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Abstract
Introduction In recent years, smuggling of health goods has apparently increased in the country. Despite the preventive and regulatory measures taken to combat this problem, the outcomes seem to be undesirable. This study thus aims to identify and elucidate the role of economic barriers in the prevention of smuggling health goods in Iran.
Method We conducted semistructured interviews with 29 purposefully identified key informants in the detection, prevention and control of health goods smuggling in different organisations, between May 2021–January 2022. An inductive data-driven thematic analysis approach was further adopted to identify patterns of meaning, using MAXQDA 2020 software to facilitate data management.
Results We identified four main themes representing the economic barriers to prevent the smuggling of health goods in Iran; Monetary and financial policy, which includes subthemes of financial rules and procedures, market regulation, economic incentives and imbalanced development; Behavioural patterns, consisting of consumer behaviour, the opportunism of smugglers, the behaviour of statesmen and politicians; Economic diplomacy, categorised into international relations and interactions, relations and interactions in the national arena, interaction with non-governmental organisations and Health economic monitoring and evaluation including transparency of statistics and economic information and supervision.
Conclusion Smuggling health goods has become a concerning challenge in the health sector. It is, therefore, imperative to develop and implement appropriate policies and operations towards security and international cooperation, lobbying and coalition-building. Demonopolisation, creating competitive and dynamic markets, removal of rent-seeking layers at all levels, and the use of commercial diplomacy to reduce the burden of smuggling in the health sector of Iran, and perhaps beyond might be of sizeable use to combat such challenge.
- Health policy
Data availability statement
Data are available on reasonable request.
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WHAT IS ALREADY KNOWN ON THIS TOPIC
The focus of many studies has been on the production, buying and selling of substandard and falsified medicines, and less attention has been paid to the issue of smuggling health goods, and there are no accurate data to measure the scale of this extensive trade, especially in low and middle-income countries.
Weaknesses in the economic infrastructure have increased the smuggling of health goods.
Detection, suppression and prevention of smuggling counterfeit and substandard medicines should be systematic rather than periodic.
Current strategies to address the problem of smuggling health goods focus largely on regulatory issues.
WHAT THIS STUDY ADDS
This study highlights the important factors such as economic cooperation and programmes and the capacity of the private sector to prevent the smuggling of health goods.
Obstacles such as systematic corruption, dual behaviour of statesmen and policy-makers, exclusive support of the generic plan, unbalanced economic and political development, lack of deterrence of laws, and consumer behaviour in the country play a significant role in reducing the success rate of preventive measures against smuggling from the economic aspect.
The need for continued investment in solving the country’s infrastructure problems and economic challenges is emphasised.
HOW THIS STUDY MIGHT AFFECT RESEARCH, PRACTICE OR POLICY
This study highlights the economic barriers to prevent the smuggling of health goods in Iran and, along with surveillance tools, emphasises on health diplomacy to reduce border and cross-border challenges in the field of health economics.
Social responsibility in interactions between countries can play a key role in the area of comprehensive reform and strengthening of monetary and financial policies, and putting this issue on the agenda at the national and international levels.
Demand management and modification of consumption patterns, issuing licence to sell through brand representation, creating incentives to modify doctors’ prescribing patterns, encouraging domestic and foreign investors and the pharmaceutical industry to participate in awareness programmes, promoting the position of insurance as a powerful purchaser, adopting sustainable economic policies and fair distribution and access were largely highlighted in the current study to prevent smuggling health goods.
Introduction
Gross domestic product reached 5825 thousand billion rials in the first 9 months of 2022 in Iran. Export and import of goods and services increased by 22.4% and 6.4% during the same period, compared with 2021.1 Moreover, the annual inflation rate in April 2023 was 49.1%, and the monthly inflation rate of the country’s households in that month was 54.6%. In 2021, the Gini coefficient of Iranian households was 0.39, showing a decrease of 0.0068. These coefficients for urban and rural households in the country are 0.37 and 0.35, respectively, indicating a decrease of 0.0078 and an increase of 0.0004. In 2022, the unemployment rate of the population aged 15 and over was allegedly around 9%–12%.1 2 Such conditions have in a way laid the grounds for more tendency to smuggling in the country.
Smuggling is the clandestine movement of goods across borders to evade customs supervision.3 This multifaceted phenomenon is influenced by various factors, including especially economic factors, with varying degrees of influence. On average, 13% of Iran’s trade is smuggled, and the smugglers’ probability of success is estimated at 90%–95%.4 Only 3% of smuggled goods entering the country are detected, meaning that 97% of smuggled goods reach their destination.4 It is estimated that the volume of smuggled goods in Iran is around US$20–US$25 billion per year, partially coming from commercial sources.5 However, due to the sensitivity of the issue, there are no accurate data to measure the scale of this extensive, lucrative and detailed business.
Due to the deterioration of economic circumstances in recent years, the supply and smuggling of health products have also increased (figure 1).6 In addition to the economic problems caused by smuggling health products that might affect people’s health, their low quality can also pose serious risks to the population’s health. For instance, the prevalence of substandard and falsified (SF) medicines is estimated as high as 70% in some parts of Africa and Asia.7 8
Price estimation of smuggling statistics in Iran.6
The average amount of smuggling in the health sector, including medicines, cosmetics, food supplements, dietary supplements, natural products and medical equipment, is about 15%–20% of the national market, although this amount varies in different sectors (figure 2).6 The monetary volume of smuggling in the entire health market is so sizeable that the normal allocation of this amount can solve many health system problems.
Estimated price of smuggled health goods in the country.6
Iran is among the top 20 countries in the world and ranks second in Asia after China in terms of medicine consumption. Approximately, 5%–10% of the country’s pharmaceutical market is composed of the smuggled SF medicines.4 It is reported to be more than 1% and up to 50% in cosmetics. The proportion of smuggled health goods in the Iranian market is as high as 90% for some items. However, less than 10% of these goods are detected,7 and their smuggling and distribution take place outside the pharmaceutical network and even in the official networks. Globally, it is estimated that 10% of all prescribed medicines are SF.9
The problem and complexity of SF medicines and their effect on health worldwide is not a new issue. The identification and reduction of SF medicines are effective in reducing or increasing costs imposed on society, including lost employment, lost income, sales tax and costs associated with increased budget deficits.10 Economic factors, followed by the cultural-social, regulatory and security-political criteria, are of great prominence affecting the smuggling and counterfeit.11
In addition, the unilateral sanctions imposed by the USA on Iran have also had a negative impact on human health, as a result of which the provision of medicines for special patients, the procurement of basic goods and the quality of food have been all affected. As a result, medicines and medical facilities in Iran have become scarce, drug prices have risen by 50%, and over 6 million people with chronic diseases have been affected by potential sanctions by international pharmaceutical companies and banks.12 13
There has been a resort accordingly to smuggling as a substitute in response to this shortage.14 15 This happened due to the problems related to trade and business activities, as well as the economic conditions of the citizens.16 Given the importance of economic factors in formation or reduction of the smuggling phenomenon and the paucity of similar studies, this study has sought to identify the main economic barriers to prevent smuggling of health goods in Iran.
Methods
Participants and setting
The target population for this qualitative study was selected using purposive and snowball sampling, and finally, 29 key informants, were recruited from May 2021 to January 2022. Maximum diversity was considered to provide a comprehensive view of the issue, and the stakeholders came from different levels in the Central Headquarters to Combat the Smuggling of Goods and Currency (CHCSGC), Ministry of Health and Medical Education, Ministry of Industry, Mines and Trade, Customs and other organisations (table 1). Participation was voluntary; there were no exclusion criteria, and no incentives were offered to participate. A file containing the objectives of the study, ethical considerations, profile and contact number of the researchers was sent to the participants with the assurance of confidentiality and anonymity.
The characteristics of interviewees
We used a generic interview guide for face-to-face, semistructured interviews. The research team developed the interview guide and piloted (online supplemental appendix 1). The interviews lasted, on average, about 80 min. All interviews were conducted and analysed in Persian language. Selected data were analysed by Consolidated Criteria for Reporting Qualitative Research, which is a reporting guideline for qualitative researches and consisted of 32 items and three domains, that is (1) research team and reflexivity, (2) study design and (3) data analysis and reporting.17 A number of 14 interviews were digitally recorded and transcribed verbatim, and 15 interviews were jotted down due to the participants’ unwillingness to record their audio. We allowed flexibility in the facilitation of the interviews to allow the interviewers to explore further the various issues that arose. The identity of the participants was coded as the letter ‘P’ for citation and analysis. The majority of the participants in the study were men and had more than 10 years of experience (table 1).
Supplemental material
Trustworthiness
The trustworthiness was addressed largely based on four criteria proposed by Guba and Lincoln, including credibility, confirmability, dependability and transferability.18 Researchers’ long‐term engagement with data collection (9 months) and their continuous investigation and review of codes, categories, and themes were as such conducted. The initial codes were de facto returned to 12 interviewees and checked with 2 experts in line with respondent validation and peer examination, respectively. Finally, the maximum diversity was ensured in the selection of participants from different organisations. This process ended with all authors agreeing on the final classification after discussing on emerging discrepancies.
As to the reflexivity; first, the research team, given their background and expertise in health policy and research, designed, pilot tested and revised the interview guide, according to the comments of key relevant people, before the actual interviews commenced. Then, during data collection, the interviewer avoided directing the participants’ answers in order to minimise the potential bias and assured on the confidentiality and privacy of their recording. There was no conflict of interest between the interviewees and the researchers. Ultimately, before reporting, the findings were checked by some interviewees and experts to ensure that they accurately reflect the views and experiences of the participants, not the researchers.
Data management and analysis
The data were coded as collected, and the collection was continued until saturation, that is, no new data were emerged while repeating the interviews. It took 29 interviews to reach saturation level, where we developed a richly textured understanding of the issues.
Inductive approach, using thematic analysis, was used to guide the categorisation and generation of concepts from the data and to identify the patterns of meaning in qualitative data sets; through careful examination and constant comparison by the researchers.19 The resulting text from the interviews was read line by line, deconstructed into meaningful units, compared and contrasted to identify similarities, differences and connections between the findings, and then synthesised and presented as main and secondary themes. The final classification was approved by all authors after discussion of any discrepancies. MAXQDA2020 was used for data management.
Patient and public involvement
Patients were not involved in the research process and there was no public consultation.
Results
Economic barriers were identified in four main areas and a number of subthemes. Financial and monetary policies, including financial rules and procedures, market regulation, economic incentives and unbalanced development; behavioural patterns, focusing on consumer behaviour, the opportunism of smugglers, and the behaviour of statesmen and policy-makers; trade diplomacy, with the issues of international relations and interactions, relations and interactions in the national arena, and interaction with non-governmental organisations (NGOs); and the monitoring and evaluation system, manifested by transparency of statistics and economic information, and supervision (table 2).
Economic barriers to prevent smuggling health goods in Iran
Financial and monetary policies
Monetary and financial policies and controls are some reasons why countries control the entry and exit of goods. Financial rules and procedures, market regulation, economic incentives and unbalanced development were examples of monetary and financial policies that played a role in the creation or intensification of health product smuggling.
Financial rules and procedures
Mandatory price fixing
Price controls are a form of economic intervention by the government; they are used to make goods and services more affordable to consumers and are usually also used to help steer the macroeconomy in a particular direction. Respondents mentioned mandatory pricing: ‘The government creates problems with its strict pricing. In some cases, the cost is higher than what the insurance will pay’ (p1). ‘Sometimes the patient’s willingness to pay is much higher than the price set by the government’ (p2).
High import tariffs and tax evasion by traders
Customs duties and tariffs are among the most important types of indirect taxes, and unreasonable rates can increase the motivation of individuals and companies to avoid paying taxes and lead to smuggling, which reduces government revenues and ultimately calls into question the effectiveness of economic policies. A customs official noted: ‘They always bring up the rationalization of tariffs, so if the source of tariffs is high, there will be a discussion of benefits and people will tend to bring in smuggling because the difference is big, it’s not 4 or 5% like in some countries. Nobody takes a risk for 4 or 5%… public-private companies are involved in corruption and smuggling… importing companies also smuggle. Compared to Asian countries, Iran’s tariff rate is relatively high’ (P3). CHCSGC manager claims that: ‘part of smuggling is due to evasion of taxes and evasion of the rules that countries set for the entry and exit of goods and products’ (p4).
Prohibition of imports
Non-tariff barriers are generally opaque in terms of price and protection effects and cause deviations in the patterns of production, consumption and trade in the economy. One pharmaceutical industry activist said: ‘Prohibiting the import of the brand Xanax does not eliminate its smuggling; if we allowed 1% of the market to import Xanax, it would meet the needs of those in need, the government would take its customs rights, and we would allow the original material to be imported instead of the smuggled and counterfeit goods’ (p5). The manager of a company said: ‘I had 12 billion imports last year; this year you have limited me to 500 million imports, I will import the rest through smuggling!!’ (p6) One of the officials stated: ‘They are talking on the basis of the leader’s words, although he did not say that a production boom means stopping imports; a production boom means expanding exports, not stopping imports.’ (p7).
Currency intervention
Some of the interviewees pointed to the obvious role of foreign exchange interference in the growth of smuggling: ‘When the exchange rate becomes two prices and there is a difference between the government currency and the free currency, we can escape from the supply chain; the reverse smuggling of health goods is caused by this kind of policy’ (p8).
The discrepancy and the weakness of the theory and an approach in the policy of the insurance coverage
Two conflicting opinions exist regarding the impact of insurance coverage on the promotion and prevention of smuggling. From the perspective of a faculty member: ‘In unstable and inconsistent conditions like ours, health subsidies should be given to insurance organizations that can pay the price of the drug to the manufacturer, and this creates a protective buffer so that people do not suffer financial pressure and resort to smuggling.’ (p9). But two people disagreed. They said: ‘The medicine should be imported in official and government currency and not be insured. This is because insurance provides an incentive for traders to export the medicine, which facilitates reverse smuggling’ (p10, 11).
Market regulation
Imbalanced and unstable supply chains, allocation and distribution of goods
Under this subtheme, respondents identified important categories, including availability—the opportunity and ability to use the medicine at the right time and place—basic needs assessment, and equitable allocation and distribution. An economic activist in the pharmaceutical industry expressed the following: ‘You have to get the medicine to the person’s receptor, so if I make a medicine that doesn't sit on the receptor, then I haven't done my job properly; if the medicine is suitable to sit on the receptor but he doesn't have the money to buy it, then I haven't done my job properly; if he has the money but he doesn't have access to it, then I haven't done my job properly. If the patient has the money and it is accessible, but I give it to an incompetent person in the responsible pharmacy, and the patient does not want to take the medicine from him because of bad morals or too much bureaucracy to deliver the medicine, I have not delivered the medicine to the receptor; the word adherence is now used for this, and this is my inherent duty’ (p15).
Overemphasis on market failure
Market failures occur when there are inefficiencies in allocating goods and services, requiring the government to intervene in the economy. An economic activist complained about the overemphasis on market failure: ‘Health economics, separates the health system and introduces information asymmetry and market failure. They say, see us as special; well, do you see the mechanisms inside the car and the injector; there is also information asymmetry there; now, under pretexts, a set of rules is defined for it, apart from the free economy, and the rights of all the people involved are not seen’ (p12).
Economic incentives
Granting subsidised currency
The importation of medicines and raw materials with subsidised currency was a source of corruption and abuse, as well as reverse smuggling to neighbouring countries. One politician said: ‘We used to subsidise some medicines to keep the price down. These were mainly expensive medicines for special and incurable patients, which entered the distribution cycle in the country at a very low price, and there was a possibility of these drugs being smuggled abroad.’ (p17). Another policymaker stated that ‘Outbound smuggling and the so-called reverse smuggling, which goes to other countries, has a negative impact on our economy, it takes subsidies out of the country and causes economic problems.’ (p18).
Exclusive support for the Generic Medicine Policy
There are claims that the Generics Plan has had a significant impact in terms of reducing costs and availability of medicines for patients, but One pharmacist said: ‘The Ministry of Health says that Glucophage is metformin, and X Company’s metformin is on the market, and in my opinion, there is no shortage, but a diabetic patient wants Glucophage, so the way is open for smuggling; these items are not provided by the Ministry of Health’s forecasting system, while the patient may need a specific brand’ (p19).
Imbalanced development
Unstable economic policies
One of the important aspects of economic stability is the stability of economic policy. If there is uncertainty about economic policy, it will lead to uncertainty among economic agents. According to a senior consultant in the insurance organisation: ‘We have a sick economic system, and the health system is the victim of this phenomenon, not the perpetrator’ (p22). Others say: ‘Development must always be balanced; we cannot leave a golden tap in a ruined toilet’ (p4).
Recession and Inflation
Economic inflation, investment stagnation and unemployment are some of the examples that have made the issue of preventing and combating smuggling more important than ever. One pharmacy faculty member claimed that ‘In Iran’s inflationary economy, someone who produces medicine cannot maintain his sales; if he doesn't withdraw, it means he has no economic sense’ (p23).
Underdevelopment of bordering cities
Lack of facilities, underdevelopment, limited employment opportunities and the unbalanced distribution of facilities in the border areas have resulted in the border population suffering from unemployment and a lack of stable jobs. According to a CHCSGC executive: ‘The need factor is the main root of smugglers at the micro-level; mostly the social and economic conditions and poverty of the border residents make them engage in smuggling’ (p24).
Development gaps with neighbouring countries
The uneven development of neighbouring countries for various reasons, including war, colonisation and political differences, has created a gap and exacerbated regional disparities to prevent and combat health smuggling. A faculty member at the Medical University argued that ‘There are around 10 times as many pharmaceutical firms in Pakistan as in our country… Many of these companies produce under foreign licenses, but because people are poor, their availability is not much better than Iranian, perhaps worse; the Afghan government may not know what’s going on, and they have areas that are the biggest areas for smuggling weapons, drugs, and medicine, and it’s possible to get any kind of fake drug’ (p25).
Behavioural patterns
Consumer behaviour
Consumerism
Consumption determines how society is economically organised and influences what and how manufacturers choose to make. One faculty member commented that ‘Two debates have been forgotten in our health system: one is rationality and the other is post-marketing surveillance (PMS); rationality has two parts: rational drug use, and rational drug prescription… We should use the capacity of people who work in the field of AI in data mining; we have many good methods to remove out-of-range; this out-of-range are also useful for the patient’s health; drug interactions will be reduced and excessive consumption will be prevented, and from an economic point of view, less cost will be imposed on the patient and the issue of smuggling will be monitored’ (p6).
Consumption of smuggled goods as a reaction to the currency shock
Those who lack resilience may engage in unhealthy behaviours and make risky decisions, using the wrong mechanisms to cope with life’s challenges. One authority from the CHCSGC contended that ‘The price difference between the domestic and foreign markets is one of the economic factors of smuggling health goods; sometimes the reason for smuggling is the price difference and its huge profit, not that the quality of the material is very good’ (p26).
Self-imposed sanctions
Self-sanctions are sometimes imposed by the government for political reasons, and sometimes by the consumer. An official from the broadcasting organisation explained that ‘Sometimes consumers prefer to use foreign products and become reluctant to buy local products, affecting the local industry and increasing illegal imports’ (p27). Another said: ‘The government has created a void and said that you can't import the original commercial medicine, so the applicant gets it by smuggling it in’ (p28).
Opportunism of smugglers
Creating and discovering opportunities for counterfeiting and smuggling
It is important to pay attention to the activities of smugglers in the fields of design, creation and smoothing of smuggling opportunities in order to meet their expectations. One customs manager said: ‘A group does not import legally for profit. They do not want to pay customs duties, and they cheat and use new methods and technologies to smuggle goods as well. The issue of the bioterrorist motives of smugglers should also be considered…’ (p3).
Behaviour of statesmen and policy-makers
Acceptance of official smuggling by the government
The government has to accept a contradictory approach to smuggling because of widespread problems, particularly economic problems in border towns. For example, a wide range of activities is accepted, such as the entry of goods with passengers, sailors, border crossings and the permitted import of border cooperatives.
One CHCSGC executive believed that ‘The government itself is the cause of smuggling, 100%; the agent of these rules that have been set up is the government; only their severity and weakness depend on the implementation of the policy’ (p2). ‘Those who have more power and are less controlled are definitely present in big networks. They interfere with and help this systematic trafficking.’ (p22)
Neglect of business facilitation and acceleration
Facilitating and speeding up trade, including reducing customs formalities and administrative procedures and emphasising digitisation and the use of new technologies in controls, can lead to a reduction in the cost of exporting and importing.
As a customs official added: ‘Every time the government has been tougher on imports, the smuggling market has grown’ (p3).
Administrative and financial corruption
Financial and administrative corruption generally takes the form of abuse of position, bribery and embezzlement, partisanship, extortion, selling confidential organisational information to others, and conflicts of interest. One faculty member with experience in the Food and Drug Administration said: ‘If an official of the FDA is a member of several boards of directors of pharmaceutical companies, how can he be indifferent and not biased; some people in the minister’s office decide which issue should be on the agenda, which medicine should be imported into the country!’ (p9).
Trade diplomacy
Commercial diplomacy is usually focused on the achievement of specific commercial outcomes, social welfare and the promotion of competitive advantage. This study identified the themes of international relations and interactions, relations and interactions in the national arena and interactions with NGOs in this category.
International relations and interactions
Aggressive economies
In terms of volume, our outbound smuggling is not as much as the inbound smuggling of our country, but in terms of importance, it is perhaps more important. Reverse smuggling is a drain on our national resources, resources that happen to be public health resources.
One economic activist in the pharmaceutical industry said: ‘Some foreign companies produce and distribute their high-quality products in developed countries and low-quality or counterfeit products in LMICs; these cases occur in critical and special situations when the domestic market is tense; For example, during the change of government, in the days of COVID-19, the problem of the supply of raw materials was even more serious…. On the other hand, we are also faced with the outflow of capital from the country.’ (p12).
Organised smuggling in the shadow of sanctions
In recent years, economic activists, producers, exporters and importers have faced difficulties due to the strained political relations between Iran and other countries as a result of sanctions. From the perspective of a faculty member: ‘We have official and unofficial smuggling; official smuggling is when the government imports some of the goods it needs through multi-layered sales companies; because of sanctions, it imports officially from informal sources’ (p 23).
Lack of social responsibility by countries in international interactions
Social responsibility obliges countries to act in a sensitive manner and within a framework concerning social, cultural, economic and environmental issues. In the absence of a treaty, there is no obligation for police cooperation across borders in international investigations, and this is open to abuse by perpetrators.
As a CHCSGC executive maintained: ‘Some countries are willing to pay money for goods to be smuggled into their country to solve their economic problems and the needs of their people. These countries become the port of entry for the smuggling into our country’ (p24).
A customs official argued that ‘There should be at least a certain percentage of bilateral or multilateral agreements that allow smuggling to be monitored; I'm not saying that there isn't some interaction, but it is not enough’ (p3).
The conflict of the country’s economic interaction system with regional and global systems
In comparison to many countries where money exchange and banking are very easy, our business faces a lot of restrictions. An economic activist in the pharmaceutical industry expressed that ‘Iran’s conditions are not such that trading in it is usual and customary in the world, because we are embargoed; SWIFT is closed; LC (Letter of Credit) is very limited; maybe a person should pack and physically move this money, which has its risks; these should be seen in the analysis; if an issue is raised by other countries at the global level, we have to customize it in our own country’ (p6).
Burning opportunity in attracting investment and the presence of attraction of investment in neighbouring countries
In order to attract foreign investment, governments need to have many attractions for investors. ‘Iran has restrictions on import and export, we lost our pharmaceutical market in Iraq because we could not get quality standards from the European Union or any other union; on the other hand, some neighboring countries have provided the opportunity to invest in the health sector, including the establishment of pharmaceutical factories, and they pay low-interest loans to investors’ (p12).
Weakness in the management and development of domestic and foreign multinational companies
The inattention of economic activists to the development of multinational companies, both national and international, has been effective in the formation and growth of the smuggling of health products. The senior consultant in the insurance organisation believed that: ‘Domestic manufacturers don't keep track of whether their product is being smuggled or not. If a company has its own exclusive agent, it will ensure that its product is not smuggled, as this would damage its reputation’ (p22). ‘I emphasize regulating and allowing exports and quotas after domestic supply. This will give them the opportunity to earn foreign currency and to have customers in the world market.’ (p3). Another noted: ‘Because foreign companies cannot own more than 49% of the shares in Iran, they are sometimes reluctant to invest in our country’ (p1).
Non-compliance with modern business regulations
In a country surrounded by facilities that increase the opportunities for smuggling and where current laws are virtually ineffective, compliance with modern laws is essential for business. One researcher said: ‘We have several modern trade laws that have not entered Iran at all, and we want to work traditionally because the regularity of our market and trade has not been formed’ (p8). Another said: ‘We are throwing away the economic components that economists around the world have tested, written about, and theorized about, and hiring people who still revolve around expired socialist ideas’ (p25).
Relations and interactions in the national arena
Answering and submitting unnecessary reports to security agencies
Some respondents complained that health officials spend their time submitting successive and unnecessary reports to legislative bodies: ‘Whenever the food and drug sector was subjected to excessive forces from outside and inspected under the strange pressure of various political security institutions, more wrong decisions were made’ (p7).
A passive approach to social welfare demands and expectations
Social demand and expectations are concepts that hold government institutions accountable to their citizens.
One CHCSGC executive explained: ‘Cosmetics are among the smuggled goods in our country. We have been producing in recent years, but there is no significant production for our market. If we close the import route and cannot produce enough domestically, which is a social demand, two problems arise: smuggling and counterfeiting. These problems are harmful.’ (p4).
Uninformed managers and politicians
We have two groups disrupting the health system in the country: a series of profiteers who are mostly outside the health system, and a series of ignorant politicians who become the tools of these profiteers. ‘A manager who does not know economics, law, and the alphabet of administration is no different from an ordinary person in the regulatory system; most of these people are not bad, it means they are ignorant; we may love our parents, but we don't get on a plane that our parents are piloting; because we think piloting is a specialized job; events like smuggling are by-products or the fruits of these wrong decisions’ (p15).
Interaction with non-governmental organisations
Weakness in business development
The business development of health goods requires the implementation of tasks and processes for the creation and execution of growth opportunities, both domestically and internationally, on the basis of specific criteria. One CHCSGC executive explained that ‘The number of factory licenses should be increased so that factories can produce goods by competing with each other; restriction always has rent and always leads to corruption, no doubt’ (p 28).
Failure to attract private-sector investment
Investment uncertainty has always been a challenge for foreign and domestic investors. As a former Food and Drug Administration official said: ‘The bank, insurance, and stock exchange are elements to support the private sector and the country’s economy; the stock exchange helps a little, but banks and insurance are not serious supporters of investors at all; the bank should help to invest in sensitive companies, especially in pharmaceuticals’ (p5). Another said: ‘Sometimes there is no economic justification for the investor to produce a range of products, and they inevitably turn to smuggling’ (p27).
Health economic monitoring and evaluation
Transparency of statistics and economic information and supervision were examples of this theme in this study.
Transparency of statistics and economic information
Gaps in presenting and analysing statistics and evidence-based information
Examples of the confusion between statistics and economic information have been given in the areas of the number of public authorities that provide statistics. One CHCSGC executive said: ‘The main trustee responsible for providing statistics on the amount of smuggling is the CHCSGC, but several authorities provide statistics, which leads to confusion and chaos in the system’ (p 29). Another said: ‘Information rents have not made the market more transparent and have made it ambiguous’ (p1). An economic activist in the pharmaceutical industry said: ‘The components of the market forecast that are measured by the FDA are linear components. Currently, if a drug follows a nonlinear trend and factors other than simple regression or historical trends come into play, the market sometimes experiences drug surpluses or shortages, and the shortage is usually filled by smuggling’ (p15).
Ambiguity in the accuracy of FATF reports
The FATF rules are related to the control of financial transactions, it is one of the systems that when money moves, its origin is determined, and if its origin is unclear, it is investigated, whether it is related to smuggling or some other story. One respondent, expressed doubts about the accuracy and completeness of the FATF reports: ‘The FATF organization claims that everything is clear; we see most of the statistics, but not all the statistics are included. Everyone should accept the lack of transparency in the rent system’ (p22).
Supervision
Poorly evaluated supply chains
The unofficial supply of health goods, especially smuggled cosmetics at low prices, in the shadow of insufficient market supervision poses a major problem for the country’s health, hygiene, and economy.
One executive said: ‘We can probably control smuggling; efforts have been made, but there is still a way out with three systems of entry control, financial exchange control and product tracking. More attention needs to be paid to the evaluation of these controls and the control of people’ (p8).
Discussion
The prevention of smuggling health goods is less prominent and well-known in high-income countries than in low-income and middle-income countries (LMICs). Many studies have focused on the production, purchase and sale of SF medicines, but less attention has been paid to the issue of the smuggling of health goods. As well as being a serious concern about complications and potential harm resulting from the introduction of falsified and substandard medicines, there is also an economic dimension to this phenomenon, with costs to national economies.3 20
The spread of smuggling could have negative short-term and long-term effects on employment.21 Most evidence of counterfeit and substandard medicine trafficking from Africa and Asia has been reported in LMICs; little evidence is available for European and North American countries. The European Commission states that the problem of fake and substandard medicines in the European supply network increases between 10% and 20% each year.22
The smuggling of SF medicines via the internet has become a major health problem in the USA and UK, and in some parts of Africa in the case of diseases such as AIDS, malaria and tuberculosis.23 Based on the Pharmaceutical Security Institute Counterfeit Incident System (PSI CIS) data, during 2011–2009, 27.6% reported China as the country of origin of fraud occurrence/detection. Geographically, the Asian and Latin American regions and, economically, middle-income markets were the most prevalent.24
The size of the market for smuggled health products in Iran appears to be significant. Inbound and reverse smuggling in Iran has caused great economic losses for legal producers and investors and, on the other hand, concerns for consumers due to a lack of confidence in the authenticity of the goods and the shortage and high cost of health goods in the market.3 7
Preventing trafficking and fraud through public education, healthcare, supply chain security, enforcement, prosecution and use of technology has enormous costs; however, measures to prevent trafficking are considered an investment and the return on this investment is reflected in the social and economic well-being of the beneficiary groups.25 In addition, the detection, suppression and prevention of counterfeit and substandard medicines should be systematic rather than periodic.20 In the last two decades, China and Turkey have experienced an increase in customs revenues, an increase in the number of smuggled goods detected, and progress in preventing and combating smuggling by modernising customs equipment and applying new policies and methods. However, Iran has not been able to deal with this phenomenon as effectively as it should, despite its current structures.21 Because of the economic dimension of this phenomenon, the economic obstacles to its prevention have been examined in this study.
The results showed that obstacles such as the behaviour of statesmen and policy-makers, exclusive support of the Generics Plan, unbalanced economic and political development, monitoring and evaluation, lack of deterrence of laws, and consumer behaviour play an important role in reducing the success rate of preventive measures against trafficking from the economical aspect. Smuggling can be one of the well-organised activities in which well-known actors play a role in creating distribution channels and participating in this organised crime. The most common analytical error is to focus on smugglers and the traditional mafia, whereas it appears that they are more peripheral to the actions of white collars who play a greater role in the spread of smuggling.26
Trafficking and smuggling of counterfeit medicines, in addition to links with the mafia and organised crime, corruption and illegal pharmaceutical companies, are linked to the business interests of politicians.27
The existence of exclusive protection also leads to corruption. Among the most important problems caused by the implementation of the Generics Plan are the lack of quality medicines, international competition, innovation and research and development and of communication with educational and research centres, the habit of exclusive support, the uneconomic prices, the neglect of exports, the emigration of trained pharmaceutical workers, the lack of management and economic specialisation among pharmaceutical industry managers, the low productivity due to old machinery in the pharmaceutical industry and low-level technologies.28 The Generics Plan had a positive effect on market expansion, access to medicines and promotion of the production chain, but a negative effect on research and development and quality.29 It was revealed here that the exclusive support of the Generics Plan and the payment of subsidies led to the emergence of smuggled medicines and the black market in Iran.
Imbalanced economic and political development will have crisis-generating consequences for the continuation of development. Today, the concept of development is an all-encompassing process, not just economic development and aims to improve all aspects of people’s lives in a society, as appropriate. Cooperation between national regulatory authorities and NGOs may be a promising strategy in line with the sustainable development goal of ensuring access to quality medicines.30
According to economic theories, open, decentralised and competitive economies have performed better than other economic systems. The results of the study showed that Iran not only needs the activity and investment of foreign multinationals in the health sector, but it should also pay special attention to the development policies of multinationals. In the first type, the presence of foreign multinational companies in the country makes them act as observers and use their tracking systems to deal with the entry of smuggled or SF products with their company brand and be responsible for the price, quality and possible complications of their product and also make domestic companies pay more attention to the quality of their products in competition with them. In the second type, the production of domestic multinational companies in other countries, especially neighbouring countries, prevents the phenomenon of reverse smuggling, the production standards are observed, and by selling on a large scale and in global markets; the profit margin is reduced in competition with other companies.
Control and monitoring systems, especially the distribution channels, are ineffective because they tend not to detect the existence or seriousness of the problem. The concealment and smuggling of health products are relatively easy because very few countries have customs services that have experts in the detection of SF medicines, and most users are unable to distinguish between genuine and counterfeit medicines. The production of substandard medicines does not require much investment.1 9 With the growth of e-commerce, many illegal online pharmacies threaten patient safety by selling over-the-counter medicines. Despite this clear threat, little is known about the key challenges and current legislative, regulatory and enforcement responses. Solutions vary, and their applicability is questionable in the face of evolving technology.31 The 2D and Data matrix barcoding has emerged as a unified global strategy for tracing. Countries have incorporated this global intervention programme into their health systems at different rates. However, the cost and lack of awareness of the barcoding system have been the main factors hindering its implementation. The US (US Food and Drug Administration, 2017b), for instance, has postponed the process to several deadlines. The first milestone of Global Trade Identification Number and serialisation at a primary packaging level by all manufacturers has not yet been achieved.32
An effective global governance focus on cybercrime is needed to effectively combat illegal online pharmacies. Current strategies to address the quality of medicines focus largely on regulatory issues. However, a systematic approach and attention to social, political, economic, ethical and public health aspects, as well as the involvement of stakeholders and professional pharmacists, are needed to prevent trafficking and fraud. Complex and transnational criminal networks involved in trafficking and fraud also require transnational cooperation.33 34 Regulatory agencies in less developed countries do not have sufficient facilities to assess and address this problem. Recently, steps have been taken to address this problem, the most important of which is the WHO prequalification programme. However, much more is needed.35
The related laws in Iran, as understood, were of little deterrent power, and efficiency. It is appropriate for the legislator to focus its attention on medicine smuggling on issues such as fakes, falsification, past or near expiration dates and non-standard drugs. These cases have been introduced from the point of view of combating medicine smuggling, or the minimum penalty has been set in such a way that assuming that medicine smuggling has these characteristics, it is subject to a more severe penalty.7 In many cases, harmful and even toxic elements are used in SF medicines, and fraudsters produce and smuggle medicines as close as possible to the original medicines and even with three-dimensional images; in addition, inappropriate manufacturing or storage conditions of the medicine, which are important for the health and survival of the correct functioning of the medicine, can place medicine on the list of illegal or unauthorised medicines.36 37
Counterfeiting medicines need to be treated in the same way as counterfeiting currency, as stated in Article 18 of the Currency Convention: ‘The offense shall be defined, prosecuted and punished without impunity in all countries’.38
When discussing consumer behaviour, those responsible for the processes and policies related to the preparation, prescription and distribution of medicines should be aware of factors such as the lack of budget in the health system and the reduction of purchasing power on the part of the purchaser. The inability to finance can lead to the production of substandard medicines and jeopardise good distribution. Failure to meet market needs due to shortages or high prices can also create opportunities for the counterfeit market.33 39 Currency fluctuations and economic inflation have had an impact on the supply of smuggled goods.
International technical, logistical and financial support, possibly through a specialised NGO, is needed to enable poor countries to protect their drug resources. Any measures that reduce the profit margin of SF production, such as lowering prices and increasing access to original and quality medicines, make smuggling and counterfeiting less attractive. A social marketing campaign with guaranteed quality and prepackaged medicines can provide patients with a recognisable and cost-effective alternative.27 Promotion of awareness and the demand for information were also among the findings on which respondents agreed. Researchers, governments and the pharmaceutical industry should be more involved in gathering, analysing and disseminating knowledge. The Drug Security Institute has a large database on various drug crimes, but the industry keeps almost all secret depriving researchers investigations that would help raise public awareness of counterfeiting and prompt political action.40 Purchasers should insist that manufacturers and distributors provide medicines that meet international quality standards. Governments in rich countries should not force the export of substandard medicines to poor countries while governments in developing countries should improve their ability to detect substandard medicines.35
Although the researcher had assured the participants that their information would be confidential, some respondents were still conservative and avoided providing clear information and statistics; besides, some government organisations did not cooperate in conducting the interviews. This study reflects the economic barriers to the prevention of smuggling health goods considering the multifaceted nature of the smuggling phenomenon; nevertheless, the role of social and cultural differences was not specifically examined in this study.
Conclusion
The economic complications resulting from some decisions by white collars seem to have accelerated the phenomenon of smuggling health goods in the country. It is necessary thus for policy-makers and managers to be aware of the dangers and destructive effects of smuggling on the economy and especially on the vulnerable groups and to change or modify, or adopt multifaceted approaches in economic programmes and policies for preventing and responding correctly and timely to such major issues.
In preventing and combating smuggling from an economic point of view, we are faced with the challenge of an uneven response. That is, in addition to economic levers, there is a need for more effective levers and comprehensive development in the political, cultural, social, technological, security and international interaction areas.
Resort to health diplomacy, accompanied by surveillance tools is expected to increase its power and eliminate border and cross-border challenges in the field of health economics. The involvement of all actors in economic cooperation should not be neglected.
The complexity and multifaceted nature of the problem of smuggling and the differences in the social, political, economic and cultural conditions of countries have made it impossible to take examples from the programmes and actions of other countries to solve the problem of smuggling, constrain its spread, and provide a single version of remedial action in the country. Nevertheless, social responsibility in the interaction between countries can play a key role in the comprehensive reform and strengthening of monetary and financial policies and in putting this issue on the domestic and international agenda. It can also help the country cope with the challenges posed by the policies and differences in the development of its neighbouring countries and by the sanctions. Moreover, the importance of maintaining compatibility with internationally accepted rules and bilateral free trade systems to promote economic development and investment guarantees in trade agreements are seen critical.
Data availability statement
Data are available on reasonable request.
Ethics statements
Patient consent for publication
Ethics approval
This study involves human participants and was approved by the Ethical Committee of the TUMS- Iran, ethical code: IR.TUMS.SPH.1398.318. Written informed consent was obtained from the interviewees. Participants had the right to withdraw from the research at any time. Participants gave informed consent to participate in the study before taking part.
Acknowledgments
We are grateful to the individuals who participated in this project for their time and insights. In addition, the authors would like to express their gratitude to Iran’s Central Headquarters to Combat the Smuggling of Goods and Currency and the Economic Security Police for their support and advice.
References
Supplementary materials
Supplementary Data
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Footnotes
Handling editor Helen J Surana
Contributors FMM and EJP concieved the idea for the study. FMM conducted the collection, analysis and interpretation of the data with assistance and supervision from EJP and AMT. All authors discussed the results and contributed to the development and approval of the final manuscript. EJP and FMM act as the guarantor.
Funding This research is a part of PhD thesis in health policy, which benefited from financial support of the TUMS (Grant No: 9611460001).
Competing interests None declared.
Patient and public involvement Patients and/or the public were not involved in the design, or conduct, or reporting, or dissemination plans of this research.
Provenance and peer review Not commissioned; externally peer reviewed.
Supplemental material This content has been supplied by the author(s). It has not been vetted by BMJ Publishing Group Limited (BMJ) and may not have been peer-reviewed. Any opinions or recommendations discussed are solely those of the author(s) and are not endorsed by BMJ. BMJ disclaims all liability and responsibility arising from any reliance placed on the content. Where the content includes any translated material, BMJ does not warrant the accuracy and reliability of the translations (including but not limited to local regulations, clinical guidelines, terminology, drug names and drug dosages), and is not responsible for any error and/or omissions arising from translation and adaptation or otherwise.