Competition and Innovation in the EU Regulation of Pharmaceuticals: The Case of Parallel Trade
Year: 2010
Type: article
Abstract: Pharmaceuticals are an essential part of modern life. They help satisfy our \neveryday nutritional, sanitary and medical needs, and represent a primary method for \npreserving health and treating many diseases and conditions. Their spread, fostered by \nthe progress of pharmaceutical research, created a ‘health revolution’, increasing human \nlife expectancy and improving quality of life. \nCompared to surgical procedures, drugs represent a very cost-effective means for \ngovernments to protect the public health of their citizens. This should help reduce total \nhealth care expenditure. However, the cost of pharmaceuticals is accounting for an evergreater \nproportion of that expenditure. This in turn means that there is increasing \nscrutiny by governments to tighten budget controls on drugs. \nThese elements have recently generated a renewed interest in the pharmaceutical \nindustry’s practices, and especially in companies’ pricing policies, from both the public \nand regulators. They frequently claim that drugs are priced too highly and that this may \nundermine patients’ access to medicines, as well as their right to health. \nIn the absence of effective market mechanisms capable of controlling excessive \nprices, governments have resorted to a wide variety of different policy tools to help \nthem cap the rise of drug prices and of their health care expenditures. \nIt is the difference between the tools used that has contributed to the presence of \nlarge price gaps across countries. Such differences in prices are the basis of what is called \n‘parallel trade’. \nParallel trade is a form of arbitrage that consists of the cross-border selling of a \nproduct protected by an intellectual property right (IPR) without the authorisation of the \nIPR owner. Parallel trade is an entirely EU phenomenon, because it is based on the \nprinciple of free movement of goods, as developed by the jurisprudence in the principle \nof regional exhaustion of IPRs. Under this principle any protected good that is first \nmarketed in the EU by the IPR owner, or with his consent, shall freely circulate along the \nsupply chain.
Author: Desogus, Claudia <1980>
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
Funder: University of Oxford
OpenAlex ID: W1499344660