At WTO, Online Pharmacy Watchdog, Tobacco Industry Explain Anti-Counterfeiting Efforts

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The US Chamber of Commerce’s Global Intellectual Property Center [corrected] organised a panel during the World Trade Organization Public Forum last week to explore what industry sees as challenges of trade in the digital age. Three panellists presented concerns – mainly counterfeiting – and solutions they have put in place to address such challenges.

Marjorie Clifton, executive director of the Center for Safe Internet Pharmacies (CSIP), said CSIP was founded two years ago and was not trying to discourage people from getting online drugs but providing safe channels of distribution, mainly for prescriptions drugs.

CSIP’s members are composed of search engines advertisers, registries and registrars, payment processors, and shippers, she said.

Over 25 percent of consumers in the United States purchase prescription drugs online, she said. Drivers for buying online seem to be price and convenience, she added.

However, most of the online pharmacies available to US consumers [corrected] are not legitimate, she said. The National Association of the Boards of Pharmacy (NABP) in its July 2013 report on Internet Drug Outlet Identification , said that out of the 10,533 internet drug outlets selling prescription medications that the association reviewed, “96.66 percent were found to be operating out of compliance with state and federal laws and/or NABP patient safety and pharmacy practice standards, and are listed as Not Recommended in the ‘Buying Medicine Online’ section” of the NABP Website.

The NABP chases unsafe drugs as well as counterfeit drugs, which may relate only to an intellectual property rights infringement. In its report, the NABP says that a large part of these counterfeit drugs are aimed at treating erectile dysfunction. “They take a trademarked name and tack on descriptors … as though such products had been developed, tested, and approved alongside the authentic drug.”

“While these counterfeit drugs may (or may not) contain some quantity of the authentic drug’s active ingredient, because they are not subject to the testing and safety requirements as the approved drug, there is no way of knowing whether they contain the right amount of the active ingredient, or what other substances or impurities they may contain,” the report says.

The use of the term “counterfeit” for unsafe or spurious drugs has been hotly debated at the World Health Organization where some developing countries, and civil society have argued that the use of trademark infringement to describe unbranded products could create confusion for legitimate generic drugs.

The unsafe online pharmacy started “with a Viagra problem,” Clifton said, but now has spread to chronic illnesses such as HIV and cancer drug. CSIP promotes safe online pharmacy through consumer education, partnership with law enforcement, and sharing information, she explained.

According to Clifton, there are between 40,000 and 50,000 active drug sellers at a given time on the internet. In 2011, she said, the registrar Go Daddy shut down 47,000 illegal online drug sellers. Some 27,000 of these sites also contained malware used for identity theft, she underlined. Between November 2011 and December 2012, “our companies collectively shut down over 3 million websites.”

She mentioned the partnership of CSIP with Interpol, in particular the “Operation Pangea,” which, according to Interpol, is an international week of action tackling the online sale of counterfeit and illicit medicines.”

Interpol also announced in March the launch of the “Pharmaceutical Industry Initiative to Combat Crime,”which is an agreement with 29 pharmaceutical companies committing some €4.5 million (US$ 6 million) over three years (IPW, Public Health, 14 March 2013).

Anti-Counterfeiting Coalition: Follow the Money

Robert Barchiesi, president of the International AntiCounterfeiting Coalition (IACC), said the coalition determined that the best way to go after “rogue merchants” was to follow the money around the world.

Counterfeiters, he said, rely heavily on card transactions to make online sales. Consumers seeing a MasterCard, Visa or American Express logo on a website, find it provides some legitimacy.

The IACC is trying to “demonetise” counterfeiters, he said, in particular through a “Portal Program.” According to an IACC statistical review [pdf] of the Payment Processor Initiative & Portal Program, launched in January 2012, “the only real deterrent to counterfeiters is to make counterfeiting less profitable as an industry, payment processing has been identified as an effective choke-point in the fight against counterfeit goods.”

“The main objective of the Portal Program is to provide a streamlined, simplified procedure that allows rights-holders to report online sellers of counterfeit or pirated goods directly to credit card and payment processing networks in a more time- and cost-efficient manner,” the report said.

Partners in the initiative include MasterCard, Visa International, Visa Europe, PayPal, American Express, and Diners Club, Barchiesi said. The programme aims include increasing the cost of doing business for counterfeiters, and to “shrink the universe of third-party acquiring banks,” which are doing business with “rogue merchants,” he said.

The programme “is dependent on Card Network policies, which prohibit merchants from using card services for illegal transactions,” the report said. “Use of card services for sales of counterfeit or pirated goods constitutes a breach of these policies, and thus provides for remediation of the corresponding merchant account. Because merchants are bound by Card Network policies regardless of jurisdiction, the Portal Program has global reach.”

Tobacco Industry: Collaboration with WHO, WCO Needed

Daniel Hubert, head of Supply Chain Tracking & Verification, for British American Tobacco (BAT), said the tobacco faces three main issues: smuggling, counterfeiting and tax evasion.

Some 12 percent of the global tobacco consumption is illegal, he said, which amounts to between $5 and $10 billion dollars of loss annually, and government losing millions of dollars in tax revenue, he said.

The company half-year report [pdf] of 2013 shows continued performance, and chairman, Richard Burrows said in the half-year highlights, “Despite fragile economic conditions persisting in some parts of the world, notably Europe, British American Tobacco has delivered another good set of results. The business is performing well and we are confident of another year of good earnings growth.”

Counterfeiting is linked to organised crime and terrorism, Hubert said, and undermines health policies, like “the desire to ensure that regulated products are only sold to those over 18 years of age,” he said.

The tobacco industry has campaigned against Australia – which implemented measures regulating the plain packaging of tobacco products to protect the health of its citizens – and has actively lobbied other countries considering such measures. Several countries have filed disputes at the World Trade Organization against Australia, on the grounds that plain packaging is in breach of their obligations under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) (IPW, IP-Watch Briefs, 28 September 2013).

The approach of industry to address the current issues of counterfeiting is to secure the global supply chains, and track products, Hubert said. Four major tobacco industries (BAT, Imperial Tobacco Group, Japan Tobacco International and Philip Morris International) have joined efforts and set up the Digital Coding & Tracking Association to that effect.

BAT is also working with Interpol and the World Customs Organization (WCO), he said. The company also “wholly supports” the World Health Organization’s Protocol to Eliminate Illicit Trade in Tobacco Products.

The WHO “is trying to glue together the global supply chain for the tobacco industry,” he said, but basic rules have to be followed if this attempt at regulation is to be successful, he said. Each country should make sure when they translate the WHO regulation into their national regulations that the track-and-trace systems they put in place talk to each other.

More coordination and collaboration between WHO, WCO and WTO as custodians of international trade, is key to success, he said. He admitted that WHO “does not want to talk to us now”, but “it would seem lunacy not to include the industry in this dialogue because we know how the supply chains work,” he said.

The WTO Public Forum took place from 1-3 October and was themed “expanding trade through innovation and the digital economy.”

Chan Praises EU Efforts Against Tobacco

Meanwhile, on 7 October, WHO Director General Margaret Chan issued a statement encouraging the European Union in its process of updating the EU Tobacco Products Directive, underlining weaknesses, gaps and loopholes in the existing 2001 directive [pdf].

As party to the WHO Framework Convention on Tobacco Control, the EU “has an obligation to strengthen its tobacco control legislation to reflect its international commitments,” she said. Among the steps countries have to take are banning advertising, putting large health warnings on packages of tobacco, and counteracting illicit trade, according to the statement.

“In the case of the EU Directive,” the statement said, “the tobacco industry is, once again, making an extraordinary effort to keep its products from being regulated, precisely because regulation works so well to reduce the vast harm caused by tobacco products. The tobacco industry is, once again, using an arsenal of economic arguments, precisely because such arguments are so effective in shifting the emphasis away from health, especially in times of financial austerity.” She encouraged EU parliamentarians to turn a deaf ear to those pressures.

Catherine Saez may be reached at info@ip-watch.ch.

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