Policy Department C: Citizens' Rights and Constitutional Affairs ________________________________________________________________________________________
The costs resulting from compromises in public health and safety are subject to underidentification and reporting of counterfeit goods. It is clear that customs officials are impounding more consumable items as a percentage of all items over the past three years (World Customs Organization, 2012, 2013a), though the number of articles detained by EU Customs dropped by two thirds in 2012 (European Commission, 2013). While there exist consumers who willingly buy known counterfeited ingestible items (not deceived) (Prabhakar, 2012), particularly tobacco products (World Customs Organization, 2013b), it is more likely that users are deceived with ingestible items given the reluctance of consumers to hazard personal harm due to ingesting unknown substances and the resulting efforts by counterfeiters to sell products as exact substitutes (BASCAP, 2009; Mackey & Liang, 2011). Spink (2011, p. 184) identifies three types of public health risks resulting from food fraud: direct, posing immediate risk to the consumer such as acute illness or death; indirect, posing a sustained, long term risk to the consumer such as poisoning resulting from long-term exposure to toxic elements; and, technical whereby the consumer is duped into ingesting something that is not necessarily harmful but not what it claims to be. It is possible that counterfeiting and piracy may cost G20 governments and consumers over $US120 billion every year, with $77.5 billion of this from tax revenue losses, $25 billion in increased costs of crime, $18.1 billion in the economic cost of deaths resulting from counterfeiting and $125 million for the additional cost of health services caused by dangerous counterfeit products (Frontier Economics, 2011), but we are unable to evaluate these claims in general or re-estimate them for the EU in particular.44 We are particularly sceptical of all time-invariant accounts. Of particular concern are the costs to public health that can originate and extend past the physical borders of the EU, namely those resulting from the counterfeiting of pharmaceuticals. To be clear, in referring to counterfeit pharmaceuticals, we refer to medications that do not contain the same quantity or quality of the legal equivalent. Pharmaceuticals are attractive items to pirates given their margins to be earned on a per dose basis. Counterfeiters can accept tiny margins on each piece because they are able to move millions of pieces (Bate, 2008). Whether or not such counterfeiting is undertaken by organised crime groups committing other crimes, it seems to us obvious that the label is appropriate to them: they may be distributed via otherwise legitimate channels, however. Though counterfeit pharmaceuticals are known to be sold widely in economies that can afford the medications the least (Bate, 2008), there is little research on the percentage of counterfeit pharmaceuticals in the developed world or, by extension, to the EU (Outterson & Smith, 2006). An ASOP EU (2013) report estimates that sales generated in Europe by criminals who make fake/falsified medicines is greater than â‚Ź1.4 bn per year, but this is not an estimate of harm anywhere, let alone to the EU. Additionally, counterfeit pharmaceuticals pose a threat to consumers when there are times of great demand due to shortages or pandemics (Liang, 2006; Liang & Mackey, 2012; Mackey & Liang, 2011). The threat that counterfeit products are used has increased with the use of online pharmacies and medical providers (Liang & Mackey, 2012). Furthermore, the risks generated from the consumption of such medications pose a possible worldwide public health threat do the resistance that bacteria can develop when treated with inferior or insufficient doses (Mackey & Liang, 2011). The resulting costs of drug development, the resulting deaths due to the inability to treat, and the costs of healthcare are not able to be estimated. 44
Given corporate tax avoidance mechanisms, the tax loss estimates are particularly problematic.
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