The European Commission is looking into several parallel imports cases, including in the life sciences industry, with a view to opening formal antitrust investigations, which may eventually lead to fines being imposed. The pharmaceutical sector is understood to be under scrutiny in at least one of the current informal investigations, according to a leak in the specialized press.
In the European internal market, pharmaceuticals and medical devices should move freely from one European Member State to the other. However, each Member State may regulate their price and/or reimbursement. This can lead to price differences between similar products in different Member States. Distributors often seek to exploit these differences by importing products purchased in low price States into high price States. These are known as parallel imports.
Pharmaceutical or medical device companies may need to consider whether and how intellectual property rights (for example, a drug patent or trademark or a medical device trademark) and compliance with regulatory provisions (such as the European Directive and Regulation on Medicinal Products or the most recent Medical Device Regulations) affect the sales of products between Member States.
Parallel importers are subject to several regulatory requirements. In addition, when re-packaging medicinal products for parallel trade, the parallel importer should respect the trademark holder’s trademark rights.
For European antitrust/competition law, parallel trade restrictions may be illegal. This is because parallel imports are considered to bring about greater price competition and increase consumer welfare. Nonetheless, parallel import restrictions may be justified in some specific circumstances.
The European Commission has consistently found pharmaceutical companies to have infringed antitrust rules by restricting parallel trade. The EU courts have sometimes taken a more nuanced approach, which seeks to balance the competing interests of the pharmaceutical sector and national health systems. However, life science companies should pay attention to practices that impact parallel imports, such as:
- Export bans
- Stock management programmes
- Dual pricing
- Providing misleading information to the pharmaceutical regulators
Things may become even more problematic when the pharmaceutical company is dominant, which may be the case when the company’s market share is above 40% in the relevant market, which can be defined very narrowly based on the ATC (Anatomical Therapeutic Chemical) classification system. In such a case, even unilateral conduct can be problematic, such as a refusal to supply, the withdrawal of marketing authorisations, or the packaging of parallel traded pharmaceuticals or medical devices to make it harder to sell them across European states. Antitrust infringements have attracted significant fines in Europe:
- (2017) Fine of €5m on a pharmaceutical company for parallel import restrictions (and excessive prices) in Italy
- (2011) Fine of ca. €2m on suppliers of prescription-only medicine and their distributors for restricting parallel imports in Romania
- (2009) European Commission fined a company €44.5m for restricting parallel imports from the Netherlands to other Member States
- (2005) European Commission fined a company €52m for regulatory abuses resulting in, amongst others, a parallel trade restriction
The European Commission continues scrutinizing business practices affecting parallel trade. It is currently looking at territorial restrictions in cross-border sales in several e-commerce cases, including probes into companies active in consumer electronics, video games and hotel bookings. The Commission has also sent a statement of objections to a leading brewery, accusing the company of hindering cheaper imports of its beer brands from the Netherlands and France into Belgium, where the product is more expensive.
More cases are in the pipeline, including in the life sciences industry. The press recently reported that the European Commission is looking at two or three parallel imports cases. The pharmaceutical sector is understood to be under scrutiny in at least one of the cases, in which the dual pricing of drugs sold both through the social security system and on the open market is of concern, according to a leak in the specialized press.
Pharmaceutical or medical device companies should pay the utmost attention to this issue, especially at this point in time when the life sciences sector is amongst the highest priorities of antitrust agencies around the world and in Europe.