Reverse distribution of medicines: waiting for the enforcement of the new Spanish Criminal Code

Faced with the possibility of shortages of various medicines, which are in great demand and with no alternative treatment, the Spanish legislator is considering tougher penalties for anyone illegally selling medicines.

During the last few months, newspapers have published articles about the exportation of medicines from Spain – for the purpose of trying to withdraw several of these products from the legally fixed price circuit - to other EU countries where they are sold at a higher price. We are referring to Spanish police operations such as Noisa, Caduceo, Pharmakon or Convector. One of Spain's largest distributors, Cofares, has been linked to the latter and is now involved in an alleged case concerning the illegal sale of medicines.

Parallel distribution of medicines is entirely legal in the EU and its member states use it to sell their products. It is called "parallel" because the distribution and sale of a medicine takes place in another member state and, therefore, it is outside the local distribution network created by manufacturers. According to the principle of free movement of goods and services, parallel distribution of medicines is allowed in the European Union, provided that the distribution of the medicine in another "parallel" country complies with local laws. Additionally, its sale should be approved in the country of origin and the imported product should be essentially similar to a product that has been authorized in the country of destination.

On the contrary, the reverse distribution of medicines, a practice which was apparently carried out by the individuals accused in the above cases, is an illegal form of commerce. The reason for this unlawfulness is that pharmacies, which are only authorized to sell certain medicines under prescription to a final patient, infringe this obligation when they supply this type of medicine to wholesale companies, which later export them to other countries. In other words, a medicine which can only be sold in a pharmacy, and only to a patient with a prescription, is sold to a wholesaler that shall later sell it for a high/non-fixed price in another country.

To date, and according to information related to operation Convector and recently published in the media, some employees of the company Euroserv (a warehouse acquired by Cofares in 2010) have been arrested as alleged authors of 5 crimes: a crime against public health, another against the Treasury and the Social Security, money laundering, forgery and membership of a criminal group.

Up to now, the reverse distribution of medicines has been usually punished through administrative procedures rather than criminal ones, even when said illicit conduct clearly damaged the competition in national and European Union markets, as well as directly damaging any public funds aimed at supporting the Spanish National Health System.

Pursuant to the Spanish Guarantees and Rational Use of Medicines and Health Products Act (Ley de Garantías y Uso Racional de los Medicamentos y Productos Sanitarios), the reverse distribution of medicines is punished as an administrative offence with fines imposed to pharmacies of up to one million Euros, and the possibility of disqualifying them from selling medicines under prescription of the National Health Service and, even, temporarily closing a pharmacy for a maximum period of 5 years.

However, from a criminal point of view, the current legislation makes it very difficult, if not impossible, to link reverse distribution with the criminal conduct developed in article 361 of the Spanish Criminal Code (supply of damaged/expired medicines). Consequently, it is quite difficult to prove, as repeatedly requested, that said crime may harm people's health or that the medicines which are being distributed inversely are damaged, have expired or do not comply with the technical requirements regarding composition, stability and efficiency.

Additionally, since the last reform of the Spanish Criminal Code of December 2010, a company may be declared criminally liable of certain crimes committed by their employees that inure on the benefit of the company. For instance, for crimes such as the shipping or supply of damaged medicines, a company is not criminally responsible according to article 31 bis of the Spanish Criminal Code, but the legislator could impose penalties such as closing the premises, factory or, laboratory for a period of at least 5 years or close it indefinitely in extremely serious cases.

Therefore, it is our opinion that the much publicized, and in some cases controversial, reform of the Spanish Criminal Code is long overdue. Firstly, because if the current wording of the reform of the Spanish Criminal Code is approved, the reverse distribution would constitute a crime, punishing the illicit sale of medicines with prison penalties between 6 months to 2 years or imposing fines of 6 to 12 months, in addition to probably being disqualified from practicing their profession for one year. Also, if it can be proved that people's health has been put at risk, prison and fines shall be imposed at the highest level, as well as making the company criminally liable. And secondly, because companies shall be aware of the control measures that they must apply internally in order to avoid (the reform to the Spanish Criminal Code even mentions the word "exonerate") being declared criminally liable for crimes committed by their employees and that inure on the benefit of the company. In other words, the future reform of the Spanish Criminal Code shall clearly prosecute the inverse distribution of medicines, as well as defining whether a company behind said distribution is or not responsible of committing such illicit conduct.

Silvia Steiner
Partner, Spain

Noemi Seco de Herrera
Associate, Spain