Emerging Business Models in the Pharmaceutical Industries ...

Short Term Strategies Against Parallel Trade
Growth in Parallel Trade
Differences in selling prices for the same drugs in
various countries, and government price controls in
many countries, are resulting in increasing parallel
trade.
The EU's single market rule of free movement of
goods ensure that surplus profit can be made just by
moving drugs from a country where the price is lower
(such as Spain) to another where they are sold at a
higher price (like the UK).
Though companies stand to lose by selling drugs at
cheaper prices, measures like supply quotas for
individual countries and specific pricing policies have
proved ineffective.
Parallel imports are facilitated by higher prices for
selected products, easy licensing procedures for
parallel imported products, and the NHS
reimbursement system.
Pharma Competing Against Parallel Trade
With price differences across Europe becoming smaller, the
volume of parallel trade in medicines is decreasing. Drug
manufacturers are also making efforts to introduce quotas in
a bid to combat parallel trade.
Parallel import in the EU amounts to only 1.4%. This
disproves the theory that parallel trade adversely affects the
R&D based industry as it makes innovative, patent-protected
medicinal products more affordable.
The pharmaceutical industry has been increasing investment
in R&D in recent years and their profits have risen manifold.
This is largely because the prices for innovative medicinal
products world-wide bring profits that far exceed investment
costs for R&D. As parallel trade only offers the original
products of the industry itself, their total sales volumes are
not affected.
The European Court of Justice ordered in October 2004 that
GlaxoSmithKline should be allowed to restrict some supplies
of pharmaceuticals to Greece, a low-priced market.
Strategic Analysis of the Pharma Market, Future Revenue Models and Key Players 38