For years, parallel trade of pharmaceutical products has been an important issue for the European pharma industry, the Commission, the European Court of Justice and the member states. Even though parallel trade in pharmaceuticals is generally increasing in the EU, the research-based pharmaceutical industry is lobbying for its suppression (parallel trade causes a big revenue losses for these companies) and supports the concept of a single market across the EU. Industry estimates suggest that lost sales in the EU amount to more than 3 billion euro per year.
Cutting health cost vs stimulating innovation:
The core problem with parallel imports is that its benefits are ambiguous. Governments authorise parallel trade in attempts to contain health care costs. Especially in countries in which pharmaceutical prices are high, parallel trade may help cut pharma costs. However, this policy conflicts with another health policy objective, namely to encourage innovation and development of new drugs. Big pharmaceutical companies say that, as their profits decrease due to parallel imports, they are obliged to invest less in R&D.
Who benefits from parallel trade?
Nobody really disputes the fact that there are direct savings from parallel imports. The questions to be answered are: what is the size of the savings and who (producer, exporter, importer, wholesaler, pharmacy, consumer) gets what size of these benefits.
Studies on the issue:
A University of Southern Denmark study (June 2006) on the economic impacts of pharmaceutical parallel trade in the UE concludes that parallel distribution generates considerable savings, both direct saving to patients and health insurers.
A London School of Economics study (January 2004) on the same issue concludes that there are no direct benefits to patients and recommends a re-evaluation of current practice by policymakers.
A York Health Economics Consortium study (May 2003) found evidence that parallel imports have indirect competitive effects by forcing down the price of their domestically sourced counterparts and that direct and indirect savings from the parallel trade of pharmaceuticals have helped contain mounting public healthcare expenditure in many European countries.
Restriction of parallel trade
Parallel Trade in Europe and the US: The challenges facing pharma -study, published by Datamonitor in April 2006, states that the legal framework supporting parallel trade in the EU has restricted the actions pharmaceutical companies' can take to restrict parallel trade. However, the Bayer's legal victory on the Adalat case in 2004 has provided pharma companies with a means to restrict parallel trade without infringing EU law.
In its landmark Bayer/Adalat judgment of January 2004, the European Court of Justice (ECJ), held that the imposition of a supply quota system – under which Bayer unilaterally limited supplies to exporting wholesalers – did not constitute an 'agreement' to restrict parallel trade and could not, therefore, be prohibited under Article 81 of the Treaty (see EurActiv 7 January 2004).
The Datamonitor report also states that the EU enlargement has not caused a rise in parallel trade yet, "mainly because of the derogation that prevents parallel exportation of many branded drugs from 8 of the new countries". The effect of derogation will, however, "erode over time" and gradual rise in EU parallel trade is expected as a result from the enlargement.
From G10 to High Level Pharmaceutical Forum
In February 2002, the G10 Medicines Group adopted recommendations to enhance competitiveness in the pharmaceutical industry while sustaining high public health standards. The Group proposed that a member state's authority to regulate prices in the EU should extend only to those medicines purchased, or reimbursed, by the state. This recommendation is being considered by the Commission's new High Level Pharmaceutical Forum, set up in 2006.
The High Level Pharmaceutical Forum, consisting of relevant ministers from the EU troika, Members of the European Parliament, senior industry representatives and other stakeholders will meet once a year to review progress and give a political mandate for further work. In the meanwhile, steering committees will meet more frequently to prepare the Forum's yearly meeting.