6 The Global Health Impacts of Illicit Trade Flashcards
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Overview Summary
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This session is about various forms of illicit trade, involving the transactional production and consumption of a good or service, which are either prohibited by law only (illegal) or, more broadly, prohibited by law, rules, custom or other sets of agreed principles (illicit). You will learn about three types of illicit trade, the actors involved, the global health impacts of this trade, and the global policy responses to date.
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Overview Aims
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The aims of this session are to understand the global nature of various types of illicit trade, specifically focused on health-harming products, their diverse impacts on health, and the complex challenges posed to policy makers.
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Overview Learning outcomes
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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
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Key terms Illicit activity
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There are many types of illicit activity related to the trade of health-harming products. The following terms are useful to understand for this session. It should be recognised, however, that definitions used can vary by the specific product, jurisdiction and regulatory body involved.
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Key terms Black Market
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Economic activity which takes place outside of government-sanctioned channels. Transactions are made in the Black Market generally to avoid official controls of a traded product or service (such as price controls or taxes) or to supply an illicit product or service (OECD, 2016).
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Key terms Bootlegging
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The relatively small-scale purchase of legal products for the purpose of illegally selling them onwards. This can occur to supply a product which is prohibited (e.g. alcohol) or to circumvent differentials in taxation (e.g. cigarettes) (Joosens and Raw, 2012).
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Key terms Contraband
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A product or good which has been imported or exported illicitly (Joosens and Raw, 2012).
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Key terms Counterfeiting
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The practice of imitating something authentic, without permission, for the purpose of stealing, destroying or replacing the original. Counterfeiting is used in illegal transactions whereby the imitated product is dishonestly presented to others as the original or of being equal value to the original (Liberman, 2012).
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Key terms Dark Web
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A section of the internet which is not accessible to the everyday user but requires specialist software and dark web address. The software enables users to anonymise their unique Internet protocol (IP) address while browsing and thus protect their identity (OECD, 2016).
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Key terms Illegal activity
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An activity prohibited by law (Shelley, 2017).
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Key terms Illicit activity
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An activity prohibited by law, rules, custom or other set of agreed principles. Note that this is a more encompassing term than illegal activity. The activity spans the provision of illicit goods and services, and infiltration of a legitimate business or government (Shelley, 2017).
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Key terms Illicit trade
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An activity involving the exchange of a good or service which is prohibited by law, rules, custom or other set of agreed principles (Shelley, 2017).
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Key terms Money Laundering
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The concealing of the origins of money illegally obtained by transferring funds to foreign financial institutions or establishing legitimate businesses (Costa Storti and De Grauwe, 2011).
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Key terms Smuggling
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The movement of something or someone from one location to another with disregard to official legal channels of movement (e.g. people smuggling, cigarette smuggling) (Joosens and Raw, 2012).
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Key terms Trafficking
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The illegal supply and sale of something or someone prohibited by law (UNDOC, 2019).
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- What is illicit trade?
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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).
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- What is illicit trade?
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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).
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- What is illicit trade?
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Overall, what trade is considered illicit can vary substantially across national jurisdictions due to differences in law, rules and custom. Across countries, international law has evolved over time, based on agreement across national jurisdictions, that certain forms of trade are deemed illegal or illicit (e.g. narcotics, firearms and other weapons, tobacco products).
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1.1 Why does illicit trade take place? Pull factors
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The illicit trade occurs for both “pull” and “push” factors. Pull factors relate to the demand for such products. The illicit trade can enable consumers to acquire certain products that are prohibited and otherwise not available or in short supply. Or consumers may acquire the products at prices lower than offered on the legal market. For example, differential taxes on cigarettes across jurisdictions has contributed to bootlegging. In some cases, the use of the product (such as tobacco, alcohol, psychoactive substances) can lead to strong addiction which adds further to demand (Shelley, 2017; OECD, 2016).
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1.1 Why does illicit trade take place? Push factors
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Push factors relate to the supply of such products. The illicit trade involves numerous actors along a global supply chain from production (e.g. farmers, facilities growing marijuana, illegal labs) to the laundering of proceeds (e.g. legitimate businesses, banks). In some cases, the economic incentive to engage in illicit trade may be attractive because legal employment is scarce. In other circumstances, the illicit production and selling of such products is an opportunity to generate substantial earnings, and to pay less or no taxes on those earnings. As trade grows, the need for greater logistics to supply an illicit market and evade authorities leads actors to become more organised locally and across countries. Increasingly, organised criminal groups dominate large-scale illicit trade in counterfeit goods, tobacco products, illegal drugs and firearms. These groups may even conduct clandestine research and development, subcontract transport and other logistics, create systems of quality control, and offer renumeration in exchange for cooperation from local law enforcement and customs officials (Costa Storti and De Grauwe, 2011; OECD, 2016).
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1.1 Why does illicit trade take place?
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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. Despite facing repercussions such as fines, arrest, incarceration and even execution, the prospect of earning a high payoff ensures that there will always be a continual stream of individuals and groups that are willing to produce and supply these goods. 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).
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1.1 Why does illicit trade take place?
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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).
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1.2 What health harms arise from illicit trade?
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In this session, 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.
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1.2 What health harms arise from illicit trade?
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Illicit trade poses direct and indirect risks to health. For example, counterfeit medicines can harm patients directly 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.
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1.2 What health harms arise from illicit trade?
Moreover, the harms caused by illicit trade are not limited to health. On a societal scale, illicit activities undermine the rule of law and cause governments to devote resources that might otherwise be used in promoting health to curbing their existence and addressing their consequences. They are also costly because they deprive governments of tax revenues that could be earned from the legitimate trade and sale of goods (OECD, 2016).
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1.3 What will you learn in this session?
In this session, you will be provided with an overview of illicit trade involving products harmful to health. While such activities are likely to have a history as long as trade in general has been conducted, this session will focus on the ways illicit trade has changed as a result of globalisation. To understand the increasingly global nature of illicit trade, we will focus on medicines, tobacco products and psychoactive substances (drugs). You will learn about the scope of illicit trade involving each type of product, the risks posed to public health, and the response by authorities. From a public health standpoint, it is essential to understand the factors that enable these products to be produced and supplied across national jurisdictions, posing risks to population health worldwide. The challenges posed to regulate the illicit trade of each type of product will also be explored. You will see that, while each area of illicit trade is distinct, all three shared common characteristics and are often linked by the same actors and global supply chain. In other words, organised criminal groups often engage in more than one illicit trade at a time by making use of the same networks to produce and supply illicit markets. Furthermore, the profits earned from carrying out trade in one product can be used to support other forms of illicit activity. You will learn about the interconnected nature of these activities, in terms of the producers and suppliers that operate globally, thus requiring collective action across countries to regulate them.
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Activity 1 Apart from the three types of illicit trade covered in this session, research a product which is reported as being sold illicitly in your country. In conducting your research, you may wish to consult newspaper archives for reports of injuries or deaths from illicitly traded products, or government warnings issued to the public. You may also wish to consult government reports related to illicit trade such as customs and excise authorities, law enforcement and public safety. Along with identifying the product, note any information on the actors involved, information on the source of the traded product, and directly and indirect risks posed to health. a) Does this product pose potential harms to health? and b) Does the trade of this illicit product involve a supply chain that extends beyond your country?
There are many other products you might identify that might be illicitly traded in your country. These might be genuine products such as livestock, exotic pets and fuels. Or they might be counterfeit or substandard products such as alcohol, food and soft drinks, cosmetics and bodycare products, and children’s toys. Many of these products are made with dangerous substances such as arsenic and lead, lack required nutrients (e.g. baby formula, vitamins), or pose potential choking hazards for small children. Counterfeit automobile and mechanical parts may contribute to accidents and injuries.
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2. The illicit trade in tobacco
In Session 4, you learned about global tobacco control as part of global health policy responses to the non-communicable diseases pandemic. 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.). As you work through this section, please keep in mind the distinctions between these types of products:
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2.1 Introduction Genuine tobacco products
are manufactured legally by tobacco companies
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2.1 Introduction 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.”
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2.1 Introduction 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).
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2.1 Introduction
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:
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2.1 Introduction 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.
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2.1 Introduction 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.
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2.1 Introduction Bootlegging
refers to the small-scale purchase of tobacco products for the purpose of illegally selling them onwards to circumvent differential taxation between jurisdictions.
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2.1 Introduction
The clandestine and nefarious nature of the illicit tobacco trade makes it difficult to measure its true scale and scope. It is estimated that 1 in every 10 cigarettes and tobacco products consumed globally is illicit (WHO, 2021 and see Figure 1). This includes an estimated one-third of legally manufactured cigarettes which end up on the black market (World Bank, 2019). By operating covertly, criminals ignore import quotas and avoid paying customs duties. Significant tax revenues are also lost on the sale of these products to customers. Indeed, studies have shown that tobacco smuggling cost governments worldwide an estimated US$50 billion in lost tax revenues each year, with low- and middle- income countries bearing the greatest burden from this lost revenue (FCA, 2008).
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2.2 Who is responsible for the illicit tobacco trade?
There are many different actors involved in the global supply chain for illicit tobacco products, from manufacturing to distribution and sales. Traditionally, manufacturers of genuine tobacco products have denied involvement, attributing the significant and lucrative illicit tobacco trade to criminals and organized crime groups (Holden, 2017). However, detailed analysis of internal tobacco industry documents since the early 2000s, along with successful 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).
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2.2 Who is responsible for the illicit tobacco trade?
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).
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2.3 The health harms associated with the illicit tobacco trade
The consumption of most commercial tobacco products is inherently harmful to health. The illicit tobacco trade poses additional harms by undermining tobacco control efforts. Illicit tobacco products may 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. Counterfeit tobacco products may contain harmful ingredients in addition to existing harms associated with tobacco use. It has been estimated that eliminating the illicit trade in tobacco would save more than 160,000 lives annually (Joossens et al., 2009). 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).
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2.4 Global efforts to eliminate 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.
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2.4 Global efforts to eliminate the illicit tobacco trade
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.
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2.4 Global efforts to eliminate the illicit tobacco trade
In summary, the illicit tobacco trade occurs on a massive scale, via a global supply chain linking producers and consumers worldwide. The key aspects of this trade to understand are: 1. The illicit tobacco trade is believed to account for around 9% of the tobacco trade worldwide, with substantial variation across regions. This includes a wide range of products which are illicit based on their inauthenticity, unauthorized sale in given jurisdictions or nonpayment of requisite taxes. This trade amounts to US$ billions in sales for suppliers and lost tax revenues. 2. While criminal organisations 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. And 4. The FCTC Protocol on the illicit tobacco trade is the focus of global cooperation to prevent and control the supply of these products.
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Activity 2 The complicity of TTCs in the illicit tobacco trade has been well-documented and subject to successful prosecution. Today, companies such as British American Tobacco and Philip Morris International (PMI) present themselves as responsible companies involved in the fight against illicit tobacco. Read the following two articles and then answer the questions below. PMI’s initiative Impact to fight illicit tobacco: https://www.pmi.com/sustainability/fighting-illicit-cigarette-trade/pmi-impact. An analysis of PMI Impact by researchers at the University of Bath: https://medium.com/@ASH_LDN/pmi-impact-controlling-research-controlling-policy-9b11562f4dae
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Activity 2 a) To what extent are TTCs part of the problem or part of the solution to the illicit tobacco trade?
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).
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Activity 2 b) Do you think that TTCs should be invited as partners in the fight against the illicit tobacco trade?
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.
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3.1 The illicit drug trade: Introduction
In this section, we examine the illicit trade in certain types of controlled substances. A controlled substance is a drug or chemical whose manufacture, possession, or use is regulated by a government. An illegal drug is one that is produced, sold or used unlawfully. 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.
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3.1 The illicit drug trade: Introduction
What is and is not an illegal or illicit drug depends on the laws of a specific jurisdiction, prevailing societal customs, norms and rules. Importantly, these criteria change over time. Prior to the twentieth century, almost all drugs were legal. During the twentieth century, concerns about health harms, societal norms and criminality led to their control and even 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).
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3.1 The illicit drug trade: Introduction
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).
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3.2 Who is responsible for the illicit drug trade?
The illicit drug trade is dominated by criminal groups that operate a global supply chain. The production of illicit drugs may involve farmers growing drug-related crops alongside other types of crops (e.g. coca, cannabis). Synthetic drugs (e.g. methamphetamine, fentanyl) are created from man-made chemicals obtained legally or illegally. Producers may also mix together synthetic drugs (e.g. fentanyl) with heroin or cocaine. The UNODC (2020) reports that “[d]rug 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.”
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3.2 Who is responsible for the illicit drug trade?
The distribution of illicit drugs involves their movement from place of manufacture to place of sale. This can involve multiple actors and long distances across national borders. Small-scale transport is conducted by individuals (known as “mules”) paid to smuggle illicit drugs in their possessions or person (e.g. strapped on their bodies, internally). Larger-scale transport is 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 (OECD, 2016).
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3.2 Who is responsible for the illicit drug trade?
The sale of illicit drugs by dealers may be direct or via the Internet including the “dark web”. Dealers are the visible face of the illicit drug trade who interact most directly with the buyer. Dealers are usually hired by criminal groups to sell in exchange for a percentage of the earnings or a fee. Individuals themselves addicted to illicit drugs may agree to deal in exchange for their own supply. The enormous scale of earnings from this trade has led to the “laundering” of proceeds via foreign banks or legitimate businesses. In 2009, the UNDOC Executive Director claimed that the liquidity created by illicit drug earnings prevented the collapse of the banking system during the 2008 global financial crisis (Syal 2009), a testament to the amount of earnings generated by this illicit trade and its embeddedness in the world economy.
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3.3 The health harms associated with the illicit drug trade
The potential health harms and their severity depend on the specific drug, an individual’s health status and other factors such as socioeconomic status. The short-term risks range from changes in appetite, wakefulness, heart rate, blood pressure, and/or mood to more serious effects of heart attack, stroke, psychosis and death. Because illicit drug production is not subject to quality control, drug authenticity, impurity or dosage can result in poisonings and overdose.
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3.3 The health harms associated with the illicit drug trade
The longer-term effects of illicit drug use include heart or lung disease, cancers, oral health problems, mental illness and infectious disease risks. There is evidence that some drugs (e.g. cannabis) can impair development of the brain especially in youth. Long-term drug use can lead to addiction with psychological and physiological impacts including stress levels, rational decision making, and learning and memory skills. Mental health impacts include depression, psychotic episodes and social stigma. Users who attempt to discontinue their use may experience withdrawal symptoms and even death (Clarke, 2016). Harms to health can also be indirect arising from personal neglect, impaired judgment or impulse control, and risky behaviours, such as operating vehicles under the influence, using unclean needles (i.e. infection with HIV/AIDS or hepatitis), engaging in unprotected sex and criminal activity (e.g. drug trafficking, prostitution).
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3.3 The health harms associated with the illicit drug trade
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).
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3.4 Global efforts to respond to the illicit drug trade
The increased variety and volume of illicit drugs available, increase in drugs users, and the complexity of the global supply chain present additional challenges to efforts to control the illicit 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).
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3.4 Global efforts to respond to the illicit drug trade
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. 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 (e.g. opium, coca, cannabis and derivatives such as morphine, heroin and cocaine), except under licence for specific purposes, 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 the UN Economic and Social Council[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”.
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3.4 Global efforts to respond to the illicit drug trade
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.
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3.4 Global efforts to respond to the illicit drug trade
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)
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3.4 Global efforts to respond to the illicit drug trade
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).
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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:
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Activity 3 a) What are the merits of this approach?
a) A harm reduction approach provides a safer, more affordable and secure supply of an alternative drug (e.g. methadone medication-assisted treatment instead of other opioids), and/or safer environment for using drugs (e.g. safe injection sites, needle exchange). As well as reducing health risks to users, harm reduction can benefit wider society by reducing criminal activity or other behaviours potentially harmful to users or other people. Harm reduction can reduce the burden on social services, law enforcement and health care providers, and contribute more effectively to cessation.
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Activity 3 b) Who would be opposed to this approach?
b) Opposition to harm reduction may come from those who believe that addictions to substances are a result of weaknesses of moral character or individual behavioural 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.
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Activity 3 c) Do you think this might work in your country? 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.
c) 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.
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4.1 The illegal trade in counterfeit medicines: Introduction
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 of counterfeit medicines seek to mislead buyers and users, to earn profit, by selling their products as authentic therapeutics. Counterfeit medicines are distinct from generic medicines which are “produced without a licence from the innovator company when the patent or other market exclusivity rights on the innovator product has expired” (Gwaza, 2016).
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4.1 The illegal trade in counterfeit medicines: Introduction
Manufacturers of patented medicines may oppose generic versions of their products on the grounds of alleged violation of intellectual property rights, but this is a separate issue from the safety and efficacy of generic drugs. The importance of generic drugs, produced with or without the approval of patent-holders, to improving access to affordable medicines is discussed in Session 5 (Access to pharmaceuticals in a globalising world). Approval of a medicine as generic requires demonstration of bioequivalence (interchangeability or therapeutic equivalence to the genuine product). 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).
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4.1 The illegal trade in counterfeit medicines: Introduction
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.
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4.2 Who is responsible for the trade in counterfeit medicines
Counterfeit medicines have been produced for decades but have become a substantial and lucrative global trade since the early twenty-first century. 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.
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4.2 Who is responsible for the trade in counterfeit medicines
Counterfeit medicines may be shipped in bulk and then falsely packaged and labelled for regional and local markets. The transport of these goods via land, air, or sea may be with other legal or illegal products undeclared or declared as another good (Costa Storti and De Grauwe, 2011). 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).
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4.2 Who is responsible for the trade in counterfeit medicines
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).
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4.3 The health harms associated with counterfeit medicines
Medicines of virtually all classes are counterfeited and shipped worldwide. Customs seizures suggest antibiotics, lifestyle drugs and painkillers are most falsified by counterfeiters. Treatments for malaria, diabetes, epilepsy, heart diseases, allergies, high blood pressure, cancers, stomach ulcers, along with local anaesthetics are also common (OECD, 2020).
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4.3 The health harms associated with counterfeit medicines
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. Counterfeit medicines may contain little or none of the API needed or contain harmful substances. The use of counterfeit medicines delays authentic treatment, and in the event of poor outcomes, creates distrust in health care providers and systems.
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4.3 The health harms associated with counterfeit medicines
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.
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4.3 The health harms associated with counterfeit medicines
Finally, counterfeit medicines undermine the development of genuine medicines. Counterfeits harm 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).
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4.4 The global response to counterfeit medicines
The global reach and scale of the counterfeit medicines trade pose a major policy challenge. 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).
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4.4 The global response to counterfeit medicines
A second response is to seize products along the global supply chain before reaching end markets. This can occur at several points. Local authorities may seek to close down manufacturers at source. Counterfeit medicines may be intercepted by customs officials while being transported to transit or final destination countries. Law enforcement officials may visit local pharmacies or unauthorised sellers (WHO, 2018). A third approach is to prosecute parties involved given that most counterfeit drugs are detected once harms are inflicted.
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4.4 The global response to counterfeit medicines
Given the global nature of the illegal trade in counterfeit medicines, 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).
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4.4 The global response to counterfeit medicines
While these initiatives have increased awareness and encouraged increased international cooperation, several challenges remain. First, due to the 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 definitions and aggregation of comparable data across jurisdictions is critical, along with its sharing to identify priority action. This has been hindered in the past by different approaches and sometimes competing policy goals and measures. While the public health community seeks to protect and promote the health of users (e.g. safe injection sites, legalized access, drug treatment centres), law enforcement agencies approach the problem as one of criminality (e.g. arrest and prosecution of suppliers). Customs officials and the pharmaceutical industry see the problem as an economic issue (e.g. seizures, tracing of money laundering).
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4.4 The global response to counterfeit medicines
Second, 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.
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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:
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Activity 4 a) Based on your knowledge of the global supply chain for counterfeit medicines, what are the strengths and weaknesses of this example?
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.
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Activity 4 b) How might this approach be scaled up to other parts of the global supply chain to reduce the problem of counterfeit medicines?
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 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.
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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.
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5. Integrating activity a) What common features do these three types of illicit trade share?
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.
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5. Integrating activity b) What causal factors might contribute to all three?
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.
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5. Integrating activity c) How might they involve the same actors at certain points along their global supply chains?
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.
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5. Integrating activity d) Are there global responses common to all three that might be more closely integrated?
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.
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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.
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6. Summary 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.
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6. Summary 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.
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6. Summary 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.
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6. Summary 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.
