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Study report
COUNTERFEIT MEDICINES AND
CRIMINAL ORGANISATIONS
Report presented by IRACM
Author: Eric Przyswa
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Eric Przyswa, Research Fellow Mines ParisTech in the Centre for Research on Risks and Crises, is the author
of this report for the Institute of Research against Counterfeit Medicines (IRACM). The author writes in many
French and foreign academic reviews (Hermès, Futuribles, Tribune de la santé, Information and Society, etc.)
and conducts research on the human safety.
The report is available in its entirety on: www.iracm.com.
Institut de Recherche Anti-Contrefaçon de Médicaments
10 avenue Franklin Roosevelt
75008 Paris - France
info@iracm.com
IRACM – September 2013
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COUNTERFEIT MEDICINES
AND CRIMINAL ORGANIZATIONS
Report presented by IRACM
Author: Eric Przyswa
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Table of contents
Foreword __________________________________________________________________________ 7
Introduction ________________________________________________________________________ 9
I. Medicine counterfeiting, criminal organisations and cybercrime __________________________ 11
I.1. Counterfeiting, falsification and medicines ___________________________________________ 11
I.2. State of play __________________________________________________________________ 14
In light of this assessment of counterfeit medicines, how can a more specific analysis be made of the
criminal organisations involved in this ever-growing illicit trafficking? __________________________ 21
I.3. Criminal organisations and counterfeiting ____________________________________________ 21
I.3.a. Definition of criminal organisations ______________________________________________ 22
I.3.b. Criminal organisations and counterfeit medicines: a ‘structural hole’ logic ________________ 24
I.4. Cybercrime and counterfeiting ____________________________________________________ 28
I.4.a Definition __________________________________________________________________ 28
I.4.a Types of cybercrime _________________________________________________________ 29
II. Realities of the « counterfeit medicines and criminal organisations » combination __________ 33
II.1. Small-sized criminal organisations (two to five persons) ________________________________ 34
II.2. Medium-sized transnational criminal organisations (about 10 persons) _____________________ 35
II.2.a. Wuppertal case ____________________________________________________________ 35
II.2.b. Arnaud B. case ____________________________________________________________ 36
II.2.c. Peter Gillespie case _________________________________________________________ 36
II.3. Large-scale and transnational criminal organisations __________________________________ 37
II.3.a. RxNorth case ______________________________________________________________ 38
II.3.b. The ‘Jordanian-Chinese’ network ______________________________________________ 40
II.3.c. The ‘Avastin’ network _______________________________________________________ 44
II.4. Crime in China ________________________________________________________________ 47
II.4.a. Crime and exports from China ________________________________________________ 47
II.4.b. The case of mainland China __________________________________________________ 49
II.4.c. Evolution of criminal organisations in China ______________________________________ 50
II.5. Mafia groups, terrorism and financing ______________________________________________ 52
II.5.a. Mafia organisations _________________________________________________________ 52
II.5.b. Terrorism _________________________________________________________________ 55
II.5.c. Money laundering __________________________________________________________ 56
II.6. Cybercrime and counterfeit medicines ______________________________________________ 57
II.6.a. Cyberspace and criminality ___________________________________________________ 57
II.6.b. Cybercrime techniques ______________________________________________________ 58
II.6.c. Online pharmacies __________________________________________________________ 64
II.6.d. Concrete cases to illustrate the ‘cybercrime – counterfeit medicine’ combination __________ 68
II.7. A summary of the criminal organisations involved in counterfeiting medicines: organisational
challenges _______________________________________________________________________ 74
II.7.a. ‘Real’ criminal networks and medicine counterfeiting _______________________________ 74
II.7.b. ‘Virtual’ criminal networks and counterfeit medicines _______________________________ 77
III. Criminological issues and recommendations _________________________________________ 83
III.1. Shaking up criminological concepts _______________________________________________ 83
III.1.a. A partially suited theoretical view ______________________________________________ 83
III.1.b. The novel nature of criminological concepts linked to medicine counterfeiting ___________ 85
III.2. Considerations to counter this phenomenon _________________________________________ 92
III.2.a. The issue of assessing the ‘crime – counterfeit medicines’ combination ________________ 92
III.2.b. Improving the analysis of the problem through centralised intelligence _________________ 94
III.2.c. The issue of law enforcement _________________________________________________ 96
III.2.d. The issue of prevention _____________________________________________________ 98
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III.2.e. The importance of whistleblowers and experts __________________________________ 100
III.2.f. Internet specificities ________________________________________________________ 103
Conclusion _______________________________________________________________________ 109
APPENDICES _____________________________________________________________________ 113
Glossary of acronyms _____________________________________________________________ 114
List of interviews (in alphabetical order) _______________________________________________ 115
Bibliographic references ___________________________________________________________ 116
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Foreword
Today, drug counterfeiting is a rapidly growing phenomenon in both developed and developing countries. The
number of victims is rising, as is the income derived - almost with impunity - from transnational organized crime.
The International Institute of Research against counterfeit Medicines (IRACM) intends to devise measures to
better understand the phenomenon, educate and motivate leaders, rally public opinion, warn potential victims
and to facilitate the implementation of strategies related to these issues, both from governments and the
international community. This is the IRACM’s very reason for existing.
Drug counterfeiting is primarily a ‘dark figure’, and most likely a considerable one. The effectiveness and
credibility of the solutions are subject to a systematic and comprehensive understanding of the phenomenon, all
its aspects, its mechanisms and the strategy of organized crime, which, in many parts of world, has become a
leading activity.
This is why the IRACM decided to support the creation of an in-depth study and instructed a particularly
competent researcher in the field, Eric Przyswa, to conduct it.
The work he has achieved is substantial and we now know more thanks to him. He has written a very full report,
which, once published, will no doubt be a milestone in the understanding of the role of organized crime in drug
counterfeiting and the implications and effects of these truly transnational crimes. Transnational because they
thrive in the wake of globalization by exploiting the destitution in poor countries and the credulity of the people in
rich countries.
Through this report, the IRACM wishes to inform as many citizens of the world as possible of the dangers and
threats it has revealed, and to ensure that policymakers take them into account to implement the necessary
action, contain organized crime, protect society and safeguard the rule of law in our countries against the power
these criminals have gained.
Bernard Leroy, Director of IRACM
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Introduction
The combat against counterfeiting started during the 1980s and, at that time, was limited to sectors where it was
frequently the consumer who asked for the product, and was even party to the purchase. Above all, it is only
since the start of the 2000s that the situation expanded substantially particularly with the liberalisation of the
WTO1, technological developments, containerisation and the significance of China as the world's factory. On the
other hand, it was only later that counterfeiting seemed to affect the pharmaceutical sector, at least from the
industrial point of view. Studies and reports have covered the involvement of organised crime in ‘traditional’
counterfeiting, particularly in creative industries (luxury goods, audiovisual).
Nevertheless, even if there are more and more discussions on the topics of ‘counterfeit medicines’ and
‘organised crime’, very few researchers have analysed the relationship between the two phenomena.
Consequently, it appeared that such a report should be written and a dual objective was decided:
- To take as objective and as rigorous a view as possible on the reality of the "counterfeiting – criminal
organisations" combination in the area of medicines.
- From a criminology and strategic standpoint, to give some consideration to what could be done to guide current
actions.
What about the reality of this phenomenon? How can criminal organisations be characterised in our area of
study? Are these organisations transnational? Is the Internet a genuine Eldorado for criminal organisations
dealing in medicines?
The questions relating to our problems proved to be varied and complex. One of the interests in this research is
to offer new food for thought on a potentially real, but still opaque threat for which an interpretation can only be
made through a documented, pragmatic and also imaginative approach.
In the first part, the framework of our new conceptual study will be explained. It is important to define the
counterfeiting and falsification of medicines in a clear field of analysis, presenting the specific features of the
Internet in particular.
In the second part, we will analyse the reality of the relationship between counterfeit medicines and criminal
organisations both in the physical world and on the Internet. Theoretical considerations will also supplement our
own thoughts.
Thirdly, we will go into detail on the criminological issues raised by our problems. Finally, we will analyse to what
extent knowledge of the phenomenon can be improved and therefore eliminated with new forms of expertise.
1 World Trade Organization.
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I. Medicine counterfeiting, criminal organisations and
cybercrime
I.1. Counterfeiting, falsification and medicines
It is essential to better determine the concepts relating to our problems so that the current challenges may be
painstakingly identified.
The issue in counterfeit medicines is an old one since Dioscoride (born towards 40 A.D.), a Greek doctor and
botanist, already gave advice on how to detect fake medicines2. More recently3, in post-war Vienna, counterfeit
penicillin was detected in 1948, an event used in the famous film noir The Third Man, directed by Carol Reed.
Etymologically, the origin of the term counterfeiting4 comes from the 18th century Latin word contrafacere which
means ‘imitate’ and, generally speaking, counterfeiting is therefore a fraudulent reproduction intended to mislead
the consumer on the product's real identity or origin. From a legal point of view “counterfeiting consists in the
violation of an intellectual property right protected by law, particularly by reproducing by copying or imitating a
design, an invention, a trademark or a model protected by an intellectual property right”5 without its owner's
consent. In the case of consumer goods, “a counterfeit is an identical reproduction or a fraudulent imitation
including deception: the counterfeiter's aim is to create confusion between the original product (counterfeited)
and the imitation he proposes (counterfeit). (…). Let us be clear that, in some cases, consumers are themselves
fooled but they may also become a counterfeiter's accomplice by knowingly buying fakes”.6 On the other hand, it
should be noted that in the case of counterfeit medicines, the patient is rather the victim and rarely the
accomplice in the purchase, at best they are foolhardy enough or misled by third parties to order medicines on
websites which do not have all the necessary guarantees.
Where the definition is concerned, a medicine may be defined as “any substance or compounds presented as
having curative or preventive properties with regard to human diseases. Any substance or compound which may
be administered to humans with a view to establishing a medical diagnosis or to restore, correct or modify
physiological functions in humans is also considered as a medicine”.7 It should also be noted that a medicine is
not a product like any other. To date, it is certainly the product most subject to control from its creation and its
development, but also during its marketing phase (pharmacovigilance).
Similarly to other cases of counterfeiting concerning everyday consumer products, the definition of the
counterfeit medicine has for many years been linked to infringement of intellectual property rights. On reflection,
this analysis is all the more relevant since a counterfeit medicine involves reproducing or imitating an authentic
brand and also, sometimes, copying the product patented by the pharmaceutical company. Nevertheless,
however justified this may be, this view to a large degree overshadows an essential consequence of fake
medicine: health.
2 Barbara Pick, Accès aux médicaments et contrefaçon pharmaceutique en Russie post-soviétique, L’Harmattan, 2006,
L’Harmattan, p. 10.
3 Albert I. Wertheimer, Perry G. Wang, Counterfeit Medicines Volume I: Policy, economics and Countermeasures, ILM
Publications, 2012, p. 1.
4 Eric Przyswa, Cybercriminalité et contrefaçon, FYP, 2010.
5 Ibidem.
6 IRACM, Fiche Propriété Intellectuelle, January 30, 2012.
7 WHO definition (WHO Drug Dictionary Enhanced) and the one in European Directive 65/65, source: IRACM, Fiche Propriété
Intellectuelle, January 30, 2012.
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Even though some laws have included health as a circumstance aggravating a violation of intellectual property,
this parameter was only a component and not the determining element. Under these conditions, medicine
counterfeiting is still closely linked to reproducing, imitating, importing and selling an intellectual property right
without it's holder's authorisation. As an extension to this infringement of intellectual property rights, the terms
fake, illicit, counterfeiting and counterfeit have emerged. That said, limiting the concept of medicine
counterfeiting to this simple legal aspect comes down to considering this phenomenon as ordinary counterfeiting
while denying its singular and dangerous nature.
The challenge in finding an exact definition of ‘counterfeit medicine’ is confirmed by Jean-Christophe Marten
Pérolin, a senior official at the OCLAEPS8: “The products proposed are not always counterfeits; there are also
other forms of crime. It may mean stolen or diverted medicines, quackery or medicines which have no marketing
authorisation. The process for protecting public health (and consequently consumers) is an added value in the
protection of trademarks and patents. The danger to health is real and must be taken into account by all”.
Gradually, the concept of falsification above all emerged and even if this concept is still relatively inaccurate in its
application, falsification may be defined as the “voluntarily altering (a substance or any other elements) with a
view to misleading”. Paradoxically, even if the intrinsic elements have been defined within the scope of
falsification (fraudulent portrayal of its identity, of its source), counterfeiting is still the term used in numerous
cases. On this subject, the most significant example is the definition deriving from the Médicrime convention,
which defined falsified medicines but still kept the term counterfeiting for convenience. This semantic inaccuracy
is also to be found in the definition of the IMPACT9 group's work in Hammamet (Tunisia) in December 2008.
According to the IMPACT group, whose Secretariat is provided by WHO: “A medical product is counterfeited
when its identity and/or its source is falsely portrayed. This applies to the product, its packaging or to any other
information concerning the packaging or labelling. Counterfeit may apply to patented products or generic
products. Counterfeit products may be products containing the right ingredients/components or bad
ingredients/components, no active ingredient or an insufficient quantity of the active ingredient or products
whose packaging was falsified”.10 But in actual fact, in this case this is indeed the definition of a ‘falsified’
medicine.
The term falsification, compared with the term counterfeiting, by emphasising the risks of an impact on public
health, makes it possible to go beyond a simple infringement of an intellectual property right. Furthermore, this
concept avoids the difficult equation between the territoriality of intellectual property rights, access to medicines
and the tricky issue of generics.
Preference is therefore given to the term ‘falsification’ rather than the more legal ‘counterfeiting’ to emphasise
the risks of impact on public health.
In this context, the best definition would be the one in the European Directive of May 16, 201111 which defines a
falsified medicine as:
“Any medicine which falsely presents at least one of the following characteristics:
‐ its identity, including its packaging and labelling, its name or the composition, regarding any of its ingredients,
including the excipients, and the dosage of these ingredients;
‐ its source, including its manufacturer, its country of manufacture, its country of origin or that of its marketing
authorisation holder;
8 Philippe Collier, “L’OCLAESP cible toutes les problématiques liées à la santé publique”, Contrefaçon Riposte, December 18,
2009.
9 IMPACT: International Medicines Products Anti-counterfeiting Task force. The IMPACT Secretariat is provided by WHO. Group
without any activity at present.
10 IRACM, Fiche Propriété Intellectuelle, January 30, 2012.
11 Amending directive 2001/83/EC establishing a community code on medicines for human use with regard to preventing falsified
medicines being introduced into the legal supply chain.
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‐ its history, including registrations and documents concerning the distribution circuits used.
This definition does not include unintentional quality defects and is understood as being without prejudice to
violations of intellectual property rights”.
This directive must be incorporated into the national legal systems of the European Union Member States by
January 2013 at the latest.
Moreover, a distinction should be made between the concepts of counterfeiting and falsification in other cases:
- The “sub-standard medicine” or the “non-compliant medicine”:
Even though there is no legal definition for them, sub-standard medicines (called 'OOS' -out of specification) are
authentic medicines produced by manufacturers authorised by the national regulatory authority but which do not
meet the quality specifications set for them by national standards for such products. The term ‘non-compliant’
means that a medicine partially deviates from the specifications set by the registration dossier approved by the
registration authority and/or good manufacturing practices in force in the country of registration. It is also
important to make a distinction between defective products and counterfeit medicines as, according to Médecins
sans Frontières, problems with defective products are more widespread.12 The definition of a defective product is
close, even identical, to that of a ‘sub-standard medicine’. There are many causes for the defect, which may
include the holder of the right and its potential sub-contractors. Not conforming to the standards of quality and
traceability does not constitute counterfeiting but is rather a potential consequence of this.
- “Fake medicines”:
There is no proper definition of a ‘fake medicine’. The term is occasionally employed, and is used in the Cotonou
Appeal of the Jacques Chirac Foundation. A fake medicine is one that is not what it claims to be and is intended
to mislead the consumer.
- “Generic medicines”:
Generic medicines are authorised copies of an original drug (brand-name drug). These copies are permitted by
law once the patent protecting the active ingredient of the reference drug has expired, i.e. 20 years after the
patent is filed and not 20 years after the product’s launch (sometimes there are several years between the two
dates), and unless an extension is granted by an SPC (supplementary protection certificate for a maximum
duration of 5 years after the initial expiry date). Even though they are not totally identical to the originals, generic
drugs have the same qualitative and quantitative composition in active ingredients, the same pharmaceutical
form and the same bioavailability in the body as the brand-name drug.
Generic medicines are regulated, controlled and require a marketing authorisation (MA). Accordingly, they are
not a problem for public health and we should note that generic medicines can also fall victim to counterfeiting.
In short, “the problem with counterfeit medicines lies in the wider context of sub-standard pharmaceuticals. (…)
Counterfeiting can apply to both brand-name and generic products and counterfeit medicines may include
products with the correct active ingredients but fake packaging, or other active ingredients, no active ingredient
or insufficient active ingredients”.13
In such a complex environment, the concept of counterfeit medicines must be harmonised14 as the most widely
accepted definition is the previously mentioned WHO definition but this dates back to 1990. It should be updated
12 Jean-Michel Caudron et coll, “Substandard medicines in resource-poor settings: a problem that can no longer be ignored”,
Tropical Medecine and International Health, vol. 12, No. 8, August 2008, p. 1062-1072.
13 Allafrica.com, “Médicaments de qualité inférieure ou contrefaits - 25% des produits consommés dans les pays pauvres sont des
contrefaçons”, All Africa, August 25, 2006.
14 Amir Attaran, Roger Bate and Megan Kendall, “Why and How to Make an International Crime of Medicine Counterfeiting”,
Journal of International Criminal Justice, vol. 9, No. 4, 2011.
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as, according to this definition, counterfeit medicines involve brand-name products and generic products as well
as products containing appropriate or dangerous ingredients. In this case, counterfeit products may therefore be
‘professional’ or ‘semi-professional’, even ‘amateur’.
The Council of Europe's definition is different from that of WHO in that it takes into account the counterfeiter's
intentional nature in the definition and the portrayal of the counterfeit product. In this definition, it is not
necessary to establish proof that the author's behaviour was actually detrimental to public and individual health.
The importance of the intentional nature is to be found in the field where a distinction is rarely made between
counterfeit medicines and unintentional defective medicines, and according to a report made in South-East
Asia15, quality defects are more frequent (10% of medicines analysed) than counterfeits according to the WHO
definition (from 0.3 to 0.5% of medicines analysed).
As we have noted, the problem of defining counterfeiting is particularly evident in the case of medicines,
particularly on an international scale. As Graham Jackson, editor of The International Journal of Clinical Practice
16 recently summarised, “among the obstacles to adopting effective measures, the lack of any clear worldwide
consensus on what constitutes a counterfeit medicine, as well as the fact that activities that are illegal in one
country may be legal in another”. More generally, a distinction should also be made in the analyses between the
parameter on the health and public health impact and that of intellectual property17.
Consequently, particular caution is necessary in the field of statistics on counterfeit medicines and we will
sparingly use the statistics given in a large number of reports, as quantifying this phenomenon on a world-wide,
even regional scale, is delicate to say the least.
I.2. State of play
Counterfeiting medicines is a world-wide phenomenon, for example fake medicines for malaria and tuberculosis
are present in 90 countries and kill 700,000 people each year.18 The areas most affected are Africa, Asia and
Latin America. The Center for Medicines in the Public Interest19 estimates that the sale of counterfeit medicines
reached USD 75 billion in 2010, i.e. an increase of 90% since 2005 while the overall turnover in the
pharmaceutical sector increased from USD 605 to more than USD 856 billion in 201020. A more recent figure
from the World Economic Forum21 even evaluates counterfeit medicine sales at approximately USD 200 billion,
i.e. the leading sector for illicit trafficking ahead of prostitution and marijuana. Even if it proves impossible to
provide reliable world-wide statistics on this situation22, it can nevertheless be estimated that the sales of
counterfeit medicines over this period increased by 20% more than the legal market world-wide. In fact, it must
be considered that the only sound statistical data concerns seizures made by customs.
15 Marcus M. Reidenberg, Bradley A. Conner, “Counterfeit and substandard drugs”, Clinical Pharmacology & Therapeutics, vol. 69,
No. 4, April 2001, p. 189-193 cited in Waito Foundation, Le crime-contrefaçon : Un enjeu majeur, 2011, p. 285.
16 Bulletin of the World Health Organisation, The growing threat from counterfeit medicines, vol. 88, No. 4, April 2010, p. 241-320.
17 Amir Attaran, Roger Bate and Megan Kendall, “Why and How to Make an International Crime of Medicine Counterfeiting”,
Journal of International Criminal Justice, vol. 9, No. 4, 2011, p. 947-951.
18 Julian Harris, Philip Stevens, Julian Morris, “Keeping It Real - Protecting the world's poor from fake drugs”, International Policy
Network, May 2009, p. 4.
19 Ibidem.
20 Sources: IMS, Health Market Prognosis, March 2010 and Health Market Prognosis, March 2011.
21 World Economic Forum, Global Risks, Sixth edition, An Initiative of the Risk Response Network, 2011, p. 23.
22 Randall W. Lutter, Associate Commissioner for Policy and Planning, Food and Drug Administration, “Pharmaceutical Supply
Chain Security”, Statement before the Subcommittee on Criminal Justice, Drug Policy, and Human Resources, House Committee
on Oversight Government Reform, July 11, 2006.
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There are three focuses on which the world-wide dimension of counterfeit medicines may be observed: the
physical flows, the organisation of illicit trafficking and the Internet.
- Geography of the physical flows
According to researcher Roger Bate less than 1% of medicines are counterfeit in developed countries (United
States, United Kingdom, and Europe)
23
are counterfeit and approximately 10% in a large number of developing
countries (Russia, China, Cambodia).
However the ‘dark figure’ is considerable and sources are limited. According to the WHO IMPACT programme:
24
- one in 3 medicines is counterfeit in some African, Asian or Latin American countries,
- one in 5 medicines is counterfeit in the former Soviet Union.
- China, India and, to a lesser extent, Russia remain the main producers of counterfeit medicines but Nigeria and
the Philippines also have a significant number of illegal factories.
25
By geographic area
26
, Asia is significantly dominant by number of incidents:
Figure 1: Incidents by region.
Source: Pharmaceutical Security Institute, Situation Report, 2010.
The Pharmaceutical Security Institute (PSI) uses specific terminology where cases of counterfeit medicines are
referred to as “incidents” (according to the WHO definition) but also include stolen items and illegal diversions.
These statistics are submitted by pharmaceutical companies who are members of the PSI.
23 Roger Bate, Making a Killing. The Deadly Implications of Substandard and Counterfeit Drugs, Wellcome Trust presentation,
October 26, 2009.
24 IMPACT, Counterfeit medicines, Fact sheet, Estimates, November 14, 2006. It should be noted that the overall figures are
debatable.
25 See Commonwealth Business Council Working Group on Healthcare, The Problem of Counterfeit Medicines in the
Commonwealth, May 2007, p. 2.
26 Pharmaceutical Security Institute, Situation Report, 2010.
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According to its methodology, the PSI only takes into account seizures of more than one thousand medicine
doses. The statistics concerning Africa are quite poor (45 incidents referenced), stemming from the inadequate
means of detection and investigation in this part of the world.
In 2009, according to the PSI, Asia and Europa were the two main regions involved in manufacturing counterfeit
medicines. According to the OECD, 75% of counterfeit medicines in the world come from China and India and
half of these products transit through Dubai to conceal their origin.
- Organisation of illicit trafficking
This trafficking is characterised by a variety of strategies depending on the regions, the increasingly dangerous
nature of the counterfeit medicines as well as an ever-greater number of seizures.
Strategies varying depending on the regions
More specifically, there are three stages in the medicine counterfeiting process:
- Production:
The counterfeit medicines can be produced in an emerging country such as China but, in certain cases, in more
developed countries which are happy to import for example the starting material at a lesser cost.
- Transit:
This may be by sea but air, road and rail transport may also be used or medicines even carried by travellers.
The storage areas may have no relation to the country of origin, which tend to cover their tracks. Furthermore,
similarly to world transport, particularly by container, goods may transit through countries, be stored in free trade
zones, be transhipped to other means of transport, and in this way enable the real origin of the goods to
disappear so that only their declared origin remains.
At all stages, the counterfeiters try to maximise fragmentation so as to avoid being detected (see the ‘broken
load technique’ page 34).
- Distribution:
The products are often distributed through various shell companies which take advantage of local relay networks
but may also be distributed directly within legal economic networks through well-known companies. In this way,
they can be directly incorporated into the mainstream medicines distribution chain as far as the delivery outlet, or
quite simply, in certain countries, made available on street markets or the Internet.
In industrialised countries the packaging of counterfeit medicines is identical to that of authentic medicines. The
easy access to high-quality low-cost mass production printing systems is also behind an increase in internet
counterfeiting. “Counterfeiters know that the key to success is making the packaging as realistic as possible,
then distributing the products as quickly as they can”. 27 The marketing channels are international and
counterfeiters take advantage of deregulation to penetrate a given market after passing through several
countries. According to the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA)
counterfeiting a ‘blockbuster’ (medicine generating sales of more than one billion dollars for the pharmaceutical
company) can generate a profit in the region of USD 500,000 for an initial investment of USD 1,00028 while the
same initial sum invested in the trafficking of counterfeit money or heroin would bring in USD 20,000 and
USD 43,000 for counterfeit cigarettes. Drug counterfeiting is 10 to 25 times more profitable than drug
trafficking.29
27 Andrew Baxter, “The war on drugs copycats”, Financial Times, December 19, 2006.
28 Report written under the direction of Eric Schmidt, Evaluation de l’ampleur de la vente des produits contrefaisants sur internet,
CEIS, March 2009, p. 56.
29 IRACM, Fiche Criminalité organisée, January 30, 2012.
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In poor and developing countries, counterfeit medicines are of poor quality and dangerous to human health. It is
very often in these countries that dangerous ingredients are found, such as the cough syrup containing anti-
freeze for motor vehicles which killed 84 Nigerian children (2009).
30
In these countries, counterfeit medicines are found locally, for instance at markets or in hospitals. The counterfeit
products are often also intended to treat potentially lethal illnesses, such as malaria or HIV/AIDS. These
products are also copycat antibiotics, analgesics or antiparasitics.
31
In Nigeria, six out of 10 medicines sold have not been approved and in Guinea, 60% of the medicines sold in
pharmacies are counterfeit.
32
Figure 2: Example of the manufacturing and distribution flow of counterfeit products
Source: OECD, The economic impact of counterfeit and piracy, 2008
33
Counterfeiting is a world-wide problem. According
to the WCO (World Customs Organization), 140 countries are
targeted.
34
Counterfeiting has become globalised.
It should be noted that information on the Chinese factories involved and their sometimes dubious methods are
still not well documented. A few years ago it was estimated “that China has 80,000 firms in the chemical sector
but the U.S. Food and Drug Administration does not know how many of them sell ingredients used in the
medicines taken by Americans. The Times, which examined thousands of firms selling products on the major
B2B sites, succeeded in identifying 1,300 Chinese firms in the chemical sector offering medical ingredients for
sale”.
35
30 Blandine Fauran, “Les enjeux de la lutte contre les faux médicaments”, Cahiers de la sécurité. Les dangers de la contrefaçon,
No. 15, January-March 2011.
31 Ibidem.
32 Pierre Delval, Le marché mondial du faux. Crimes et contrefaçons, CNRS éditions, 2010, p. 153.
33 OECD, The economic impact of counterfeiting and piracy, 2008, p. 361.
34 World Customs Organization, Customs and IPR Report, 2008.
35 Walt Bogdanich, “Chinese drugs flow to market unchecked”, International Herald Tribune, November 1, 2007.
Producers Fill/Finishers Flow-through Destination
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:
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hhel
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.
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The genuinely dangerous nature of counterfeit medicines
These medicines are truly dangerous and we should remember that, even if they do not actually kill, counterfeit
products, whether over-dosed, under-dosed or without any active ingredient, do not cure. Therefore, at best, a
counterfeit medicine fails to cure the patient and, at worst, it is deadly. Somewhere in between, it can lead to
drug resistance, which may result in treatment failure. From a more concrete standpoint, the WHO referenced a
series of major accidents and particularly the case of injections of counterfeit products to treat anaemia that
killed a young Argentinian woman in 2004.36
There are other examples that may be cited:
In 2006, more than 100 children in Panama were victims of a counterfeit medicine containing diethylene
glycol, a powerful solvent, added to a fake cough syrup. The solvent was falsely identified and exported
as glycerine, an ingredient used in a large number of medicines37.
Singapore: the health authorities recorded 11 deaths and 24 coma cases after taking counterfeit
medicines for sexual dysfunction in 2008-2009.38
China: 192,000 deaths from counterfeit medicines in 2001 (400,000 deaths since 2001 according to
Pharmaciens sans Frontières in Luxembourg).39
The risk to public health from counterfeit medicines is expanding: counterfeit seizures in 2009 during the ‘Storm
2’ operation, co-ordinated by IMPACT in Asia, ranged from antibiotics to contraceptives, tetanus vaccines, anti-
malaria medicines and treatments for erectile problems. In Egypt, investigators have found products of all types:
from medicines used in organ transplants to those prescribed for disorders such as heart disease, schizophrenia
and diabetes, as well as thousands of packs of cancer medicines. 40 The PSI estimates that about 523 medicines
were counterfeited in 2012.41
A growing number of seizures
According to the WCO, the trafficking of counterfeit medicines increased by 300% between 2007 and 200942. In
2009, 117 million medicines were seized by customs in Europe 43, 18 million of which were dangerous. Seizures
of counterfeit medicines are becoming more and more varied.). 44 (anti-inflammatory drugs, pain killers,
antiseptics, medical equipment (stethoscopes, etc).
36 IMPACT, Counterfeit medicines, Fact sheet, November 14, 2006.
37 IRACM, Fiche Enjeux : Stopper une pandémie planétaire, January 30, 2012.
38 Sylvia Tan, “Counterfeit sex drugs: 11 deaths and 24 coma cases”, Friday, September 18,2009.
39 Pharmaciens-sans-frontieres.lu, “Les médicaments contrefaits”, Pharmaciens Sans Frontières Luxembourg, May 22, 2011. We
will come back to the validity of these statistics later on.
40 Comments by Aline Plançon, Interpol in the Bulletin of the World Health Organisation, vol. 38, April 2010, p. 241-320.
41 Kathy Chu, “Growing problem of fake drugs hurting patients, companies”, USA Today, September 13, 2010.
42 IRACM, Fiche Criminalité organisée, January 30, 2012.
43 Christophe Zimmerman, co-ordinator of the combat against counterfeiting and piracy at the WCO, Conférence sur la
contrefaçon à la Mutualité française : Le trafic de faux médicaments comment le combattre, October 15, 2010.
44 Interview with Jean-Christophe Marten Pérolin, senior official at OCLAESP, by Philippe Collier, “Douanes : 7 million d’articles
contrefaisants saisis en 2009”, Contrefaçon Riposte, April 23, 2009.
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Between 2009 and 201045, the number of shipments intercepted by customs almost doubled: it went from 43,500
in 2009 to almost 80,000 in 2010, with health products representing respectively 18% and 14.5% of the total.
These substantial figures can be explained by the huge increase in the number of illicit postal parcels
intercepted, almost 50,000, which were purchases on the Internet. Germany (22,125) and Great Britain (22,146)
each made almost 30% of these interceptions. In France, customs seizures mainly concern fake tablets for
erectile dysfunction. That said, these figures should be put into perspective as, at the same time, it should be
remembered that smaller quantities of this type of product are despatched.
In the United States, the customs authorities also seize increasing quantities of counterfeit medicines. Hence,
their market value was assessed at USD 16.8 million in 2011 compared with USD 5.7 million the previous year,
i.e. an increase of 200%.46 In financial terms, these medicines represent 10% of total seizures compared with
3% in 2010.47
The number of investigations conducted by the FDA (Food and Drug Administration) concerning cases of
counterfeit medicines went from 6 in 2000 to 58 in 200848. Products potentially dangerous to the health and
safety of consumers represented 10% of seizures made in 2008 at a value of USD 28 million. 49
There are several reasons for the increase in the number of seizures of counterfeit medicines50:
- High profitability and low penal risk.
- Technological progress (particularly in printing).
- Globalisation mechanisms.
Internet: a major distribution vehicle
International trans-organised crime has very quickly understood the substantial advantages that the internet has
to offer. The net is decentralised and anonymous and the malleability and permanent interconnection of
networks seems to offer genuine opportunities for illicit trafficking.
On the whole, e-commerce is increasing considerably world-wide and counterfeit medicines can therefore find a
real growth potential in cyberspace. Even if there are still very few studies concerning the internet, a certain
number of results portray the reality of the phenomenon:
- according to the WHO, 50% of the medicines are bought on web sites which conceal their physical address51,
- according to a study52 carried out by the European Alliance for Access to Safe Medicines, 62% of medicines
bought on the internet are counterfeits (50% according to the WHO).
45 European Commission - Taxation and customs union, Report on EU customs, enforcement of intellectual property rights Results
at the EU border, 2010. Source: Philippe Collier, “Europe : En 2010, les douanes ont saisi pour plus d’un milliard d’euros de
contrefaçons aux frontières de l’UE”, Contrefaçon Riposte, July 15, 2011.
46 U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement, Intellectual Property Rights, Fiscal Year
2011 Seizure Statistics, 2011.
47 Ibidem.
48 Leem.org, “La contrefaçon dans les pays industrialisés”, LEEM, May 19, 2010.
http://www.leem.org/article/contrefacon-dans-les-pays-industrialises
49 Ibidem.
50 Mickaël R. Roudaut, Marchés criminels. Un acteur global, Presses Universitaires de France, 2010, p. 133.
51 Bulletin of the World Health Organisation, “Growing threat from counterfeit medicines”, vol. 88, No. 4, April 2010, p. 241-320.
http://www.who.int/bulletin/volumes/88/4/10-020410/fr/index.html
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- 90% of counterfeit medicines now sold on the Internet53 are fakes54 and according to a Japanese study55, 60%
of medicines treating erectile dysfunction on the Internet are counterfeits.
Some elements per geographic area
- United States
In the United States, 36 million Americans56 bought medicines without a prescription on illegal sales sites and
the Internet has become the leading distribution channel for counterfeit medicines in this country.57 A more
worrying statistic cited by the American firm OpSec Security58: 66% of Internet users are prepared to knowingly
buy counterfeit products and 90% of people interviewed gave the price as the main criterion for buying such
products. Such information challenges the claim that the patient is always the victim and not the accomplice
when buying a fake medicine or, at least, is very foolhardy. Sites offering medicines for sale in America often
emphasise their Canadian nationality even though there are only 300 legal Canadian on-line pharmacies.
Furthermore, according to the International Chamber of Commerce, more than 11,000 fake sites using a
‘Canadian cover’ are in actual fact based in other countries (often in Russia and India).59
- Europe
The regulations adopted by the various governments to implement the new European directive vary greatly 60
from one country to another. Based on the Doc Morris61 order from the Court of Justice of the European Union
(CJEU) of December 11, 2003, online marketing of products without a prescription is now authorised.
One unique study serves as a reference: the ‘Cracking Counterfeit Europe”62 study conducted in 14 European
countries concludes that the European market for counterfeit medicines is worth around EUR 10.5 billion
annually. In France, the market is worth almost EUR 1 billion.
52 Agence France Presse, “Les médicaments vendus sur Internet inquiètent”, EAASM, July 2, 2008.
The study concerns the analysis of 100 on-line pharmacies and the purchase of 30 medicines.
53 Indo-Asian News Service, “Beware, 44 percent Viagra sold on net is spurious”, IANS, January 26, 2010.
54 Ibidem.
55 Pharma-japan.com, “60% of ED Treatments Sold Online Are Counterfeits”, Pharma Japan, December 21, 2010.
56 Prnewswire.com, “36 Million Americans have Bought Medications Online Without a Doctor’s Prescription”, PR Newswire,
December 14, 2010.
57 National Intellectual Property Rights Coordination Center, Intellectual Property Rights Violations: A Report on Threats to United
States Interests at Home and Abroad, November 2011, p. 31.
58 OpSec Security, Press release, OpSec Identifies High Quality and Product Functionality as Key New Drivers Motivating Online
Counterfeit Electronic Sales, July 8, 2009.
59 International Chamber of Commerce, Counterfeiting Intelligence Bureau, The International Anti-Counterfeiting Directory, 2009,
p. 25.
60 Philippe Collier, “L’OCLAESP cible toutes les problématiques liées à la santé publique”, Contrefaçon Riposte, December 18,
2009.
61 The company Doc Morris offered German consumers, in German, medicine for human use, part of which were authorised in
Germany and the majority of which were authorised in other member states of the European Union. The Court held that the
prohibition to sell medicines online without authorisation is justified and for those which need a prescription. On the other hand,
mail-order sales of medicines that do not need a prescription and their advertising cannot be prohibited.
62 Mypharma-editions.com, “Les faux médicaments représenteraient 10,5 milliards d’euros en Europe”, MyPharma Editions,
February 16, 2010.
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This study, carried out by Nunwood on behalf of Pfizer Inc. shows that, in Europe, one out of five persons
surveyed, i.e. 77 million individuals, acknowledges buying prescription medicines outside the authorised
channels. In France, it was 14% of those interviewed, i.e. 6.9 million people.
- France
France is still safeguarded in Europe, thanks to the quality of the healthcare system, the strong regulations
governing pharmaceutical activities and thanks to the system of reimbursement for prescription drugs. However,
risks are now emerging in connection with “purchases of counterfeit so-called 'comfort' products on the internet,
slimming pills, food supplements, performance-enhancing drugs or anabolic agents sought by bodybuilding
enthusiasts”.63
Between 2001 and 2008, some 40 pharmacovigilance cases relating to the use of internet medicine purchases
were reported to the Afssaps64. Out of 38 cases identified, 11 concerned purchases of slimming products, 3
anabolic steroids, and 8 stimulants or revitalizing products, particularly hormone-based.
- Switzerland
Switzerland is sometimes used as a strategic area for trafficking counterfeit medicines at European level. In
2011 the director of Swissmedic65 pointed out “a strong rise in the illegal imports of medicines potentially
dangerous for patients”. According to customs authorities, seizures of illicit products rose to 61% compared to
2009. More than a third of the counterfeits were stimulants treating erectile problems.
The counterfeit medicines most frequently purchased online66 are mainly medicines against erectile dysfunction,
but also slimming products, anabolic agents, growth hormones, melatonin, products to quit smoking and also
narcotics and psychotropic substances.
With regard to the slimming products sold on the internet, a Swissmedic study67 showed that almost 90% contain
active ingredients that are a dangerous health threat.
In light of this assessment of counterfeit medicines, how can a more specific analysis be made of the criminal
organisations involved in this ever-growing illicit trafficking?
I.3. Criminal organisations and counterfeiting
The concept of criminal organisations should be determined and the logic of ‘structural holes’ used by such
organisations when counterfeiting medicines.
This survey was carried out between October 27, and November 8, 2009. 14,000 men and women in 14 European countries took
part in it. Countries concerned: United Kingdom, Belgium, Switzerland, Spain, Norway, Denmark, Sweden, Austria, Germany,
France, Italy, Netherlands, Finland and Ireland.
63 Philippe Collier, “L’OCLAESP cible toutes les problématiques liées à la santé publique”, Contrefaçon Riposte, December 18,
2009.
64 Philippe Collier, “L’Afssaps démontre les dangers des médicaments vendus sur Internet” Contrefaçon Riposte, January 13,
2009.
65 Elisabeth Eckert, “Berne lance l'alerte contre les faux Viagra”, Le Matin, 20 F2011.
66 Blandine Fauran, “Les enjeux de la lutte contre les faux médicaments”, Cahiers de la sécurité. Les dangers de la contrefaçon,
No. 15, January-March 2011.
67 Swissmedic, Press release, Résultats d’analyse alarmants: Nouveaux chiffres sur des produits amincissants dangereux vendus
sur Internet, June 6, 2011.
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I.3.a. Definition of criminal organisations
The expression ‘organised crime’68 first appeared in 1897 in the United States and developed during prohibition.
The concept is generally associated with “rackets, extortion, predatory activities and the supply of illegal
goods. Interest in it revived during the 1960s with the spread of the drug dealing which grew at an
unprecedented rate in the United States”.69 This view of organised crime influenced the European approach,
particularly from the 1970s, with “a view of organised crime which is moving towards a more violent model, more
professional and multinational”.70
There are two main definitions71 of organised crime:
- The Council of Europe (1998) describes criminal organisations as “a structured group of more than two
persons, established over a period of time, acting in concert with a view to committing offences which are
punishable by deprivation of freedom or a detention order of a maximum of at least four years or a more serious
penalty, whether the offences are an end in themselves or a means of obtaining material benefits and, where
appropriate, of improperly influencing the work of the public authorities”.
- The definition of criminal organisations with the greatest consensus is that of the United Nations Convention
against Transnational Organised Crime (Palermo, December 2000)72, which defined an “organised criminal
group” as a “structured group of three or more persons, existing for a period of time and acting in concert with
the aim of committing one or more serious crimes in order to obtain, directly or indirectly, a financial or other
material benefit”.
From a more theoretical standpoint, we note moreover that “this transition from multiple to single definition raises
many questions, particularly concerning the appropriateness of the legal standard in relation to the phenomena
that we wish to comprehend (…) but also (…) its purposes and its functions”.73 Consequently, a definition of
‘organised crime’ as flexible as the one decided at Palermo still raises the question of adapting the ‘legal
standard’ on how organisations are perceived and treated. Another issue with the definition: the ‘transnational’
dimension. This aspect of the definition is not quite as simple as it appears and the question of relations between
criminal organisations and the international economy was a subject for debate among researchers in the 1960s.
It was in 1975, at the fifth United Nations congress on ‘Crime Prevention and Criminal Justice’ that the
expression ‘transnational crime’74 took on its full magnitude, particularly by going into the details of the complex
links which may exist between conventional organised crime, major economic actors and corrupt institutional
representatives. That said, little effect seems to have resulted from this pertinent review of the situation,
particularly on the type of relations in question between these actors, which has nevertheless not dampened
academic debates often out of touch with the real issues.
This transnational dimension is obvious to an initial category of researchers. According to the economist Loretta
Napoleoni75 “a new economy of terror has emerged” and for the journalist Claire Sterling there is a “Pax Mafiosa”
with criminal organisations which peacefully share territories on a world-wide scale.76 A more ‘networked’ view of
68 We will not make a distinction between the expressions ‘criminal organisation’ and ‘organised crime’ in this report.
69 Bleuzenn Monot, La guerre de la contrefaçon. Le grand pillage des marques, Ellipses, 2008, p. 77.
70 Maria-Luisa Cesoni, Criminalité organisée : des représentations sociales aux définitions juridiques, LGDJ, 2004, p. 622.
71 IRACM, Fiche Criminalité organisée, January 30, 2012.
72 Source of the definition: United Nations Convention of November 15, 2000.
73 Maria-Luisa Cesoni, Criminalité organisée : des représentations sociales aux définitions juridiques, LGDJ, 2004, p. 5.
74 Vincenzo Ruggiero, “Fuzzy criminal actors: Introduction”, Crime, Law & Social Change, vol. 37, No. 2, p. 177-190, 2002.
75 Franck G. Madsen, Transnational Organized Crime, Routledge, 2009, p. 80.
76 Claire Sterling, Crime Without Frontiers, Little, Brown and Co, 1994.
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international mafia groups77 is favoured by the sociologist Manuel Castells 78 , a specialist in information
technologies, who sees in these mafia organisations “a global network”. Within a more geopolitical approach, the
academic Susan Strange, who considers that there “is a form of transnational mafia diplomacy which has given
rise to a proliferation of informal agreements denoting the existence of an international mafia society just as a
State one”.79
Another category of researchers has a more critical view and considers this transnational dimension of
organised crime as ‘hypothetical’ and “to obtain additional resources or to extend their prerogatives, it is naturally
of interest to the enforcement authorities to present the criminal organisations as powerful, threatening and
hungry to extend their activities and influence”.80
In the context of today's globalised economy, these two views however appear to be somewhat exaggerated as
we will see that, at the very least, this transnational dimension of crime is obvious. According to the most
credible researchers,81 it is important to challenge the ‘conspiracy views’ as the alliances in question between
so-called transnational criminal groups are above all “temporary opportunistic alliances”82 and their structures
are still not particularly ‘formalised’. Criminal organisations (and ‘mafias groups’ even more so) in fact must see
themselves as not particularly structured as, according to the expression of the academic, Jean-Louis Briquet 83,
they are “an object with indeterminate outlines, a reality constantly avoiding the definitions suggested for them
(…) a constantly changing moving phenomenon, forcing a corresponding change in the models which try to
comprehend it”.
As for the ‘critical approach’, even if it raises pertinent questions on the direction in which certain enforcement
agencies may or may not be going, in its analyses it neglects access to the crime sources which, even if they are
difficult to access, may to a certain degree be available particularly on problems as specific as ‘counterfeit
medicines’.
Generally speaking, one should avoid falling victim to sensationalism or being taken in by the frequent incorrect
information on criminal organisations not only in the media but sometimes also in the academic environment.84
The whole difficulty therefore lies in having comparative research work on a study subject as complex as
criminal organisations, as “although the attempt to unequivocally identify an 'organised crime' subject, enabling
international comparative research to be developed, was made by various researchers85, it resulted in “an
impossibility being recognised, based on the over-diversity of the phenomena generally grouped together under
these names”.86 The organised nature of the phenomenon is particularly difficult to determine.
77 There are many definitions and academic debates about the mafia. In the original sense, the term means the Sicilian mafia but
in the wide sense it means any form of organised crime in other geographic areas (Russian, Japanese mafia, etc.). The mafia may
be defined as a criminal organisation whose activities are subject to concealed collegial management and which is based on a
strategy of infiltrating civil society and institutions. Source Wikipedia: September 15, 2012.
78 Manuel Castells, End of Millennium, Oxford: Blackwell Publishers, 2000, p. 172.
79 Richard Friman, “Prise au piège de la folie ? Le pouvoir étatique et le crime organisé transnational dans l’œuvre de Susan
Strange”, Culture & Conflits, No. 42, summer 2001.
80 Gilles Favarel-Garrigues, “La criminalité organisée transnationale : un concept à enterrer ?”, L’Economie politique, No. 15, July
2002.
81 Jean-Louis Briquet or again Mark Galeotti may be cited.
82 Mark Galeotti, “Introduction: Global Crime Today”, Global Crime, vol. 6, No. 1, February 2004, p. 1-7.
83 Jean-Louis Briquet, “Comprendre la mafia. L'analyse de la mafia dans l'histoire et les sciences sociales”, Politix, vol. 8, No. 30,
1995, p. 139.
84 Roderic Broadhurst, Naryanan Ganapathy, “Organized Crime in Asia: A Review of Problems and Progress”, Asian Criminology,
vol. 3, No. 1, June 2008, p. 1-12.
85 Maria-Luisa Cesoni, Criminalité organisée : des représentations sociales aux définitions juridiques, LGDJ, 2004.
86 Ibidem.
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A complexity probably mainly due to globalisation, as it must not be perceived as “a technological extension”,87
particularly with the impact of the Internet, but rather as a “social process which configures and reconfigures
“relations between multiple entities (…) which are widely spread over the area”.88 An interpretation which tends
to prove the wide variety of social organisations present and therefore the multiplicity of potential criminal
organisation models.
For all that, should it be considered that we are faced with a form of analytical stalemate?
A Council of Europe report on crime89 qualifies this stalemate and considers that “the concept of organisations
with a clearly defined hierarchy seems increasingly to give way to one with criminal networks made up of
individuals or small units, as well as legal structures (most often commercial) and experts of all types (lawyers,
accountants, etc.) more or less closely affiliated to these structures. (…) In short, the criminal networks can
function by adapting to market conditions and by exploiting the possibilities offered to them”. However, beyond
this flexible organisational structure, it remains true that criminal organisations, particularly in counterfeiting, may
be described as “economic extremists, who are looking for profit any way they can”.90
Although globalisation has transformed the traditional models of criminal organisations, even made them more
complex, from this point of view, medicine counterfeiting is a stimulating study area which will enable us to
question and shed light on ‘organised crime’ – and therefore the concepts of ‘crime’ and ‘organisation’ – under a
new and pragmatic angle.
I.3.b. Criminal organisations and counterfeit medicines: a ‘structural hole’ logic
Whatever definitions of criminal organisations are accepted (Council of Europe or Palermo), the trafficking of
counterfeit medicines most often meets each of the criteria common to both91:
- several persons involved,
- the existence of a real structure within the group,
- the violations committed or intended are serious,
- the criminal activity is stable over time.
But this view of the criminal organisation appears to be too ‘static’ as many criminal organisations, particularly
where medicines are concerned, seem to be formed on ‘organisational flaws’. A point of view more particularly
conceptualised by the American sociologist Ronald S. Burt92, who theorised on the concept of “structural holes”93
which appear “when there is a gap between two persons with a complementary need in terms of resources and
information”.94 A third party is then necessary and acts as a sort of entrepreneur, bringing together the two
separate individuals and closing the existing gap. This ‘social bridge’ then enables the entrepreneur to make a
87 David S. Wall, Cybercrime. The Transformation of Crime in the Information Age, Polity Press, 2007, p. 37.
88 Maureen Cain, “International crime and globalisation”, Criminal Justice Matters, vol. 46, No. 1, 2001.
89 Council of Europe, Organised crime situation report: Focus on the threat of economic crime, 2005.
90 Bertrand Monnet, Philippe Véry, Les nouveaux pirates de l’entreprise : Mafias et terrorisme, CNRS éditions, 2010, p.173.
91 IRACM, Fiche Criminalité organisée, January 30, 2012.
92 Ronald S. Burt, Structural Holes. The Social Structures of Competition, Harvard University Press, 1992.
93 Ming Xia, “Organizational Formations of Organized Crime in China: perspectives from the state, markets, and networks”,
Journal of Contemporary China, vol. 17, No. 54, 2008, p. 1-23.
94 Ronald S. Burt, Structural Holes. The Social Structures of Competition, Harvard University Press, 1992.
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profit. In the field of counterfeit medicines the counterfeiters may be extremely skilful at locating the ‘social holes’
within the supply chain.
The following diagram (based on food fraud) may also be applied to crime in counterfeit medicines.
Figure 3: Criminal opportunities based on the Felson triangle.
This diagram is based on the Felson criminal triangle
95
which identifies three elements offering opportunities for
crime: the criminals, the victims and the “guardians and protectors of gaps”. ‘Guardians’ should be understood
as the police, customs, NGOs, etc. and by ‘protectors’ as systems intended to monitor product traceability, watch
techniques, etc. Above all, the importance of the gaps and ‘structural holes’ for fraudsters is seen here. No
matter how skilled the ‘guardians’ or ‘protectors’ may be in reducing the risks of counterfeit, the opportunities for
crime cannot be entirely controlled and they have probably increased with globalisation and the liberalisation of
international trade over the past 20 years. However, similarly to food fraud
96
, detecting counterfeit medicines is
complicated as the counterfeiting criminals can multiply the ‘entry points’ thanks to the numerous ‘gaps’ that the
logistics flows offer them.
From the more operational standpoint, it can be seen that the medicine counterfeiters use the “broken load”
technique
97
which makes it difficult to seize the goods. This technique consists in “routing a counterfeit product
to its final destination and passing it through one or more third party countries which, as far as possible, are not
considered to be countries producing counterfeits in that particular field. In this way, the counterfeiters hope that
95 Marcus Felson, Ronald V. Clarke, Opportunity makes the thief: practical theory for crime prevention, Police research series,
Paper 98. London: Home Office, 1998.
96 Douglas C. Moyer, John Spink, “Defining the Public Health Threat of Food”, Journal of Food Science , vol. 76, No. 9, 2011.
97 Mark Davison, Pharmaceutical Anti-Counterfeiting. Combating the Real Danger from Fake Drugs, Wiley, 2011, p. 18.
Opportunités de
crimes
Criminels
Criminalité organisée
« Gardiens et
Protecteurs » des
décalages
Environnement
criminologique
Victimes
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the customs will focus on where the product has come from and not its origin”.98 Furthermore, the counterfeiters
use every means of transport possible and divide up the manufacturing and packaging stages. Such operations
make it difficult to trace the goods as “counterfeit medicines may be manufactured in one country, processed in
another, packaged in a third before they are shipped in transit via various countries to arrive at last at the
destination where they are intended for sale”.99 These criminal organisations also tend to perfect their medicines'
packaging rather the content, giving priority to deceiving the customs services on the products' origin.100 On a
large scale, these networks of counterfeiters also have the capacity to produce fake quality conformity
certificates for the medicines or other fake official documents enabling them to infiltrate the legal wholesaler or
distribution networks. Control of the distribution network is generally the key factor for the most powerful criminal
organisations. 101 Moreover, it can be noted that these problems of intermediation and traceability of
pharmaceutical products are hardly new and that, in the 19th century, control over the products sold already gave
rise to fears of counterfeiting at that time.102
This question of flows more generally poses the problem of the manufacturing and distribution network. The
American system, with its complex network of distributors and wholesalers, offers a great many opportunities for
a criminal organisation specialised in counterfeiting to enter into this maze of flows by identifying the weak
points. As the diagram below103 shows, the three main American wholesalers which distribute 90% of medicines
in the United States (AmeriSourceBergen, Cardinal Health Inc., and McKesson Corp.) are in contact with
pharmacies then consumers and can also potentially be the target for the flow of counterfeit products. The risk
particularly comes from 6,500 small secondary wholesalers which can be targeted by counterfeiters.104
98 Ibidem.
99 Barbara Pick, Accès aux médicaments et contrefaçon pharmaceutique en Russie post-soviétique, L’Harmattan, 2006, p. 128.
100 Roger Bate, Phake: The Deadly World of Falsified and Substandard Medicines, The AEI Press, 2012, p. 29.
101 Roger Bate, Phake: The Deadly World of Falsified and Substandard Medicines, The AEI Press, 2012, p. 146.
102 Gérard Béaur, Hubert Bonin and Claire Lemercier, Fraude, contrefaçon et contrebande de l’Antiquité à nos jours, Droz, 2007,
p. 717.
103 Wyatt Yankus, prepared for The American Council on Science and Health, Counterfeiting drugs: coming to a pharmacy near
you, updated version, 2009, p. 6.
104 Roger Bate, Making a Killing: The Deadly Implications of the Counterfeit Drug Trade, The AEI Press, 2008, p. 28.
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Figure 4: Example of manufacturing and distribution flows of counterfeit products.
Infiltration of U.S. Drug Supply.
As figure 4 shows, the counterfeiters seek to integrate the supply chain legally. To do this, they can mix the real
and fake products and repackage counterfeit products.
The aim is to avoid arousing the suspicion of the three main American wholesalers by mixing legal and illegal
products and by fragmenting the chain as much as possible thanks to secondary wholesalers who are less
particular about the products' origin, making it even more difficult to trace back to the source.
Generally speaking, the United States is a priority target for counterfeiters as, according to estimates, 40% of
medicines are imported there, thereby increasing the potential risk of importing counterfeit medicines.
105
These problems are also to be found in Europe, in particular in Switzerland
106
, which may sometimes be an
intermediate zone at risk, especially due to its permeable borders with the European Union.
In fact, even if imports of medicines directly intended for the Swiss population are tightly monitored, this is less
the case for exports to European countries.
107
According to Hans-Beat Jenny, deputy director of Swissmedic, the
Swiss Institute for therapeutic products, favourable economic and tax conditions make Switzerland an attractive
country for traders in somewhat dubious medicines, and despite rather strict local practices with regard to
authorisations. “That’s just the way it is”, admits the deputy director of Swissmedic. “It is often noticed that the
real origin of fake medicines has been concealed”.
108
105 Nabp.net, “National, International Stakeholders Develop New Strategies for Fighting Counterfeit Drugs”, NABP, May 3, 2011.
106 Julie Zaugg, “La Suisse leader des faux médicaments”, L’Hebdo, May 29, 2008.
107 Ibidem.
108 Ibidem.
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Trying to trace these commercial routes proves to be difficult109. That said, there is no doubt that ‘commercial’
flows of counterfeit medicines exist between Asian countries such as China and India and Europe and North
America. It is obvious that there are unscrupulous European and North American importers who exploit the
opportunities offered by the parallel market as we have seen with the cases of Peter Gillespie in Great Britain or
Andrew Strempler in Canada. These importers set up dangerous entry points within legal supply chains. It is all
the more complicated to backtrack along these commercial routes since the supply chain may be particularly
sophisticated and the counterfeiters may have various ways of integrating them.
The criminological environment also has a special significance in the case of counterfeit medicines as we saw
that the criminal organisations are difficult to identify. White-collar crime, sometimes linked to an industrial
environment or immersed in a legal environment, can offer opportunities to set up illicit networks in medicines.
Sometimes a major analytical challenge arises which is of course linked to the fact that such organisations are
more or less secret as well as access to sources of information both confirmed and relevant. This work does not
claim to be an exhaustive view but to open up strong lines for analysis with the most credible sources (media,
academics, interviews). Fieldwork and subsequent work could of course extend this initial analysis to where
crime and the pharmaceutical sector meet since it should be kept in mind that criminal-counterfeiting methods
and organisations are permanently evolving110. In addition, this research work should be considered not as a
definitive study on a complex and opaque phenomenon but rather a ‘snapshot’ which also tries to clarify a field
of thought, to a large degree as yet untouched. The case of cybercrime reveals analytical challenges on the
combination of ‘criminal organisations and counterfeit medicines’.
I.4. Cybercrime and counterfeiting
I.4.a Definition
Similarly to the many debates on the definition of crime, cybercrime does not evade definition problems, which
particularly stem from the difficulty in identifying this form of Internet crime. Among the many proposals is the
one put forward by the United Nations111: “cybercrime means any illegal behaviour using electronic operations
which target the security of computer systems and data they process”. Olivier Iteanu112, a lawyer specialised in
new technologies, proposes a definition widely shared by the majority of actors: “cybercrime can be defined as
any illegal action in which a computer is the instrument or the subject of the offence”.
However, as Olivier Iteanu makes clear, this definition has the disadvantage of not taking what is ‘offline’ into
account113. That said, the customs and a certain number of actors tend to widen the concept of cybercrime to
include actions which involve criminal flows both in reality and on the Internet by means of a computer. This
wider view of cybercrime is accepted as it has the advantage of enabling this form of crime to be observed both
in a real and a virtual field. Indeed, it is evident that if an order is placed on the Internet, inevitably it is physically
delivered.
109 UNICRI, Counterfeiting, A Global Spread, A Global Threat, 2007, p. 39.
110 Nayanah Siva, “Tackling the booming trade in counterfeit drugs”, The Lancet, vol. 376, November 20, 2010.
111 Myriam Quéméner, Joël Ferry, Cybercriminalité, défi mondial et réponses, Economica, 2007, p. 4.
112 Olivier Iteanu, Tous cybercriminels, Jacques-Marie Laffont éditeur, 2004.
113 ‘Offline’ here may be assimilated with the so-called physical world contrary to the virtual world embodied by the Internet.
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The question remains114 as to whether cybercrime as such is actually a new form of avant-gardist criminality or if
it is only a medium for more conventional forms of crime.115 According to this point of view, the concept of
cybercrime ‘swings’ between the new and the conventional which “raises a difficulty from the definition's
theoretical standpoint”. The Canadian researcher, Stéphane Leman-Langlois, makes a distinction between
simple computer crime and cybercrime which involves a more dynamic use of the Internet network and within
which the concept of cybercrime covers conduits whose existence is entirely linked to that of the networks. This
dynamic view of the networks is particularly relevant for the continuation of our reflections on the issues of
counterfeit medicines on line.
I.4.a Types of cybercrime
Since the 1990s, cybercrime has been characterised by its “automatic and dispersed” nature116 thanks to
broadband technology. In the 2000s, there was a substantial increase in cybercrimes with growing specialisation
in technology:
Spam: this may be defined as “unsolicited bulk email. Unsolicited means that the recipient has not granted
verifiable permission for the message to be sent. Bulk means that the message is sent as part of a larger
collection of messages, all having substantively identical content”. 117
The despatch of these emails is often “an instrument starting the execution of a main violation enabling
substantial profits to be made illegally”.118
This technique can be used in certain cases of online counterfeiting, in particular for medicines.
Phishing is a “method for fraudulent gathering of individual and personal data from Internet users with a view to
using it to the detriment of the customers of banks and commercial websites”. This technique consists in taking
advantage of Internet users' gullibility to obtain, for instance, their credit card number by means of fake emails
using official logos (FBI or a famous bank).119
As for pharming, it is an offshoot of phishing and involves rerouting access to a website towards a pirate site.
Even if the site's address seems to be correct, the Internet user is in fact rerouted to a bogus site where the
hacker can then capture confidential information.
Cybersquatting120 is a practice which consists in registering an Internet domain name (most often taking the
name of a known brand), then selling it back with profit to the legitimate owner of this name. Depending on the
way the domain name is used, this technique can have certain similarities with counterfeiting, unfair or parasitic
competition.
114 Stéphane Leman-Langlois, “Questions au sujet de la cybercriminalité, le crime comme moyen de contrôle du cyberespace
commercial”, Centre International de Criminalité Comparée, Université de Montréal, Criminologie, vol. 39, No. 1, spring 2006, p.
63-81.
115 It should be noted that according to the British reference academic David S. Wall, the majority of cybercrimes which come to
court in fact are classic criminal activities rather than a presumed new type of cybercrime in David S. Wall, “The internet as a
conduit for criminal activity” in April Pattavina (ed.), Information Technology and the Criminal Justice System, Sage, 2004.
116 Franck Guarnieri, Eric Przyswa, “Cybercriminalité - contrefaçon : les interactions entre ‘réel et virtuel’”, Cahiers de la sécurité.
Les dangers de la contrefaçon, No. 5, January-March 2011.
117 Source: The site of the international organisation The Spamhaus Project, http://www.spamhaus.org/consumer/definition/
118 Joël Ferry, Myriam Quéméner, Cybercriminalité, défi mondial et réponses, Economica, 2007.
119 According to the sources quoted by researcher Eric Filiol, about 5% of targeted Internet users fall into the traps set by phishers.
Eric Filiol, Philippe Richard, Cybercriminalité, enquête sur les mafias qui envahissent le web, Dunod, 2006, p. 41.
120 CEIS definition, Source: Eric Schmidt (dir.), Evaluation de l’ampleur de la vente des produits contrefaisants sur internet, CEIS,
March 2009.
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Typosquatting (or typowriting) consists in registering a domain name whose spelling is very similar to that of
another name which has the advantage of substantial traffic. If Internet users accidently enter an incorrect
website name, they may be rerouted to the site owned by the cybersquatter.
As for cyberspace, two features may describe it121:
- A permanent interaction between real and virtual (an essential point which is also extremely relevant to the
analysis of a cybercrime relating to counterfeiting).
- A spatiality specific to it since it is a moving landscape, a relational territory constantly being reconfigured which
gives priority to gateways and ‘connectivity’.
To summarise, cybercrime is evolving in an emerging territory where computer threats are carried out
specifically in relation to the real world but where the interaction between virtual and real is still essential for
analysis particularly in the case of a product with high added value such as a medicine.
The moving dimension of cyberspace makes the observation of cybercrime all the more strategic since there are
2.2 billion Internet users in the world.122
121 Solveig Godeluck, La géopolitique d’internet, La Découverte, 2002, p. 7-8.
122 Internet World Stats, December 31, 2011.
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II. Realities of the « counterfeit medicines and criminal
organisations » combination
Before moving onto the specific case of counterfeiting, it should be made clear that criminal organisations are
also involved in the theft or diversion of medicines to the black market. A recent case in Canada123 is significant
of this situation: almost 3 million painkillers were stolen or mysteriously disappeared from Canadian pharmacies
over three years, of which more than 200,000 were doses of opiates in Quebec. The others were above all ‘lost
in transit’ or were ‘inexplicably lost’. Two products are particularly prized by thieves: “oxycodone (…) and
hydromorphone”.124 These two products enable the production of medicines belonging to the opiates class,
which include all those deriving from the poppy, including heroin, opium and morphine and can therefore in part
be of interest to drug addicts. The origin of this trafficking may be varied: thefts from pharmacies, fake
prescriptions, thefts from a wholesaler or from an importer's premises, even from customs.
With regard to counterfeiting, the links between counterfeit medicines and organised crime today seem to be
widely acknowledged particularly by UNICRI125 as well as by Interpol126. As far as trafficking is concerned, it is
confirmed that this involvement in counterfeit medicines is managed to varying degrees by organised crime.
“The criminal organisations have seized the opportunities inherent to global changes. They have developed a
competitive advantage and governments are today incapable of setting up effective strategies to combat a crime
which is both delocalised and globalised”.127 Hence, organised crime has a new face that increasingly resembles
a transnational firm's trade which combines a rigid hierarchy and a territorial presence with flexible structures
that can be adapted depending on the circumstances.
These organisations which meet the criteria laid down by the United Nations Palermo Convention
(2000)128 above all want to profit financially from these serious offences. A financial profit that we will see is
increasingly substantial in medicine counterfeiting. As for the structure of the groups in question, the diversity of
cases can be observed, with prominence given to networked organisations over those with a more highly
structured hierarchy. The size parameter appears to be the most significant indicator of the criminal nature of
such organisations: cybercrime will confirm such a network approach sometimes on a large scale but with more
marked organisational fragmentation and with one individual's capacity to commit crimes potentially on a world-
wide scale.
Generally speaking, these criminal organisations will also tend to sustain their activities over time to generate
even more profits with an ever-growing risk to health.
Several types of criminal organisations may be distinguished in medicine counterfeiting:
- small-sized organisations,
- medium-sized transnational organisations,
- large-scale and particularly transnational organisations which can last for several years and change depending
on constraints/opportunities,
- cybercriminal organisations.
123 Daphné Cameron, “Opiacé des million de pilules disparues”, LaPresse.ca, June 6, 2012.
124 Ibidem.
125 UNICRI, Counterfeiting, A Global Spread, A Global Threat, 2007, p. 103.
126 “The link between organised crime groups and counterfeit products is well established”. Public speech made by R. K. Noble on
July 16, 2003 to the International Relations Commission of the United States House of Representatives (www. interpol.com).
127 Ibidem., p.105.
128 Source of the definition: United Nations Convention of November 15, 2000.
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As we will see, a strategic category is linked to this typology: the case of Chinese crime which combines crime
linked to a grey economy with the triads whose involvement, despite everything is still difficult to demonstrate
accurately in our field of research. We will also discuss the question of mafia groups and links with terrorism.
II.1. Small-sized criminal organisations (two to five persons)
This type of organisation is generally to be found in a western country where an individual imports counterfeit
medicines from China or India either alone (or with two or three accomplices). These organisations are often
people who sense the opportunity to make money by proposing specific products for a section of the population
at attractive prices. Among the many examples that can be cited is the case of Englishman Victor Cheke129, 42
years old, who was questioned by agents of the UK Border Agency at Coventry airport when he arrived with
packets containing tens of thousands of counterfeit pills to treat erectile dysfunction. Cheke had initially
contemplated simply importing these ‘medicines’ then planned on distributing them afterwards on the Internet
and selling the tablets at 25 pence per unit. The Englishman was in financial difficulties and, in this illegal trade,
saw a fast way of earning money. He had a previous history as he illegally imported 29,000 tablets from India in
2009 and was given a one-year prison sentence.
There is also the case of Mimi Trieu130 , the owner of a beauty salon in Philadelphia, who imported and sold
slimming pills from October 2008 to May 2009 and continued to import them up to March 2010, even though she
was well aware that these pills contained sibutramine and other dangerous substances. Almost four million pills
were imported from China by post in this way: the parcels stated that the contents were gifts with a non-
commercial value.
According to the American authorities, Mimi Trieu sold 1,750,000 capsules of illegal medicines at a value of
USD 245,000. Furthermore, she promoted these fake pills stating that they were manufactured in Japan and
contained natural ingredients… All incriminating evidence.131
In the case of China, there is the example of Lu Chong132, a 27-year old Chinese man from Tianmen City, in the
province of Hubei, who was sentenced to 11 years in prison for having sold almost a hundred types of
counterfeit medicines on the Internet (especially to treat diabetes, gout and depression) in 2007 and 2008. When
his apartment was inspected, more than 5,000 bottles of medicines were confiscated as he did not have a
licence to manufacture medicines. His sales were estimated at CNY 1.4 million (USD 220,000) in two years. The
investigators had to travel to 20 Chinese towns over three years to collect proof from 400 victims in order to
prove his guilt.
Even if France is still protected, and no counterfeit medicines have been seized in legal pharmacies,
nevertheless trafficking can be organised particularly with Chinese channels. In an investigation, the SNDJ133
established the involvement of a couple134 who, from 2006 to 2008, ran a family network to procure medicines
for their Paris shop and several illegal pharmacies in Paris. “They also used frontmen to conceal the illegal
import of medicines and the financial transfers between France and China. The couple and their accomplices
were questioned in May 2008. 7,600 boxes, representing more than 400 medicines, were seized in their Paris
129 Matthew Cooper, “Man jailed for faked Viagra imports”, TheIndependent.co.uk, September 9, 2011.
130 FDA, Philadelphia Woman Pleads Guilty to Importing Illegal Diet Pills, December 17, 2010.
131 Source of information, Website: http://www.justice.gov/usao/pae/News/Pr/2010/may/trieu,m_indictment.pdf
132 Xinhua News Agency, Chinese court gives heaviest sentence for selling fake drugs on Internet, October 10, 2009.
133 SNDJ: French National Judicial Customs Service
134 Case cited in: Leem, French Customs, Press release, Lutte contre les trafics de médicaments, le Leem et la Douane renforcent
leur coopération et signe une déclaration de principes avec les laboratoires pharmaceutiques, June 18, 2010.
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shop. Only pharmacists have the right to sell these medicines. Some of them, particularly those treating sexual
dysfunctions, were counterfeits or were forbidden due to their toxicity (risks of hypertension or renal failure)”.135
These types of case confirm that ordinary people increasingly have access to criminal activities thanks to widely
accessible technological tools and international commercial flows.
II.2. Medium-sized transnational criminal organisations (about 10
persons)
Three big cases can be distinguished in this category: the Wuppertal and Arnaud B. cases (both of them still on-
going) and the Peter Gillespie case, which is a major health risk. These examples prove that medium-sized
organisations can stem both from international organised crime (Wuppertal) and actors more directly involved in
the pharmaceutical industry (Gillespie) or an opportunistic wheeler-dealer (Arnaud B.).
II.2.a. Wuppertal case136
This case started in February 2007. At that time, a German received a parcel containing medicines addressed
as ‘return to sender’ that he had never posted. This German informed the authorities and in May 2007 the
regional police set up a surveillance system around the Wuppertal central post office which seemed to be where
counterfeit products were sent from to potential patients. In July 2007, almost 18,000 parcels containing
medicines, i.e. 1,300 kilos of various brands, were intercepted in Wuppertal warehouses after only four months
of surveillance. The parcels seized contained tablets in bulk packed in sachets with a photocopy of the leaflet
sent to American patients who had ordered their medicines on two supposedly American Web sites
(www.usamedz.com and www.pillenpharm.com) but which in fact are domiciled in the Netherlands and Israel.
Furthermore, the online payments routed the patient to a third site called rxsecured.com, shared by the former
sites, hosted in Israel. Finally, the money was paid into a bank in Panama.
In August 2007, the authorities made test purchases on the site www.usamedz.com which confirmed that the
medicines were counterfeit. The investigation proved that the goods were manufactured in China then imported
to a warehouse in Italy. Four suspects were then arrested, the ringleader of which was an Israeli. The value of
the goods seized was estimated at EUR 450,000 in cash or equipment. The value of the post sent was valued at
about USD 4 million. Two other Bulgarian suspects, responsible for the logistics and post, were located in
Salzburg in Austria. Finally, a last suspect was from Georgia and Israel. A number of countries were used for the
logistics: Italy for storage and the transfer of counterfeit medicines and Germany for packaging the orders
intended for American patients.
The goods were then sent by post from France to the United States.
The payment system turned out to be complex and transited through various countries: Germany, Cyprus,
Austria then Switzerland. A Georgian bank was also involved in money transfers. Two central points in the
organisation were in Israel and the British Virgin Islands.
This case is similar to organised crime which is characterised by “the temporary nature of the groups which
spontaneously break up after a few operations or spontaneously disperse after some of their members have
been arrested”.137 With the sole difference that the network was only dismantled temporarily as it was formed
135 Ibidem.
136 The name of the town has been changed.
137 Christian Choquet, “Evaluer la menace terroriste et criminelle”, Cultures & Conflits, February 25, 2005, p. 4.
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again particularly in Spain. On the other hand, the three-fold skill in logistics, e-commerce and finance brings this
organisation very obviously close to a managerial system.
II.2.b. Arnaud B. case
A second recent large-scale case with a central actor: the Arnaud B. case138.
Since 2007, Arnaud B. is suspected of having disposed of more than 4 tonnes of counterfeit medicines
manufactured in China through official pharmacies in the United Kingdom, and also in Germany, Belgium,
Switzerland, the United States the United Arab Emirates.
“He had medicines manufactured that were either under-dosed or had no active ingredient at all, according to a
source close to the case. These products were intended to combat cardiovascular diseases and treat people
who suffered from bipolar disorder”139. The damage to pharmaceutical companies, including Sanofi, came to
several million euros. The suspect, the owner of a villa in Spain, bought EUR 14 billion in cash, was served a
European arrest warrant before being presented to the Spanish judicial authorities. He is expected to be handed
over to an examining magistrate in the specialised inter-regional court in Marseilles, in charge of this case.
“This operation, called Casamayor, the name of the company managed by Arnaud B. in Spain, was made
possible thanks to the collaboration between the investigators of the Guardia Civil and the gendarmes in the
OCLAESP (French central office for combatting dangers to the environment and public health), the same source
went on to say. This international dealer in medicines had become the number one priority”.140 The French
investigators traced back to him after the American health authorities, during clinical trials, found anomalies in
the composition of several medicines treating cardiovascular diseases and schizophrenia delivered by Arnaud B.
“Without this, he would have continued his little businesses for a long time” revealed someone close to the case.
One of his accomplices was questioned in the United States and was given a six-year prison term. One of his
intermediaries in France was also identified before being questioned”.141 Catherine K., director of a company
based in Nice, responsible for reshipping part of the counterfeit goods, was formally accused with dealing in
‘counterfeit medicines’, ‘laundering’ and ‘illegal practising the profession of pharmacist’, before being put under
judicial supervision. These pills were resold in packaging very similar to the originals and with the same name as
the genuine medicines. The investigations are being continued to establish the destination of the money
amassed by this dealer.
II.2.c. Peter Gillespie case
Peter Gillespie is 65-year old Englishman, originally from Windsor, Berkshire who managed a Luxembourg-
based company. Between December 2006 and May 2007, this chartered accountant and pharmaceutical
distributor imported 72,000 packets of counterfeit medicines, i.e. more than two million doses142. Approximately
one-third of these shipments concerned medicines presumed to treat serious conditions such as prostate
cancer, heart problems and schizophrenia. His company imported medicines for an amount of GBP 1.4 million
while they had a retail value of GBP 4.7 million and, hence, the profit earned by all the partners came to GBP 3
million (USD 4.9 million).
138 Stéphane Sellami, “Le trafiquant avait écoulé quatre tonnes de faux médicaments” Le Parisien, October 10, 2012.
http://www.leparisien.fr/espace-premium/actu/le-trafiquant-avait-ecoule-quatre-tonnes-de-faux-medicaments-10-10-2012-
2219347.php
139 Ibidem.
140 Ibidem.
141 Ibidem.
142 Chris Greenwood, Neil Sears, “Fake cancer drugs given to thousands: Conman jailed for importing two million doses”, Daily
Mail on Line, February 1, 2012.
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The counterfeit medicines were shipped from China by sea via Hong Kong, Singapore and Belgium, then
packaged as French medicines to be sold in Great Britain under the ‘parallel distribution’143 system.
According to the MHRA144, this was the first major case where counterfeiters used this distribution technique. In
this enormous fraud, 25,000 packets of counterfeit medicines were sold to pharmacies or hospitals and were
therefore available to patients.145 A contributing factor: according to the MHRA these ‘medicines’ only contained
50 to 80% of active ingredients plus impurities of an unknown nature.
Gillespie put forward146 that he thought he had imported French medicines from Brussels and that he was
therefore legally practising ‘parallel trade’ and taking advantage of the price differences between the countries.
But the medicines in question did not have the social security price tags for reimbursement specific to France
and were in boxes labelled in Chinese. The MHRA gave even less credence to these arguments since
Gillespie's claims were rapidly refuted by the fact that the Englishman had also bought machines to make the
French social security tags and to make it appear that they were from France.
Peter Gillespie was sentenced to eight years in prison and four other men were also accused of being his
accomplices (his brother Ian Gillespie, Richard Kemp, Ian Hardling and James Quinn). According to the
prosecutor Andrew Marshall, this was the biggest case of failure in medical monitoring to occur within the
European Union. The investigation cost the MHRA GBP 750,000 over four years.147
II.3. Large-scale and transnational criminal organisations
According to the philosopher Peter Sloterdijk148, with present-day globalisation there is “crime which is based on
professionalised improved disinhibition, which continues to find new ideas in circumstantial loopholes. This
sustainable crime is basically about sensing the loophole, a loophole in the market and a loophole in the law”. All
growth elements for transnational criminal organisations.
But it should also be made clear that studying transnational crime comes up against three major obstacles149:
- the lack of any sound data,
143 “The parallel imports of patent pharmaceuticals derive from the principle of free circulation of goods between the States party to
the Agreement on the European Economic Area. Their legality was recognised by the Court of Justice of the European
Communities in 1976. In practice, parallel imports may be briefly defined as a situation where an economic operator, independent
of the official distribution channel of the marketing authorisation (MA) holder, acquires in a State party to the Agreement on the
European Economic Area a patented medicine with an MA issued by the health authorities in this State*, with a view to its sale
(…)”. *When the medicine has a European MA obtained through a centralised procedure, the term parallel distribution is used
instead of parallel import.
Source: ANSM (French National agency for the safety of medicines and healthcare products). http://ansm.sante.fr
144 MHRA: Medicines and Healthcare Products Regulatory Agency, British organisation responsible for combating counterfeiting.
145 BBC.co.uk, Man jailed for £4.7m counterfeit medicine fraud, April 8, 2011.
http://www.bbc.co.uk/news/uk-england-beds-bucks-herts-13020208
146 Nayanah Siva, “How investigators unravelled Europe’s biggest-ever-fake-medicine scam”, Wired, December 2011.
147 Chris Greenwood, Neil Sears, “Fake cancer drugs given to thousands: Conman jailed for importing two million doses”, Daily
Mail on Line, February 1, 2012.
148 Peter Sloterdijk, Le palais de cristal : à l’intérieur du capitalisme planétaire, Maren Sell Editeurs, 2006, p. 257.
149 Robert Mandel, Dark Logic, Transnational Criminal Tactics and global security, Stanford Security Studies, Stanford University
Press, 2010, p. 7.
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- the difficulty in defining these transnational activities,
- ambiguity in trying to identify these transnational criminals and their organisations.
A considerable amount of work on transnational crime has barely taken these parameters into account and
resulted in “numerous inaccuracies, simplifications, exaggerations and misconceptions”
150
of the issues.
That said, some criminal cases may reveal more sophistication in the organisation of counterfeit medicines.
Even if the aforementioned cases of Wuppertal or Peter Gillespie are similar to ‘transnational criminal
organisations’ with a structured but flexible organisation ‘on a human scale’, other cases may reveal networks of
an unprecedented scope on a much more complex transnational scale. Two cases in this category are
significant: the RxNorth case, and above all, the so-called ‘Jordanian-Chinese’ network, which became the
‘Avastin’ network, all of which have in common that they lasted for a long period (respectively, five years and
about ten years).
II.3.a. RxNorth case
On May 22, 2006, the British customs at Heathrow airport seized a large quantity of the counterfeit version of
medicines manufactured by major pharmaceutical companies. The goods originated in China, then went by truck
to Hong Kong, by boat to Dubai and finally by plane to the United Kingdom, before being shipped to the
Bahamas.
The medicines in question were intended for a company called Personal Touch Pharmacy based in the
Bahamas. The shipment concerned eight different medicines, seven of which turned out to be counterfeit. These
were not so-called comfort medicines but treatments for blood pressure, cholesterol and osteoporosis.
Following the investigations, the telephone number of the goods' recipient in the Bahamas, entered on the air
transport document, and enabled Andrew Strempler, director of RxNorth, to be identified.
Andrew Strempler
Source: http://updatednews.ca/2012/06/20/canadian-online-pharmacy-pioneer-
denied-bail-in-u-s
This company was founded by Strempler in Canada in 1999 and took advantage of flaws in the health system in
the United States to specialise in online distribution of medicines intended for a niche in the American population
with little or no insurance. In fact, the medicines ordered on the RxNorth site (now closed) did not originate in
Canada but… China and took a complex commercial route.
On June 9, 2006, the Bahamian police investigated the company Personal Touch Pharmacy which turned out to
be an RxNorth distribution centre. After the warehouses were raided, the Bahamas authorities found USD 3.7
million worth of goods concerning 13 pharmaceutical companies and more than 3 million dose units.
151
According to the authorities, the annual revenues of Personal Touch Pharmacy (and therefore RxNorth) can be
estimated at about USD 8 million.
152
This Bahamian company sent parcels of the goods, which originated in China, ordered by customers on its
website. These orders were in fact accepted by two other companies in England which sent the goods directly
150 Ibidem.
151 Bryan A. Liang, Tim Mackey, “Searching for Safety: Addressing Search Engine, Website, and Provider Accountability for Illicit
Online Drug Sales”, American Journal of Law and Medecine, vol. 35, No. 1, 2009, p. 125-184.
152 Ibidem.
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by letter to customers living in Canada and, above all, in the United States. This simple rerouting operation
enabled the English companies involved in this trafficking to earn a commission of USD 1 per packet. For its
part, RxNorth placed orders for counterfeit products in China. The trafficking of counterfeit medicines was
complex and transited through Hong Kong, the United Arab Emirates, Great Britain and Canada. The reason
why these physical flows of goods were fragmented was to conceal the exact origin of the medicines which were
then sold on to an illicit online pharmacy which was officially ‘Canadian’, targeting the American market. (see
figure 5).
Figure 5: Counterfeit medicine trafficking - RxNorth
Source: Walt Bogdanich, “Free Trade Zones Ease Passage of Counterfeit Drugs to U.S.”
The New York Times, December 17, 2007
The investigators' task was a complex one: in this way, the licence number corresponding to the transport of the
suspect medicines from mainland China to Hong Kong could not be used in an investigation. Another example,
after the raid in the Bahamas, the counterfeiters moved the stocks of counterfeit medicines held in the Sharjah
free trade zone within the United Arab Emirates to another free trade zone in Dubai called Jebel Ali. The goods
were stored in a warehouse belonging to a trading house called Euro Gulf specialised in linen and cleaning.
153
When alerted, the Dubai customs found the suspicious medicines and charged seven people.
The searches made on the Personal Touch Pharmacy computers proved that their server also hosted a
Canadian online pharmacy which belonged to RxNorth.
Faced with the charges against him, Andrew Strempler temporarily took refuge in Panama, but six years later,
his situation changed:
- In August and September 2006, the FDA intercepted 5,000 packets from the online pharmacy and warned the
Americans about buying 10 specific medicines (above all, anti-cholesterol treatments) as tests revealed that they
were counterfeit.
- In 2007, the company was sold to a competitor, the CanadaDrugs.com Group of Companies. - In 2010, Andrew
Strempler lost his pharmacist's licence in Manitoba.
- In June 2012, Andrew Strempler was arrested in Miami, Florida and runs the risk of a 60-year prison sentence.
153 Walt Bogdanich “Free Trade Zones Ease Passage of Counterfeit Drugs to US”, The New York Times, December 17, 2007.
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Even though RxNorth used the Bahamas particularly as a distribution platform, the exact origin of the Chinese
manufacturer or manufacturers involved in this trafficking is still unknown today.
But an even more complex case stemming from the Middle East deserves to be explained.
II.3.b. The ‘Jordanian-Chinese’ network
Two transnational channels embody the complexity of the counterfeiters' networks. The first channel is based in
the Middle East with relations with China in particular, and the second channel – which partially stems from the
first one – concerns counterfeit medicines exported from the Middle East to markets in western Europe and
North America. Turkey played the role of intermediary between the two channels in question.
The first channel was originally developed at the time of the American invasion of Iraq in 2003. Two families, one
Syrian and the other Jordanian, shared smuggling activities on both sides of the border, in Daraa and Ramsa.
The chaos of the civil war in Iraq encouraged the two families to specialise in medicine counterfeiting activities
(particularly treatments for leukaemia, breast cancer, etc.) to meet the Iraqi demand and in particular to supply to
the country's main distribution structure for medicines: the company Kimadia154. In fact, this company has proven
to be a distribution structure subject to regular corruption.
A Jordanian, Wajee Abu Odeh, claims to be a central operator in the counterfeiting networks in the Middle
East and went as far as setting up his own company, Sky Park Co. Ltd, in Shenzen in China in July 2003, to be
closer to the manufacturing sources of counterfeit medicines (officially his Shenzen company is a subsidiary of
his Hong Kong holding company, which operates in textiles, electronics and economic consulting). Married to
two Jordanians, Abu Odeh had a third wife, Wu Xia, also born in Shenzen, China, who helped him to set up his
commercial structure locally. The fake Sky Park Co. Ltd medicines were sent by boat and above all by air from
China to various hubs in the organisation: Dubai, Amman, Damascus then Cairo.155
Amman was the most important hub, particularly for counterfeit medicines for aggressive treatments but Dubai
was more involved in counterfeit comfort medicines. The majority of the medicines were sent by Emirates
airlines which, once informed of this illicit trafficking, assisted the investigators in their inquiries. Fake official
documents concerning the counterfeit medicines were given to customs, who were not particularly fussy about
the exact origin of the products so that they could be imported. The medicines were then distributed according to
a system similar to that for traditional drugs156 by using hiding places in vehicles (tanks or false compartments)
where the counterfeit medicines were concealed. These medicines were then redistributed in smaller quantities
by ‘human mules’ towards the various Middle East borders. If the ‘mules’ were questioned by the customs
authorities, they declared that these fake medicines were for their own use and, in the case where they were
intercepted by local customs, one may wonder about their destination as no counterfeit medicine has ever been
returned to its original laboratory.
In certain cases, the distribution techniques were particularly creative since counterfeit medicines were found in
table tennis balls, hidden in washing machines or wrapped in T-shirts sent by sea. Between 2003 and 2006, the
trafficking prospered in seven Arab countries: Iraq, Syria, Jordan, Lebanon, Egypt, the United Arab Emirates and
the Palestinian territories.
In 2007-2009, the network developed substantially and distributed these counterfeit medicines in a large number
of countries in the region.
154 Kimadia, set up in 1964, is the only Iraqi company specialised in importing, storing and distributing medicines and medical
devices and equipment for public and private hospitals or healthcare centres. Source: http://www.kimadia-iraq.com
155 Roger Bate, Phake: The Deadly World of Falsified and Substandard Medicines, The AEI Press, 2012, p. 209.
156 Roger Bate, Phake: The Deadly World of Falsified and Substandard Medicines, The AEI Press, 2012, p. 209.
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- Jordan
The network is changing: initially it was dismantled in Jordan in 2007 with a first raid in Amman when the
Jordanian security forces discovered four thousand packets of counterfeit medicines to treat blood pressure
supplied by the Chinese company Sky Park.157 At least 15 persons were arrested at that time but there were
difficulties in proving their guilt. The individuals in question were released after two months and were sentenced
to pay fines of between a few thousand dollars and USD 100,000, which was the case for Abu Afifeh, one of the
network's key participants.
The network then extended into the Palestinian territories and afterwards into Egypt.
- Palestinian territories
In the Palestinian territories, the case took on particularly worrying aspects. In March 2008, a large number of
counterfeit medicines (treating leukaemia for instance) were discovered at the main Palestinian medicines
distributor, Al Thulathia. The tests carried out by Al-Najah University in Nablus created confusion as they
confirmed the quality and the authenticity of the products identified. The personnel of the university in question
were seriously suspected of corruption (also linked financially to Al Thulathia) as the tests by the other official or
private laboratories proved the medicines were counterfeit.158 Even more serious: the local police saw possible
collusion in this illicit trafficking by the Al Arabi Center for Cancer and Blood Diseases, a subsidiary of Al
Thulathia.
The manager of the main Palestinian medicines distributor, Abu Hijleh, a former pharmacist who, up to recently,
had a permanent Canadian residence permit, was very skilful in selling counterfeit medicines. He particularly
talked about access to low-cost treatment in a "humanitarian" spirit (sic) compared with the Israelo-western
oppressors.
This demagogic rhetoric encouraged local pharmacists to unknowingly buy counterfeit medicines at preferential
prices compared with existing competitors. The cynicism of Abu Hijleh seems to be limitless since he developed
a Machiavellian technique for disposing of counterfeit medicines when he was advisor at the Al Arabi Center for
Cancer and Blood Diseases. In fact, Hijleh ensured that the patients were initially treated with legal medicines,
waiting for the temporary improvement brought about by the medicine, then when the risk of relapse appeared,
he then proposed counterfeit medicines whose harmfulness was somewhat ‘diluted’ by the foreseeable
weakness of the patient in question. Questioned by the local security authorities, he acknowledged his links with
the Jordanian network for counterfeit medicines.
According to the British researcher Roger Bate, the case is currently blocked by political protection on the
Palestinian side and it is unlikely that the Palestinian hospitals will make their files available to the courts,
thereby proving how real this local counterfeiters' network is.
We should lastly explain that the Chinese authorities, once warned of the links between their country and the
trafficking in Jordan (2007) and in the Palestinian territories (2008), carried out raids on 11 production sites in
four provinces: Guangdong, Zhejiang, Jiangsu and Henan. Links between Al Thulathia and the company Sky
Park International were also revealed and the Palestinian authorities informed the Chinese authorities who
afterwards prevented members of Al Thulathia from entering their territory. Arrests were also made in six
criminal organisations including Sky Park International belonging to Wajee Abu Odeh, currently on the run.
- Egypt
A member of the Jordanian-Chinese network, Sherif Abdul Kareem Abu Kasheh then directed his activities
towards Egypt where he established a new distribution centre more independent from the rest of the network
and targeting specifically the Egyptian market, while Iraq was the priority target for counterfeiters based in
Jordan and Syria.
157 Roger Bate, Phake: The Deadly World of Falsified and Substandard Medicines, The AEI Press, 2012, p. 212.
158 Roger Bate, Phake: The Deadly World of Falsified and Substandard Medicines, The AEI Press, 2012, p. 215.
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Figure 6: Summary of the distribution in the Middle East in 2007.
159
The Abu Kasheh network was infiltrated by the security forces through Mohammed Markieh who was the
originator of the Jordanian network but who, once arrested, turned informer. Thanks to Mohamed Markieh's
infiltration, Abu Kasheh, after taking six months to build up confidence, accepted to meet a potential buyer under
the code name "Monaco" supposedly a buyer from the Colombian FARC (Fuerzas Armadas Revolucionarias de
Colombia). Thanks to this stratagem, on April 14, 2009 the Egyptian authorities arrested Abu Kasheh in his
apartment in Cairo. At the time of his arrest, the authorities seized over 5,000 boxes of counterfeit medicines for
Alzheimer's disease and more than 1,700 boxes of counterfeit medicines for breast cancer. Sentenced to two
years in prison, he was released in the spring of 2012 and is currently thought to be in Jordan where he has
resumed his activities. In Cairo, investigations proved that the Abu Kasheh network was responsible for several
deaths
160
. The volume of counterfeited legal medicines was assessed at half the legal volume of equivalent
medicines for the whole of Egypt.
161
- Syria
After this initial ‘Jordanian-Chinese’, Palestinian and Egyptian stage, the criminal network then turned towards
Syria to run its illegal activities more efficiently. In Damascus, activities in counterfeit medicines for the Middle
East were developed with Abu Afifeh as leader, originally based in Jordan. The manufacturing equipment was
imported from China and Austria. But the Syrian authorities identified distribution hubs in Aleppo, Idlib, Hims and
Hamas and about a dozen people were arrested. In May 2009, numerous raids were carried out in Syria to
dismantle these networks and resulted in 73 arrests. Four tonnes of stolen medicines, either not authorised for
sale or counterfeit, were seized at this time, of which 60 types of counterfeit medicines from western Europe and
also half a dozen counterfeit versions of medicines from local companies: Nile Pharmaceuticals and Chemical
Industries Company (Egypt), Aleppo Pharmaceutical Industries (Syria) and Hikma Pharmaceuticals (Jordan).
The majority of packages had fake Iraqi Ministry of Health stamps, indicating that these products were intended
for sale in Iraq.
This operation proved to be a success for the Syrian regime and, according to Roger Bate, the biggest case of
dismantling a counterfeit medicines network to date. But the network is still partially in existence.
162
159 Roger Bate, Phake: The Deadly World of Falsified and Substandard Medicines, The AEI Press, 2012, p. 219.
160 Roger Bate, Phake: The Deadly World of Falsified and Substandard Medicines, The AEI Press, 2012, p. 220.
161 Roger Bate, Phake: The Deadly World of Falsified and Substandard Medicines, The AEI Press, 2012, p. 220.
162 Roger Bate, Phake: The Deadly World of Falsified and Substandard Medicines, The AEI Press, 2012, p. 222.
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Figure 7: Distribution network in the Middle East, 2009.
163
It should be noted that for many years Syria has been a hub for counterfeit medicine trafficking and Syrian
companies manufacture, import and export illicit medicines to Europe and the Middle East. According to the
European Commission, 37% of the counterfeit medicines seized at the European Union borders in 2008 came
from Syria.
164
More generally, since 2008, the Middle East has become a strategic area for counterfeit medicine
trafficking with, according to certain observers, the involvement of terrorist organisations such as the Hezbollah.
The Middle East's strategic position between Asia and Africa makes it a particularly sensitive area for such
trafficking.
165
163 Roger Bate, Phake: The Deadly World of Falsified and Substandard Medicines, The AEI Press, 2012, p. 221.
164 European Commission Taxation and Customs Union, Report on EU Customs Enforcement of Intellectual Property Rights:
Results at the European Border, 2008, available on
http://ec.europa.eu/taxation_customs/resources/documents/customs/customs_controls/counterfeit_piracy/statistics/2009_statistics
_for_2008_full_report_en.pdf (access on May 2, 2012).
165 Roger Bate, Phake: The Deadly World of Falsified and Substandard Medicines, The AEI Press, 2012, p. 205.
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II.3.c. The ‘Avastin’ network
The second channel is somewhat an extension of ‘Jordanian-Chinese-Syrian’ network since the counterfeiters'
networks then tried to export certain counterfeit medicines, particularly Avastin, to western countries probably
through Turkey.
The ‘Avastin’166 case concerns a cancer drug which appeared at the Syrian border in 2009, that is three years
before copies of the same medicine appeared on the American market. It is uncertain whether the Middle
Eastern channel previously described was used as a ‘corridor’ or if the medicines in question were manufactured
locally or both. In fact, it is difficult to trace with any certainty the ‘overall path’ taken by the counterfeit medicines
as the counterfeit Avastin then went back and forth between Turkey and Egypt, before the products were sold to
a Swiss wholesaler (Hadicon AG) then a Danish one (CareMed ApS).
The problem showed up more clearly when a British wholesaler, Richard’s Pharma Ltd, bought 120 packs of
counterfeit Avastin from a Turkish wholesaler and exported 38 of them to the United States. The remaining 82
packs were sold by Richard’s Pharma Ltd to the British wholesaler, River East Supplies Ltd. This British
company then sent the counterfeit medicines to the United States to a distributor in Tennessee.167 The
medicines were then bought by American doctors through a company belonging to Thomas Haughton called
Montana Healthcare Solutions. Finally, it should be explained that Haughton's brother-in-law, Kris Thorkelson, a
pharmacist based in Winnipeg in Canada, distributed medicines by Internet to American consumers on the
website Canadrugs.com and was investigated even though it did not sell Avastin. The investigators however
accepted Thomas Haughton's good faith when he stated that he did not know the nature of the counterfeit
medicines he had obtained. The two British wholesalers, Richard’s Pharma Ltd and River East Supplies Ltd,
also proclaimed their good faith and insisted that they did not know that the medicines were counterfeit.
166 Benoit Faucon, Jeanne Whalen, “Tracing Fake Avastin to the Mideast”, The Wall Street Journal, February 24, 2012.
167 Benoit Faucon, Christopher Weaver and Jeanne Whalen, “Drug Distributor is Tied to Imports of Fake Avastin”, The Wall Street
Journal, March 7, 2012.
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Figure 8: Diagram summarising the distribution network between
the United Kingdom and North America.
168
168 Benoit Faucon, Christopher Weaver and Jeanne Whalen, “Drug Distributor is Tied to Imports of Fake Avastin”, The Wall Street
Journal, March 7, 2012.
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Figure 9: Diagram
169
summing up the overall transit route of the fake medicines
in question between the Middle East, Turkey, Switzerland, the UK and the US.
This diagram starts in Switzerland: “one of the intermediaries involved in the trade, Hadicon AG in Zug, lodged
an official complaint to the Public Prosecutor of the canton. Hadicon is alleged to have ordered the drug in
Egypt, from a company called ‘SAWA for importing and exporting’. The merchandise is then said to have been
stored in a warehouse in the free port of Zurich before being sent on to Denmark, from where the firm CareMed
sent it to the UK, the last stop before the US”.
170
Equipment (and also bags) made in China found during the Syrian raids in 2009 suggest that there is also a
Chinese network: in 2010 fake Avastin was given to 116 patients in Shanghai, some of whom suffered
complications after injections in the eyes (as well as being a cancer treatment, Avastin can also be prescribed
for certain eye disorders, which has been known to cause blindness).
171
As we see from the Jordanian-Chinese network case or with ‘fake Avastin’, examining such transnational
networks with any methodology is tricky to say the least, as they are by definition fragmented and polymorphous
and are located in a sensitive geopolitical region. The fact that the various ‘criminal’ groups work in isolation
makes it even more complicated to collect information. Finally the investigators need to assess whether or not
the wholesalers or distributors involved in these affairs are acting in good faith. It is still not certain exactly where
the counterfeit medicines could have been sold in Europe and the US by local distributors.
It appears however that Egypt and especially Turkey were used as relays for counterfeit medicine trafficking
towards Western Europe or even the United States via the UK. The Middle East may also be a production area.
So in the case of the ‘Jordanian-Chinese network’, when the Chinese production line was broken off in 2008,
large-scale production shops in Damascus took over.
169 Benoit Faucon, Jeanne Whalen, “Fake Avastin Took Murky Path to U.S.”, The Wall Street Journal, April 5, 2012.
170 Peter Siegenthaler, “De faux médicaments au pays du ‘swiss made’”, Swissinfo.ch, 3 March 2012.
http://www.swissinfo.ch/fre/societe/De_faux_medicaments_au_pays_du_swiss_made.html?cid=32221256
171 Benoit Faucon, Jeanne Whalen, “Tracing Fake Avastin to the Mideast”, The Wall Street Journal, February 24, 2012.
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The network probably comprises about 150 people and is said to be still under the surveillance of the targeted
pharmaceutical companies172 particularly for high added value medicines: cancer drugs, cardiovascular disease
treatments, etc.
At this stage in our study it is important to note that from Mimi Trieu to the ‘Avastin’ network, and including the
Peter Gillespie case, the organised crime cases that we have described highlight the central role of China in this
trafficking and a great variety of counterfeit medicines.
II.4. Crime in China
The Chinese authorities are concerned about the role of national organized crime in drug counterfeiting and are
increasingly striving to counter organized crime. We must remember that China has the most severe sanctions
in this area (the death penalty).
In this country, it is important to distinguish between crime based on exports of counterfeit drugs and crime
focusing on mainland China.
II.4.a. Crime and exports from China
- The Kevin Xu case
The Kevin Xu affair is typical of the Chinese business leaders involved in counterfeiting medicines intended for
clients in the West.
In July 2007 Kevin Xu, a Beijing businessman, offered potential buyers counterfeits of medicines in high
demand, such as treatments for cancer, cardiac disorders or Alzheimer’s disease. Xu, owner of the Orient
Pacific International chemicals company, explained to his supposed clients that these medicines could be made
in his factory in China and that he would have the consignments sent via different ports to conceal the origin of
the products. But he had been followed since March 2007 173 and the clients in question whom he met at
Suvarnabhumi airport in Bangkok and who bought USD 167,000 worth of merchandise to gain his trust, were
actually special agents of ICE (US Immigration and Customs Enforcement) in the Department of Homeland
Security.
At another ‘business meeting’ in Houston, Xu was taken for questioning by agents from ICE and the FDA.174 He
admitted that his production capacity could reach 200,000 boxes of medicines or over a million pills in one single
consignment175. At first his counterfeiting activity was more for ‘lifestyle’ type medicines, particularly for sexual
problems, but Xu gradually expanded his range of counterfeit medicines to those with higher added value
concerning treatment for heart disorders, prostate cancer or a treatment for swine flu. After the European
market, Xu later targeted the US market and admitted that he was able to distribute 29 kinds of counterfeit
medicines in the US.176 But paradoxically Xu was also involved in legal business activities as he supplied generic
medicines to Chinese hospitals. When he was arrested the Chinese authorities were of little help in identifying
the business leader’s counterfeit medicines.
172 Ibid.
173 Robert Sherman, Edward Tarver, IPR Center Report, vol. 2, No. 1, March 2009.
174 ICE: US Immigration and Customs Enforcement. FDA: US Food and Drug Administration.
175 Dan Rather, “The Mysterious case of Kevin Xu”, HDNet: Dan Rather Reports, September 14, 2010.
176 Nayanah Siva, “How investigators unravelled Europe’s biggest-ever-fake-medicine scam”, Wired, December 2011.
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At his trial in Houston in August 2008, observers realised the full extent of the affair, especially with counterfeit
medicines of well-known brands intended for American consumers. Xu was sentenced to 78 months in a US
Federal prison and a fine of USD 1.4 million. His arrest may have prevented the dealer from spreading
counterfeit medicines within the US supply chain, but some of the counterfeit medicines destined for the UK
market were distributed, as the unprecedented ‘Class 1’ drug alert by the MHRA was unable to prevent the
partial distribution of this version in UK pharmacies and hospitals. Laboratory analyses of a medicine to treat
schizophrenia showed that the counterfeit version was under-dosed as it only contained 55% to 80% of active
ingredients. There are suspected links between Kevin Xu and Peter Gillespie but so far nothing has proved this
hunch.
This affair shows the growing importance of the Chinese organized crime in the production of counterfeit
medicines and of some initiatives by unscrupulous businessmen. Older cases in Haiti and Panama caused the
deaths of dozens of children, and those mainly responsible proved to be Chinese manufacturers who were not
licensed to produce medicines.177 In June 1996, syrups made in China were alleged to have caused the deaths
of 88 Haitian children, and in April 2007, 78 deaths were reported in Panama (219 victims in June 2011)178 after
taking an illicit medicine containing counterfeit glycerine179. Unravelling the counterfeit networks was even trickier
as in the cases of Haiti and Panama the illegal medicines passed through six and five intermediaries
respectively. For Haiti, the American FDA was unable to determine the exact origin of the counterfeits in spite of
the numerous investigations in China. A manufacturer named Tianhong Fine Chemicals Factory was tracked
down in Dalian in northeast China but in late 1997 the factory closed down without the investigators being
informed of the exact address.180
In the Panama case, the perpetrators were found in the Yangtze delta thanks to the cooperation of the Chinese
authorities, but there again, no manufacturers were formally charged. The manufacturer Taixing Glycerine
Factory was apparently closed following investigations by the Chinese authorities at the request of the US FDA.
The Chinese brokerage company involved, CNSC Fortune Way, belonging to the Chinese government, was
never penalised and continues to do business today.181
So although there is a whole history of export of Chinese counterfeit medicines, the Kevin Xu affair shows that
the distribution of this sort of product is becoming more opportunistic and cleverly marketed.
- The Sengyang Zhou case
A similar, though less widespread, affair has recently been brought to light182 concerning Sengyang Zhou, 31,
from the Kunming Yunnan region. This young Chinese national specialised in the export of fake diet medicines
sold on websites in 2008-2009. The products Zhou put on the market contained undisclosed active
pharmaceutical ingredients like sibutramine, which can cause extreme hypertension or tachycardia. Zhou also
produced counterfeits of an anti-obesity drug in China and marketed it successfully in the US. These counterfeits
circulated on the Internet and particularly on online auction websites like eBay. A site specialising in the
distribution of counterfeit medicines known as www.2daydietshopping.com was even based in Texas for better
promotion locally. This particular site was managed by a Chinese person with US citizenship called Qingming
Hu, who was followed by the American authorities.
Zhou was arrested in March 2010 in Honolulu, Hawaii during a ‘business meeting’ set up by FDA agents in
which he confirmed that he could make large quantities of a counterfeit version of the anti-obesity medicine. In
June 2011 he was sentenced to 87 months in a US federal prison for trafficking and attempted trafficking of
counterfeit medicines and ordered to repay more than USD 500,000 to the victims of his crimes.
177 Walt Bogdanich, “F.D.A. Tracked Poisoned Drugs, but Trail Went Cold in China”, The New York Times, June 17, 2007.
178 Source IRACM.
179 Walt Bogdanich, “A Toxic Pipeline: Tracking Counterfeit Drugs”, The New York Times, May 6, 2007.
180 Source IRACM.
181 Roger Bate, Phake: The Deadly World of Falsified and Substandard Medicines, The AEI Press, 2012, p. 20.
182 States News Services, Chinese national sentenced to federal prison for trafficking counterfeit pharmaceutical weight loss drug,
June 3, 2011.
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This affair proves that criminal strategy in counterfeiting medicines also tends to rely on a diaspora settled in a
targeted developed country. It shows that in spite of the complexity of the criminal system in place, various US
authorities (FDA Office of Criminal Investigations, ICE Homeland Security Investigations, U.S. Postal Inspection
Service) managed to work together to arrest the criminal.
But cases of Chinese counterfeiting do not target foreign markets exclusively, and mainland China is also a
victim of the problem.
II.4.b. The case of mainland China
In China there is one affair183 that reveals this ambitious criminal tendency. It began when a man named Li was
questioned in July 2011 in Jinhua City, Zhejiang, during a regular taxi rank inspection. Li had in his possession
700 empty medicine bottles with their packaging and the anti-forgery tags. The police then discovered that he
had been obtaining used bottles from a number of hospitals in Zhejiang for years thanks to the help of at least
one person in each hospital cleaning service. This particular criminal network bought used bottles and packaging
from hospital cleaning services all over China. Li’s family supervised the network and supplied the bottles to
medicine producers based in Beijing and Shanghai. The enquiry later revealed that Li was part of a larger
network which included 300 people from all over China targeting mainly medicines for serious conditions such as
cancer treatments (lymph node cancer, breast cancer and lung cancer). The counterfeit medicines were sold for
CNY 10,000 per pack (USD 1,600) and even more on the Internet or in unregistered private hospitals or
pharmacies.
The criminal network actually comprised four main groups184: hospital cleaners who sold the packaging, the
hospital agents who bought them, the wholesalers and finally the counterfeit medicine manufacturers. According
to Jiang Yiqun, of the public security economic crimes investigation team in Jinhua, a cleaning agent could
pocket CNY 1,500 (USD 240) for a full package of medicine to treat breast cancer (with the bottle, the
instructions and the authentication labels) and CNY 1,200 (USD 190) for a medicine used to treat lymph node
cancer. A drug inspection officer in the same city said that most of the medicines contained starch and wheat
powder and could cause serious diseases and even death.
In November 2011, 16,000 police officers were called in, leading to the arrest of 1,770 suspects in this
trafficking. Counterfeit medicines worth CNY 2 billion (USD 315 million) were seized by the Chinese authorities.
The search also unearthed 1,400 counterfeit medicine production or marketing facilities.
Like the previous examples in English-speaking countries, we can also observe here – on a grander scale – the
involvement of corrupt players directly linked to the health sector.
For most experts, the Chinese organized crime is unquestionably the leader in counterfeit medicines, but other
countries too can be involved in this kind of trafficking, particularly India. The researcher Roger Bate reports the
case of a famous Indian counterfeiter named Rajesh Sharma, also known by the name Rajesh Dua, who allows
the purchasers themselves to decide on the type and content of the product to be used in the medicine. This
semi-industrial counterfeiter employs some forty people for a production worth tens of millions of dollars.185 What
is special about China is the huge number of counterfeiters who do both legal and illegal business and who can
produce large quantities of counterfeit medicines partly destined for export, so the Chinese authorities are
undoubtedly a little less vigilant. As a result, a number of pharmaceutical companies are unsure of the exact
origin of their production because, according to analyses by Philipe Andre, a teacher at the School of
Pharmaceutical Science and Technology in Tianjin University “39% of European and US pharmaceutical
companies are ill informed of the origin of the Chinese producers with whom they work”.186
Certain pharmaceutical companies therefore share some responsibility for this situation.
Finally there is the difficulty in describing these Chinese counterfeiters, as situations vary enormously and
information sources are limited: manufacturers who, like Kevin Xu, have both legal and illegal activities; Chinese
183 Alice Yan, “Massive fake-drug network busted”, SCMCOM, November 21, 2011.
184 Ibid.
185 Roger Bate, Phake: The Deadly World of Falsified and Substandard Medicines, The AEI Press, 2012, p. 152.
186 Roger Bate, Phake: The Deadly World of Falsified and Substandard Medicines, The AEI Press, 2012, p. 180.
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counterfeiter networks who, as in the case of Sengyang Zhou, have foreign intermediaries; and counterfeiting
cases concerning mainland China which can involve hospital networks. And there is one last case that is even
more difficult to understand: what role do ‘conventional’ criminal organisations, like triads, play in these
dealings?
II.4.c. Evolution of criminal organisations in China
In China relations between the state and crime are largely ambiguous. The Chinese criminal economy is
summed up in a paradox: “On the one hand, corruption should be preserved as an element of stabilisation for
the Party-State apparatus through rent seeking, but on the other hand, it should be opposed as a destabilising
factor of its political legitimacy, which threatens the survival of the regime. In other words, in spite of the current
political rhetoric, the fight against corruption can only be limited and used only as an example, or they risk
collective suicide.”187
The Chinese population may be largely in favour of these criminal organisations being subjected to the authority
of the Chinese government, seeing it as bringing more stability in the face of the unpredictable effects that these
illegal organisations can generate within society.188 But the most frequent mistake in describing these Chinese
organisations is to think that they are still somehow hierarchical, whereas “under pressure from the Chinese
government and market dynamics (including the black market), criminal networks are above all flexible”.189 On
the other hand, although such organisations continue to recruit on the margins of Chinese society, they also
seek possible members among politicians or well-known individuals with a strong social status.190 In general,
relationships between Chinese politicians and criminals are particularly widespread, especially at intermediate or
lower levels and based on corruption which protects the criminals from illegal activities, 191 particularly
counterfeiting.
It was in the 1980s that contraband and counterfeiting businesses (cigarettes, weapons, currencies, medicines,
etc.) really took off in China.192 According to counterfeiting expert Li Guorong, in general “counterfeiting has
become so significant that taking radical action would have a disastrous effect on the economy and could
destabilise the government, some of whose factories and warehouses connected to counterfeiting belong to the
local army or to political leaders”.193 In the more specific case of counterfeit medicines, the Chinese government
has long been somewhat tolerant towards the counterfeiters involved.194
187 Guilhem Fabre, “Etat, corruption et criminalisation en Chine”, Revue internationale des sciences sociales, No. 169, March
2001.
Sometimes large-scale corruption is officially recognised. One of the most significant examples is the death sentence in May 2007
on Zheng Xiaoyu, former manager of the State Food and Drug Agency, for accepting bribes from eight pharmaceutical and
medical companies and having illegally approved their products which led to dozens of deaths and undermined confidence in the
Chinese health system.
188 Ibid.
189 Ibid.
190 An Chen, “Secret societies and Organized Crime in Contemporary China”, Modern Asian Studies, vol. 39, No. 1, 2005, p. 77-
107.
191 Peng Wang, “The Chinese mafia: private protection in a socialist market economy”, Global Crime, vol. 12, No. 4, 2011, p. 290-
311.
192 He Bingsong, Le crime organisé en Chine. Des triades aux mafias contemporaines, CNRS éditions, 2012, p. 61.
193 Quoted by Peter Navarro in “Chargers Join China’s Deadly Imitations”, Asia Times Online, August 1, 2008.
Roger Bate confirms the fact that the Chinese army does indeed host medicine counterfeiting activities.
Roger Bate, “The deadly world of fake drugs”, Foreign Policy, No. 168, September-October 2008.
194 Roger Bate, Karen Porter, “The Problems and Potential of China’s Pharmaceutical Industry”, AEI online, 23 April 2009.
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In China, criminal organisations have also adapted to anti-crime campaigns and have redirected part of their
assets to legal activities. In the city of Chengdu (capital of Sichuan province), a criminal organisation specialising
in illicit activities in the medicine sector (theft in particular) became partly involved in legal activities by buying
shares in legal pharmaceutical structures, particularly by investing in a medicine production unit and donating to
medical institutions195. Members of this organisation included doctors, hospital managers and primary school
teachers. These criminal organisations are in fact similar to informal relationship networks. Such networks can
then resume a more hierarchical structure by continuing to recruit in marginal groups and regularly approaching
politicians and people with a high social status. The real leaders give their instructions ‘behind the scenes’ and
then break with the original strategy aiming to favour legal business activities. 196 In this case we find ourselves
facing particularly resilient networks that are able to play on ‘licit’ and ‘illicit’ activities in a pragmatic and
opportunistic manner to avoid arousing too much suspicion in their environment.
This example shows the importance of corruption and illicit economic dealings that need to be identified locally.
In the past few years Chinese regions have gained more independence and developed an increasingly
autonomous local economy197. The counterfeit medicine industry can benefit a whole series of economic sectors
thanks to the organisation of the trafficking in question (restaurants, hotels, transport companies).198 This
regional dimension of the counterfeit medicine trade in China is even more strategic in that local court rulings
find it difficult to question the ‘favourable’ economic context around counterfeiting.199 Furthermore, investigations
are made more difficult in the Chinese system of decentralised factories as in general, finding the counterfeiting
factories is tantamount to finding your way through a complicated labyrinth with a multitude of intermediaries and
suppliers.200
There is also the question of these organisations’ relations with Hong Kong. Contrary to what some experts
believed, Hong Kong’s return to China did not lead to an exodus of triads, and a new type of alliance was set up
between mainland China and the former British colony.201 Production units of the multi-product counterfeiters in
Guangdong and Fujian provinces are often financed by criminal organisations based in Hong Kong and
Taiwan,202 which are themselves often involved in drug trafficking, prostitution and pornography.203 In Hong Kong
they have the benefit of different legislation from mainland China, which can complicate matters in logistics and
in legal terms when trying to track down the originators in the counterfeiting business. The situation in Taiwan is
even more favourable to criminal organisations based on the island but with illegal business activities,
particularly counterfeiting, in mainland China. There is virtually no cooperation between China and Taiwan on
these issues.204
195 An Chen, “Secret societies and Organized Crime in Contemporary China”, Modern Asian Studies, vol. 39, No. 1, 2005, p. 86.
196 An Chen, “Secret societies and Organized Crime in Contemporary China”, Modern Asian Studies, vol. 39, No. 1, 2005, p. 77-
107.
197 Andrew Evans, Note, “Taming the Counterfeit Dragon: The WTO, TRIPS and Chinese Amendments to Intellectual Property
Laws”, The Georgia Journal of International and Comparative Law, vol. 31, No. 3, 2003.
198 Daniel C. K. Chow, declaration by, “Counterfeiting in China: Roundtable on Intellectual Property Protection as Economic Policy:
Will China Ever Enforce Its IP Laws?”, Congressional Executive Commission on China, May 16, 2005. Available on
http://www.cecc.gov/pages/roundtables/051605/index.php
199 Jessica C. Wong, “The Challenges Multinational Corporations Face in Protecting Their Well-Known Trademarks”, Brooklyn
Journal of International Law, vol. 31, No. 3, 2006.
200 UNODC, The Globalization of Crime. A Transnational Organized Crime Threat Assessment, 2010, p. 178.
201 Mark Galeotti, “Introduction: Global Crime Today The Changing Face of Organized Crime”, Global Crime, vol. 6, No. 1,
February 2004, p. 1-7.
202 Daniel C. K. Chow, “Organized crime, local protectionism, and the trade in counterfeit goods in China”, China Economic
Review, vol. 14, No. 4, 2003, p. 473-484.
203 Ibid.
204 Ibid.
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These networks also involve the Chinese diasporas (in the US or Canada) comprising import-export companies
but also community leaders, restaurant owners, and various types of employees who can help suppliers meet
potential buyers.
These parasitic, opportunistic criminals seek to develop alternative strategies and invent non-conformist, flexible
and undetectable organisations. Conversely, they can also implement a camouflage strategy or mimic
hegemonic organisations thereby concealing their activities. 205
To sum up the profiles of these Chinese criminal organisations involved in counterfeit medicines we propose the
following classification:
- Large-scale organisations working nationally, which may be an aggregate of different types of network. We
observed that in a landmark case brought to light in Jihua City “the criminal organisation” in question included
different types of actor: members connected to the hospital environment, wholesalers and manufacturers of fake
medicines.
- Chinese businessmen involved in legal activities who expand into illicit counterfeiting of medicines intended for
export, particularly to high added value markets like North America or Western Europe. The example of Kevin
Xu (p. 59) is symptomatic of local businessmen who become involved in large-scale illegal trafficking intended
for international markets.
- Smaller structures which develop an Internet strategy with an intermediary abroad (Sengyang Zhou affair, p.
67).
- Small foreign structures which arrive in Chinese industrial areas and establish local companies intended to
form transnational networks. The previous example of Sky Park and their relays in the Middle East is a telling
example of this kind of strategy which seems to be catching on.
- And finally cross-border crime is also developing in China with foreign mafia groups who can be involved in
counterfeiting medicines206. Chinese people living abroad seem to have an important role in these dealings with
foreign countries.207 Access to these information sources remains tricky and tracking them down will probably
require extra research work with the help of specialists in Chinese matters.
II.5. Mafia groups, terrorism and financing
What about mafia groups in the counterfeit medicine trade?
II.5.a. Mafia organisations
The Italian Mafia has a long tradition in counterfeiting, as their involvement in criminal counterfeiting
organisations dates back to at least 1860 with one Giuseppe Morello, a famous counterfeiter who later
emigrated to the US where he continued his activity by counterfeiting dollars (1867-1930)208.
205 Ming Xia, “Organizational Formations of Organized Crime in China: perspectives from the state, markets, and networks”,
Journal of Contemporary China, 17: 54, 1-23, 2008.
206 He Bingsong, Le crime organisé en Chine. Des triades aux mafias contemporaines, CNRS éditions, 2012, p. 94.
207 He Bingsong, Le crime organisé en Chine. Des triades aux mafias contemporaines, CNRS éditions, 2012, p. 97.
208 Federico Varese, Mafias on the Move, How Organized Crime Conquers New Territories, Princeton University Press, 2011, p.
112.
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In the more specific case of contemporary Italian mafia groups, there is hardly any doubt about the involvement
of the Mafiosi in counterfeiting. Take for example the involvement of the Camorra in the luxury product industry
as shown by Saviano209 or in the worldwide distribution of fake Bosch electric drills described by the researcher
Francesco Forgione210. These counterfeiting activities are at local level in Italy but also on a worldwide scale via
specific distribution networks. Links between the Camorra and the counterfeiting business were in fact confirmed
in a recent Europol report which does not reveal too much about the nature of the relations in question.211
According to certain reliable studies212, the Italian mafia is allegedly also directing its activities to the health
sector: “the benefits for the Mafia of breaking into the medical sector is twofold: the gangs, who have now
become part of the middle classes, have understood that this sector is both a guaranteed income and a means
of social control.” In Calabria, forty or so private hospitals, over three hundred medical laboratory centres and
doctors belong to Mafia families.213 In short, the health sector plays the same strategic role for these criminal
organisations as the construction sector played during the booming post-war years.
In the more specific case of counterfeit medicines, the Camorra’s involvement has been confirmed by the PSI,214
particularly for medicines to treat infections and cardiovascular disease. Roberto Saviano215 also mentions the
case of the Camorra copying real bar codes on medicines imported into Italy via networks set up between China
and the port of Naples. These counterfeit medicines are then allegedly transferred to anonymous buildings near
the port to be later ‘integrated’ into the official medicine distribution network.216
That said, in the medicine sector, links with mafia organisations are very often tricky to establish and in general it
should be specified that the pattern of “integrated criminal counterfeiting remains rare and is ‘reserved’ for
organisations which have full control over their socio-economic environment”. 217
But these port cities, historically mafia capitals, which no doubt guarantees them a ‘geographic income’,218 are
presumably strategic zones for direct or indirect mafia involvement in trafficking medicines. For access by sea,
the western part of the Balkans is also mentioned219 as a hub for counterfeit products from China arriving in the
European Union via the Black Sea through ports on the Adriatic or Ionian Seas.
Mafia involvement in counterfeit medicines is all the more plausible, at least theoretically, because the Italian
Mafia and particularly the Ndrangheta have become “entrepreneurial mafia”220 and have gone from “traditional
homicides, kidnappings and large-scale drug trafficking to controlling whole sectors of the economy (such as
209 Roberto Saviano, Gomorra, dans l’empire de la camorra, Gallimard, 2009.
210 Francesco Forgione, Mafia Export, Comment les mafias italiennes ont colonisé le monde, Actes Sud, 2010.
211 Europol, EU Organised crime threat assessment, OCTA, 2011, p. 36.
212 Jacques de Saint Victor, Un pouvoir invisible. Les mafias et la société démocratique. XIXe et XXIe siècle, Gallimard, 2012, p.
301.
213 Jacques de Saint Victor, Un pouvoir invisible. Les mafias et la société démocratique. XIXe et XXIe siècle, Gallimard, 2012, p.
302.
214 The information provided by Tom Kubic, PSI, about Camorra dates from 1997.
Tom Kubic, “IP Theft and International Organized Crime and Terrorism – The Emerging Threat”, IPR Center, Symposium, June 3,
2010.
215 Roberto Saviano, Gomorra, dans l’empire de la camorra, Gallimard, 2009.
216 European Commission Taxation and Customs Union, Combating Counterfeit and Piracy, 2007.
http://ec.europa.eu/taxation_customs/customs/customs_controls/counterfeit_piracy/combating/index_en.htm
217 Bertrand Monnet, Philippe Véry, Les nouveaux pirates de l’entreprise: Mafias et terrorisme, CNRS éditions, 2010, p. 155.
218 Jean-François Gayraud, Le monde des mafias, géopolitique du crime, Odile Jacob, 2005, p. 123.
219 Europol, EU Organised crime threat assessment, OCTA, 2011, p. 35.
220 Roberto Saviano, Le combat continue, Résister à la Mafia et à la corruption, Robert Laffont, 2012, p. 86.
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earth moving, construction, financing awarded to people in difficulty)”. 221 The very real difficulty in analysing
these mafia groups lies in the fact that “their levels and methods are much trickier to discover. It is indeed
difficult to determine whether these structures are involved during production, circulation or final distribution of
the counterfeit products, and whether these groups organise, do the production themselves or merely provide
various services for the counterfeiters, for example ensuring the mobility of the production units. There is also a
varying degree of opportunistic criminality, so the members and aims are likely to change as opportunities
arise.”222
Another probability factor is the relative proximity of the narcotics and medicine markets. Some researchers
believe that the fight against drugs may have encouraged some organised criminal groups to move into the
counterfeit medicine market where there is less risk of penalties and where profits remain high.223 The case of
the Columbian drug cartels is mentioned as having certain connections with illicit medicine trafficking. In the
1990s, Cali covered their illicit dealings in cocaine, which involved purchasing raw materials, with a network of
pharmacies.224 But this close link between narcotics and medicines became particularly relevant from the
production angle, and as the historian Jacques de Saint Victor said in a recent work225, “Refining tons of cocaine
required millions of litres of chemical precursors, made in Europe or the US. Some were widely – and freely -
distributed, like potassium permanganate, but others needed permits. By investing in these pharmaceutical
companies, the cartel could import all the products it wanted quite legally”.
In China the involvement of triads in the synthetic drug market and particularly amphetamines is a significant and
confirmed phenomenon.226 This kind of diversification could in theory lead certain organisations to move into
counterfeit medicines. There are a certain number of accounts which point to this: “The corruption of government
officials by local mafia groups, backed by triads, does not make things any easier. And the economic
significance of the counterfeit business in some regions (between 8 and 10% of the Chinese GDP) explains the
lack of enthusiasm of certain local institutions”. 227 But these conclusions should be treated with caution as
reliable criminology studies seem rare in China or are less easily accessible than in the West.
But Europe should certainly not be excluded from these studies and some comments from specialists suggest
that there may be links within the European Union between drug traffickers and counterfeit medicine traffickers
or that a certain form of imitation may exist between the two networks. At an international meeting of experts in
Romania, Karolyi Szep, a Hungarian customs officer declared,228 “The Balkans are a significant route for the
trafficking of fake medicines, and it is the same for heroin and other drugs.” One case of seizure by the Turkish
police which included 6,000 fake Viagra pills and 750,000 ecstasy tablets and the wherewithal to produce 150
kilos of heroin is a good illustration of this connection.
In short, the strong presence of mafia groups in our field of study cannot be confirmed with any certainty, but we
must maintain an active watch as we have discovered potential factors for the possible involvement of this kind
of organisation in counterfeit medicines.
221 Ibid.
222 Barbara Pick, Accès aux médicaments et contrefaçon pharmaceutique en Russie post-soviétique, L’Harmattan, 2006, p. 59.
223 Point of view of Lewis Kontnick from the firm Reconnaissance International specialised in security problems. Source Victoria
Colliver, “Bogus Drugs a Growing Threat”, San Francisco Chronicle, August 3, 2003.
224 Roger Bate, Phake: The Deadly World of Falsified and Substandard Medicines, The AEI Press, 2012, p. 49.
225 Jacques de Saint Victor, Un pouvoir invisible. Les mafias et la société démocratique. XIXe et XXIe siècle, Gallimard, 2012, p.
257.
226 He Bingsong, Le crime organisé en Chine. Des triades aux mafias contemporaines, CNRS éditions, 2012, p. 38.
227 Pierre Delval, Le Marché mondial du faux. Crimes et contrefaçons. CNRS éditions, 2010, p.115.
228 AFP World News, Eastern Europe confronts fake medicines trade, October 21, 2010.
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II.5.b. Terrorism
The IRA229 is the most widely cited example of a terrorist organisation involved in counterfeit medicines,
particularly veterinary medicines230 to finance their activities. In the 1990s, two IRA members, Brian Ruddy and
his cousin Paeder Hamill,231 set up a counterfeit veterinary medicine laboratory in Hialeah Gardens, 30 miles
from Miami with USD 60,000 of financial aid. The mastermind of this operation was another IRA member called
Edward Davidson who was involved in the large-scale theft of British stock in May 2010. Medicine bottles were
supplied by a legal company based in Atlanta on the understanding that they would be used as medical supplies
during operation Desert Storm. One James ‘Seamus’ Costello was in charge of these purchases for the IRA232.
The fake labels were made on a farm in Northern Ireland belonging to Patrick Brady, Hamill’s uncle233. The
counterfeit medicines, which looked genuine to the untrained eye, contained only water, with no active
ingredients, with the small difference that they were packaged in 500ml bottles, whereas the originals were sold
in 100ml bottles. The counterfeit medicines were distributed by Life Services Inc., a subsidiary of a large
distributor, Lextron, based in Ocala, Florida. The money obtained from these sales was then transferred to bank
accounts in Northern Ireland. In March 1991 a raid on the property uncovered 30,000 labels for veterinary
treatments and growth hormones.
About 700,000 animals may have received injections of the counterfeit medicine234. The affair was discovered by
Merck who sued Lextron and its subsidiaries, and also Davidson and the other members of the operation in a
Florida court in February 1992. Davidson was banned from selling, producing or in any way representing the
counterfeit veterinary medicine and Brian Ruddy was ordered to pay USD 6 million to the company.
More recently, Hezbollah is a terrorist organisation frequently mentioned as being involved in counterfeit
medicines. In March 2006, the US Terrorism Joint Force, an inter-agency initiative led by the FBI, charged 19
individuals involved in a network of counterfeit medicines to treat sexual disorders with activities in Lebanon,
Canada, China, Brazil, Paraguay and the US235. Five members of this network were Canadian and according to
the Vancouver Sun,236 which allegedly had access to the US indictment documents, a portion of the USD
500,000 per month linked to the trafficking was paid to Hezbollah.
A recent Israeli study237 confirmed that Hezbollah is focusing more and more on developing illicit activity
connected with counterfeiting medicines, particularly for energy stimulants. The move to this sector may be due
to the fact that drug dealing has become something of a problem for this terrorist group: the Islamic community
had reservations about this kind of activity. But the fact that one of the authors of this Israeli study, Dr Boaz
Ganor, is also a member of the Israeli National Committee for Homeland Security Technologies makes one
wonder just how independent this sort of research is in the context of the Middle East crisis and the post-9/11
crisis.
229 IRA: Irish Republican Army.
230 Franck G. Madsen, Transnational Organized Crime, Routledge, 2009, p. 73.
231 Case cited by Peter Lowe, “Counterfeiting: links to organised crime and terrorist funding”, Journal of Financial Crime, vol. 13,
No. 2, 2006, p. 255-257.
232 GlobalOptions Inc., An Analysis of Terrorist Threats to the American Medicine Supply, Signature Book Printing, Gaithersburg,
Maryland, 2003, p. 66.
233 Ibid.
234 GlobalOptions Inc., An Analysis of Terrorist Threats to the American Medicine Supply, Signature Book Printing, Gaithersburg,
Maryland, 2003, p. 67.
235 Bryan A. Liang, “Safety of Drug Supply: Tougher Laws Needed to Stem Counterfeit Drug Rings”, San Diego Source The Daily
Transcript, May 4, 2006.
http://www.sddt.com/News/article.cfm?SourceCode=20060503crd (access March 5, 2012).
236 Kim Bolan, “For Hezbollah: Cheap Smokes, Fake Viagra”, The Vancouver Sun, September 21, 2007.
http://www.canada.com/vancouversun/news/story.html?id=70dfb2cd-83ff-4f0f-b6db-f49f8c8b0228 (access on March 5, 2012).
237 Roi Kais, “Hezbollah funding terror with fake medicine”, Ynetnews.com, October 9, 2012.
http://www.ynetnews.com/articles/0,7340,L-4279293,00.html
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In general, although a number of reports238 tend to confirm the links between terrorism and the production of
medicines, particularly for ETA, the Chechens or the guerrilla groups in North Africa, there are no precise,
confirmed elements to prove it. Some elements seem to argue for a close link between terrorism and
counterfeiting, but as Peter Lowe239 explains, it is important to distinguish between direct links and indirect links
where sympathisers provide money through a third party. Although Lowe believes the latter case is more
frequent, it must be admitted that as a general rule the factual elements proving these links between terrorism
and counterfeit medicines are all too often based on unsupported anecdotal elements, as a recent US report
confirms.240 The IRA affair therefore stands alone in the detail of its modus operandi and independent
researchers should make more effort to authenticate Hezbollah’s level of involvement in the phenomenon and
the possible participation of other terrorist groups in medicine counterfeiting.
But in addition to the ‘mafia’ and ‘terrorism’ issues, there is also the financial issue, and particularly money
laundering in connection with counterfeit medicines.
II.5.c. Money laundering
Although, in the Middle East, counterfeiters tend to use cash to avoid being noticed in the bank systems241,
money laundering is often the focus of numerous transnational counterfeiting strategies. It was the case in the
Goldfinch affair, handled by the MHRA in the UK. This affair began in 2005242 with a person known by the police
services for armed assault who went over into selling counterfeit medicines on the Internet and who acquired
over the years a great many properties and assets. The fraud squad found it difficult to follow these laundering
activities, which made light of borders and which also included the opening of an online casino with a partner in
Malta.
Operation Goldfinch enabled the MHRA to find a number of bank accounts in various countries:
- Spain: three bank accounts with GBP 7 million.
- Netherlands: three bank accounts with GBP 4 million.
- Cayman Islands: one bank account with GBP 1.2 million.
- Malta: thirty bank accounts with GBP 10 million.
- Curacao: two bank accounts.
- Isle of Man: two bank accounts with GBP 3 million.
- UK: one bank account with GBP 3 million.
making a total of over GBP 28 million (USD 44 million).
And in assets:
- Two properties in London worth GBP 3 million.
- Two villas in Spain worth GBP 2.5 million.
- Two Bentleys worth GBP 250,000.
238 Wyatt Yankus, prepared for The American Council on Science and Health, Counterfeiting drugs: coming to a pharmacy near
you, updated version, 2009, p. 2.
239 Peter Lowe, “Counterfeiting: links to organised crime and terrorist funding”, Journal of Financial Crime, vol. 13, No. 2, 2006, p.
255-257.
240 National Intellectual Property Rights Coordination Center, Intellectual Property Rights Violations: A Report on Threats to United
States Interests at Home and Abroad, November 2011, p. 42.
241 Source: testimony from a security department manager in the medicine industry.
242 Source: Mike Jones, MHRA, April 3, 2012.
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57
- A boat in Spain worth GBP 1 million, etc.
making a total of over GBP 8 million (USD 12.5 million).
Legally, the counterfeiters have been ordered to pay damages of up to GBP 1 million.
One stratagem for stopping the counterfeiters is to prove that often they do not pay any taxes, which is a definite
discrepancy, given the size of their assets and their lifestyle. In general, therefore, MHRA aims to focus on the
traceability of money flows when arresting counterfeiters. This strategy may appear somewhat strange, but it is
relatively effective because, of the 2,143 suspected and 179 confirmed cases of pharmaceutical crimes in 2011,
six have so far led to prosecution.243 In France, in the latest report by Tracfin244, an organisation specialised in
money laundering issues, it was shown that only two cases are linked to counterfeiting, although the report did
not specify in which sectors it occurred. Finance remains a widely underestimated sector in the fight against
counterfeiting, but this tool cannot become effective unless more efforts are made, not only from the law
enforcement authorities, but also those who create government policies.
II.6. Cybercrime and counterfeit medicines
This section aims to describe the environment in which cybercrime is expanding in relation to the question of
counterfeit medicines.
II.6.a. Cyberspace and criminality
Cyberspace is also a specific area which, to some extent, favours deviant behaviour.
Cyberspace seems to bring about a series of transformations in criminal behaviour.245
- Globalisation: globalisation of criminal opportunities modifies relationships between global and local as it
transcends conventional borders. This globalisation also modifies these ‘global – local’ relations from a legal
point of view.
- Distribution networks and technologies: these networks create new forms of commercial and emotional
relationships between individuals and generate new forms of victimisation. But these information flows also
make it difficult to have a coherent view of the deviant behaviour and to identify these new forms of risk.
- The simultaneous synoptic and panoptic qualities of Internet technologies: the assailants can observe their
victims and attack them from a distance. It is also possible to identify the types of attack and the aggressors
concerned.
243 Source: MHRA.
244 French Ministry of the Economy and Finance, Rapport d’activité Tracfin, 2011, p. 62.
245 The British university professor David S. Wall proposes a series of transformations in criminal behaviour related to the
expansion of the Internet. David S. Wall, “The internet as a conduit for criminal activity” in April Pattavina (ed.), Information
Technology and the Criminal Justice System, Sage, 2004.
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- Asymmetrical rather than symmetrical relationships: the relationships between the aggressors and the victims
also have implications for the law. For example, if there are a number of victims from different legal systems, it is
difficult to finance customised legal investigations even if the criminal act is a well-known fact.
- Long trains: Internet enables traffic to be traced, particularly at the time of each electronic transaction by an
Internet user. To some extent this is a good thing, as a copy of this data serves as a backup and supports the
law, but the copies of this data are also a sensitive issue in human rights and respect for privacy.
- Changes in the organisation of criminal activities: for example, an isolated Internet user can carry out extremely
complex criminal acts without any restrictions of time or space. These people can commit crimes which were
once beyond their organisational or financial means.
These six points show that the Internet alters the way in which criminal acts are committed and the conventional
interactions between aggressor and victim. Even if the nature of the offences and crimes does not change
fundamentally (fraud, counterfeiting, swindling, etc.), the behaviour on this new type of network has changed
considerably.
In fact from the criminal point of view, “the most significant transformation in the physical world towards
cyberspace is the fact that the territory is much wider for both organisations and individuals. The criminals can
operate on the Internet with less control and on a transnational scale.” 246
II.6.b. Cybercrime techniques
Four cybercrime techniques play a strategic role in the distribution of counterfeit medicines on the Internet:
cybersquatting, forums, spam and search engine manipulation.
- An increase in cybersquatting
The cybercriminal technique called cybersquatting is developed to illegally obtain a domain name to mislead
cyber-consumers when making purchases on the internet.
According to the internet software company MarkMonitor,247 cyber-squatting rocketed by over 33% in 2007 with
382,000 offences identified in the last quarter, making it the most common form of fraud.
Jérôme Sicard, Southern Europe manager of MarkMonitor explains: “In the past, cyber-squatters registered
domain names to harm the brands and then sought to sell them back to them; today this is a business in itself,
aimed at generating huge profits. What could be simpler to generate traffic on search engines than to use brand
names in a domain name? Because most of the words in the dictionary are already used in domain names, the
fraudsters and criminals are increasingly turning to brand names and trademarks”. The World Intellectual
Property Organisation (WIPO) has confirmed this growth in cybersquatting: since the launch of the UDRP
(Uniform Domain Name Dispute Resolution Policy) in December 1999, over 17,000 disputes have been
submitted to WIPO’s Arbitration and Mediation Centre.
The medicine brands most often cited in these disputes248 include: Bayer, Eli Lilly, F. Hoffman-La Roche, Pfizer
and Sanofi-Aventis.
246 Joan E. Foltz, “Global Crime Case: Cybercrime and Counterfeiting”, Futurist, November 1, 2008.
247 MarkMonitor, Brandjacking Index, 2007. The final analysis is based on approximately 134 million recordings and 60 million
email phishing attempts in nine sectors of activity: automobile, clothing, multimedia, consumer goods, electronics for the general
public, pharmaceutics, agribusiness, high technology and finance.
Source: Philippe Collier, “Les attaques contre les marques font rage sur Internet”, Contrefaçon Riposte, March 25, 2008.
248 Ibid.
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Figure 10: Sectors most affected by cybersquatting
Source: Philippe Collier, “En 2009, L’OMPI a traité 2107 plaintes de cybersquatting”,
Contrefaçon Riposte, March 23, 2010.
- Forums: strategic discussion areas
Forums are strategic in spreading information about the trafficking of counterfeit products.
Two main types of forum can be distinguished:
- Consumer forums where information is shared on products, prices and low-cost web sites. Cybercriminals
target these forums by spam and fake comments to attract potential purchasers to their websites.
- More “underground” forums
249
for amateur or more experienced cybercriminals sharing the latest innovations or
proposing collaborations for illicit operations. There is a hierarchy between the members of these forums and it
is easy to distinguish between the administrators, moderators, sellers, recognised members and guests who
might arouse suspicion about possible undercover operations. Interestingly, these types of forum are used as
meeting places between ‘virtual’ and ‘real-world’ criminal activities. These forums reduce the time factor by
allocating a precise task to each cybercriminal to diminish the extent of each offence but also the risk factor by
allocating cybercriminal actions to different geographic areas and protecting themselves against any possible
legal proceedings.
- Spam: a vector for cybercrime
249 Example cited by CEIS, Study under the direction of Guillaume Tissier, Les marchés noirs de la cybercriminalité, June 2011,
p.14.
Industrie lourde et
construction de
machines 4% Automobile
4% Electronique
4%
Télécommunications
5%
Hôtellerie et voyages
6%
Autres
6%
Presse et édition
6%
Sports
2%
Transports
4%
Assurance
2%
Articles de luxe
2%
Biotechnologie et
produits
pharmaceutiques
10%
Banque et finance
9%
Internet et
informatique
9%
Commerce de
détail
9%
Produits alimentaires,
boissons et
restauration
7%
Spectable
6%
Mode
6%
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Spams
250
are an essential vector that use e-mail to advertise websites distributing counterfeit products. The
complexity of the digital and financial flows is summed up in figure 11.
251
The pharmaceutical sector is prioritized
as a target. One can see how a potential purchaser clicking on an e-mail spam will obtain - via servers based in
China or Brazil -counterfeit Viagra traced back to Russia for a product manufactured in India and with a final
payment to a bank in Azerbaijan.
Studies have proved that 95% of the payments for this spam were made through three banks located in
Azerbaijan, Denmark and Nevis in the Caribbean. Most of the time, these bank transactions were not
necessarily fraudulent in that the consumers received their orders, however both the patients and the
pharmaceutical companies were taken advantage of in that these products were illegal.
Figure 11: Digital and financial flows connected to the spreading of spam for counterfeit Viagra.
Source: Neha Chevra et al., “Click Trajectories: End-to-End Analysis of the Spam Value Chain”,
In Proceedings of the IEEE Symposium and Security and Privacy, Oakland, CA, May 2011,
pages 431–446.
Cybercriminals use several effective and opportunistic techniques to flood in-boxes through dedicated servers
offering services for sending spam, particularly with a view to inviting the recipient to log on to attractive sites
from a visual and a financial point of view. The list of recipients can also be ‘targeted’ thanks to the use of
marketing databases.
According to Stefan Savage,
252
an IT expert at the University of California in San Diego who took part in this test
study, there are a great many techniques for sending spam to people thanks to the internet setup without being
blocked, and the real weak point is the banks. “The question is whether this problem is sufficiently strategic for
politicians to become deeply enough involved.” According to this study, only 0.0001% of spams are thought to
result in the sale of counterfeit medicines but with a substantial gain. It has to be pointed out that spams are also
used to disseminate malware such as a ‘Trojan horse’, which surreptitiously runs a programme in the user’s
250 Spamming can be defined as the excessive use of an email system intended to expose, deliberately and usually repeatedly, all
or some of its users to messages or content that they neither need nor have asked for, often by making sure they can be confused
with the messages or content usually exchanged or looked for by these users.
Source: http://www.futura-sciences.com/fr/definition/t/internet-2/d/spam_1650/
251 Neha Chevra et al., “Click Trajectories: End-to-End Analysis of the Spam Value Chain”, In Proceedings of the IEEE
Symposium and Security and Privacy, Oakland, CA, May 2011, p. 431-446. Graphic: Courtesy of Stefan Savage.
252 David Talbot, “Anatomy of a Spam Viagra Purchase”, Technology Review, May 20, 2011.
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computer to obtain confidential information that the hackers will sell to third parties.253. These spams account
for 5% of all mailing activities.254
A recent study255 revealed that most of this spam is based on an advertising approach consisting in encouraging
potential clients to buy the products. Only 38% of the medicines in question are products for sexual problems,
and the variety of medicines on offer is therefore much wider, with 289 different products listed, including
treatments for cancer, leukaemia or diabetes.256 Western countries, the US in particular, are the main buyers
through spam and monthly orders257 for the seven leading illicit medicine distributors have been estimated at
more than 80,000 units.
Spam is also spread by clever cybercriminals. One of the most significant examples is the case of Oleg Y.
Nikolaenko, 24, nicknamed the King of Spam, who was arrested in Las Vegas by the US authorities in
November 2010. Under the name of ‘Docent’ he earned hundreds of thousands of dollars using his ‘Mega D’
botnet258 capable of sending 10 billion unsolicited emails a day259. The US Department of Justice accused
Nikolaenko of spamming on behalf of Lance Atkinson and other members of the Affking group, an affiliation
programme of illegal online pharmacies. 260 According to the journalist Brian Krebs, ‘Docent’ also sent spam for
other illegal online pharmacy networks and recordings made of SpamIt without their knowledge revealed that
‘Docent’ earned commissions of USD 320,000 between 2007 and 2010 to use spam to promote illegal
pharmacies affiliated with SpamIt distributing counterfeit medicines. The young Russian fiercely negotiated his
commissions at 45-50% because of his extremely powerful botnet, whereas normally they are 30% for a
spammer.
However the importance of spam should be put into perspective, as for some researchers in cybersafety, the
search engines also play a major role in the access to counterfeit medicines on the Internet.
- Manipulating search engines
According to a study directed by Nicolas Christin261, associate director of the Information Networking Institute in
Carnegie Mellon University, a quarter of the ten most frequent requests on search engines are directed to illicit
pharmacies. This investigation262 led by some of the foremost researchers (Carnegie Mellon, Harvard) suggests
that illegal pharmacies seek to manipulate the search engines to promote their activities, especially as it is very
efficient in encouraging people to buy. The researchers pointed out that the rate of conversion into a medicine
purchase could be estimated at between 0.3% and 3% when search engines were manipulated, which is a much
higher percentage than the previous example for spams targeting medicines (0.0001%). To aggravate matters,
253 John Richard Castronova, “Operation Cyber Chase and Other Agency Efforts to Control Internet Drug Trafficking, “The ‘Virtual’
Enforcement Initiative is Virtually Useless”, Journal of Legal Medicine, vol. 27, No. 2, 2006.
254 Economist.com, “Long life spam. The changing landscape of online fraud”, The Economist, November 20, 2010.
255 Chris Kanich, Tristan Halvorson et al., “Show me the Money, Characterizing Spam-advertised Revenue”, USENIX Security
Symposium, 2011, San Francisco, USA.
256 Ibid.
257 Ibid.
258 A botnet is a set of Internet connected or semi-automatic programs which interact with computer servers. Nowadays, the term
is often used to designate a network of zombie computers, i.e. malicious computers. Source: Wikipedia September 2012.
259 Brian Krebs, “Chat With Accused ‘Mega-D’ Botnet Owner?”, KrebsOnSecurity, December 5, 2011.
260 Ibid.
261 Medical Daily Reporter, “Illegal Online Pharmacies Exploiting the Web”, August 17, 2011.
http://www.medicaldaily.com/news/20110817/7040/illegal-online-pharmacy-illegal-drugs-online-drug-perscriptions-online-order-of-
perscriptions-il.htm
262 Study source: Nicolas Christin, Nektarios Leontiadis, Tyler Moore, “Measuring and Analyzing Search-Redirection Attacks in the
Illicit Online Prescription Drug Trade”, 20th USENIX Security Symposium San Francisco, August 8-12, 2011.
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the legal online pharmacies have little visibility because of this aggressive strategy of the counterfeiters on the
Internet who boost their visibility on search engines by latching on to websites with.edu suffixes to make their
strategy even more effective. Online advertisements can also be very efficient for directing to illicit pharmacy
websites. As we can see from this study, search engine manipulation is a major problem and is no doubt vastly
underestimated.
One well-known case showing the role of search engines in promoting illicit websites concerns Google and its
system of keywords managed by its advertising sales division. This system, called Adwords, uses keywords to
bring up an advertisement in the margin of the results page in an Internet search, if these words correspond to
the words used in the request. These advertisements comprise the URL of the advertiser’s website. The
advertiser can reserve a keyword of a registered brand that he does not own, and this is what causes problems,
particularly as in the past few years, Google has been facing lawsuits for counterfeiting from brand owners. The
ambiguity of this issue comes from the fact that search engines earn most of their revenue from advertising. The
online pharmacy market represents USD 1 billion a year according to market survey company eMarketer263.
According to the company LegitScript LLC more than 80% of online pharmacies advertising on these search
engines are illegal.
To try to counteract this visibility for websites distributing counterfeit products, some big companies have started
legal proceedings against the US search engine.
These court rulings increasingly encourage the two parties (manufacturers and Google) to cooperate. They
show the limits of the fight against counterfeiting, which should above all contribute to controlling the information
networks.
But Google is not the only strategic search engine; there is also Bing created by Microsoft which has been the
subject of a report by Legitscript and Knujon,264 which suggests that 89.7% of advertisements for online
pharmacies sponsored by Microsoft are illicit and although Microsoft’s promotional policy implies that these
websites are based in the US or Canada, some websites were obviously based in a foreign country, particularly
India. Finally, most advertisements for pharmacy websites presented by Bing are for medicines not requiring
prescriptions. The keyword auctioning system on which Microsoft’s online advertising is based is thought to be
more beneficial financially to the illicit pharmacies than the legal ones.
Among the examples mentioned and deciphered by Legitscript as pharmacies sponsored by Microsoft links is
the network Choice-Rx.com which says it is based in the Seychelles, but is actually part of a network known as
medstore.biz, which works through an affiliation system. This system allegedly belongs to a Russian criminal
organisation called Regtime, which plays an important part in the illegal pharmacy network. Legitscript believes
that criminal organisations are widespread, as the criminal organisation 33 Drugs is said to own the
dailymedrx.com network which advertises on Bing and is said to have a network of about a hundred affiliated
pharmacy websites which sell counterfeit medicines without prescriptions. Canada has also been a major point
of contention and Google was sued by the US Department of Justice for having allowed Canadian pharmacies to
buy advertisements on Google Adwords that illegally targeted US consumers. That said, in August 2011 the US
Department of Justice published a statement announcing an agreement with Google for the payment of a fine of
USD 500 million by the company for having allowed Canadian cyberpharmacies to publish advertisements
targeting US consumers and then export prescription medicines to the US in violation of the nation’s laws. This
fine represents the total sum of gross advertising revenue received by the company and the estimated gross
income collected by Canadian cyberpharmacies from sales made in the US.
The size of the fine is evidently meant to encourage Google to exert more control over the use of its Adwords
platform.
263 Thomas Catan, Amir Efrati, “Google Was Warned On Rogue Pharmacy Ads”, The Wall Street Journal, May 20, 2011.
264 Knujon and Legitscript, No Prescription Required: Bing.com Prescription Drug ads, August 4, 2009.
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Why not use filtering to counter the promotion of illicit websites connected with counterfeit medicines?
According to the European Alliance for Access to Safe Medicines (EAASM)
265
one solution would be for the most
frequently used search engines to ignore web pages giving information on counterfeit medicines. Such an
initiative was conducted in 2009 by Google, Yahoo and Bing, which banned fake online pharmacies from using
registered brands for medicine prescriptions. But these cybercriminals then switched to other methods. They
now try to reach consumers by using spamming techniques on forums which appear in search engine searches
(see figure 12 below: a Google search for the psychostimulant Adderall)
266
Figure 12: Search for the psychostimulant Adderall, Google page.
Source: OpSec Security, Risk Assessment: Counterfeit Pharmaceuticals on the
Online Marketplace, Study, November 15, 2010.
Therefore, the filtering technique has its limits and it also raises civil liberty issues, as some associations have
pointed out (for example La Quadrature du Net,
267
which is very active in European institutions).
On the other hand, these problems are arising on an international level. Counterfeiting activities involve many
operators and many countries. According to International Law the States are still the ultimate reference – thanks
to the Treaty of Westphalia! In such a context, how can governments adopt national laws that are
comprehensive, modern and compatible with those in other countries? Not to mention develop international
judicial cooperation?
There is also the question of filtering and ‘criminal organisations’.
265 Philippe Collier, “62% des médicaments vendus sur Internet sont des faux”, Contrefaçon Riposte, July 22, 2008.
266 OpSec Security, Risk Assessment: Counterfeit Pharmaceuticals on the Online Marketplace, Study, November 15, 2010.
267 http://www.laquadrature.net
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Faced with these “increasingly industrialised and hyper-reactive networks” 268, the effectiveness of the current
measures should be put into perspective. According to David Fernyhough269, an expert in counterfeiting with
Hills & Associates (a risk management company based in Hong Kong), “The problem has simply become so
huge that no measures can possibly stop it.” In the ‘real’ world but also on the Internet.
- Cybercriminal techniques with two strategic targets
Finally it is important to note that the targets of these various cybercrime techniques are either the end clients or
the distribution channels. 270
In the case of end clients, they may be attracted by an affordable price that comes from a continual flow of spam
in their inboxes. A potential buyer will then start to surf the web, especially on websites that look legal. For
websites selling medicines, there will generally be a statement that the online pharmacy is authorised and
registered in compliance with the legislation. All these factors aim to reassure potential buyers even if they do
not have a doctor’s prescription. There are a number of online pharmacies that do not require a prescription to
conclude the transaction.
In the second case, the counterfeiters tend to break into the distribution channel by using Internet as a marketing
vehicle, exploiting the fact that some distributors look for low-cost products to maximise their profits without
thinking to check the integrity of the supply source. Once the products have been bought by the distributors, the
medicines are for example marketed as legitimate products and it will then be difficult to trace their origin.
According to the UK’s MHRA271 criminals have for some years now preferred to distribute counterfeit medicines
to pharmacy wholesalers, particularly those supplying to hospitals or medical support organisations rather than
directly to consumers. By targeting these organisations, the counterfeiters can capture a bigger, more lucrative
market. For example, in the UK, the wholesale value of a pack of twenty-eight pills of medicines to treat prostate
cancer is USD 260, which can give the traffickers a comfortable profitable.272
But with all these various cybercrime techniques, we should not lose sight of the fact that the principal
distribution vector of counterfeit medicines for end consumers remains the illicit online pharmacies.
II.6.c. Online pharmacies
What types of pharmacies can be found on line?
In the eyes of the law, there are three types of online pharmacy273:
- Some countries authorise online pharmacies to deliver medicines to patients after obtaining an electronic
prescription delivered by a doctor.
- Online pharmacies circumvent the law by employing doctors who prescribe medicines on the basis of
information supplied by the patients in an online questionnaire. Once the medicines have been prescribed,
they are sent to the patients.
268 afp.com, Internet news, “Statement by Christine Huber, counterfeit project manager at Sanofi-Aventis”, AFP, June 23, 2008.
269 Donald G. McNeil Jr, “In the World of Life-Saving Drugs, a Growing Epidemic of Deadly Fakes”, The New York Times, February
20, 2007.
270 UNICRI, Counterfeiting, A Global Spread, A Global Threat, 2007, p. 90.
271 Roger Bate, Phake: The Deadly World of Fake Drugs, Appendix, The AEI Press, February 2012.
272 The Sunday Times, Factory for Fake Prescription Drugs, September 23, 2007.
273 IRACM, Fiche La falsification sur Internet, January 30, 2012.
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65
- The most illegal pharmacies deliver all kinds of medicine anywhere in the world, including those that require a
prescription, with no controls at all, provided the patient can pay for them.
In Europe the situation can be summed up as follows:
- Online sale authorised in primary care for medicines for which a medical prescription is optional: Ireland,
Spain, Belgium, Italy, Poland, Czech Republic, Slovakia, Hungary, Finland.
- Online sale authorised for all medicines if the site is connected to an actual pharmacy: Germany, Denmark,
Portugal, Sweden.
- Online sale authorised for all medicines: UK, Netherlands.
- Medicine only sold on prescription: Switzerland.
- These Internet sales were recently authorised in France on certain conditions.274 Firstly, the website must be
owned by a chemist with a dispensary: to put it plainly, sales of the medicine remain the domain of the
professionals in the sector and should be an additional activity. No ‘pure-player’ from the web can break into
this market. Next, the website must be approved by the Regional Health Authority. The owner of the site must
also register it with the Order of Pharmacists. Finally, online sales are currently limited to OTC (over-the-
counter) medicines, i.e. those that can be bought freely and that customers can pick up off the shelves
themselves.
In general, the free circulation of merchandise between member States is one of the principles of the European
Union. In virtue of this principle and since the voting of a jurisprudence in the European Court of Justice in 2003
(known as ‘DocMorris’), Europe considers that a State cannot ban pharmacies from selling over-the-counter
medicines online.275 The situation is therefore likely to change again in the short or medium term in France.
In the US online selling is allowed for all medicines but as we will see, the online standardisation systems are not
sufficiently well established.
A recent study conducted by MarkMonitor276 revealed a strong interest from consumers for websites offering
pirated content and counterfeit products. Over 53 billion visits have been registered in one year. Of these,
counterfeit medicines attract over 92 million visitors annually. Three-quarters of the sites suspected of hosting
content listed as ‘counterfeit’ are located in North America or in Western Europe according to a MarkMonitor
study conducted for the US Chamber of Commerce.
The problem is increasing: an enquiry277 led jointly by Interpol and the WHO four years ago, with the help of 24
countries, referenced 800 illegal sites, 125 of which are thought to be located in France.
274 Christophe Guillemin, “Polémique: la vente de médicaments en ligne désormais autorisée”, Usine Nouvelle, December 24,
2012.
http://www.usinenouvelle.com/article/polemique-la-vente-de-medicaments-en-ligne-desormais-autorisee.N188556
275 Ibid.
276 Sécurité Informatique, “Selon Markmonitor le piratage et la contrefaçon sur Internet dépasseraient les ... 200 M$ chaque
année”, Sécurité Informatique, Cybercriminalité, No. 344, Monday January 24, 2011, p. 5.
277 Mutualité Française, Faux médicaments sur Internet: des contrefaçons dangereuses pour la santé, November 20, 2009.
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A number of elements provided by MarkMonitor show that this trend is worsening278:
- The VIPPS279 programme led by the NABP (National Association of Boards of Pharmacy) has certified only
four online pharmacies out of the nearly 3,000 listed in this study. This trend was confirmed in a more recent
study in July 2012 with 96.71% of online pharmacies practising illegally.
- These websites receive tens of thousands of visitors a day, to the extent that their activities are sufficient to
earn them a listing in Alexa, the reference site for internet statistics.
- China heads the list (49%), followed by India (17%) for those countries of origin of the products according to
the advertisements.
- The discounts (up to 90%) are significant of the fraudulent origin of these medicines.
In 2008, the National Center on Addiction and Substance Abuse at Columbia University280 which researches the
phenomenon in the US, identified 365 websites offering medicines on line that in principle required a
prescription: 85% of these sites did not ask for the prescription and only two of them were officially registered as
online pharmacies. More recently, the company OpSec Security281, published a study which estimated the
number of non-accredited pharmacies not requiring a medical prescription as 89% versus 51% in 2007.
This study provides other significant results:
- Discounts on medicines reach 40% or more on 86% of non-accredited online pharmacies.
- The illicit activities of these non-accredited pharmacies are in full growth.
- Three-quarters of these pharmacies describe certain products still protected under a US patent as generic
medicines. These medicines are often made in India and are still not authorised for sale in the US.
- Marketing techniques282 to target consumers are increasingly sophisticated and can cleverly divert any risk of
interception by the authorities. The counterfeiters target message forums with spams to avoid the new
improved filters used by search engines to detect illicit pharmaceutical sites.
- consumers are at an increasing risk of reaching non-accredited sites that pass themselves off as legitimate
sites, according to OpSec Security.
Other studies have made it possible to gather a certain number of analyses to get a better grasp of distribution.
Many e-pharmacies with illicit activities are taking on an increasingly sophisticated legitimate appearance in
targeting consumers and using advanced marketing techniques.283. One technique consists in the site passing
itself off as being in a ‘secure’ country. One in five online pharmacy sites claims to be Canadian but is registered
in Russia, Panama or Bulgaria, which are high-risk countries for counterfeiting problems. Another strategy that
counterfeiters privilege is the ‘merchandising’ of ‘star’ medicines on the internet before their official launch. For
example, the European Commission reported that one counterfeit obesity medicine and smoking cessation
278 MarkMonitor, Press Release, MarkMonitor Finds Online Drug Brand Abuse is Growing, September 28, 2009.
https://www.markmonitor.com/pressreleases/2009/pr090928-bji.php
279 VIPPS: Verified Internet Pharmacy Practice Sites. VIPPS is an American accreditation programme of the National Association
of Boards of Pharmacy which aims to provide official certification for legal online pharmacy websites.
280 The National Center on Addiction and Substance Abuse at Columbia University, “You’ve Got Drugs! V: Prescription Drug
Pushers on the Internet”, A CASA White Paper, July 2008.
281 OpSec Security, Press release, OpSec Security Identifies Latest Market Trends in the Online Sales of Prescription Drugs by
Internet Pharmacies and Trade Boards, December 10, 2010.
282 Businesswire.com, “OpSec Security Exposes Emerging Schemes by Rogues Internet Pharmacies to Target Consumers”,
Business Wire, December 7, 2010.
283 Ibid.
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product was “on sale on several websites” before its approval. Sanofi, which developed this future blockbuster,
has filed a number of suits against counterfeiters since 2004 with the WIPO’s Arbitration and Mediation
Centre
284
.
The latest Brandjacking Index report of 2009 from MarkMonitor highlights an alarming increase in the
counterfeiting of well-known pharmaceutical brands. Asian manufacturers are offering counterfeits of brand
medicines on B2B trading platforms that are normally delivered on prescription. These online pharmacies have
increased their presence on the market. Their turnover was estimated at USD 11 billion in 2009 (USD 4 bn in
2007).
- Difficult traceability
In spite of the difficulty in tracing the origin of certain medicines, there is some geographic information about illicit
pharmacies and on the origin of the spams used to sell counterfeit medicines (see figure 13 below).
285
The
United States are the champions in hosting illicit online pharmacies, with 36% of the total in 2009 versus 49% in
2008.
Figure 13: Origin of spam aimed at selling counterfeit medicines.
286
Chinese organized crime has specialized somewhat in selling counterfeit medicines. Most of the spam attracting
people to these rogue sites comes from China (31% in 2009, see figure 14)
287
. In addition, it can be noted that
the pharmaceutical sector accounts for 64% of all
288
(the second industrial sector is watchmakers, with 6.5%),
which shows just how strategic this sector is for counterfeiters.
284 Sandrine Cabut, “Une pilule anti-obésité pullule sur l’Internet”, Libération, March 29, 2006.
285 MarkMonitor, Brandjacking Index, summer 2009.
286 Ibid.
287 This 2009 statistic should be taken in perspective, as in 2010, the results of the company Sophos placed China in fifteenth
place among spam-relaying nations. Sophos study conducted between January and March 2010. Source: Presswire.com, “Dirty
dozen spam- relaying countries revealed by Sophos; China dramatically disappears from list of worse spam-relaying nations for
the first time”, M2 Presswire, April 28, 2010.
288 Message Labs, State of Spam Report, 2010.
Germany
9%United
Kingdom
12%
Netherlands
7%
Italy
5%
Canada
4%
United
States
49%
Other
14%
2008 Germany
13%
United
Kingdom
7%
Netherlands
10%
Italy
3%
Canada
6%
United
States
36%
Spain
5%
France
5%
Other
15%
2009
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Figure 14: Origin of spam leading to rogue websites.
289
II.6.d. Concrete cases to illustrate the ‘cybercrime – counterfeit medicine’ combination
We focus particularly on health scares which can be opportunities for cybercrime strategies, and also a large-
scale Russian example that brought to light counterfeit medicine networks organised on the Internet.
- Health scares
Europol
290
is concerned about the considerable role played by the internet in aiding criminal organizations to
distribute counterfeit medicines. According to this international organization, these criminal groups are well
structured and able to instrument health scare situations. That was the case with the swine flu virus during which
there was an increase in the trafficking of counterfeit medicines supposed to treat the virus. In circumstances like
this, opportunistic cybercriminals
291
send messages (see some examples of Russian cybercriminal messages
below) to boost sales of counterfeit medicines like Tamiflu and manipulate the search engines during epidemics
that require emergency treatment.
According to the company Sophos, Russian cybercriminals targeted UK citizens during the swine flu crisis as
there were limited stocks available locally.
292
In July 2009 when there were concerns about whether the UK
pharmaceutical industry could supply enough Tamiflu, searches on the Internet for this medicine in the UK
increased by 1,400%
293
and Internet users were often directed to websites managed by cybercriminals (see
figure 15).
289 MarkMonitor, Brandjacking Index, summer 2009.
290 Europol, EU Organised crime assessment, OCTA, 2011, p. 34.
291 Graham Cluley, “Swine flu fears making millionaires out of Russian hackers, Naked Security Blog”, Sophos, November 16,
2009.
http://nakedsecurity.sophos.com/2009/11/16/swine-flu-fears-making-millionaires-russian-hackers/
292 Sharma Rasik, “Russian Crime Gangs Selling Fake Tamiflu Online”, Top News, November 16, 2009,
http://topnews.co.uk/2728-russian-crime-gangs-selling-fake-tamiflu-online (accessed on April 27, 2012).
293 Graham Cluley, “Swine flu fears making millionaires out of Russian hackers, Naked Security Blog”, Sophos, November 16,
2009.
Germany
12% Other
Europe
8%China
4%
Korea,
Republic of
9%
Other Asia
2%
Latin
America
2%
Russian
Federation
2%
United
States
48%
Other
13%
2008 Germany
3% Netherlands
6%
Other
Europe
10%
China
31%
Korea,
Republic of
7%
Other
Asia Pacific
3%
Unknown
4%
Russian
Federation
4%
Turkey
6%
United
States
22%
Other
4%
2009
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Figure 15: Messages from Russian cybercriminals said to have targeted UK citizens during the swine flu crisis.
Source: Graham Cluley, “Swine flu fears making millionaires out of Russian hackers,
Naked Security Blog”, Sophos