[Pharm-policy] SCRIPS Parallel importing report
James Love
love@cptech.org
Mon Jul 23 10:42:08 2001
Thanks to the Geneva researcher for this pointer. Jamie
-----------------
http://www.pjbpubs.com/scriprep/bs949.htm
Parallel Importing Strategies
CONTENTS
LIST OF TABLES
LIST OF FIGURES
EXECUTIVE SUMMARY
GLOSSARY
<<...OLE_Obj...>> 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
<<...OLE_Obj...>> 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
<<...OLE_Obj...>> 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
<<...OLE_Obj...>> 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
<<...OLE_Obj...>> 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
<<...OLE_Obj...>> 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
<<...OLE_Obj...>> 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)
<<...OLE_Obj...>> 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
<<...OLE_Obj...>> 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.
The extent of market penetration by the trade in the four major
markets is influenced by certain national criteria including the
following:</LH
* the requirements of the regulatory authorities. A Product Licence
(Parallel Import) (PL (PI)) is required by all countries before a medication
can be imported. The essential characteristics of each licensing system may
be similar, but there are some variations and there are significant
differences in the time that it takes to obtain a licence
* national pricing controls vary in every country and can determine
whether a product can be parallel imported: it may be economically sound to
do so in one country, but not in another
* copayment systems vary between countries. In Denmark, where patients
contribute a proportion of the prescription price, they illustrate a greater
degree of cost consciousness than, for example, in the UK, where over 60% of
all prescriptions are free at the point of delivery
* the attitude of the various constituent parties in the supply chain,
eg the wholesalers
* exchange rate variations
* dispensing attitudes vary from country to country. In the
Netherlands the pharmacist receives a percentage of the saving that is made
from each parallel imported product that he or she dispenses: in the UK,
there is the impact of the 'claw back' (see Chapter 1, Section 1.4.2)
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
--
James Love
Consumer Project on Technology
P.O. Box 19367, Washington, DC 20036
http://www.cptech.org, mailto:love@cptech.org
voice: 1.202.387.8030 fax 1.202.234.5176 mobile 1.202.361.3040