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Parallel Exports Lead to Drug Shortage Problems in the Heart of Europe

09 October 2012 Brendan Melck

Cost-containment policies focusing on bringing down the prices of reimbursed medicines in three neighbouring countries in the Central and Eastern Europe region - Poland, the Czech Republic and Slovakia - have had their desired effect, but have also had some undesired ones too. One of the most significant of these has been a boom in parallel exports of medicines - the practice of wholesalers exporting products originally imported to a particular country to another country, usually where they can obtain a higher price.

This is reported to be resulting in shortages of medicines for patients - and while European Union (EU) officials frown upon attempts to restrict the practice, there is a growing tendency to favour imposing restrictions, with citizens' health potentially at stake.

Czech Republic
In the Czech Republic, a shocking statistic emerged at the end of last year: according to the State Agency for Drug Control (SUKL), the value of the parallel export market for medicines in the country is around CZK16 billion (USD824.67 million) - which, considering the value of the Czech pharmaceutical market - estimated by SUKL at CZK58.93 billion (in ex-factory prices) - is a significant proportion. The majority of this parallel export is thought to be going to Germany. SUKL has carried out price reviews for most reimbursed drugs in the past few years, which have resulted in significant price reductions - and the unintended consequence has been a big boom in parallel exports.

The Czech authorities have got to work on finding a legal solution to this problem this year - and a solution involving putting limits on the operations of pharmacies which have both retail and wholesale operation was proposed as part of an amendment to the law on pharmaceuticals. However, in August, when the amendment came before parliament, it was blocked, mainly on the grounds that it would represent an excessive restriction on smaller pharmacy operators. Among the medicines which are reported to be in short supply in the Czech Republic are epilepsy drug Ebixa (memantine; Lundbeck, Denmark) and angiotensin II receptor blocker Micardis (telmsartan; Boehringer Ingelheim, Germany).

Slovakia
Meanwhile, the Slovakian government has progressed further down the path of legislation, with measures intended to limit parallel exports of particular medicines being approved by the government - as part of an amendment to the law on medicines and medical devices - in late September. The country has seen a marked increase in parallel exports since the coming into force of legislative changes at the end of last year which include a new regulation under which prices of drugs are referenced to the second-lowest priced market in the whole EU. The proposed measures to restrict the practice - which still have to go through the legislature - involve the Slovak SUKL monitoring parallel exports and identifying any shortages of medicines on the market, and subsequently disallowing the parallel export of these medicines. These changes have been received positively by the pharmaceutical industry - unsurprisingly, because parallel exports from low-price countries to higher-priced ones threatens pharmaceutical companies' margins in the higher-priced countries, and reduce stocks in the markets where the products were initially supplied, which can result in legal sanctions against them - as has reportedly happened in Slovakia.

In response to the measures planned by the Slovak MoH, the Association of Innovative Pharmaceutical Companies (AIFP) in the Czech Republic has filed a motion to the Czech MoH for a change to the pharmaceutical law which would involve the same measures as those being planned in Slovakia.

Poland
Poland's Reimbursement Act, which came into force at the beginning of this year, was accompanied by challenging price negotiations and the introduction of new regulations which have resulted in major reductions in drug prices. Since the start of the year, it has become clear that some medicines are in short supply on the market. Currently, Poland's Main Pharmaceutical Inspectorate is investigating a major shortage of the Eli Lilly fast-acting insulin analogue Humalog (insulin lispro) - with representatives of the producer in Poland saying that supply has not been interrupted; however, since the drug's price in Poland is among the lowest in Europe, it is clearly a candidate for parallel export.

The Polish government is not, however, looking to take any legal steps to resolve the situation at this stage. The GIF's vice president Zbigniew Niewójt is reported by Polish medical news provider Rynek Zdrowia as saying that his organization is not about to stop pharmaceutical wholesalers from being involved in parallel exports, but he is clear that they must understand their duty to supply Polish pharmacies too. However, with the price of Humalog reported to be around 30% lower in Poland than in Germany, it is not hard to see how the problem arises.

A report in Polish newspaper Gazeta Wyborcza from August also highlighted shortages of Humalog and the Novo Nordisk (Denmark) fast-acting insulin analogue NovoRapid (insulin aspart) on the national market. It mentions efforts made by producers to curb the practice, through setting up their own warehouses and production facilities - with Sanofi (France) leading the way, and GlaxoSmithKline (United Kingdom) and Swiss majors Roche and Novartis following - but emphasizes the limits to such solutions, since in order to be viable across the country, each producer would need to establish multiple distribution centres.

Conclusion - EU context
As reported on the European Union (EU) information website Euractiv, parallel exports can only be restricted when serious threats to the provision of healthcare in an EU member state have been identified, and any new mechanism established to control it would have to take into account the requirement of consulting with the European Commission if the free movement of goods was to be restricted - and agreement would be on a case-by-case basis.

So, the Czech and Slovak authorities could yet face the EU's wrath if they do not abide by its tough standards on free movement of goods and services - a fate which has already befallen the Greek National Organisation for Medicines, which was warned in January by the European Commission about measures it took to curb parallel exports.

The pharmaceutical industry, however will be hoping that there can be some legal compromise which allows the practice to be restricted, especially in the context of what it sees as unfavourable international reference pricing arrangements - certainly this is the case in Slovakia. If parallel trade was restricted at least, the price 'contagion' the industry is facing could be contained to some small extent.

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