The Economic Impact of Pharmaceutical Parallel Trade in European Union Member States: A Stakeholder Analysis

January 2004

The Economic Impact of Pharmaceutical Parallel Trade in European Union Member States

Pharmaceutical parallel imports are defined as the legal importation into a country where a patent has been registered for the same product which is patented and legally marketed in another country without the authorisation of the patent holder.

Within the European Union, a series of European Court of Justice (ECJ) rulings or opinions, underpin the legitimacy of pharmaceutical parallel trade. As a result, it is also encouraged by the governments of several Member States, particularly those where price levels for in-patent pharmaceuticals are at or above the European average (most frequently, the UK, Germany, Sweden, Denmark, the Netherlands, without excluding cases of individual products being traded fromtraditionally low-price countries).

Over the past few years there is evidence that parallel trade is expanding at least in certain therapy areas or individual products. Based on European jurisprudence, the free movement of goods and the exhaustion of intellectual property rights underpin the establishment of one free common internal market in the EU. The endeavour to assure a single intra-EU market is further reflected in numerous decisions by the ECJ, as outlined above. 

The objectives of this paper are, first, to map out policies on parallel trade in the EU Member States and Norway, and, secondly, to provide a stakeholder analysis of welfare effects by building on the available theoretical and empirical literature and by testing a number of economic hypotheses. The paper analyses the direct effects from parallel trade on the various stakeholders, namely health insurance organisations, patients, pharmacies, parallel traders and the pharmaceutical industry. The likely competition effects within importing (destination) countries and across exporting and importing member states are also examined.