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USTR: 97% of Counterfeit Drugs in US Shipped From Four Countries

Posted 02 May 2016 | By Zachary Brennan 

USTR: 97% of Counterfeit Drugs in US Shipped From Four Countries

The Office of the US Trade Representative (USTR) is raising new questions in its latest special report about some trade partners’ practices of limiting imports of foreign pharmaceutical and medical devices, as well as major concerns about counterfeit drugs and devices coming from four countries.

Trade Issues

For the pharmaceutical and device industries, USTR highlights particular issues in Algeria, India, and Indonesia with regards to their “discriminatory, nontransparent or otherwise trade-restrictive” practices that “have the potential to hinder market access in the pharmaceutical and medical device sector, and potentially result in higher healthcare costs.”

For instance, taxes or tariffs may be levied, often in a non-transparent manner, on imported medicines, USTR says, noting that the increased expense associated with those levies is passed directly to health institutions and patients.

“By some estimates, federal and state taxes can add 38 percent to the cost of medicines in Brazil,” the report says, adding that India has the highest tariffs on drugs, pharmaceutical inputs and medical devices among other World Trade Organization members.  

In addition, “unreasonable regulatory approval delays and non-transparent reimbursement policies can impede a company’s ability to enter the market, and thereby discourage the development and marketing of new drugs and other medical products,” the USTR says, noting that it encourages trade partners to provide appropriate levels of transparency, procedural and due process protections, and opportunities for public engagement.

The Generic Pharmaceutical Association (GPhA) offered general support for the USTR report on Monday, though it also said certain elements from the report “could limit competition from safe and effective generic drugs and biosimilars.” The industry group urged the USTR “to utilize more objective criteria” to identify countries that “do not provide adequate and effective intellectual property rights.’ Such criteria could be based on the failure of countries to comply with TRIPs obligations and/or in bilateral and regional agreements entered into by those countries.”

Specific Concerns

On issues related to pharmaceutical innovation and market access, the USTR says that the US pharmaceutical and medical device industry has expressed specific concerns regarding the trade policies of Algeria, Austria, Belgium, China, Colombia, Czech Republic, Ecuador, Hungary, Italy, Korea, Lithuania, New Zealand, Portugal, Romania, Taiwan and Turkey. 

Examples of concerns include:

  • A ban in Algeria on more than 350 imported pharmaceutical products and medical devices in favor of local products;
  • The lack of efficiency, transparency, and fairness in the pharmaceutical manufacturing inspection process in Turkey;
  • A series of measures in several EU Member States, including Austria, Belgium, Czech Republic, Finland, Hungary, Italy, Lithuania, Portugal, and Romania that raise concerns about transparency and the opportunity for meaningful engagement in policies related to pricing and reimbursement, which reportedly create uncertainty and unpredictability;
  • Proposals in Colombia and Ecuador designed to enhance domestic manufacturing capacity for pharmaceuticals that could adversely impact market entry and investment from outside;
  • Policies and the operation of New Zealand’s Pharmaceutical Management Agency (PHARMAC), which include a lack of transparency, fairness, and predictability of its pricing and reimbursement regime, as well as negative aspects of the "overall climate for innovative medicines" in New Zealand.


The report also notes that the manufacture and distribution of counterfeit drugs and active pharmaceutical ingredients is a growing problem for the US supply chain.

In particular, the US is concerned with the proliferation of counterfeit drugs manufactured, sold and distributed in Brazil, China, Guatemala, India, Indonesia, Lebanon, Peru and Russia.

“While it is impossible to determine an exact figure, studies have suggested that up to 20 percent of drugs sold in the Indian market are counterfeit and could represent a serious threat to patient health and safety,” the report says. “Ninety-seven percent of all counterfeit pharmaceuticals seized at the US border in Fiscal Year 2015 were shipped from four economies: China, Hong Kong, India, and Singapore.”

The USTR praises efforts by customs authorities in Hong Kong to increase their efforts to seize counterfeit pharmaceuticals, as well as collaborations between the US Customs and Border Control with Singapore Customs to conduct a joint enforcement operation that focused on addressing the issue of counterfeit pharmaceuticals.

China, US and Pharma Patents

The report also singles out China as an example of a country that needs to address pharmaceutical patent reforms as recent revisions to their policies have “severely restricted a patent applicant’s ability to provide supplemental data in support of an application.

“As a result, China has, in some cases, denied pharmaceutical patent applications and invalidated existing patents, while the United States and other jurisdictions have generally granted patent protection in similar cases,” USTR says.

Despite some recent revisions, the USTR says that industry “generally reports only partial progress as a result of the change, and that continued unjustified denials of patent applications and invalidations of existing patents create great uncertainty and potentially undermine incentives to innovate."

In addition, undisclosed trial data used to obtain marketing approvals in China is also drawing the ire of the USTR.

The US also continues to express concerns about the extent to which China provides "effective protection against unfair commercial use of, as well as unauthorized disclosure of, and reliance on, undisclosed test or other data generated to obtain marketing approval for pharmaceutical products,” the report says.

And although China has committed to the practice of not allowing subsequent applicants to rely on undisclosed test or other data submitted in support of an application for marketing approval of new pharmaceutical products for a period of at least six years from the date of marketing approval in China,  “there are reports that generic manufacturers have, in fact, been granted marketing approvals by the China Food and Drug Administration (CFDA) prior to the expiration of this period, and in some cases, even before the originator’s product has been approved.”

Meanwhile, on 4 March 2016, China put into effect a Work Plan for the Reform of Chemical Drug Registration Categories, which limits the definition of “new drugs” to only those drugs for which marketing approval is first sought in China.

The USTR criticized such an approach and says it’s “inconsistent with the harmonized practice of the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use.

The US has engaged with China to increase efficiency in regulatory approval processes for pharmaceuticals and medical devices to accelerate patient access and incentives to innovate and market new products in China, though the USTR remains concerned about proposals that would provide regulatory incentives for companies to shift manufacturing capacity to China or participate in selected national projects and programs.

2016 Special 301 Report

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