Abbott, Frederick M. --- "Parallel trade in pharmaceuticals: trade therapy for market distortions" [2016] ELECD 844; in Calboli, Irene; Lee, Edward (eds), "Research Handbook on Intellectual Property Exhaustion and Parallel Imports" (Edward Elgar Publishing, 2016) 145

Book Title: Research Handbook on Intellectual Property Exhaustion and Parallel Imports

Editor(s): Calboli, Irene; Lee, Edward

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781783478705

Section: Chapter 8

Section Title: Parallel trade in pharmaceuticals: trade therapy for market distortions

Author(s): Abbott, Frederick M.

Number of pages: 22

Abstract/Description:

Pharmaceutical products are developed, approved, manufactured, traded, and used under complex and demanding regulatory schemes. While the intensity of regulation varies substantially among countries, lightly regulated markets are the exception, particularly from an economic standpoint. In this regard, pharmaceuticals are not generally traded in what might be described as a “free market” in the sense of absence of regulation, and this includes import restrictions which are generally consistent with the overall regulatory schemes. A drug that is not approved for marketing in a particular country does not become so because it is imported. Parallel trade (i.e., imports and exports) in pharmaceuticals takes place in markets that are “distorted” by regulation. Probably the single most significant “distortion mechanism” is the patent. The patent allows its owner to price a pharmaceutical product in the absence of ordinary market competition in the sense that potential competitors may not freely copy the product. The ultimate price may depend on a variety of factors, including the uniqueness of therapeutic effect within a particular class. But, the price of patented pharmaceutical products generally does not represent the cost of reverse engineering plus production.