Tackling the parallel trade issue

Independent market analyst Datamonitor reports that although it expects parallel trade to be stable for the short-term, it will gradually rise as the impact of the most recent EU expansion and future

By Editor on Apr 27, 2006

Independent market analyst Datamonitor reports that although it expects parallel trade to be stable for the short-term, it will gradually rise as the impact of the most recent EU expansion and future ones materialize.

Despite fears to the contrary, the group says, the most recent enlargement of the EU in 2004 has not resulted in a flood of cheap prescription drugs in old EU member states. One of the key factors it says been the low volume of branded prescription drugs available in new member countries due to their relatively small populations and high penetration of generics.

Another key deterrent has been the derogation included in the Accession Treaty for eight of the ten accession countries, which prevents the parallel export of drugs from countries where there was no equivalent patent protection available when the patent was originally filed in an EU member state.

But the group says going forward the derogation will be eroded as new products are launched, which will likely contribute to a gradual increase in parallel trade. The accession of Bulgaria and Romania in 2007 or 2008 will have a similar effect, but the group warns the possible accession of Turkey could pose a serious threat to parallel trade in the longer term given the substantial volume of branded prescription drugs available at low prices in that market.

Datamonitor suggests several measures that pharma companies can consider to effectively tackle the parallel trade issue.

Supply quota systems, it says, have become one of the most popular strategies, particularly since the European Court of Justice's landmark ruling in the Bayer Adalat case in 2004, which set the precedent for companies to design and implement such systems without infringing on Community law.

Pricing strategies also are proving successful when used selectively. In 2005, the group says, a number of pharma companies used the compulsory PPRS price cut in the UK to modulate the prices of particular products and packs that were subject to high levels of parallel imports.

The group says that while companies can take the do nothing approach, it doesn'st recommend it.

In Datamonitor's view, this is a risky approach to take because as competitors take action to restrict parallel trade, this will leave your products vulnerable to attack, says Datamonitor pharmaceutical analyst Romita Das.

The group recommends active monitoring of the situation and assessing what competitors are doing to determine when and where to take action to limit parallel trade.

There's no question that doing nothing is not a strategy. But watching and waiting for others to take the lead and following suit probably isn'st the best strategy either.

Taking a proactive stance, as Pfizer has done with its dual pricing strategy for domestic versus exported products in Spain, may seem risky. But as in any game worth playing rewards may only come to those willing to take a risk.