Academic journal article Washington International Law Journal

Counterfeit Pharmaceuticals in China: Could Changes Bring Stronger Protection for Intellectual Property Rights and Human Health?

Academic journal article Washington International Law Journal

Counterfeit Pharmaceuticals in China: Could Changes Bring Stronger Protection for Intellectual Property Rights and Human Health?

Article excerpt

I. INTRODUCTION

The World Health Organization ("WHO") defines a counterfeit drug as "a medicine, which is deliberately and fraudulently mislabeled with respect to identity and/or source."1 China is one of the world's top producers of both legitimate and counterfeit pharmaceuticals.2 In 1980, China took initial significant steps to improve its IP climate when it joined the World Intellectual Property Organization ("WIPO").3 Since this important development, China has adopted and amended its IP law, signed several treaties, and joined international organizations to work towards establishing a "made by China" label, rather than remaining with the "made in China" label.4 These changes have led to fast-paced growth of intellectual property activity.5 In fact, according to a WIPO report, China has become the third largest recipient of patent filings with a filing increase of almost thirty-three percent in 2004 alone.6 Although these numbers seem promising, China's prominent role in the counterfeit drug market reveals its ongoing inability to enforce IP rights or to prosecute infringement through administrative, civil, or criminal mechanisms.7

Worldwide, the counterfeit drug market accounts for approximately forty billion dollars in annual sales.8 China is a lead actor in this market, and its role will arguably only increase in the future.9 Although there are significant profits that can be earned from participation in the counterfeit drug market, counterfeiting also results in physical harm or death to thousands of people globally,10 as well as decreased confidence in the Chinese economy and stifled innovation.11 The Chinese government could arguably approach this problem head-on by amending legislation and increasing enforcement efforts. Additionally, it could work to eliminate the local government corruption that undermines existing counterfeit drug regulations.12

This comment discusses the issues revolving around China's counterfeit drug industry and provides suggestions as to how the Chinese government can better address this problem. Part II discusses the serious health threats posed by counterfeit drugs, introduces a prominent example of drug counterfeiting, and presents the steps China has already taken to fight against IP infringement. Part III describes the body of Chinese law created to confront IP infringement and fight against counterfeiting. Part IV addresses the legal mechanisms used to enforce these IP laws and discusses specific issues that hinder deterrence of pharmaceutical counterfeiting. Finally, Part V suggests possible means by which the Chinese government could improve enforcement of IP laws in order to reduce China's production and sale of counterfeit drugs.

II. BACKGROUND ON PHARMACEUTICAL COUNTERFEITING

Countries around the world have communicated their strong opposition to drug counterfeiting, despite the fact that counterfeiting has the ability to yield high economic gains for those who do business in the industry.13 The rise of counterfeit drugs has caused a decrease in innovation and investment in legitimate pharmaceutical companies. It has also caused a wide array of social and economic problems for China.14

A. Pharmaceutical Counterfeiting Causes Serious Physical and Economic Harm

According to WHO, counterfeit drugs account for ten percent of the world's pharmaceuticals, though this number may be as high as sixty percent in some developing countries.15 Counterfeit drugs will be worth approximately seventy-five billion dollars globally by 2010.16 Due to China's significant contribution to this mass production, the United States has placed China on its "priority watch list"17 of countries failing to protect IP rights adequately and reduce infringement levels significantly.

The counterfeit pharmaceuticals market presents a serious health risk to both Chinese citizens and to the international community. This growing problem is due to the fact that approximately fifty percent of China's drug supply is counterfeit. …

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