PARALLEL IMPORTS OF PHARMACEUTICALS

REPORT BY:

PARTH GANDHI (13)HIMANSHU TRIPATHI (14)VINAYAK INDULKAR (15)MRUNALI INTWALA (16)RUDRAKSH JOSHI (17)UMANG JOSHI (18)

INTRODUCTION

• What is it ????

It is importation of non-counterfeit product without the authorization of the person holding the patent rights in the goods – called ‘ GREY MARKET ’

• Why is it ????

When price of patented products varies between two different markets

traders to import the product from cheaper source

Grey Market Goods

they are neither legal nor

illegal and hence fall in the

intervening grey area.

3/19/2015parallel importing 2

REASONS FOR PRICE DIFFERENTATION

• Currency fluctuations

• Price Regulation

• Product Regulation

• Distribution Costs

• Manufacturer Choice

3/19/2015parallel importing 3

Price Comparison

Drug Cost / Tab

US INDIA

Ibuprofen(For Pain)

Rs.10.00* Re.0.60

Amoxicillin(For Infection)

Rs.90.00** Rs.6.50

Pantoprazole(For Acidity)

Rs.180.00*** Rs.1.30

15 + times more

expensive

*Advil,**Amoxil, *** Protonix

3/19/2015parallel importing 4

which is compromised primarily through increased transport and packing activities in the products’ supply chain

PARALLEL IMPORTING

• Reduces price of pharmaceuticals by introducing competition

• Fundamental principle of intellectual property law - once an article is sold, its re-sale bythe purchaser wherever he wants cannot be stopped by the IPR holder.

• Concept of exhaustion of intellectual property rights

• Territoriality of IPRs- states that intellectual property rights are limited to the nationgranting them.

3 modes of exhaustion:

National/Territorial Exhaustion

International Exhaustion

Community Exhaustion/Regional Exhaustion

3/19/2015parallel importing 5

The Legal Status of Parallel Trade in Pharmaceuticals

• Patents provide inventors of new products and technologies the legal right to exclude rivals from making, selling, and distributing those inventions.

o National/Territorial Exhaustion: exclusive rights end upon first sale within a country but IPR owners may exclude parallel imports from other countries.

o International Exhaustion: rights are exhausted upon first sale anywhere and parallel Imports cannot be excluded.

o Community Exhaustion/Regional Exhaustion: rights end upon original sale within a group of countries, thereby allowing parallel trade among them, but are not ended by first Sale outside the region.

• A country could treat parallel imports (PI) and parallel exports (PE) separately.

PI

PE PE

PI

The European Union pursuesregional exhaustion but excludesPI coming from nonmembers

3/19/2015parallel importing 6

• There are now a number of E-commerce "pharmacies" (distributors) offering

prescription, trademarked drugs to consumers at prices below retail.

• Trademark law in USA- could be open to PI subject to its “common-control

exception”. (This rule allows trademark owners to bar PI except when both

the foreign and U.S. trademarks are owned by the same entity or when the

foreign and U.S. trademark owners are in a parent-subsidiary relationship)

• Two legal restraints prevent PI in prescription drugs:

o American patent owners are protected from parallel imports by an explicit right of

importation

o PI of trademarked, prescription drugs are explicitly excluded under terms of a

1988 law covering pharmaceuticals

3/19/2015parallel importing 7

• JAPAN allows PI in patented and trademarked goods unless the goods are

explicitly barred from parallel trade by contract provisions or unless their original

sale was subject to foreign price regulation.

• AUSTRALIA generally permits parallel imports in trademarked goods but patent

owners may block them. Thus, Australian consumers cannot benefit from cheaper

drugs available on foreign markets.

• Developing countries, including ARGENTINA, THAILAND, AND SOUTH

AFRICA, recently have enacted laws permitting parallel imports of

pharmaceutical products.

• INDIA follows a regime of international exhaustion in trademarked and patented

goods

3/19/2015parallel importing 8

Indian legal regime

• First statutory provision on parallel import was introduced in patent amendment act of 2002.

• Section 107 A(b) states “importation of patented product by any person who is duly authorized by patentee to sell or distribute the product, shall not be considered as infringement of patent rights”

• This was considered restrictive in scope.

• The potential of restrictive interpretation of section 107A and consequent thwarting of principle of international exhaustion forced Indian parliament to bring an amendment in 2005.

3/19/2015parallel importing 9

Indian Patent Act says about International exhaustion in Patents Amendment Act, 2005 :

“Importation of patented products by any person from a person

who is duly authorized under the law to produce and sell ordistribute the product shall not be considered as aninfringement of patent rights.”

TRIPS compatibility

TRIPS agreement in Article 6 states that this practice cannot be challenged under the WTO dispute settlement system and so is effectively a matter of national discretion.

CONCLUSIONS DRAWN

• Allows traders from comparatively more expensive market to importthe product from cheaper source

• Effects of parallel trade on various nations differ widely due todifferences in pricing structures, tax structures, transportation costs,labor costs, consumer tastes and preferences.

• This parallel trade mechanism will succeed only if the pharmaceuticalcompanies maintain a broad difference in price of their patenteddrugs across the globe.

• A nation must first judge the effects of parallel trade on its economybefore taking a decision on parallel trade.

• Pharma sector requires more subtle balance to be drawn betweenprotecting creative interest of innovator and general public so that toensure a steady supply of life saving drugs at affordable price.

3/19/2015parallel importing 13

FOR INDIA

• For developing countries like India which is good in generic pharmaceutical industry, thistype of parallel trade holds no attraction. India’s technology base is so strong that duringabsence of patent regime all patented drugs were being manufactured at half price.

• Very limited scope for traders of countries like India to import drugs from other countriesto ensure affordable medicines for its population

• It would be necessary to identify the possible sources in world where drugs are cheaperthan India and chances of which are very less.

Parallel trade provisions have no practical utility for India.

3/19/2015parallel importing 14

REFERENCES

• Research Paper for the Competition Commission of India, June-July 2010, by Avinash B amaranth.

• Parallel Trade and its Implication on the Availability of Patented Drugs: A Theoretical Approach by Mainak Mazumdar, Institute for Social and Economic Change (ISEC), Bangalore, India.

• Exhausting patent rights in India, by Shamnad basheer Journal of intellectual property rights, vol 13, September 2008, pp 486-497.

• Parallel imports in pharmaceuticals: implications for competition and prices in developing countries, final report to world intellectual property organization by Keith E Maskus.

3/19/2015parallel importing 15

THANK YOU