28.02.2018 | Brussels Background Parallel trade of medicines – Towards a parallel society when it comes to health?

Some argue that it is just a manifestation of the core principles of the European Union, some say that the practice of parallel imports leads straight to a public health crisis in the Eastern European Member States. A prominent discussion, which will get even more heated now that Bulgaria starts its Presidency of the Council and is eager to put the topic higher on the agenda.

One of the core principles of the European Union is the free movement of goods within the European Union. However, price differences between Member States are more than normal as not every Member State has the same economic strength. And that is where parallel importers see their business opportunity. The core business principle is to generate profit by buying goods in one Member State at a relatively low price and re-sell them in another Member State where the prices are considerably higher. This practice however introduces competition to the existing products in the higher priced market forcing them to reduce these prices and thus lead to an increase of consumer welfare, but leaves the lower priced markets with a lack of products or goods. As goods are subject to the free movement principle the practice of parallel trade is protected by the European Union as an instrument to foster and maintain the single market. 
Especially in case of medicinal products, it is a very lucrative business for parallel traders. The market share of imported medicinal products in the GKV (the umbrella organisation of the German public health insurers) rose form 4,9 % in 2009 to 9,2 %  in 2013. This rise is also due to Article 129 of the SGB V, fostering the sales of imported medicinal products. In addition, the general costs parallel traders have to bear are low. Except for the logistic component and the costs for employees, there are almost no additional costs. Plus, the effort that has to be put into the import of medicines is minimal. Furthermore, in contrast to originators and the generic industry parallel traders do not invest in research and development and the process to obtain marketing authorisation is facilitated as well. 
There are only a few circumstances under which parallel trade can be restricted. A substantial lack of medicine could lead to a severe danger for the public health. This would be one reason to restrict parallel trade for a certain period of time. The last time this happened was in May 2017. Romania suspended the export of measles vaccination due to a measles outbreak, which would classify as “indispensable”. Ever since then, the Romanian Health Minister Florian Bodog became a very prominent voice in discussions evolving around the topic of parallel trade. His standpoint is very contra parallel trade, of course, and he is a strong supporter of a general trade restriction for medicinal products governed by an EU regulation. 
The problem clearly shows the divide between economically stronger and weaker European Member States. The ones importing these medicines welcome the competition and decreased prices as well as the relief for their healthcare systems, as the others, rightfully so, complain about a huge lack of medicines and unbearable access problems for their patients. The Eastern Member States urge strongly and very vocal for a change of the existing system and would in the best case have the European Commission regulate parallel imports. 
The solution of the problem might not be that simple, though. A more detailed look into these countries also show a couple of poor public health policies, that are employed to artificially keep medicinal prices low such as claw-back taxes under which drug makers are penalised if sales of medicines exceed a certain threshold, whereas other countries like e.g. Germany actively promote parallel imports.  
As long as there is no social or economic convergence at European level, differences in prices will continue to provide a lucrative business opportunity for parallel traders. It seems unlikely that a limitation to the free movement of medicines will apply generally throughout the EU. Therefore, it is up to the Member States not to undermine the systems by de-incentivising parallel trade via abandoning quotas to encourage such products and by strengthening public health policies to render local markets more attractive.