Introduction

Parallel trade is a legitimate method of pharmaceutical import and export within the EU zone. Although previously recognized in North America as illegal, cross-border reimportation is now permitted following legislation allowing drugs to be imported into the US from Canada. However, counterfeit drugs have been shown to be increasingly introduced into the global supply chain, which threatens patient safety, ethical pharmaceutical sales, and undermines the integrity of the distribution channels. Parallel trade is regarded as a major contributor to counterfeiting and this is explored in the report.

Furthermore, the report provides a comprehensive account of the route of market access for counterfeits and shows how companies and governments in Europe and North America are tackling the problem strategically. It also updates the reader on the latest parallel trade and anti-counterfeiting initiatives adopted globally and whether current efforts to stem the practice have been successful or not. The report discusses further action plans and recommends which strategies are likely to best curtail the practice.

This report also evaluates the extent of parallel trade in Europe and counterfeiting globally with an analysis of major counterfeit-producing countries and the anti-counterfeiting efforts currently in place.

Key findings

• Parallel trade is an expanding global sector of industry now that reimportation is permitted in the USA. European parallel trade is set to grow based on accession countries providing new markets in which to trade multiple products in multiple markets.

• Counterfeiting is prevalent in higher priced drug markets of developed nations and also in lower priced markets of essential drugs in developing countries.

• The drug distribution routes are the market access points for counterfeits. Parallel traded and non-parallel traded routes are vulnerable to counterfeiting.

• Anti-counterfeiting technologies are being deployed in westernised countries but there are issues that need to be resolved before widespread implementation such as standardization of protocols, technology reliability and validity, and stakeholder funding.

Key features of this report

•Analysis of parallel trade and counterfeiting in European Union, North America, Asia and Africa. Country-by-country analysis including France, Germany, UK, USA, Spain, Netherlands, USA, Canada, China, India, and other countries.
•Evaluation of the drivers behind parallel trade and counterfeiting in context of drug distribution.
•Coverage of recent regulatory and legislation changes relative to parallel trade and counterfeiting in Europe and North America.

Use this report to

•Understand how the international markets are affected by parallel trade and counterfeiting.
•Information on the scope of parallel trade and counterfeiting in key European territories and how importation has affected pricing in North America.
•Evaluate the impact of importation on the US market and how counterfeits can penetrate the drug supply-distribution chain.
•Shows the routes of market access for counterfeits and why they are increasingly being produced.


Discover

• What is the process of parallel trade in Europe and North America and why is it associated with counterfeiting?
• What is the extent of parallel trade and reimportation in Europe and North America?
• How has recent regulation and legislation changed the parallel trade sector?
• What is the impact of online pharmacies on parallel trade and counterfeiting?
• How are countries dealing with counterfeiting and what efforts have been implemented?

Table of Contents
Impact of Counterfeits on Parallel Trade &
Pharmaceutical Distribution
Executive summary 10
PT in Europe: A legitimate mechanism for redistribution 10
PT in North America: A cross-border growth industry 11
Counterfeits and the global supply-distribution chain 12
Anti-counterfeiting strategies: current perspectives 13
Global initiatives to combat counterfeiting 14
Chapter 1 PT in Europe: A legitimate mechanism for redistribution 16
Summary 16
Introduction 17
The parallel trade process 18
Driving factors for profitable parallel trade 20
Drug price differential 20
Exchange rate fluctuations 21
Government price controls 22
Pharmacoeconomics as a price control measure 24
Multiple importation markets driving profit margins 24
Supportive legal and regulatory free trade framework 25
Selection criteria for parallel-traded drugs 26
Disease incidence and type 26
Drug formulation 26
Transport and distribution 27
Advantages and disadvantages of parallel trade 29
Key advantages of parallel trade 29
Key disadvantages of parallel trade 31
Quality and safety concerns: the risk of counterfeiting 32
Parallel traders: building bridges for portfolio services 34
Extent of parallel trade in European markets 35
Denmark 37
Germany 38
France 38
Netherlands 39
Norway 39
Spain 39
United Kingdom 41
Direct-to-pharmacy distribution 42
Pharmaceutical Price Regulation Scheme 2009 43
Recent legislation on parallel trade in Europe 44
Importance of stakeholder support 46
Chapter 2 PT in North America: A crossborder growth industry 48
Summary 48
Pharmaceutical importation in the US 49
The legal framework: past and present 49
2003 Medicare reform bill and Canadian imports 50
Recent legislature on importation 53
Scope of parallel importation in the US 54
Online pharmacies and parallel distribution 56
Unapproved imports in Canada 61
Chapter 3 Counterfeits and the global pharmaceutical supplydistribution chain 64
Summary 64
Introduction 65
The extent of counterfeiting – a global analysis 66
Factors driving counterfeit trade 67
Counterfeits in developed countries: recent evidence 70
European Union 70
United Kingdom 71
France 72
Germany 73
Italy 73
Netherlands 73
Recent enforcement action in the EU 74
North America 76
USA 76
Canada 77
Counterfeits in developing countries 78
Counterfeiting in Africa, Asia, Middle East, and South America 79
Africa 81
Middle East 82
Asia 82
Types of drugs targeted by counterfeiters 83
Counterfeits and the pharmaceutical distribution chain 86
Access points for counterfeits 86
Repackaging, wholesaling, and counterfeiting: recent issues 89
Repackaging and counterfeiting 89
Wholesaling and counterfeiting 90
Online pharmacies 90
Unauthorized Internet pharmacies and counterfeits 91
Major producers of counterfeit drugs: China and India 94
China 95
Domestic counterfeiting: recent evidence 96
Contract manufacturing and the risk of counterfeiting 97
The counterfeit route: going West 99
India 99
Factors contributing to copycat & counterfeiting activities 100
The legitimate distribution pathway: problems going West 102
Chapter 4 Anti-counterfeiting strategies: current perspectives 104
Summary 104
Anti-counterfeiting strategies 105
Technical strategies 105
Non-technical strategies 105
Non-technical strategies and counterfeiting: current initiatives 106
Anti-counterfeiting technologies in developed countries 107
Current focus: track-and-trace technologies & mass serialization 109
European Union 109
United States 110
Mass serialization: main technology types 112
Barcodes 112
Radio frequency identification 112
Radio frequency identification in developed countries: recent activities 116
Chemical authentication technologies in developed countries: recent activities and initiatives 117
New packaging technologies 119
Anti-counterfeiting technologies in developing countries 120
Radio frequency identification in developing countries: recent activities 120
Chapter 5 Global initiatives to combat counterfeiting 122
Summary 122
International anti-counterfeiting initiatives 123
Government efforts 123
European Commission 123
United States Department of Health & Human Services 126
World Health Organization 127
INTERPOL 129
Non-government efforts 129
UNICEF 129
Medecins Sans Frontières 130
UNITAID 130
Anti-counterfeiting initiatives in Asia 131
India 131
China 132
Taiwan 134
Pharmaceutical trade and industry organizations 135
Pharmaceutical Security Institute (PSI) 136
International Federation of Pharmaceutical Manufacturers Associations
(IFPMA) 136
European Federation of Pharmaceutical Manufacturers Associations (EFPIA) 137
The European Alliance for Access to Safe Medicines (EAASM) 139
New initiative: Rx-360 139
Stockholm Network 140
Considerations for parallel trade and counterfeiting 140
Key points and recommendations 140
Chapter 6 Appendix 143
Primary research methodology 143
References 143
Websites 144
Glossary 145
Index 147

List of Figures
Figure 1.1: Generalized parallel trade process for pharmaceuticals in Europe 19
Figure 1.2: Major factors contributing to parallel trade in the EU 28
Figure 1.3: Advantages & disadvantages of parallel trade 32
Figure 1.4: Estimated market penetration of parallel imports by value in key European destinations (%), 2001 & 2009 37
Figure 2.5: Key opposing issues on parallel importation from Canada 53
Figure 2.6: Prescription drugs typically imported into the US 56
Figure 2.7: Typical savings offered by a Canadian online pharmacy, 2009 58
Figure 2.8: Lowest price guarantee offered by Canadian online pharmacy, 2009 59
Figure 3.9: Therapy areas with largest increase in incidents y-o-y (%), 2008 67
Figure 3.10: Key factors driving counterfeiting in pharmaceuticals 69
Figure 3.11: Increasing trend of counterfeiting, illegal diversion and theft of pharmaceuticals, 2002- 2008 70
Figure 3.12: Counterfeit access points in the drug distribution chain 87
Figure 4.13: Non-technical and technical anti-counterfeiting strategies used in the drug supply and distribution chain 107
Figure 4.14: Advantages & disadvantages of RFID & EPC anti-counterfeiting technologies 115

List of Tables
Table 1.1: Common pharmaceutical pricing controls 23
Table 1.2: European stakeholder support initiatives 46
Table 2.3: Key Provisions of the H.R.1 [108th] Medicare Prescription Drug, 51
Table 2.4: Key Provisions of the H.R.1 [108th] Medicare Prescription Drug, 52
Table 2.5: Popular online pharmacy brands, 2009 57
Table 2.6: Popular full service online pharmacies in the US 60
Table 2.7: Drug price savings offered by Canadian pharmacies in 2009 61
Table 3.8: Results of IMPACT-INTERPOL anti-counterfeit initiatives in developing countries 80
Table 3.9: Lifestyle drugs potentially targeted by counterfeiters 84
Table 3.10: Products susceptible to counterfeits in the US, 2004 85
Table 3.11: Authorized online pharmacies in the US 92
Table 4.12: Anti-counterfeiting technology types 109
Table 5.13: Key European Commission anti-counterfeiting proposals, 2008 124
Table 5.14: World Health Organization guidelines to combat drug counterfeiting 128
Table 5.15: EFPIA policy initiatives on parallel trade to maintain supply integrity 138