Fake drugs cost the European pharmaceutical industry €10.2bn each year, corresponding to about 4.4 per cent of the sector's sales, a new report has revealed.

Published by the European Observatory on Infringements of Intellectual Property rights, the pharmaceutical report is the latest in a series that explores the financial impact of counterfeits on various sectors.

The report, which only refers to manufacturing and wholesalers and not retailers, notes that the impact of lost sales in the pharmaceutical sector translates into direct employment loses of almost 38,000 jobs.

The presence of counterfeit medicines also has a wider impact, with a knock-on effect on other industries and government revenue. The report concludes that fake drugs could cause €17bn in lost sales to the EU economy, which leads to the loss of about 91,000 jobs and €1.7bn in government revenues.

EUIPO's executive director, António Campinos, said: "We know through analysis done by the World Health Organization that both generic and innovator medicines are falsified, from cancer treatment products to inexpensive pain treatments. These fakes can be toxic and pose a serious danger to health. Our report shows that they also have a serious impact on the economy and on jobs. Our aim is that our data and evidence-based studies will help policymakers as they devise responses to the challenge of combating fake pharmaceuticals."

According to the report, the countries worst hit by counterfeit medicines are Italy and Spain. Italy's pharmaceutical sector, for instance, is estimated to lose up €1.59bn, or 5 per cent of the sector's sales, each year, which translates to almost 4000 direct job loses. The Spanish industry loses up to €1.17bn, or 5.9 per cent of the sector's sales, each year, with an estimated 3,223 jobs lost.

Meanwhile, the report estimates that the UK's pharma industry loses €605m annually, which is 3.3 per cent of the British sector's sales, with 2,940 direct jobs lost. Germany, as the largest producer of medicines in the EU, lost the highest number of jobs in the sector due to counterfeiting at nearly 7,000, but only lost 2.9 per cent in sales.

The report also makes note of the fact that "due to the special nature of pharmaceutical preparations" there can be "very significant health issues associated with fake medicines" and that this suffering can have economic consequences on society, notably healthcare systems. However, the report said: "Such economic consequences can unfortunately not be taken into account in the present study due to the difficulty of quantifying them, but they should be kept in mind when considering the phenomenon of counterfeit pharmaceutical products."

European pharma trade body EFPIA (European Federation of Pharmaceutical Industries and Associations) has welcomed the report. There are an estimated 30,000 illegal sites that operate on a daily basis to target European citizens, while estimates suggest that 10 per cent of all medicines supplied globally are falsified, EFPIA said in a statement.

"It is highly regretful that the offer of counterfeit medicines has surged in recent years, mainly as a result of significant criminal networks, attracted by high profit prospects, the low level sanctions and the ease of trafficking, through, for example, e-commerce. Counterfeit medicines represent a worldwide threat and there is therefore a global shared responsibility to tackle the issue effectively and promptly".

In April this year the Observatory alongside the Organization for Economic Cooperation and Development, published a report on the international trade of counterfeit goods in 2013. They estimated the value at €338bn globally, corresponding to 2.5 per cent of world trade.

The EUIPO pharmaceutical sector report is the ninth in the counterfeit series. Other reports have explored the following sectors: spirits and wine; recorded music; watches and jewellery; handbag and luggage; toys and games; sports goods; clothes, shoes and accessories; and cosmetics and personal care.