Parallel Trade in Pharmaceutical Sector

Zeynep OKUR

The aim of this article is to explore parallel trade, its importance and effects on European Union and common market and the issues on parallel trade in pharmaceutical sector. This article mainly consists of two parts; the first part starts with the definition of parallel trade, when and how it occurs. Then, it will continue with the legal foundation of parallel trade in European Union. The second part starts with the nature of the pharmaceutical industry and it continues with the relationship between parallel trade and intellectual property rights, the effects of the parallel trade on European pharmaceutical industry and finally the ways, which can restrict parallel trade in european pharmaceutical industry.

A. Parallel Trade & Its Legal Foundation in European Union

“Parallel trade is a lawful form of trade in goods between Member States of the European Union, which takes place outside or in parallel with the original supplier’s ‘official’ distribution network.”¹ Being a lawful form of trade, parallel trade is different from counterfeit trade of goods in which intellectual property rights are ignored². However, “some argue that parallel trade is a good thing on the grounds that it leads to lower prices for consumers, and others argue that parallel trade undermines intellectual property protection and thereby undermines the incentives to invest in the research and development and marketing of IP-based products, which may harm the consumer in various ways”.³

Re-importation or parallel trade occurs when a product that is protected by patent, trademark or copyright entered into a market, and then it is imported into another market without the permission of the patent, trademark or copyright holder. “The re-importer chooses a country where the target product - a recent and innovative drug to ensure maximum profit - sells at a low price compared to the same product sold by the original manufacturer or licensee in the import country”.⁴ Therefore, the important part of the parallel trade is to find a suitable place for arbitrage.