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Parallel-export bans: Member states in collision course with EU regulations?

11 December 2014 Brendan Melck

An increasing number of new EU member states in central and south-eastern Europe are introducing new legislation to allow restrictions and bans on the parallel export of medicines of which supplies are scarce. But they risk a strong response from the European Commission.

New parallel export bans in Greece

On 14 November, the Greek National Organisation for Medicines (EOF) issued a new series of temporary bans on the parallel export of 13 innovative drug brands. This is the latest of a number of bans issued recently in Greece. The drugs included have been subjected are many of the same ones which have been subject to bans in the recent past, including Pfizer’s chronic heart failure drug Inspra (eplerenone) and its antiepileptic drug

Parallel exports accounted for around EUR500 million of the total value of the Greek pharmaceutical market in 2012, estimated at EUR4.153 billion (EFPiA). The growth of parallel exports from Greece has been driven by low pharmaceutical prices compared to many of its EU peers. Changes in drug pricing regulations at the beginning of the year have given a further impetus to the downward pressure on prices, particularly on off-patent originators, with or without generic competition. The list of drugs subject to the new bans can be accessed at the website of the EOF.

Cost-containment leads to parallel export boom

The issue of parallel exports of medicines from lower-price, economically-weaker EU member states to higher-price, economically-stronger member states has been high on the agenda of the pharmaceutical industry in recent years. A pattern which can be observed in a number of EU member states across the central and south-eastern European region – including the Czech Republic, Slovakia, Hungary, Romania and Poland - is of a dynamic increase in spending on pharmaceutical reimbursement at the end of the previous decade being halted early in this decade, with the introduction of more restrictive pricing and reimbursement policies. The resulting price reductions have led to a boom in parallel exporting from these countries, leading in many cases to shortages of the heavily-exported drugs. Many of these countries have reacted with laws to limit the practice. Ironically perhaps, countries where the focus has been on expanding access to innovative medicines have seen many of those medicines becoming scarce again. This is due to the lucrative drug-price differentials between the newer EU member states (and Greece) on the one hand, and western European and Scandinavian countries on the other, where, in many cases, the use of parallel-imported drugs is positively encouraged, as part of their own cost-containment agendas.<

Slovak bans challenged by the European Commission

The European Commission (EC) takes a dim view of restrictions on parallel exports, and has warned Greece’s government on several occasions to remove legal obstacles to the practice. Most recently – as reported in early October by Slovak newspaper Hospodárske Noviny - the Commission has set its sights on the bans on parallel exports of medicines from Slovakia. Such bans are being issued by the country’s drug agency ever since a legal amendment came into effect at the beginning of 2013. Organisations involved in parallel trade are required to inform the drug agency of their intention to export particular medicines 30 days in advance, during which time the agency can check on the availability of these medicines and, if it considers this to be scarce, stop the export. In 2013, the Slovak drug agency issued 113 decisions banning the export of 85,875 drug packages. Among the affected medicines were Pfizer’s Lyrica, as well as Eli Lilly (US) depression drug Cymbalta, and Amgen (US) neutropaenia treatment Neulasta (pegfilgrastim). Even after the EC called for the Slovak government to make changes to the law allowing bans to be imposed on parallel exports of certain drugs – which the Commission considers to be applied too generally –Slovakia imposed bans on another three drugs in November.

Several other countries introduce laws to restrict parallel exports

Slovakia’s parallel trade-restricting law has served as the model for a similar regulation introduced in Bulgaria earlier this year, in spite of concerns about opposition from the EC. Other countries in the region have also introduced new legal measures to monitor and restrict parallel exports, if deemed necessary, in recent times: in 2013, such measures came into force in the Czech Republic and Hungary, and in 2014, they were introduced – apart from in Bulgaria – in Romania and Estonia. In Poland, where there is increasing pressure on government to introduce such measures, restrictions on parallel trade are part of a draft legal amendment which continues to be delayed.

No solution to please all sides

Balancing the requirements of the newer, economically weaker member states to make treatments available to their citizens with the aspirations of richer EU member states to make savings on their public pharmaceutical bill through favouring cheaper parallel-imported versions of branded drugs has proven to be very challenging. Member states can, under EU regulations, impose temporary restrictions on parallel exports in specific situations in which it can be shown that public health is at risk. At what point does this become an unreasonable restriction of trade? The scale of the problem, and the widespread legislative response to it in the new member states – and Greece – suggests it is one which current EU regulations are not really fit to solve.

Brendan Melck is a Life Sciences analyst for IHS
Posted 11 December 2014

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