Parallel trade in the pharmaceutical industry - benefitting whom?

Abstract: The aim of this thesis is to investigate whether restrictions to parallel trade in the pharmaceutical industry, distorting the internal market, are treated differently by the Court of Justice compared to other sectors, on grounds of the specific characteristics of the pharmaceutical sector. For this purpose the focus is on restrictions deriving from dominant pharmaceutical companies’ refusal to supply wholesalers engaged in parallel trade. The second chapter presents a short overview of the specific regulatory framework for pharmaceuticals within EU law as well as the special characteristics of the pharmaceutical sector are analyzed. In the third chapter there is a brief description of specific legal questions relating to parallel trade within the EU, with a special focus on how the rules on free movement of goods have been interpreted and applied in context with this sector, particularly in relation to regulatory barriers to trade and how IPRs (intellectual property rights) have been raised to impede parallel trade. The main competition law matters related to parallel trade in pharmaceuticals are also discussed shortly in this context. The fourth chapter’s focus is on EU competition law and refusal deal as an abuse of dominant position in general. Furthermore, the Court of Justice’s approach to abusive conduct, aiming at restricting parallel trade, is discussed briefly. The fourth chapter is followed by a special analyzes on refusal to supply within the pharmaceutical sector in chapter five. After investigating the law as it stands regarding refusal to supply within the pharmaceutical sector an attempt is made, in chapter six, to analyze how it affects the economic sphere. For this purpose the question of who actually benefits from parallel trade in pharmaceuticals is set forth. The main findings of the thesis are that the Court of Justice has been keen on facilitating parallel trade within the pharmaceutical industry. Recent ruling on refusal to supply medicine to parallel traders gives the impression that the Court is unwilling to provide special treatment for the pharmaceutical industry on grounds of the industry´s distinct characteristics. Instead, the Court of Justice has emphasized the importance of the functioning of the internal market and the free movement of goods, which is the cornerstone for parallel trade within the EU. However, although favoring the free movement of pharmaceutical products, it cannot be neglected that the Court of Justice is willing to give pharmaceutical companies some leeway to take actions to protect their commercial interests. Although consumers are likely achieve some benefits from parallel trade, most of the profit from such trade will most likely end with wholesalers engaged in such trade. Contrary to this, the pharmaceutical undertakings – which have invested in the development of the pharmaceutical products at issue – do not gain from such trade. Reduced profits for pharmaceutical companies will probably affect the budget spent on innovation to the detriment of potential patients. Even more seriously, pharmaceutical companies can decide to withdraw their products from low price markets. That threat appears to be especially evident at the moment when low price Member States are continuing to cut prices on medicine.