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112th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 112-537
COUNTERFEIT DRUG PENALTY ENHANCEMENT ACT
June 18, 2012.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
Mr. Smith of Texas, from the Committee on the Judiciary, submitted the
R E P O R T
[To accompany H.R. 3668]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 3668) to prevent trafficking in counterfeit drugs,
having considered the same, report favorably thereon with an
amendment and recommend that the bill as amended do pass.
The Amendment.................................................... 1
Purpose and Summary.............................................. 2
Background and Need for the Legislation.......................... 2
Committee Consideration.......................................... 3
Committee Votes.................................................. 3
Committee Oversight Findings..................................... 3
New Budget Authority and Tax Expenditures........................ 3
Congressional Budget Office Cost Estimate........................ 3
Performance Goals and Objectives................................. 4
Advisory on Earmarks............................................. 4
Section-by-Section Analysis...................................... 5
Changes in Existing Law Made by the Bill, as Reported............ 5
Strike all after the enacting clause and insert the
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Counterfeit Drug Penalty Enhancement
Act of 2012''.
SEC. 2. COUNTERFEIT DRUG PENALTY ENHANCEMENT.
(a) Offense.--Section 2320(a) of title 18, United States Code, is
(1) by striking ``or'' at the end of paragraph (2);
(2) by inserting ``or'' at the end of paragraph (3);
(3) by inserting after paragraph (3) the following:
``(4) imports, exports, or traffics in a counterfeit drug,'';
(4) by striking ``through (3)'' and inserting ``through
(b) Penalties.--Section 2320(b)(3) of title 18, United States Code,
(1) in the heading, by inserting ``and counterfeit drugs''
after ``services''; and
(2) by inserting ``or counterfeit drug'' after ``service''.
(c) Definition.--Section 2320(f) of title 18, United States Code, is
(1) by striking ``and'' at the end of paragraph (4);
(2) by striking the period at the end of paragraph (5) and
inserting ``; and''; and
(3) by adding at the end the following:
``(6) the term `counterfeit drug' has the meaning given that
term in section 201 of the Federal Food, Drug, and Cosmetic
(d) Priority Given to Certain Investigations and Prosecutions.--The
Attorney General shall give increased priority to efforts to
investigate and prosecute offenses under section 2320 of title 18,
United States Code, that involve counterfeit drugs.
Purpose and Summary
H.R. 3668 makes certain enhancements to current Federal
law, which criminalizes trafficking in counterfeit goods or
services and use of a counterfeit mark on or in connection with
such goods or services. This legislation expressly identifies
the offense of trafficking counterfeit drugs and increases the
penalties for persons who traffic in counterfeit drugs. This
bill requires the Attorney General to give increased priority
to efforts to investigate and prosecute counterfeit drug cases.
Background and Need for the Legislation
Current law prohibits trafficking in counterfeit goods.
Section 2320 of title 18, United States Code, is primarily
concerned with goods that are trafficked using counterfeit
marks or labeling. However, counterfeit drugs are more serious.
Counterfeit drugs present a real health risk to consumers and
are not limited to a financial loss to the manufacturer or mark
holder. While current law technically includes counterfeit
drugs, the law does not expressly prohibit trafficking in
counterfeit drugs and carries a maximum penalty of only 10
In February 2012, drug manufacturer Roche announced that a
counterfeit form of the cancer drug Avastin had been imported
and distributed to doctors in the U.S. The counterfeit versions
of the drug contained a variety of chemicals, ranging from
starch and salt to solvent chemicals like acetone, but not the
active ingredient found in the genuine drug. Law enforcement
authorities in the United States and several foreign countries
attempted to locate the source of the counterfeit drugs with
limited success. It is unknown how many patients in the U.S.
may have received useless cancer treatments when they were
administered these counterfeit drugs.
Even with a 10 year maximum penalty, the actual sentences
imposed under the existing counterfeit goods statute are
dramatically lower. According to the U.S. Sentencing
Commission, between FY 2006 and FY 2010, there were 385 Federal
prosecutions for counterfeit goods (18 U.S.C. Sec. 2320). The
median sentence was 17 months; the mean sentence was only 10
The Committee on the Judiciary held a hearing on H.R. 3668
on March 28, 2012.
On June 6, 2012, the Committee met in open session and
ordered the bill H.R. 3668 favorably reported with an
amendment, by voice vote, a quorum being present.
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee advises that there
were no recorded votes during the Committee's consideration of
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee advises that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of rule XIII of the Rules of the House of
Representatives is inapplicable because this legislation does
not provide new budgetary authority or increased tax
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill, H.R. 3668, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
Congressional Budget Office,
Washington, DC, June 14, 2012.
Hon. Lamar Smith, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3668, the
``Counterfeit Drug Penalty Enhancement Act of 2012.''
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Mark
Grabowicz, who can be reached at 226-2860.
Douglas W. Elmendorf,
Honorable John Conyers, Jr.
H.R. 3668--Counterfeit Drug Penalty Enhancement Act
As ordered reported by the House Committee on the Judiciary
on June 14, 2012.
CBO estimates that implementing H.R. 3668 would have no
significant costs to the Federal Government. Enacting the bill
could affect direct spending and revenues; therefore, pay-as-
you-go procedures apply. However, CBO estimates that any
effects would be insignificant for each year.
H.R. 3668 would establish a new Federal crime for
trafficking in counterfeit drugs. As a result, the government
might be able to pursue cases that it otherwise would not be
able to prosecute. CBO expects that H.R. 3668 would apply to a
relatively small number of additional offenders, however, so
any increase in costs for law enforcement, court proceedings,
or prison operations would not be significant. Any such costs
would be subject to the availability of appropriated funds.
Because those prosecuted and convicted under H.R. 3668
would be subject to criminal fines, the Federal Government
might collect additional fines if the legislation is enacted.
Criminal fines are recorded as revenues, deposited in the Crime
Victims Fund, and later spent. CBO expects that any additional
revenues and direct spending would not be significant because
of the small number of additional cases likely to be affected.
H.R. 3668 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would not affect the budgets of State, local, or tribal
On January 12, 2012, CBO transmitted a cost estimate for S.
1886, the Counterfeit Drug Penalty Enhancement Act of 2011, as
reported by the Senate Committee on the Judiciary on December
8, 2011. The two pieces of legislation are similar and the cost
estimates are the same.
The CBO staff contact for this estimate is Mark Grabowicz.
The estimate was approved by Theresa Gullo, Deputy Assistant
Director for Budget Analysis.
Performance Goals and Objectives
The Committee states that pursuant to clause 3(c)(4) of
rule XIII of the Rules of the House of Representatives, H.R.
3668 makes certain enhancements to Title 18, United States
Code, Section 2320 which criminalizes trafficking in
counterfeit goods or services and use of a counterfeit mark on
or in connection with such goods or services.
Advisory on Earmarks
In accordance with clause 9 of rule XXI of the Rules of the
House of Representatives, H.R. 3668 does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(e), 9(f), or 9(g) of Rule XXI.
The following discussion describes the bill as reported by
Sec. 1: Short Title.
Section 1 provides that the short title of H.R. 3668 is the
``Counterfeit Drug Penalty Enhancement Act of 2012.''
Sec. 2: Counterfeit Drug Penalty Enhancement.
Section 2 expressly identifies the offense of trafficking
counterfeit drugs and increases the penalties for persons who
traffic in counterfeit drugs. This section also requires the
Attorney General to give increased priority to efforts to
investigate and prosecute counterfeit drug cases.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
SECTION 2320 OF TITLE 18, UNITED STATES CODE
Sec. 2320. Trafficking in counterfeit goods or services
(a) Offenses.--Whoever intentionally--
(1) * * *
(2) traffics in labels, patches, stickers,
wrappers, badges, emblems, medallions, charms, boxes,
containers, cans, cases, hangtags, documentation, or
packaging of any type or nature, knowing that a
counterfeit mark has been applied thereto, the use of
which is likely to cause confusion, to cause mistake,
or to deceive, [or]
(3) traffics in goods or services knowing that such
good or service is a counterfeit military good or
service the use, malfunction, or failure of which is
likely to cause serious bodily injury or death, the
disclosure of classified information, impairment of
combat operations, or other significant harm to a
combat operation, a member of the Armed Forces, or to
national security, or
(4) imports, exports, or traffics in a counterfeit
or attempts or conspires to violate any of paragraphs (1)
[through (3)] through (4) shall be punished as provided in
(1) * * *
* * * * * * *
(3) Counterfeit military goods or services and
counterfeit drugs.--Whoever commits an offense under
subsection (a) involving a counterfeit military good or
service or counterfeit drug--
(A) * * *
* * * * * * *
(f) Definitions.--For the purposes of this section--
(1) * * *
* * * * * * *
(4) the term ``counterfeit military good or
service'' means a good or service that uses a
counterfeit mark on or in connection with such good or
service and that--
(A) * * *
(B) is intended for use in a military or
national security application; [and]
(5) the term ``traffic'' means to transport,
transfer, or otherwise dispose of, to another, for
purposes of commercial advantage or private financial
gain, or to make, import, export, obtain control of, or
possess, with intent to so transport, transfer, or
otherwise dispose of[.]; and
(6) the term ``counterfeit drug'' has the meaning
given that term in section 201 of the Federal Food,
Drug, and Cosmetic Act.
* * * * * * *