CONTENTS
LIST OF TABLES
LIST OF FIGURES
EXECUTIVE SUMMARY
GLOSSARY
CHAPTER 1 SETTING THE SCENE
1.1 The background
1.2 Prices of prescription medicines: an outline
1.3 History of the parallel trade
1.4 Those affected by the trade
1.4.1 Licensing authorities
1.4.2 National health authorities
1.4.3 Manufacturers
1.4.4 Parallel importers
1.4.5 Parallel exporters
1.4.6 National wholesalers
1.4.7 Hospitals
1.4.8 Pharmacies
1.5 The PL (PI) scheme
CHAPTER 2 MODUS OPERANDI OF THE UK PARALLEL IMPORT INDUSTRY
2.1 Introduction
2.2 Pre-start up requirements
2.3 Key factors for success
2.3.1 Pharmaceutical knowledge
2.3.2 Supplier relationships
2.3.3 Financial prudence
2.3.4 Capital investment
2.3.5 Processing investment
2.3.6 Distribution alternatives
2.3.7 Marketing strategies
2.4 Counter strategies
CHAPTER 3 ATTEMPTS TO LIMIT PARALLEL TRADE
3.1 Introduction
3.2 Impediments to parallel trade
3.2.1 Licensing restrictions
3.2.2 Brand names
3.2.3 Packaging and presentation
3.2.4 Continuity of supply
3.2.5 Product specification changes
3.2.6 Exchange rate variations
3.3 Defences against parallel trade
3.3.1 Encouraging misperceptions
3.3.2 Regulatory issues
3.3.3 Market segmentation
3.3.4 Direct supply
3.3.5 Trade incentives
3.3.6 Pricing
3.3.7 Litigation
CHAPTER 4 LEGAL CONSIDERATIONS
4.1 Introduction
4.2 Smith & Nephew v Primecrown
4.2.1 MAL 2 (PI)
4.2.2 Smith & Nephew: the issue
4.2.3 The judgement
4.2.4 Effect of the Smith & Nephew case
4.3 The European Commission and competition
4.3.1 Introduction
4.3.2 The European Commission v Organon
4.4 The European Commission v Bayer
4.4.1 The issues
4.4.2 The view of the Commission
4.4.3 The appeal
4.4.4 The implications
CHAPTER 5 PATENT ISSUES
5.1 Background
5.2 The European Patent Convention
5.3 Supplementary Protection Certificates
5.4 Patents v free trade
5.5 The doctrine of exhaustion of rights
5.5.1 Centrafarm v Sterling Drug
5.5.2 Merck v Stephar
5.5.3 Merck v Primecrown Limited
CHAPTER 6 ASSESSMENT ISSUES
6.1 Introduction
6.2 The audit trail: manufacturer to dispenser
6.2.1 Introduction
6.2.2 Qualified Person
6.2.3 Assessment issues for the PL (PI) scheme
6.2.4 Post-licence assessment issues
6.3 The European Medicines Evaluation Agency (EMEA)
6.3.1 The EMEA and parallel trade
CHAPTER 7 TRADE MARKS AND PACKAGING
7.1 Introduction
7.1.1 Impact of different Trade Marks upon parallel trade
7.1.2 Impact of centralised applications
7.2 Repackaging
7.3 The Paranova case
7.4 The EC Trade Mark Directive
7.5 Patient information leaflets (PILs)
CHAPTER 8 PHARMACEUTICAL PRICING AND THE PARALLEL TRADE
8.1 Introduction
8.2 Methods of price control
8.3 The Transparency Directive
8.4 Pricing and liberalisation
8.5 Future pricing strategy options
8.6 Cultural changes and the parallel trade
CHAPTER 9 THE FUTURE
9.1 Role of the European Commission
9.2 The 'Bangemann Round Table'
9.2.1 The objectives
9.2.2 The Bangemann Programme
9.2.3 Working Group 1 report
9.2.4 Working Group 2 report
9.2.5 Impact of the conclusions upon parallel trade
9.2.6 A way forward
9.3 Towards a Single Market?
9.4 The European common currency
9.5 The industry and the future
9.6 The parallel trader of the future
9.7 Enlargement of the EC
9.8 Conclusion
9.8.1 Introduction
9.8.2 EC factors
9.8.3 The Bayer case
9.8.4 National pricing policies
9.8.5 The common currency
9.8.6 The Bangemann Initiative
9.8.7 A final question
APPENDIX EUROPEAN PARALLEL IMPORTING ASSOCIATIONS: CONTACT DETAILS
list of tables
Table 3.1 Parallel import penetration % in the European Union, 1995
Table 8.1 Comparison of a basket of pharmaceutical prices in 1990
List of figures
Figure 6.1 Flow chart of the parallel import distribution chain
Figure 8.1 OECD consumer price index of nominal medical and pharmaceutical products, 1993
EXECUTIVE SUMMARY
Parallel trade. Mention the phrase to one Chief Executive Officer of a major drug house in the UK and, it is claimed, one can visibly
see a rise in his blood pressure.
This report traces the history of the trade in pharmaceuticals, showing how its increase has been fuelled by the actions of the research-based industry, which has consistently sought to contain or eliminate it, notwithstanding the inherent principle of free trade enshrined within the Treaty of Rome establishing the European Common Market.
Traditionally the trade existed only in Germany, the Netherlands, and the UK, where reimbursement of drug prices tended to be significantly higher than in most other Member States. Supplies were sourced from, in the main, Belgium, France and the southern European states. An attempt is made to explain this and also to outline the reasons why there is little prospect of a Single Market for pharmaceutical products in the short to medium term.
From its inception the parallel trade has had to fight for its existence. Initially it had to develop operating systems with the relevant national regulatory bodies in order to ensure that public health was in no way compromised. The trade is now as regulated, in some instances even more regulated, than the mainstream industry.
The trade was started by a small number of entrepreneurial pharmacists and, from the beginning, the mainstream industry perceived the actions of these individuals as a threat. War was declared, with each battle comprising a lawsuit which invariably ended in the European Court of Justice (ECJ), the verdict being given in favour of the parallel industry. Over the years the research companies have expended considerable sums of money in legal costs, in an attempt to prevent the free movement of goods across the national boundaries of those states comprising the European Community (EC).
The manufacturers have justified this litigious policy by claiming that the parallel trade has reduced their profitability in Europe to such an extent that their R&D programmes are in jeopardy. They continue by suggesting that future investment in research could be curtailed, with the relevant facilities possibly being relocated to more favourable economic environments. The cynic might be forgiven for expressing a degree of bewilderment at these assertions, when share prices of the major drug houses and their published profit records over the past decade are examined.
The parallel traders claim that their business is little more than an irritant to the mainstream industry. At best the parallel trade accounts for less than 2% penetration of the total pharmaceutical sector within the EC and at that level, it can hardly seriously be claimed to act as a significant deterrent to innovation.
However, it is true that the trade does tend to concentrate its attention on sourcing the few relatively expensive newer preparations which are still likely to enjoy patent protection: market penetration for a specific product may be higher than the average figure quoted above.
In essence, therefore, the parameters of the parallel trade have been established by the European Commission, with the foundation stones and a number of building blocks supplied by the ECJ. The internal features of the individual markets are primarily governed by national legislation.
Despite lacking the financial muscle and political clout of the mainstream industry, the parallel trade has grown. Geographically, it has extended into Denmark, Sweden, Norway and Finland. Initially there was resistance to imported equivalent preparations as compared with the national versions despite the fact that, for example, with Bayer's Adalat, the products were all manufactured in Germany. Over the last decade resistance has faded, so that today adverse reaction is extremely rare. Consumer groups have expressed their support for the trade whilst the regulatory bodies claim to be neutral.
This report brings the history and modus operandi of the trade up to date by commenting upon the results of the Bangemann Initiative, following the two Round Table Conferences hosted by Commissioner Bangemann of Directorate General III (DGIII) to discuss how a Single Market in pharmaceuticals might be achieved.
It concludes by speculating that the parallel trade will continue for the foreseeable future unless any decision is handed down by the ECJ which would, in effect, compromise the inherent principle of the free trade which is the cornerstone of the EC.
Parallel Importing Strategies
This report is essential reading for both parallel importers and the pharmaceutical manufacturers whose income they affect. It includes a full review of the development of parallel trade and the legal issues which surround it.
Parallel Importing Strategies provides you with information on the strategies used by the pharmaceutical industry to restrict parallel trade, as well as the tactics used by parallel traders to overcome these limitations. So regardless of which side of the trading divide you operate in, this report is essential to help shape your own future strategies.
Reading this report will enable you to: gain a complete overview of parallel trade and the themes shaping its future; understand the steps taken either to maximise or minimise parallel trade; review pricing issues relevant to parallel trade in Europe and assess recent judicial cases and analyse successes and failures.
This report also discusses the results of the Bangemann Initiative, following the two Parallel Trade Round Table Conferences and comments on how a single market in pharmaceuticals might be achieved in the future.
PUBLISHED: APRIL 1998
REF: BS949E
PAGES: 80+
PRICE: £395/$830/¥95,000
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