avoiding duplication of procedures and rendering the combat against counterfeiting more efficient. Another interesting provision is the possibility to take foreign judgments into account when dealing with recidivism.
As the Observatory study reveals that combatting counterfeiting in the pharmaceutical sector remains an important battle, not only for the pharmaceutical companies holding IP rights, but also for consumers, patients and the public sector alike, future ratifications of the Medicrime Convention would therefore be applauded.

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