Friday, August 7, 2009

CRS Report for Congress: Intellectual Property Rights and International Trade

The Congressional Research Service (CRS) prepared a report on Intellectual Property Rights and International Trade. The report is authored by Shayerah Ilias and Ian F. Fergusson and was published in July 2008. There were many interesting pieces of information as it relates to the pharmaceutical supply chain and although somewhat dated the data points are very relevant as it relates to the size, scope and impact on commercial interests globally.

In the opening summary, Ilias and Fergusson wrote:

This report provides background on intellectual property rights (IPR) and discusses the role of U.S. international trade policy in enhancing IPR protection and enforcement abroad. IPR are legal rights granted by governments to encourage innovation and creative output by ensuring that creators reap the benefits of their inventions or works and they may take the form of patents, trade secrets, copyrights, trademarks, or geographical indications. U.S. industries that rely on IPR contribute significantly to U.S. economic growth, employment, and trade with other countries. Counterfeiting and piracy in other countries may result in the loss of billions of dollars of revenue for U.S. firms as well as the loss of jobs. Responsibility for developing IPR policy, engaging in IPR-related international negotiations, and enforcing IPR laws cuts across several different U.S. Government agencies. The main structures for coordinating interagency efforts are the National Intellectual Property Law Enforcement Coordinating Council (NIPLECC) and the Strategy Targeting Organized Piracy (STOP!).

Here are some of the interesting pieces of information contained within the CSR report as it relates to pharmaceuticals:

  • Department of Homeland Security (DHS) provides data on counterfeit goods seized by category. Seizures of counterfeit pharmaceuticals increased significantly, from $2.3 million in 2006 (1% of total) to $11.1 million in 2007 (6%).

  • According to U.S. customs data, pharmaceuticals accounted for only 1% of all goods seized in 2006, with a domestic value of $2.2 million. Still, there is growing concern about the vulnerability of the U.S. medicine supply and distribution chain, especially in light of recent high-profile cases about counterfeit drugs entering the United States.

  • PhRMA provides annual estimates of U.S. pharmaceutical industry losses from foreign violations of data exclusivity and patent protection. In its 2007 Special 301 submission to the USTR (covering the period of October 2006 to September 2006), PhRMA contended that its member companies sustained damages totaling an estimated $21.7 million from data exclusivity and patent violations in 24 countries. Damages reported in the 2007 submission were nearly double those reported in the prior year’s submission (covering October 2005 to September 2005). While the total loss associated with IPR infringement grew, damages as a percentage of sales declined from the 2006 submission to the 2007 submission. At the time of reporting for 2008 Special 301 submissions, PhRMA was not able to provide damage estimates due to trade barriers associated with intellectual property protection and market access.

  • U.S. CBP and L.A. Strategic Trade Center, “FY2006 Top IPR Commodities Seized,” November 7, 2006, []. Because of the costs and resources required to conduct physical inspections, many counterfeit products escape inspection, making it difficult to determine the fraction of pirated goods caught. As a result, seizure statistics from the DHS agencies do not reflect on the overall size of the counterfeit market and total losses.

As we have said many times, XStream Systems believes in a comprehensive strategy to combat counterfeit and adulterated pharmaceuticals. XStream believes that this solution should include verification and screening of the materials inside their unit of sale containers. XStream’s XT250, using EDXRD, allows for the complete verification of the material, without opening the container or destroying/degrading the product being authenticated.

To view the CRS report, follow this link:

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