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Pharmaceutical Manufacturer Strategies to Parallel Importation in the EU: A Strategic Update in Light of European Court of Justice Rulings

Ryan, Andrew (2004)
Department of Business Administration
Abstract
Problem: Parallel trade occurs when a product is released on one market, and an importer purchases the product in question on a lower priced market, and subsequently imports the product to a higher priced market, and sells it there. Parallel trade of pharmaceuticals in the European Union is prevalent since the legal, business and political environment makes the trade relatively easy and legal. This is largely because of differing price containment methods employed by European Member States to control health care costs. This creates an environment where the pharmaceutical manufacturers are not free to set the prices of phamraceuticals as they wish, and different prices across Member States is the norm. This eats into the profits of the... (More)
Problem: Parallel trade occurs when a product is released on one market, and an importer purchases the product in question on a lower priced market, and subsequently imports the product to a higher priced market, and sells it there. Parallel trade of pharmaceuticals in the European Union is prevalent since the legal, business and political environment makes the trade relatively easy and legal. This is largely because of differing price containment methods employed by European Member States to control health care costs. This creates an environment where the pharmaceutical manufacturers are not free to set the prices of phamraceuticals as they wish, and different prices across Member States is the norm. This eats into the profits of the manufacturers, and creates a need for effective, and legal strategies to prevent the gray market. Objective: Stated concisely, the goal of this paper is to: Consider a wide spectrum of strategic options found in academic literature to combat parallel trade, assess strategic options available to pharmaceutical companies in light of the current legal framework in the EU, and evaluate whether current strategies employed have resulted in lessening competitive pressure from parallel importers. Working Structure: This paper uses both primary (interviews, numerical analysis), and secondary resources to come to its conclusions. After the introduction, a theoretical background is presented which shows that the market for pharmaceutical parallel trade in Europe is ripe. Effects on the manufacturer follow to show when and why a firm may want to prevent the gray market. The political section of the paper shows that the market for pharmaceuticals is only partially harmonized, and is likely to remain so, and also presents the special mechanism for newly acceding countries. The legal analysis looks mainly at the relevant case law, and the strategic implications of the cases is then looked at. A brief numerical analysis then tests three hypotheses to see if strategies have been successful, and if parallel trade competition causes more pressure on prices. Finally, strategies that were considered earlier in the paper are re-assessed in light of the legal and political environment. (Less)
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author
Ryan, Andrew
supervisor
organization
year
type
H1 - Master's Degree (One Year)
subject
keywords
parallel trade, parallel import, pharmaceutical, drug, grey trade, gray trade, gray import, grey import, re-import, Management of enterprises, Företagsledning, management
language
English
id
1348580
date added to LUP
2004-06-21
date last changed
2012-04-02 15:13:51
@misc{1348580,
  abstract     = {Problem: Parallel trade occurs when a product is released on one market, and an importer purchases the product in question on a lower priced market, and subsequently imports the product to a higher priced market, and sells it there. Parallel trade of pharmaceuticals in the European Union is prevalent since the legal, business and political environment makes the trade relatively easy and legal. This is largely because of differing price containment methods employed by European Member States to control health care costs. This creates an environment where the pharmaceutical manufacturers are not free to set the prices of phamraceuticals as they wish, and different prices across Member States is the norm. This eats into the profits of the manufacturers, and creates a need for effective, and legal strategies to prevent the gray market. Objective: Stated concisely, the goal of this paper is to: Consider a wide spectrum of strategic options found in academic literature to combat parallel trade, assess strategic options available to pharmaceutical companies in light of the current legal framework in the EU, and evaluate whether current strategies employed have resulted in lessening competitive pressure from parallel importers. Working Structure: This paper uses both primary (interviews, numerical analysis), and secondary resources to come to its conclusions. After the introduction, a theoretical background is presented which shows that the market for pharmaceutical parallel trade in Europe is ripe. Effects on the manufacturer follow to show when and why a firm may want to prevent the gray market. The political section of the paper shows that the market for pharmaceuticals is only partially harmonized, and is likely to remain so, and also presents the special mechanism for newly acceding countries. The legal analysis looks mainly at the relevant case law, and the strategic implications of the cases is then looked at. A brief numerical analysis then tests three hypotheses to see if strategies have been successful, and if parallel trade competition causes more pressure on prices. Finally, strategies that were considered earlier in the paper are re-assessed in light of the legal and political environment.},
  author       = {Ryan, Andrew},
  keyword      = {parallel trade,parallel import,pharmaceutical,drug,grey trade,gray trade,gray import,grey import,re-import,Management of enterprises,Företagsledning, management},
  language     = {eng},
  note         = {Student Paper},
  title        = {Pharmaceutical Manufacturer Strategies to Parallel Importation in the EU: A Strategic Update in Light of European Court of Justice Rulings},
  year         = {2004},
}