EconomyEuropeHealth

Is the parallel trade in prescription drugs a malaise or cure?

As the prepares to expand eastwards, new battle lines are being drawn in the confrontation over national price-setting for prescription – and in the cross-border parallel trade it engenders in the light of free movement of goods across the single market.

Parallel traders, or wholesalers who transport cheap drugs across the EU, say their embodies the free market ethos lacking in the patented industry. They claim they are performing an important public service for national services, the taxpayer and individual patients.

But drug firms argue that price-setting sits awkwardly with the concept of a free and open market and say the parallel trade is a symptom of this malaise. They complain the trade is costing them dearly in lost revenue that should be pumped into and development (R&D), which has allowed the US to pull ahead of in the innovation stakes.

“We're a couple of years away from expanding to the east and what's going to happen?” asks Brian Ager, director-general of pharmaceutical industry group EFPIA. “Medical products will flood back west,” Ager said, arguing that this would rob drug firms of revenue desperately needed for expanding research budgets and may cause shortages in the source country.

EFPIA estimates that the parallel trade is already costing drug firms over €3.5 billion – about 5% of the total market – each year in lost sales and knocking €1 billion euro off their bottom line. Meanwhile, research budgets for drug companies, which have doubled in the last decade, are suffering from diminishing returns with the increasing complexity of the and regulations involved.

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Parallel traders question the industry's maths and say drug firms make a large enough profit. They say that they help combat the monopoly drug firms enjoy with their patents and offer savings.

“Pharmaceutical companies make double-digit profits, making it one of the most lucrative industries in the world,” says Donald Macarthur, secretary-general of the European Association of Euro-Pharmaceutical Companies, a parallel traders' umbrella group. “And there's no evidence that parallel trade hurts R&D,” he adds. Macarthur estimates that parallel traders save British taxpayers alone €100 million, as well as hundreds of millions more euro across Europe.

He suggests drug companies should divert some of their huge marketing budgets, which he says outstrip R&D spending, to the development of new drugs.

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This article first appeared in the 25-31 July 2002 edition of The European Voice.

Author

  • Khaled Diab

    Khaled Diab is an award-winning journalist, blogger and writer who has been based in Tunis, Jerusalem, Brussels, Geneva and Cairo. Khaled also gives talks and is regularly interviewed by the print and audiovisual media. Khaled Diab is the author of two books: Islam for the Politically Incorrect (2017) and Intimate Enemies: Living with Israelis and Palestinians in the Holy Land (2014). In 2014, the Anna Lindh Foundation awarded Khaled its Mediterranean Journalist Award in the press category. This website, The Chronikler, won the 2012 Best of the Blogs (BOBs) for the best English-language blog. Khaled was longlisted for the Orwell journalism prize in 2020. In addition, Khaled works as communications director for an environmental NGO based in Brussels. He has also worked as a communications consultant to intergovernmental organisations, such as the EU and the UN, as well as civil society. Khaled lives with his beautiful and brilliant wife, Katleen, who works in humanitarian aid. The foursome is completed by Iskander, their smart, creative and artistic son, and Sky, their mischievous and footballing cat. Egyptian by birth, Khaled's life has been divided between the Middle East and Europe. He grew up in and the , and has lived in , on and off, since 2001. He holds dual Egyptian-Belgian nationality.

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Khaled Diab

Khaled Diab is an award-winning journalist, blogger and writer who has been based in Tunis, Jerusalem, Brussels, Geneva and Cairo. Khaled also gives talks and is regularly interviewed by the print and audiovisual media. Khaled Diab is the author of two books: Islam for the Politically Incorrect (2017) and Intimate Enemies: Living with Israelis and Palestinians in the Holy Land (2014). In 2014, the Anna Lindh Foundation awarded Khaled its Mediterranean Journalist Award in the press category. This website, The Chronikler, won the 2012 Best of the Blogs (BOBs) for the best English-language blog. Khaled was longlisted for the Orwell journalism prize in 2020. In addition, Khaled works as communications director for an environmental NGO based in Brussels. He has also worked as a communications consultant to intergovernmental organisations, such as the EU and the UN, as well as civil society. Khaled lives with his beautiful and brilliant wife, Katleen, who works in humanitarian aid. The foursome is completed by Iskander, their smart, creative and artistic son, and Sky, their mischievous and footballing cat. Egyptian by birth, Khaled’s life has been divided between the Middle East and Europe. He grew up in Egypt and the UK, and has lived in Belgium, on and off, since 2001. He holds dual Egyptian-Belgian nationality.

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