Trading counterfeit medicine is forbidden for two distinct reasons. On the one hand, unlicensed medication can pose health risks to the people using them, when the ingredients are ineffective, dosed wrongly or contain substances that have not been sufficiently tested or that have been found to have excessive side effects. On the other hand, even generics, which are safe duplicates of licensed brand medicine and therefore harmless to – or even vitally needed by – patients, can be illegal when they infringe on intellectual property rights held by pharmaceutical companies.
Since the testing necessary to conform with licensing standards is extremely expensive, successfully developed medicine is protected, thus incentivising companies to invest in the research process. However, this leads to an ethical dilemma: Developing new, more effective medicine helps patients and is aided by protecting the economic interest of pharmaceutical companies. On the other hand, once effective medicating is found, it is morally difficult to withhold from patients who urgently need it and cannot afford the oftentimes expensive treatment.
This market is thus an exception from other illegal markets with regard to the harm done in them: While many markets include illicit practices that are deemed undesirable (such as harmful working conditions or practices that harm the environment) but are not prohibited and thus legal, some aspects of the market in counterfeit drugs are illegal while being viewed as licit because they safe lives, especially of economically weak people without affordable health insurance.
Looking at the illegal trade of medicine, then, two different markets can be discerned that require different regulatory strategies and bear different harms. On one market, harmful or ineffective counterfeits are produced and packaged into equally copied packaging or authentic packaging produced in additional “secret runs”. Countering this market thus requires technical and administrative solutions by implementing anti-corruption measures in the packaging industries and using technology to verify the contents, to track the legal products and to distinguish counterfeits. Since the quality of those products will often be low, sellers, such a pharmacies and drug stores, are likely to cooperate with measures that counter this type of counterfeiting medicine.
Generics, however, are mainly produced under exceptional national licenses allowed for in the WTO regime. The “Declaration on the TRIPS Agreement and Public Health” (Doha Declaration) affirmed in 2001 that “the TRIPS Agreement does not and should not prevent Members from taking measures to protect public health”, as had already been stated by the WTO. The Doha Declaration reaffirmed the possibility of compulsory licenses (“Each member has the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted.”), which allow states to force patent holding companies to negotiate a reasonable fee instead of the market price. If the negotiations fail, the state can even decide upon a fee and use the license without the license holder’s consent. The thus produced medication should predominantly be used on the domestic market. However, this means that national markets must be capable of producing these generics. With the the General Council of the WTO adopting the Decision on Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health (the August Decision), the World Health Organization (WHO) reacted to this restriction on least developed countries’ production facilities. The change, which was implemented in January 2017 after ratification by two-thirds of the WTO members, constitutes a waiver of the export restriction, thereby allowing the total amount of production under a compulsory licence to be exported to countries without production capacities [1].
Further disputes arise over “ever greening” of patents, whereby pharmaceutical companies make minor changes to their products to renew their patents and to protect them from running out. Again, this dispute between a pharmaceutical company and an Indian generics producer was stalled by an Indian court which decided that the practice was illegal in India, a country known as the “pharmacy of the poor”.
Even though these licenses may be the subject of legal battles internationally at the WTO, the quality of the thus produced medication is generally unproblematic. Due to the price differences between countries holding such licenses and neighbouring countries, smuggle from licensed countries to those importing from patent holders is lucrative. To inhibit this smuggle, border policing is the main state reaction. However, also depending on the terrain, this measure is often costly to enforce effectively.
In sum, while the countering of counterfeit medicine is a technical regulatory and policing issue, the market of generics and their smuggling across borders is one deeply interwoven with questions of global justice, inequality and discussions of human rights. While these questions are tackled in the WTO which has in its recent amendments given health concerns precedence over intellectual property rights, many national laws are not in line with TRIPS where medicine is concerned. On the other hand, despite the legal possibilities of using compulsory licensing, pharmaceutical companies have in part reacted by threatening to withhold innovations to those countries in the future.
While the exception to intellectual property rights originally stem from a public health concern and therefore predominantly targeted communicable disease to stop the national but also global spread, the norm is now being boarded by some countries such as Thailand to also include non-communicable diseases, especially cancer. This extension of the use of compulsory licensing marks a shift in argument from a public health threat (in which the state’s functioning and in cases of viral diseases states all over the globe’s functioning is claimed to be endangered) towards a human rights argument centred more on the individual.
While this balance between risk, human rights and economic incentives for research and development of new drugs are difficult to balance, the main regulatory mechanism thus far have been legal appeals.
____________________________________________________________________________________________________
[1] WHO (2002): WTO Council for TRIPS – Statement by the representative of the World Health Organization. Available at: Link
