# Session Overview Prohibited by law only (illegal), or more broadly, prohibited by law, rules, custom or other sets of agreed principles (illicit). There are three types of illicit trade, the actors involved, the global health imapcts of this trade, and the global policy responses to date. ## Learning outcomes By the end of this session you should be able to: · Discuss the ways in which the illicit trade in products, such as tobacco and tobacco products, illegal drugs, and counterfeit medicines pose harms to human health · Understand the ways drivers of globalisation enable and facilitate this illicit trade · Identify the actors, organisations, and institutional arrangements involved in the promotion and regulation of illicit trade activities; and · Understand the main challenges faced by policy makers seeking to address illicit trade on an increasingly global scale # 1. Introduction - What is illicit trade? > Illegal trade is an activity involving the exchange of a good or service which is prohibited by law. The broader term, illicit trade, is an activity involving the exchange of a good or service which is prohibited by law, rules, custom or other sets of agreed principles (Shelley, 2017). Such trade may be prohibited by law for a broad range of reasons including the harmful effect of the product or service involved, the violation of intellectual property rights, the avoidance of taxation or other official levies, the conduct by criminals or criminal organisations, or the contribution made to other nefarious activities (e.g. terrorism). The trade may also be prohibited because of custom. In some countries, for example, commercial sex work may not be legal but is still illicit due to prohibitions based on societal norms (Shelley, 2017). Illicit trade can vary substantially across national jurisdisctions due to differences in law, rules and custom. FOr example, narcotics, sex work, firearms, tobacco products. ## Why does it happen? Push and pull factors. Pull = demand. Products that are inhibited by law, or in short supply. Or products can be acquired at lower price than offered on the legal market. Push = supply. It involves numerous actors along a global supply chain from production (farmers, facilities growing marijuana, illegal labs) to laundering of proceeds (legitimiate business, banks) The legal risks faced by suppliers to the illicit trade vary across jurisdictions and the product involved. Penalties range from confiscation of goods and fines, to long-term incarceration, physical punishment and even execution. For example, as of 2020, the trafficking of illegal drugs in Saudi Arabia (all illegal drugs), Philippines (one-third of an ounce) and Vietnam (over 1.3 kilos of heroin) is punishable by death. Where high risks are involved, criminals can charge a higher premium for their product. For counterfeit and tobacco products, punishments are generally less harsh (i.e. fines, confiscation of goods) yet the potential earnings are substantial. For this reason, some organised criminal groups have shifted to the trade of lower risk, higher reward goods such as cigarettes and counterfeit medicines (Shelley 2017). Along with the above described pull and push factors, a major enabling factor in illicit trade worldwide over the past three decades has been economic globalisation. The same advances which have facilitated restructuring of the world economy, such as global supply chains and reduction of regulatory barriers to capital flows, have benefitted illicit trade. As a result, legal and illicit trade have grown alongside each other (Costa Storti and De Grauwe, 2011). ## What health harms arise from illicit trade? We will focus on the illicit trade of selected products harmful to health - medicines, tobacco products and psychoactive substances (drugs). There are many other products and services which are traded illicitly which pose harms to human health not covered within the scope of this session. These include the smuggling and trafficking of people, the illegal acquisition and sale of human organs, the production of counterfeit alcohol products, the falsification of medical credentials, and the illicit trade of armaments or weapons. Counterfeit medicines can harm patients through the ingesting of ingredients harmful to health or harmful in the wrong dosage. Indirect harm can also be caused by the patient not receiving the genuine treatment needed for their condition. The illicit trade can also lead to the increased availability or reduced cost of genuine products, such as cigarettes, which are inherently harmful to health. This occurs as the result of genuine cigarettes being smuggled into controlled or closed markets, lower prices of these products due to non-payment of taxes, and pressure on governments to reduce taxes. The supply of illegal drugs can cause direct health harms (e.g. brain development, physiological harms), but also create powerful addictions which lead to risky behaviours and criminality such as engagement in unprotected sex, sex work and petty theft. # 2. The Illicit Trade in Tobacco In this section, we examine the illicit trade in tobacco products defined as the unauthorized manufacture, supply, distribution or sale of genuine, counterfeit or cheap white (see definition below) tobacco products. While a broad range of tobacco products can be traded illicitly, including tobacco leaf and new nicotine products such as electronic cigarettes (vaping products), the bulk of the illicit tobacco trade involves traditional (combustible) cigarettes (WHO, n.d.). Please keep in mind the distinctions between these types of products: - Genuine tobacco products are manufactured legally by tobacco companies. - Counterfeit tobacco products are an “identical copy of a branded product and packaging that is manufactured by parties that do not have the relevant intellectual property rights authorising them to manufacture such branded products. These products are illicit at the point of production because they have been manufactured without the authorisation of the legal brand owner.” - Cheap whites are “factory made cigarettes produced with the approval of a licensing authority in that jurisdiction,” largely for the purpose of supplying markets illegally. These are sometimes known as “illicit whites” but this is a misleading term as they are produced legally (FATF, 2012). In addition to the tobacco product itself being potentially illicit, how it is supplied into target markets can make the product illicit. This can occur in three main ways: - Smuggling refers to the large-scale transportation of tobacco products (usually cigarettes) across international and intranational (e.g. states, provincial) jurisdictions to, for example, avoid the payment of required taxation. During smuggling, cigarettes may be purposely transited through a number of jurisdictions enroute to their final destination to mask their origin. In some cases, exported and thus untaxed cigarettes may be smuggled back to their country of origin to be sold tax free on the black market. - Trafficking refers to the unauthorised sale of tobacco products illicitly supplied to markets. Smuggled cigarettes may be sold in bulk to local distributors and to individual sellers and businesses fronting as cafes, eateries, news agents, liquor stores, and furniture stores. The sale of illicit tobacco products on the Internet is also increasingly becoming a problem. - Bootlegging refers to the small-scale purchase of tobacco products for the purpose of illegally selling them onwards to circumvent differential taxation between jurisdictions. ## Ok who's responsible for this mess? Many different actors. Traditionally, manufacturers of genuine tobacco products have denied involvement and attributed the trade to criminals and organized crime groups. However, detailed analysis of internal tobacco industry documents since early 2000s, along with legal action brought against tobacco companies in several countries (e.g. US, Canada, European Union), provides ==clear evidence of the complicity of transnational tobacco companies (TTCs) as well in the illicit tobacco trade worldwide==. Working through “[[transit agents]]” (i.e. local companies and individuals), evidence shows that TTCs sold genuine products for the purpose of unauthorized supply into illicit markets. These analyses have shown that ==TTCs can benefit from the illicit trade by enabling their brands to be sold in closed or tightly controlled markets (e.g. China, Vietnam)==. This has been especially important when TTCs have competed to establish brand loyalty and grow market share worldwide. The illicit trade has also been strategically useful to undermine increases in tobacco taxes (e.g. Canada). Evidence from internal industry documents also shows that the illicit tobacco trade has generated significant revenues for TTCs (Campaign for Tobacco Free Kids, 2020). In addition to TTCs, new manufacturers have emerged to compete with TTCs in supplying the illicit tobacco trade. Some local manufacturers (e.g. Paraguay, Canada) have previously worked with TTCs and, over time, moved to supplying their own products into the illicit market directly. This includes manufacturers of counterfeit cigarettes whose products directly rival those of TTCs (e.g. China). The low risk, high reward nature of the illicit tobacco trade has also attracted organised crime and terrorist organisations using the lucrative earnings to finance other illicit activities (Holden, 2017; Gomis et al., 2018) ## What's the health harms associated with the illicit tobacco trade (Hint: not just the tobacco product) First, the illicit trade undermines tobacco control efforts. Circumvent taxation intended, in part, to deter use. This makes these products more affordable notably to youth and the poor who are more price sensitive. Illicit tobacco may be sold without adherence to minimum age requirements and other stipulations (e.g. warnings, plain packaging). Illicit cigarettes are often sold as “loosies” (individual cigarettes) to be more affordable. Finally, the illicit tobacco trade is associated with corruption and violence. Its profits benefit TTCs, organised crime, terrorist groups and armed conflicts (Joosens et al., 2009). ## What's the global efforts to elimite the illicit tobacco trade? Experiences from the UK, Italy, and Spain show that addressing the supply side of the illicit tobacco trade is the most effective approach. (Joossens and Raw, 2012). Collective action to address supply has been led by the WHO Framework Convention on Tobacco Control (FCTC) Protocol to Eliminate Illicit Trade in Tobacco Products which entered into force in 2018 (Craig et al., 2019). Signatories to the protocol commit to varied measures to control the supply chain such as licensing, monitoring and regulating internet sales, criminal liability and international cooperation. Governments have also taken successful legal action against TTCs resulting in major fines and, in some cases, memorandums of understanding to combat the illicit trade. For example, TTCs have agreed to use fiscal marks and bar codes on packaging to facilitate tracking. Governments also use licenses to authenticate sellers and distributors, and scan shipping containers to validate their contents (Crosbie et al., 2019). There remain challenges including inadequate tracking and tracing of cigarettes from manufacture to points of sale. This enables legally manufactured cigarettes to continue to “leak” into illicit markets. In summary: 1. The illicit tobacco trade is believed to account for around 9% of the tobacco trade worldwide. This includes a wide range of products which are illicit based on the inauthetincity, unauthorized sale in given jurisdictions or nonpayment of requisite taxes. 2. While criminal organizations are involved at all stages of the global supply chain, transnational tobacco companies have been successfully prosecuted for their complicity in the trade, backed by detailed published evidence based on internal tobacco industry documents. 3. The harms caused by illicit tobacco derive from their inherent harmfulness when used, with additional harms from counterfeit cigarettes, and the availability of lower cost products notably to youth. 4. The FCTC Protocol on the illicit tobacco trade is the focus of global cooperation to prevent and control the supply of these products. --- However, given the industry’s historic complicity in the illicit trade, [3](Rowell A, Evans-Reeves KA. Tobacco industry rallies against illicit trade — but have we forgotten its complicity? The Conversation, 16 March 2015. Available from: [https://theconversation.com/tobacco-industry-rallies-against-illicit-trade-but-have-we-forgotten-its-complicity-38760](https://theconversation.com/tobacco-industry-rallies-against-illicit-trade-but-have-we-forgotten-its-complicity-38760) [Accessed 27 April 2017]) its questionable pre-existing research [4]([4] Gilmore AB, Rowell A, Gallus S et al. Towards a greater understanding of the illicit tobacco trade in Europe: a review of the PMI funded ‘Project Star’ report. Tobacco Control, 2014; 23(e1): e51–61. Available from: [http://tobaccocontrol.bmj.com/content/23/e1/e51](http://tobaccocontrol.bmj.com/content/23/e1/e51) [Accessed 27 April 2017]) on the topic and its repeated use of illicit trade as a counter argument to the further regulation of its products, [5](Rowell A, Evans-Reeves KA, Gilmore AB. Tobacco industry manipulation of data on and press coverage of the illicit tobacco trade in the UK Tobacco Control, 2014,23(e1):e35-e43. Available from: [http://tobaccocontrol.bmj.com/content/early/2014/03/10/tobaccocontrol-2013-051397.full](http://tobaccocontrol.bmj.com/content/early/2014/03/10/tobaccocontrol-2013-051397.full) [Accessed 27 April 2017] Evans-Reeves KA, Hatchard J, Gilmore AB, ‘It will harm business and increase illicit trade’: an evaluation of the relevance, quality and transparency of evidence submitted by transnational tobacco companies to the UK consultation on standardised packaging 2012. Tobacco Control, 2015,24(e2):e168-e177. Available from: [http://tobaccocontrol.bmj.com/content/24/e2/e168](http://tobaccocontrol.bmj.com/content/24/e2/e168) [Accessed 27 April 2017]) its motives in launching PMI IMPACT are arguably spurious. In 2004, PMI paid the EU $1.25 billion to settle claims over the company’s involvement in tobacco smuggling, and committed to produce an annual ‘Project Star’ report about illicit tobacco in the EU. [6](Philip Morris International Inc., Philip Morris Products Inc., Philip Morris Duty Free Inc., et al. Anti-contraband and Anti-counterfeit Agreement and General Release. European Commission. 9 July 2004 Gilmore AB, Rowell A, Gallus S et al. Towards a greater understanding of the illicit tobacco trade in Europe: a review of the PMI funded ‘Project Star’ report. Tobacco Control, 2014; 23(e1): e51–61. Available from: [http://tobaccocontrol.bmj.com/content/23/e1/e51](http://tobaccocontrol.bmj.com/content/23/e1/e51) [Accessed 27 April 2017]) These reports were created by the global accountancy firm KPMG and have been widely criticised by academics. [7](Scollo M, Zacher M, Durkin S, et al. Early evidence about the predicted unintended consequences of standardised packaging of tobacco products in Australia: a cross-sectional study of the place of purchase, regular brands and use of illicit tobacco. BMJ Open;4:e005873. Available from: [http://bmjopen.bmj.com/content/4/8/e005873](http://bmjopen.bmj.com/content/4/8/e005873) [Accessed 27 April 2017]) Operation Henry data, produced by the UK Government’s Trading Standards Institute revealed that in 2014 72% of illicit cigarettes seized in the UK were genuine smuggled brands without UK Duty being paid. [8](Trajectory. Turning point: Insights into illicit tobacco in the UK.SICPA. July 2016.) In the past, when genuine brands have been smuggled like this, the tobacco industry has been accused of being complicit by failing to control their supply chain. [9](Select Committee on Public Accounts, Minutes of evidence questions 540–559, examination of Mr Gareth Davis, Mr Bruce Davidson and Mr John Dibble, 19 June 2002. Available from: [https://www.publications.parliament.uk/pa/cm200203/cmselect/cmpubacc/143/2061915.htm](https://www.publications.parliament.uk/pa/cm200203/cmselect/cmpubacc/143/2061915.htm) [Accessed 27 April 2017]). Source: https://medium.com/@ASH_LDN/pmi-impact-controlling-research-controlling-policy-9b11562f4dae --- ## Feedback of Activity 2 a) Analysis based on internal documents provided detailed evidence of the complicity of TTCs in the illicit tobacco trade since at least the 1980s. The documents describe large-scale trade of billions of cigarettes which earned TTCs tens of millions of US$ in undeclared revenues. By the mid 2000s, legal prosecution and the emergence of rival manufacturers competing with TTCs with genuine and counterfeit products) led TTCs to position themselves as opponents of the illicit tobacco trade. However, there remain concerns that TTCs continue to knowingly supply their products into illicit markets. Moreover, public health researchers have raised questions about efforts by TTCs to manipulate official data on this trade, to focus only on counterfeit products competing with their own brands, and to advocate for ineffective tracking and tracing methods (Gallagher et al., 2019). b) TTCs have presented themselves as allied with efforts by customs and excise, law enforcement and public health officials to combat the illicit tobacco trade. These companies have funded initiatives to train officials in LMICs and have claimed that their economic interests are harmed by this trade. However, evidence of past and continued complicity in the illicit trade by TTCs makes them inappropriate partners to fight the illicit tobacco trade. This remains the position of WHO and tobacco control advocacy groups. # 3. The Illicit Drug Trade An illicit drug is a broader category to denote a drug that may be legally available but used inappropriately or for inappropriate purposes. One way of classifying illicit drugs is by their psychoactive or psychotropic effects, notably as: · stimulants which raise levels of physiological or nervous activity in the body; · opioids or narcotics which relieve pain, dulls senses and produce euphoria; · disassociatives which create feelings of separation from one’s body and environment; and · hallucinogens which alter states of perception and feeling What is and is not an illegal or illicit drug depends on the laws of a specific jurisdiction, societal customs, normals and rules. Importantly, these criteria change over time. Prior to twentieh century, almost all drugs were legal. During the twentieth century, concerns about health harms, societal norms and criminality led to their control and even their prohibition. Since the late twentieth century, support has grown for decriminalisation and legalisation. In this section, we will use the term ==illicit drugs to refer to all controlled substances used for non-medical purposes, some of which are deemed illegal in some jurisdictions (Caulkins and Reuter, 2010; Clarke, 2016).== The United Nations Office on Drugs and Crime (UNODC) estimates that 269 million people (5.3% of the global population) aged 15-64 used controlled substances for non-medical purposes in 2018, an increase from 210 million in 2009 (4.8%). This is due, in part, from a rise in this population but also sharp increase in opioid use. Illicit drug use has grown more rapidly in low- and middle-income countries, among adolescents and young adults, and in urban rather than rural populations. However, given the association between wealth and illicit drug use, illicit drug use is more widespread in high-income countries. The illicit drug trade was estimated to be worth US$100 billion in 2013 (UNODC, 2020). ## Who's responsible? Dominated by criminal groups that operate a global supply chain. The production may involve farmers growing drug-related crops alongside other types of crops, eg, coca, cannabis. Synthetic drugs, eg, metamphetamine, fentanyl, are created from man-made chemicals obtained legally or illegally. Producers mix together synthethic drugs, eg, fentanyl, with heroin or cocain. The UNODC (2020) reports that “drug markets are becoming increasingly complex. Plant-based substances such as cannabis, cocaine and heroin have been joined by hundreds of synthetic drugs, many not under international control. There has also been a rapid rise in the non-medical use of pharmaceutical drugs. Distribution. involves movement from place of manufacture to place of sale. Multiple actors and long distances across national borders. Small-scale transport is conducted by individuals (mules) paid to smuggle illicit drugs in their possessions or person (strapped on their bodies, internally). Larger-scale transport conducted by road via large heavy goods vehicles, sea via shipping containers, and air via freight. Illicit drugs are often concealed amid other goods to evade detection. Sale. Direct dealers or dark web. Dealers get percentage fee. Others trade being a dealer in exchange for their own supply. ## What's the health harm? Short-term: change in appetite, wakefulness, heart rate, blood pressure, mood, to a more serious one: heart attack, stroke, psychosis, death Longer-term effect: heart or lung disease, cancers, oral health problems, mental illness and infectious disease. Cannabis can impair development of the brain, especially in youth. Long-term: addiction with psychological and physiological impacts, incl. mental stress levels, rational decision making, and learning and memory skills. Mental health impacts incl depression, psychotic episodes and social stigma. Withdrawal symptoms and even death. Harms to health can also be indirect arising from personal neglect, impaired judgment or impulse control, and risky behaviors, such as oeprating vehicles under the influence, using unclean needles, enegaging in unprotected sex and criminal activity. Finally, there are potential physical or mental health risks to others. Women may harm the health of their unborn babies if they engage in drug use during pregnancy, and parents can neglect their caring roles. Criminal activity may lead to violence and physical harm to others. Production of illicit drugs can mean exposure to noxious chemicals and violence. Overall, approximately 585,000 people worldwide died as a result of illicit drug use in 2017 (UNODC, 2019). ## Global efforts to respond to illicit drug trade There are also different normative frameworks (e.g. focus of harm reduction on safe supply to protect users, focus of War on Drugs on disrupting the global supply chain and reducing criminality) informing policies defined by health, education, fiscal policy and law enforcement goals. ==There is widely varying capacity to enforce control across countries. There is also varying commitment to act due to weak governance or corruption. In some countries, the illicit drug trade generates substantial revenues and officials thus turn a blind eye.== These factors have made it difficult to achieve effective international cooperation (UNDOC, 2020). > In response to the global nature of the supply chain for illicit drugs, three international treaties are currently in force to support cooperation across countries. 1. The [[Single Convention on Narcotic Drugs]] (1961) an update and expansion in scope of the 1931 Paris Convention, prohibits the production and supply of over more than 116 opioids and drugs with similar effects except under license for specific purpose, such as medical treatment and research. The 1961 treaty was expanded to include synthetic opioids (e.g. methadone, pethidine, morphinans) and a mechanism to enable the inclusion of new drugs as they arise. - WHO, and a Commission on Narcotic Drugs (composed of 53 member states elected by [[ECOSOC]]) established in 1946, were given the authority to add, remove or reclassify drugs under the Convention's four schedules. - An International Narcotics Control Board (a permanent and independent body of 13 members elected by Ecosoc for their expertise), established in 1968, was given the role of administering controls over drug production and trade, and monitoring activities and progress in implementing the Convention carried out by the UNODC. - In 1972, a Protocol to the Convention was adopted which emphasized the need to address narcotics trafficking and “provide treatment and rehabilitation services to drug abusers”. 2. In 1971, the Single Convention on Narcotic Drugs was amended alongside the adoption of the [[Convention on Psychotropic Substances]], a UN treaty which made the production and use of all psychoactive substances for non-medical and non-scientific uses illegal. - This new convention was adopted because, during the 1960s, many new drugs became available such as amphetamine-type stimulants, barbiturates, and psychedelics not covered by the previous convention on narcotic drugs. The manufacture of these new types of drugs enabled suppliers to circumvent legal restrictions. This Convention on Psychotropic Substances also introduced new import and export restrictions on drugs not designed illegal, and identified the need for “early identification, treatment, education, after-care rehabilitation and social reintegration of dependent persons” (United Nations, 1971). The treaty came into effect in 1976 and, as of 2020, has 184 signatories. 3. The third main treaty, the [[United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances]] was adopted in 1988 to provide additional legal mechanisms to enforce the previous two treaties. - The 1988 treaty was prompted by the significant increase in illicit production and trade of cannabis, cocaine and heroin during the 1970s and 1980s. The rise of the US$ billion trade, dominated by organised crime, led high-income countries, notably the US, to support a new treaty as part of the “war on drugs”. The treaty “creates and consolidates international cooperation between law enforcement bodies such as customs, police and judicial authorities”, and provides legal guidelines to stop illicit trafficking, to arrest and try drug traffickers, and to deprive suppliers with their “ill-gotten gains.” (UNODC, 2019) > Most assessments of international and domestic efforts to address the illicit drug trade conclude that there has been more failure than success (Clarke, 2016). The continued growth in numbers of users and the drugs they use, along with the many health and societal harms generated, suggest that existing measures have had limited and often counterproductive impacts. Globalisation has added further challenges by enabling the emergence of worldwide networks linking supply and demand, generating huge revenues for organised criminal groups which far exceed resources made available to law enforcement, customs and public health officials. Those who support the liberalisation of drug policies seek to reduce these harms by enabling controlled and safe access to such drugs through licensed suppliers. It is argued that decriminalisation and legalisation shift the trade from an uncontrollable Black Market to a controlled legal market. Opposition to liberalisation is based on concerns about encouraging initiation of drug use among youth and normalising the use of such drugs (UNODC, 2019). ## Activity 3 There has been much debate about how best to address the significant and growing problem of illicit drug use worldwide. One approach gaining support in some countries is harm reduction. The organisation, Harm Reduction International, advocates for social justice, access to safe supplies, and reform of drug laws. Read about this approach here: https://www.hri.global/what-is-harm-reduction and then answer the following questions: a) What are the merits of this approach? - Shed lights to victims and direct them to appropriate exit from the illicit drug ring and healing from the addiction - Acknowledge the problem and increase awareness in a positive way - Eliminate social stigma and humanize the victims b) Who would be opposed to this approach? - Those who believe that addictions to substances are a result of weakness of moral character or individual behavior problems. - People living close to harm reduction initiatives (e.g. safe injection sites) may oppose drug use in their neighbourhoods. - Others may argue that harm reduction prolongs and may even normalise, rather than reduce, the problem. It is argued that this can lead to increased uptake. - Advocates of stronger law enforcement argue that stronger sanctions and punitive measures, rather than harm reduction approaches, will deter illicit drug use. c) Do you think this might work in your country? - When reflecting on whether harm reduction approaches can be effective in your own country, you should consider the nature and scale of illicit drug use, what populations are most impacted, and the efforts made to date to address the problem. To answer c), you may wish to read editorials in local newspapers or statements by local organisations, working on addictions, to understand prevailing values, beliefs and attitudes towards addressing illicit drugs in your country. You may also wish to consider the degree of influence that advocates of harm reduction and other approaches hold in your country. # 4. The Illegal Trade in Counterfeit Medicines Counterfeit medicines, according to the WHO, are deliberately and fraudulently produced and mislabelled with respect to identity and/or source so that they appear to be genuine products. Manufacturers and distributors seek to mislead buyers and users, to earn profit, by selling products as authentic therapeutics. Manufacturers of patented medicines may oppose generic versions of their products on the grounds of alleged violation of [[Intellectual Property Rights (IPR)]] but this is a separate issue from the safety and efficacy of generic drugs. > Counterfeit medicines, in contrast, seek to deliberately and fraudulently produce and sell either patent-protected (branded) or generic products. Counterfeit medicines are not bioequivalent because they contain no active pharmaceutical ingredient (API), an incorrect amount, an inferior quality of API, a wrong API, contaminants, or repackage expired products (Williams and McKnight, 2014). The global trade in counterfeit medicines was reported to be worth an estimated US$75 billion in revenues in 2009, a 90% increase over the previous five years (WHO, 2010). The main drivers of this growth are believed to be the ease of internet sales, global supply routes and minimal punishments for producers. Medicines are now the tenth most common counterfeited product in the world after such products as fashion, electrical items, medical equipment and toys (OECD, 2020). The biggest markets are in low- and middle-income countries, notably countries in sub-Saharan Africa and Asia where 10% of medicines are estimated as substandard or falsified (WHO, 2018). Need, affordability, availability of genuine medicines, and effectiveness of regulatory mechanisms are factors influencing the presence of counterfeit medicines in specific markets. Limited availability of reliable data suggests these figures are underestimates. ## Who's responsible? The OECD (2020) reports that production by criminal groups occurs across all continents, ranging from small-scale to large-scale operations. Knowledge of how to manufacture counterfeit medicines come from criminal groups and via information on the Internet. Ingredients and equipment may be acquired locally, ordered online from internet suppliers, and from illegal or legal sources. ==Criminals earn high profits by operations not being subject to costs of research and development (including clinical trials), marketing, quality control and genuine API and other ingredients, and taxation==. India and China are identified by customs and law enforcement agencies as the primary sources of such operations, accounting for 53% and 30% of seized counterfeit medicines respectively. The Philippines and Thailand are also major sources of supply. Some countries serve as important transit points for processing and onward shipping to destination markets including Hong Kong, Turkey, Iran, Switzerland and the US. Counterfeit medicines are then sold to wholesalers and other distributors such as pharmacies and local businesses. In some cases, sellers may believe these are genuine products. Counterfeit medicines are increasingly sold knowingly or unknowingly via the Internet. Where counterfeit medicines are transited through many countries, tracking and tracing for prosecution by customs officials, regulatory agencies and law enforcement becomes increasingly difficult (OECD, 2016). People buy counterfeit medicines for several reasons. In many cases, they are unaware of the falsified nature of the product. However, where genuine products are unavailable, patients may knowingly buy counterfeit medicines to hopefully benefit from trace amounts of API. Where affordability of genuine medicines hinders access, buyers are attracted to the lower prices of counterfeit medicines. Online sellers also offer convenience and confidentiality (Clarke, 2016). ## Harms associated Counterfeiters place individuals at risk of injury and death because these products are not subject to the regulatory standards of safety and efficacy required by legal products. The use of counterfeit medicines delay authentic treatment, and in the event of poor outcomes, creates distrust in health care providers and systems. Counterfeit medicines may contribute to arise of resistance of microorganisms, esp problematic for HIV/AIDS and malaria treatments. The harms posed by counterfeit medicines ==extend beyond patients and affect population health on a global scale==. For example, counterfeiters may use trace amounts of genuine ingredients to evade detection. These low levels of API may contribute to resistance by microorganisms. This is especially problematic for HIV/AIDS and malaria treatments with so few medicines currently available to treat these diseases. Use of counterfeit vaccines can lead to outbreaks in populations thought to be protected. Finally, counterfeit medicines undermine the development of genuine medicines. Counterfeit harms the reputation and trust in genuine products and their manufacturers. Lost revenues and the violation of intellectual property of pharmaceutical companies creates disincentives to invest in future research and development (Williams and McKnight, 2014). ## The global response to counterfeit medicines One approach is to require the use of identifiers to facilitate visual inspection by regulators seeking to identify differences between authentic and counterfeit products. Packaging materials, labels, holograms, seals, colour-shifting inks, embedded codes, images and special dyes can also be used to denote authenticity. More sophisticated techniques may be used such as spectroscopic methods which are difficult to replicate by counterfeiters (Clarke, 2016). Second - seize products along the global supply chain before reaching end markets. Local authorities -> close down manufacturers at source. Custom officials -> intercept transported counterfeit Law enforcement -> visit local pharmacies or unauthorised sellers Third - prosecute parties involved given that most counterfeit drugs are detected once harms are inflicted. > Cooperation across countries, between the public and private sector, and between health and other sectors such as customs and law enforcement is essential for all three approaches (Liberman, 2012). For this purpose, WHO formed the [[International Medical Products Anti-Counterfeiting Taskforce (IMPACT)]] in 2006. This was followed in 2013 by the Global Surveillance and Monitoring System to “encourage countries to report incidents of substandard and falsified medical products in a structured and systematic format”. This system provides technical support and gathers evidence to demonstrate the scale of the problem. By 2017, WHO had issued 20 global medical product alerts and trained a network of regulatory staff based around the world to report substandard and falsified medical products (WHO, 2017). ### Several challenges remain 1. Unlawful nature of the trade, there remains a lack of reliable data. This makes it difficult to know the true extent and nature of the problem. The standardisation of definition and aggregation of comparable data across jurisdictions is critical, along with its sharing to identify priority action. This has been hindered by different approaches and competing policy goals and measures. Public health: protect and promote the health of users (e.g. safe injection sites, legalized access, drug treatment centers), law enforcement agencies approach the problem as one of criminality (e.g. arrest and prosecution of suppliers), custom officials and pharmaceutical industry see the problem as an economic issue (e.g. seizures, tracing of money laundering) 2. Capacity building among merchants, health providers, patients and others involved in the sale and use of medicines is needed. ==Along with increased public awareness of the health risks from counterfeit medicines, public information should focus on wider impacts such as increased drug resistance and criminality.== The problem of counterfeit medicines also points to the ==continuing problem of access to affordable medicines==, which are safe and effective, by all people. Inequities of access in all countries mean that the sheer need for medicines will lead many people to risky sources of supply. ## #to-think Activity 4 Digital and mobile technologies are being applied in many countries to tackle the problem of counterfeit medicines. One example is the use of blockchain (a digital record of transactions) to secure the delivery of genuine pharmaceuticals from one location (e.g. pharmacy) to another (e.g. health care clinic). Watch the brief video by IBM on Using blockchain to prevent counterfeit drugs in Kenya found here: https://www.youtube.com/watch?v=11Z4-XYoZAE (5:01) and answer the following questions: a) Based on your knowledge of the global supply chain for counterfeit medicines, what are the strengths and weaknesses of this example? b) How might this approach be scaled up to other parts of the global supply chain to reduce the problem of counterfeit medicines? ### Feedback a) One strength of this example is that it is providing a means of improving the security of drug supply in Kenya where the proliferation of counterfeit and unregulated pharmaceutical products in recent years poses threats to efforts to support universal health coverage. Another advantage is that it uses existing mobile technology and does not require major investment in infrastructure. It can also be easily used by local pharmacies and health care providers. The main weakness of this example is that it deals with only a local part of the global supply chain (i.e. pharmacy to health care provider). Mombasa is believed to have become a major hub for the global supply chain of many types of illicit trade, given increased insecurity of other routes (e.g. Syria), with counterfeit medicines transited from Kenya to other parts of Africa and other regions. b) While the Kenyan example has the potential to increase security locally, efforts are underway to apply blockchain across the entire global supply chain. Initially, initiatives like the Kenyan example are being trialled in a wide variety of countries including India, Mongolia and the US. Blockchain is being combined with other technologies, such as [[Artificial Intelligence (AI)]] and big data, to identify counterfeit medicines and breaches in the supply chain. Eventually, these projects will be joined up to create regional and global systems. This is the core idea behind the industry-led MediLedger Network (https://www.mediledger.com/) which validates the authenticity of drug identifiers across the supply chain. As of February 2020, there are 24 participating companies including manufacturers, distributers, retailers and delivery firms, with plans to expand further. # 5. Integrating activity During this session, you have learned about illicit trade in three product areas (psychotropic drugs, tobacco and counterfeit medicines) which pose harms to health. Each of these have prompted separate forms of collective action to monitor and track activity, share information, improve public education, and prosecute criminal activity. However, the OECD (2016) report, ‘Illicit Trade: Converging Criminal Networks’, argues that the interconnectedness of different types of illicit trade requires a more integrated approach. a) What common features do these three types of illicit trade share? b) What causal factors might contribute to all three? c) How might they involve the same actors at certain points along their global supply chains? d) Are there global responses common to all three that might be more closely integrated? ## Feedback a) The common features of the three types of illicit trade are their increased scale and global reach since the early 2000s, the emergence of global supply chains, the sophisticated networks which sustain their operations, and the substantial proceeds to be earned. Overall, illicit trade has taken advantage of the increased interconnectedness of the world economy which enables legal and illegal trade to flourish. b) On the supply side, poverty, limited opportunities to earn basic incomes, political and economic insecurity can lead individuals to be involved in illicit trade. The potential to earn higher returns despite the risks also attracts participation. Globalisation of transportation, financial systems and the internet, for example, has facilitated the conduct of many types of illicit trade. On the demand side, peer pressure, lesser affordability or lack of access to genuine products, and substance addiction support the use of illicitly traded products. c) The three types of illicit trade have diverse systems of manufacturing although production may be controlled by the same actors. Organised criminal groups control the supply routes for different types of illicit trade, often combining them into the same shipments, for transport to major hubs and then onwards to final markets. The distribution and sales of illicit products is often done by people who have limited employment opportunities. Vulnerable populations will bear a disproportionate share of the risks along the global supply chain of incarceration, health risks and economic insecurity. The complicity of major financial institutions in large-scale laundering of proceeds from different types of illicit trade has increasingly come to light, leading to tighter regulation and penalties. d) This session suggests more coordinated responses, across different sectors in each society, across different societies, and across different types of illicit trade is needed to combat them effectively. While the three types of illicit trade discussed pose harms to health, the problems they create are also related to law enforcement (i.e. criminal activity), customs and excise (i.e. taxation avoidance) and even security (e.g. funding of terrorism). The global supply chain indicates the need for collective action across countries. Finally, efforts to tackle each type of illicit trade separately will be less effective than addressing them as different aspects of a shared problem. The closer sharing of data, intelligence gathering on organised criminal groups, linking of one type of illicit trade to other criminal activity (e.g. proceeds from tobacco smuggling used to buy illegal firearms which are shipped to conflict zones), for example, would facilitate a more integrated approach. # 6. Summary We have briefly explored three types of illicit trade – tobacco, illegal drugs and counterfeit medicines. We have considered the definition of each type of trade, the significant scale and global nature of each of these traded products, who is responsible, what health harms arise from the trade, and the global responses to date. It is now useful to review each of the learning objectives of this session. Discuss the ways in which the illicit trade in tobacco and tobacco products, illegal drugs, small arms and light weapons, and counterfeit drugs pose harms to human health You learned that illicit trade can directly threaten the health of individuals who use such products and indirectly threaten health of many people in diverse ways. These harms can be immediate and longer-term. When formulating policies to address illicit activities, policymakers must take into account these varying harms to health. Understand the ways drivers of globalisation enable these activities to exist As part of this module, you have learned that drivers of globalisation enable people in different countries to interact more readily with one another. From this session, you have learned that interactions may include illicit and illegal activities across countries. Globalisation has facilitated the formation of global supply chains involving criminal organisations operating across geographic boundaries, and through the Internet, to produce and supply markets worldwide. The financial interconnectedness of the global economy also enables proceeds earned from illicit trade to be concealed and laundered. Identify the actors, organisations, and institutional arrangements involved in the promotion and regulation of illicit trade activities You learned that there are many actors involved in carrying out illicit trade, along global supply chains, spanning producers, distributors, sales and consumers. The nefarious and clandestine nature of the illicit trade means that individuals and criminal organisations use a variety of methods to avoid detection. Despite the risks that criminals face, including fines, arrest, imprisonment, and even execution, the prospect of earning lucrative incomes motivate their participation. In many cases, these earnings are then used to support other illicit activities, as well as, laundering into legitimate businesses. There are also many actors involved in the regulation of such activities to prevent and control illicit and illegal products. In addition to ministries of health and the United Nations bodies, law enforcement officials and other authorities are involved in the prevention and control of illicit activities. Major commercial interests, such as the pharmaceutical industry, are economically and reputationally harmed by illicit trade. Some, notably the tobacco industry, have been accused of complicity in the illicit trade of their products. Understand the main challenges faced by policy makers seeking to address illicit trade on an increasingly global scale Finally, you learned that policymakers and practitioners face numerous challenges in effectively responding to illicit activities. The large number of actors involved, the secretive manner in which these activities are carried out, the complex and global nature of the trade, and the limited availability and sharing of data across countries and agencies have posed challenges. While collective action is needed to address these activities, given their global scale and reach, differences in perspectives and interests, varying legal and regulatory frameworks (including what is considered illicit), institutional capacity or willingness to enforce these frameworks pose further challenges to effective global responses # 7. References ## 7.1 [[Essential readings]] Liberman J. 2012. Combating Counterfeit Medicines and Illicit Trade in Tobacco Products: Minefields in Global Health Governance. Journal of Law, Medicine & Ethics, 40(2): 326–347. Shelley L. 2017. Illicit Trade. In Reinert K. ed. Handbook of Globalisation and Development. London: Elgar, Chapter 6. https://www.elgaronline.com/view/edcoll/9781783478644/9781783478644.00012.xml ## 7.2 [[Recommended reading]] Holden C. 2017. Graduated sovereignty and global governance gaps: Special economic zones and the illicit trade in tobacco products. Political Geography, 59: 72-81. Mackey T, Liang B, York P, Kubic T. 2015. Counterfeit drug penetration into global legitimate medicine supply chains: A global assessment. The American Journal of Tropical Medicine and Hygiene, 92(6): 59-67. OECD. 2016. Illicit Trade, Converging Criminal Networks. OECD Reviews of Risk Management Policies, Paris, Executive Summary (pp. 13-16) and Chapter 1 (pp. 17-36). https://www.oecd-ilibrary.org/docserver/9789264251847-en.pdf?expires=1594496011&id=id&accname=guest&checksum=6F06E1224AAA318D2052C5C83D43E485