How to React to Parallel Trade

Parallel trade is the process by which goods protected by an intellectual property right, such as a patent or trademark, placed in circulation in one market, are imported into a second market without the authorisation of the IP right' s holder. It provides a local supplier with a unique problem - competition from his own brand.

Parallel trade with prescription medicines occurs between the 30 countries that make up the European Economic Area (EEA) as a consequence of the principles of free movement of goods and intra-EEA exhaustion of IP rights. Ongoing for more than 40 years, its level may have peaked overall but it still accounts for the following retail market shares by value: 16% in Denmark, 14% in both the UK and Sweden, 11% in the Netherlands, 8% in Norway, and 6% in Germany. At pharmacy buying prices, parallel trade in the top four destination markets of the UK, Germany, Netherlands and Sweden totals more than € 2700 million.

Incoming parallel trade at much lower levels is also found in many other EEA countries. Spain, Greece, France, Italy and Portugal are the main source nations. Increasingly, several countries act simultaneously as both source and destination markets (with different products). Concentration on blockbusters is lessening, largely as a result of traders looking to second-tier products as they encounter supply difficulties with the major brands. To market a parallel-traded product, the importer requires either an abbreviated marketing authorisation for the product from the national regulatory authority in the country of destination, or, in the case of centrally-approved medicines, a parallel distribution notice from the European Medicines Agency (EMEA).

In the case of products sourced from any of the 10 CEE member states that joined the EU in 2004 or the two that joined in 2007, the importer is also required to give one month' s notice to the patent holder prior to filing for marketing approval to enable a check for compliance with the specific mechanism to be made. This mechanism is designed to block east-west parallel trade with individual products while there are disparities in patent/SPC status.

Before a parallel-traded product can be marketed, either re-labelling in the local language or replacing the outer carton is required. In order for an importer to do this without infringing trademark law, all five criteria set out by the European Court of Justice (ECJ) in the Bristol-Myers Squibb cases have to be met:

• Any refixing or replacing of the original trademark must be necessary in order for the imported product to be marketed.
• The original condition of the product inside the packaging is not affected.
• The new packaging states who manufactured the product and who repackaged it.
• The presentation of the repackaged product does not damage the reputation of the trademark and its owner.
• The trademark owner is given adequate prior notice before the repackaged product is put on sale and, on demand, is supplied with a specimen of the repackaged product.

The only justification for parallel trade is to bring savings to payers, but evidence of the level of savings and the main beneficiaries is mixed. Because of the number of intermediaries involved in parallel trade and their costs, the actual net saving compared with the inter-state product price differentials is small.

Actual evidence linking parallel trade with ease of access of counterfeit medicines has only recently surfaced.