Big Pharma Imposes Quotas

May 1, 2002
Gordon Kelley

Pharmaceutical Executive

Pharmaceutical Executive, Pharmaceutical Executive-05-01-2002,

Because of the European Union's country-by-country drug price controls, enterprising wholesalers often buy prescription drugs in nations that keep prices low and resell them in countries that allow higher prices. Sanofi-Synthelabo's Plavix costs $55 in France but is resold for $79 in England. That long-standing practice, known as parallel trade, costs the pharma industry an estimated $3 billion in lost profits each year.

Because of the European Union's country-by-country drug price controls, enterprising wholesalers often buy prescription drugs in nations that keep prices low and resell them in countries that allow higher prices. Sanofi-Synthelabo's Plavix costs $55 in France but is resold for $79 in England. That long-standing practice, known as parallel trade, costs the pharma industry an estimated $3 billion in lost profits each year.

European authorities overruled previous industry attempts to block parallel trading, so pharma companies have begun restricting supplies to meet local needs only, according to formulas based on prior demand and anticipated growth. Countries will receive just enough product to meet demand so that no surplus exists for wholesalers to buy and resell. GlaxoSmithKline, Eli Lilly, Wyeth, and Sanofi have already imposed such quotas.

National governments, which pay for most European prescription products, and patients who buy drugs on their own currently benefit from the low prices provided by parallel trade and will have to pay more as a result of the quotas. One concern is possible shortages in countries with lower prices because wholesalers may use remaining supplies to profit from exports.

Parallel trade is not a global phenomenon. In the United States it's illegal to import pharmaceuticals for resale, although individuals can purchase lower priced drugs in foreign countries for personal use.