Tribune. Parallel imports of medicines now account for up to 25% of the market in some European countries and € 5.5 billion across the European Union (EU). This practice, little known to the general public, refers to buying drugs in one country and reselling in another, in order to take advantage of tariff differences within the EU. The legislation regulates this type of resale, but leaves a lot of room for this practice with the aim of promoting intra-European competition.
Using data from the Norwegian market, we tried to understand the effects of these practices on the industry, here are our main conclusions. Drug price differences between countries can be as high as 300% in Europe, due to regulatory caps or strict government pricing rules. These price differences create opportunities for parallel imports.
For patented medicines, parallel trade affects the sharing of profits between an innovative pharmaceutical company, retailers and parallel traders. In a new study, we show that in a country that does not regulate pharmacy margins, incentives to negotiate lower wholesale prices play an important role in fostering parallel trade penetration and that the ban on parallel imports would benefit manufacturers.
A system that penalizes poor countries
Reimbursements to the patient do not depend on the origin of the drug, as there is no price difference between local drugs and those from parallel sales. This trade does not therefore benefit consumers, but it is pharmacies and import-export companies that are the main beneficiaries of this type of trade, to the detriment of drug manufacturers.
Companies that import drugs offer lower prices than producers, but in countries where drugstore chains have a very large market share, the majority of profits end up in the cash desks of pharmacies that do not. There is no reason to pass this price difference on to consumers.
This profit is all the greater for pharmacies as these favorable purchase prices allow them to negotiate better with manufacturers and lower wholesale prices, threatening to otherwise turn to these imported drugs. All these effects are relatively negative in that they encourage drug manufacturers not to adjust their prices to different markets, thus potentially depriving the poorest countries of certain products.
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