Parallel Trade in Pharmaceuticals

Past and future scenarios

Publication Date October 2003
ISBN 954112156
Pages 133
Tables n/a
Figures n/a

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The parallel trade of pharmaceutical products is one of the most controversial issues in the pharmaceutical industry. In this 'grey' market, ethical companies loose control of their distribution chains and parallel traders profit from price differentials...

Parallel trade or parallel importation is the cross-border trade in a particular product, through a route that the manufacturer may not have originally intended. As many manufacturers operate a system whereby they sell their products at different prices in different markets, there is an incentive for those wishing to reduce the costs of their purchases to seek these products from the lower-priced markets. As the demand for cheaper products has grown, parallel trade businesses have flourished. By sourcing products from lower-priced markets to sell to consumers in higher-priced markets, these companies can offer significant savings to consumers, who thereby have an alternative to the price that the product is being sold at in their country by the original manufacturer.

This, 60,000 word strategic management, publication provides the valuable market overview and data that all pharmaceutical companies will find essential in their business.

Understand the development in this fast-moving sector:

  • Examines the impact of forthcoming EU enlargement as a new source of cheaper product
  • Describes how high drug prices in the United States is opening up the potential for imports from Canada and Mexico
  • Asks whether parallel trade will become a global issue as countries like Kenya and the Philippines experiment
  • Discusses whether parallel imports are influencing big pharma?s R&D spend
  • Latest thinking on the exhaustion of intellectual property rights in international law
Comprehensive insight into the major issues including:

  • Why price differential is not the only factor that causes parallel trade
  • Case studies and descriptions of legal battles in the EU that have been fought over the last 30 years
  • Why EU legislation and governments encourage parallel imports
  • How the AIDS crisis has become the biggest issue for governments, ethical pharmaceutical companies and parallel traders alike
  • The WTO's role and compulsory licensing
  • Economic arguments for and against the existence of parallel trade in pharmaceuticals
Content

Marketing Brochure
View the marketing brochure (pdf)

Executive Summary
View the Executive Summary (pdf)

Foreword

Introduction

1: Background To Parallel Importation

The concept of parallel importation
The view of pharmaceutical manufacturers
The view of parallel importers
Legalities of parallel trade
Exhaustion of intellectual property rights
Consumer views of intellectual property rights
Repackaging and re-labelling of products
The definition of price
Consumers and pricing
Therapeutic efficacy
Second-generation products and price increases
Influences on prices
Pricing strategies and parallel imports
Skimming
Prestige pricing
Penetration pricing
Extinction pricing
Pricing freedom
Pricing differentials
Differentials created by price discounts
Price differentials resulting from variations in pricing regulations
Creation of post-patent price differentials
Pricing within a single price band
Patents
Strategies to extend effective patent life
Cost containment and pharmaco-economics
Generic drugs
Parallel importation of generics
Counterfeit products
Internet trading

2: Parallel Importation in Europe

Introduction to European parallel trade issues
The European pharmaceutical market
European pharmaceutical spending controls
Is spending really the issue?
The EU
History of the EU
Philosophy of the EU
The set-up of the EU
EU law
Primary legislation
Secondary legislation
Case law
Decision making in the EU
European integration
The institutions of the EU
The Court of Justice
EU law and parallel importation
The European Economic Area (EEA)
The creation of the EEA
EU enlargement and the EEA
The euro
The euro and the pharmaceutical industryThe value of parallel trade in Europe
The legalities of parallel trade in the EU
Pharmaceutical manufacturers and parallel trade
Repackaging of parallel imports
Protection of products from parallel importation
Wholesalers in the EU
European hospitals and parallel importer


3: Enlargement of the EU

EU expansion and the pharmaceutical market
EU expansion and parallel trade ? the view of the pharmaceutical industry


4: Parallel Trade by Country & Significant Legal Battles

The UK
Parallel trade and the Pharmaceutical Price Regulation Scheme (PPRS)
Ireland
France
The Netherlands
Germany
Denmark
Sweden
Belgium
Spain
Italy
Austria
Switzerland
Norway
Future trends for parallel trade in Europe

5: Parallel Importation Issues in a Global Context

The pharmaceutical industry and globalisation
Maximising revenue worldwide
The World Trade Organisation (WTO) and its objectives
Organisation of the WTO
The WTO philosophy
The WTO?s viewpoint on intellectual property rights
Trade-related Aspects of Intellectual Property Rights (TRIPS)
Limitations of TRIPS and trade disputes
The WTO and the access-to-medicines issue
Possibilities for international parallel trade
The concept of international exhaustion
The WTO and parallel imports
Exporting to the EU from outside Europe


6: Parallel Importation Outside Europe

Drug pricing in the US
The views of the US pharmaceutical industry
US political debates over pricing and parallel importation
Canada
Mexico
Kenya and parallel trade
Philippines
US reaction to developments in the Philippines
Singapore
Discounted drugs in Taiwan
Japan
New Zealand
Australia
India
The concept of compulsory licensing
The grounds for using a compulsory licence
The AIDS crisis
HIV drug pricing becomes an issue
South Africa and HIV drug pricing
Brazil and HIV drug pricing
Future implications of compulsory licensing
Compulsory licensing in North America
Compulsory licensing, parallel importation and unscrupulous traders

7: Analyses of Parallel Importation

Pharmaceutical R&D investment and parallel trade
Innovation and new drug development
Why intellectual property matters to pharmaceutical companies
Consumer views
Tax benefits on pharmaceutical R&D
Parallel traders and pharmaceutical R&D ?myths?
Better management of R&D investment
An economic viewpoint on parallel trade issues
Market structure
Demand elasticity
Pricing regulations
Competition policies
Using parallel importation as a negotiation tool
The process of parallel importation
How to bring parallel imports to market
The effect of parallel trade channels
Defensive measures for parallel trade
Conclusions


References

Parallel Trade Organisations

LIST OF FIGURES

Figure 1.1 Fundamental reasons for parallel trade in the EU
Figure 1.2 Breakdown of retail medicine price in Europe, 2000
Figure 1.3 The global price corridor
Figure 1.4 Estimates of annual cost of CHF treatment with ACE-inhibitors, 2000
Figure 1.5 Average approval time for generic drugs according to the FDA
Figure 1.6 Estimated European generics market by volume, 2000
Figure 2.1 Breakdown of European pharmaceutical R&D
Figure 2.2 Cost-containment strategies: price controls
Figure 2.3 Cost-containment strategies: spending controls
Figure 2.4 Cost-containment strategies: volume controls
Figure 2.5 Informedica pricing analyses, 1998/99: Neoral treatment costs
Figure 2.6 Informedica pricing analyses, 1998/99: AmBisome treatment costs
Figure 2.7 Share of pharmaceutical parallel imports by value
Figure 2.8 Share of parallel imports in total European pharmaceutical market sales (industry estimates, 2001)
Figure 2.9 Parallel importation of Norvir, 1999
Figure 2.10 Parallel importation of Epivir, 1999
Figure 2.11 Parallel importation of Retrovir, 1999
Figure 2.12 HIV drug prices, 1999
Figure 4.1 Market share of parallel imports in Germany
Figure 4.2 Factors influencing the future of parallel trade in Europe

LIST OF TABLES

Table 1.1 Price variations in the EU (public prices in euros)
Table 1.2 Some parallel imports options offered to European hospitals in 1997
Table 1.3 Types of prescription drugs
Table 2.1 Market share of parallel imports in key European markets in selected years
Table 2.2 Estimated penetration of parallel imports (%) in main importing states, 1999
Table 2.3 Summary of pharmaceutical company options to counter parallel importing
Table 2.4 Summary of what is permissible and not permissible for parallel importers repackaging an original manufacturer?s products in the EU Table 2.5 Summary of key European pharmaceutical parallel trade cases
Table 4.1 Summary of parallel trade in the UK, 1997 and 2001

Faiz Kermani holds a BSc in pharmacology with toxicology from King?s College London and a PhD in immunopharmacology from St Thomas?s Hospital, London. He has previously worked and published in various areas of medical research, both in academia and the pharmaceutical industry. He has worked as a research analyst for Informedica A/S, conducting research into European pricing strategies and parallel importation, and has also worked for CMR International, examining R&D productivity and regulatory issues for major pharmaceutical companies.