Article originally published in PLC Cross-border Life Sciences Handbook, 2007/08
Apart from patent disputes linked to generic entry, perhaps no issue has spawned more litigation in the European pharmaceutical sector than parallel trade. At the root of the problem are price differences among member states for pharmaceutical products which are caused by national price controls. The pharmaceutical industry argues that, in the absence of legislative measures to harmonise prices on a pan-European basis, pharmaceutical manufacturers should remain free to take steps to prevent parallel traders from buying cheap product in one member state and selling it in another where prices are higher. The industry points out that parallel traders are nothing but arbitragers who, by eroding profit margins in high-price member states, undermine industry’s ability to devote adequate financial resources to R&D for new products. Further, parallel traders’ activities do not benefit consumers or national health systems as they keep all their profi ts to themselves.
Parallel traders, supported by the European Commission (Commission), argue that, even if pharmaceutical companies are simply reacting to price differences that are beyond their control, restrictions on parallel trade remain unacceptable. Such restrictions, regardless of the circumstances are inconsistent with the fundamental goal of market integration, and would violate a core tenet of EU competition law.
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