Market Report Source

Overview

Introduction
Since the beginning of this decade, parallel trade levels of pharmaceutical drugs in the US and Europe have risen to some of the highest levels ever seen, exerting additional pressure on the profitability of pharmaceutical companies. As a result, it has become ever more important for pharmaceutical companies to take action to limit the impact of this.

Scope
In-depth analysis of the present situation of parallel trade in Europe and the US, including an examination of the impact of the new accession states
Evaluation of the future of parallel trade in Europe and the US, including analysis of the key factors that impact this
Case studies examining strategies used by the leading pharmaceutical companies to restrict parallel trade
Recommendations on how companies can optimize their strategy to tackle parallel trade effectively

Highlights
Illegal drug importation into the US is in decline. Pharmaceutical companies have successfully restricted the supply of drugs to the main culprits in Canada who have been selling drugs to Americans, and the recent introduction of Medicare Part D has reduced the number of people without drug coverage.

The legal framework supporting parallel trade in the EU has restricted the actions pharmaceutical companies’ can take to restrict parallel trade, but Bayer’s legal victory on the Adalat case in 2004 has provided companies with an opportunity to take action that can effectively restrict parallel trade without infringing EU law.

The 2004 EU enlargement has not caused a rise in parallel trade yet, mainly because of the derogation that prevents parallel exportation of many branded drugs from 8 of the new countries. The effect of this on new accession states and future accession countries will erode over time, which is expected to cause a gradual rise in EU parallel trade.

Reasons to Purchase
Assess the commercial implications for your business of parallel trade in the US and EU
Get up to speed with recent development in the parallel trade situation in Europe and the US
Understand how to optimize your strategies to tackle parallel trade

Table of Contents

TABLE OF CONTENTS

CHAPTER 1 OVERVIEW OF PARALLEL TRADE

What is parallel trade?

Conditions for parallel trade

Implications of parallel trade

Price convergence of drugs

Parallel trade drives down pharmaceutical companies’ profitability

Does parallel trade compromise the safety of drugs?

CHAPTER 2 DRUG IMPORTATION IN THE US

Introduction

Further legislation has been passed to legalize drug importation, but implementation is no closer

US consumers are evading the law and importing prescription drugs from abroad

Route of illegal importation

Key drivers of drug importation – the search for cheaper drugs

State initiatives to drive importation of prescription drugs

Driving factors for drug importation from Canada

Key resistors of drug importation – the safety of drugs is being compromised

Many foreign Internet phamacies operate in a regulatory loophole

Rogue Internet pharmacies – a high percentage of Internet phamacies that claim to be Canadian are not really Canadian

Counterfeits entering the supply chain

Strategies for manufacturers to tackle drug importation

Supply management strategies

Anti-counterfeiting technologies

Pricing strategies

Legal challenges

Programs for the uninsured

Public awareness campaigns

Use of different packaging

Use of different brand names

Datamonitor’s recommendations

Future outlook for drug importation

Drug importation is expected to decline

Legalization of drug importation unlikely

CHAPTER 3 PARALLEL TRADE IN EUROPE

Introduction

Legal and regulatory framework

Regulatory framework

Repackaging and relabeling

The derogation of accession states

Country-level trends in parallel trade in Europe

Present situation

The future outlook of parallel trade in Europe

Strategies for manufacturers to tackle parallel trade in the EU

Supply management is the most effective approach

Pricing strategies are unlikely to be profitable moves, although Pfizer’s dual pricing system may change this

Legal challenges by drug manufacturer’s rely on intellectual property rights

Use of different packaging and brands in member states may deter parallel trade – but the effect is limited

The ‘do nothing’ approach is risky

CHAPTER 4 APPENDIX : SUPPORTING DATA

Definitions

Glossary of terms

Supporting data

Conferences attended

Reference

Exchange rate

LIST OF TABLES

Table 1: Evaluation of three generics bought by the FDA from an Internet pharmacy failed on a number of tests

Table 2: Product patents were introduced in eight of the accession states between 1991 and 1994

Table 3: Incentives for parallel importation in the six main parallel importing European countries

Table 4: Summary of the economic impact of parallel trade, based on the ESRC, LSE and YHEC studies

Table 5: EEA countries

Table 6: Exchange rates*, 2004

LIST OF FIGURES

Figure 1: Generalized distribution chain for parallel traded pharmaceutical products

Figure 2: The number of state and federal bills introduced in Congress proposing the legalization of parallel drug importation has dramatically risen over the last four years

Figure 3: Foot traffic traditionally accounted for the majority of cross border sales of prescription drugs from Canada to the US, however, foreign Internet pharmacies have become more popular after their emergence

Figure 4: Average ratio of Canadian prices to Median International Prices of patented drugs, 1987-2004

Figure 5: Ratio of average Canadian patented drug prices to foreign drug prices, 1987, 1997, 2004

Figure 6: The high level of competition for major generic products in the US drives the price down

Figure 7: Main strategies available to drug manufacturers to tackle the current illegal importation of prescription drugs in the US

Figure 8: A large section of LillyAnswers’ website discusses the risks of drug importation

Figure 9: Lilly ICOS devotes a whole section on its Cialis website on how customers can avoid counterfeit Cialis drugs

Figure 10: Benchmarking anti-drug importation strategies

Figure 11: Although Medicare D provides some coverage of prescription drug costs, beneficiaries will still have to contribute

Figure 12: Legal framework of EC law supporting parallel trade in the EU

Figure 13: Parallel trade rose substantially in Europe between 1998 and 2002, particularly in the UK, Sweden and Germany

Figure 14: Parallel import penetration across selected European countries in terms of value in 2004

Figure 15: Parallel import penetration in Germany, 1997-2004

Figure 16: ARB case study: selective use of PPRS price cuts to UK packs with high parallel import penetration drove down parallel importation

Figure 17: Sales of locally-sourced Aprovel and Amias rose sharply in 2005, while parallel imports fell

Figure 18: The accession countries have a high penetration of generics, compared to some of the most common parallel exporter countries

Figure 19: Wholesalers are vertically integrating into offering pre-wholesale and pharmacy activities

Figure 20: Main actions that drug manufacturers can take to limit parallel trade in Europe