Parallel trade: are industry concerns real or imagined?

Transcription

1 Parallel trade: are industry concerns real or imagined? Steve Chaplin MSc, MRPharmS The parallel trade in medicines is claimed to save money for the NHS, but results in lost profits for the pharmaceutical industry. Here, Steve Chaplin examines the pros and cons of parallel imports. Figure 1. About 1 in 17 prescriptions are now filled with a parallel import The UK pharmaceutical industry wants to abolish the parallel trade in medicines. Buying medicines cheaply in other European Union (EU) countries and reselling them in the high-priced UK market is a profitable and growing business. The industry has long complained about lost profits, and now it blames parallel trade for facilitating another costly problem: counterfeiting. Is this self-interest or concern for patients interests? How does parallel trade work? The EU market in medicines is not driven by consumers. Governments decide the prices they will pay, resulting in wide differences in the costs of medicines between member states; Greece and Spain, for example, set far lower prices than the UK, Germany, Scandinavian countries and the Netherlands. Some of the countries that set high prices tend to have a large research-based pharmaceutical industry. EU regulations designed to support a single market mean that licensed traders can buy medicines in one European country and resell them in another. The price difference between the countries must be large enough to provide a profit after meeting the costs of transport, dealing and licensing. Among the parallel imports licensed in February 2006 by the Medicines and Healthcare products Regulatory Agency (MHRA) were atorvastatin, nebivolol, sertraline, salmeterol and risperidone. 1 According to the Association of the British Pharmaceutical Industry (ABPI), the MHRA received 2867 new applications for parallel import licences and processed 3380 in 2004/05. 2 Parallel imports enter the supply chain through wholesalers. Pharmacists are incentivised to use them by the DoH, which assumes that they buy medicines at less than manufacturers UK prices; their remuneration is reduced accordingly. The ABPI says that 1 in 17 NHS prescriptions were filled with a parallel imported medicine in What are the regulatory safeguards? In the UK, traders who want to import medicines must be licensed as wholesale dealers by the MHRA and hold a parallel import licence for each product imported. 3 This is granted provided the product has no therapeutic difference from the equivalent UK product. 4 Product labelling and patient information must conform to MHRA guidelines. 5 In practice, 22 Prescriber 5 September

2 UK 342m ( 232m) Germany 194m ( 132m) Sweden 47m ( 32m) Netherlands 32m ( 22m) Denmark 16m ( 11m) (2001) Total 631m ( 429m) Table 1. Total savings from the parallel trade of pharmaceutical products in 2002 this may mean overlabelling a pack with a new English language label (see Figure 1) and opening the pack to insert an English language information leaflet. To repackage medicines, a trader must also hold a manufacturer s assembly-only licence. 3 The MHRA ensures the quality of licensed products by a system of site inspections and medicines testing; specifically, it must approve proposed repackaging before issuing a licence. The economic impact of parallel trade The British Association of European Pharmaceutical Distributors (BAEPD), the organisation representing parallel traders, claims that parallel trade offers a considerable saving to healthcare providers and the government and helps the drug cost containment programme. 6 In 2003, the European Association of Euro-Pharmaceutical Companies (EAEPC) the European association representing parallel traders commissioned the York Health Economics Consortium to assess the benefits of parallel trade. 7 Its report found that the UK had one of the largest markets in parallel trade in Europe, worth an estimated 1.3 billion in The UK achieved direct savings of 342 million ( 232 million), or 17 per cent of the market (see Table 1). Much of this saving passed to the government through lower prices to hospitals and clawing back excess profits from pharmacies, though pharmacists retained some profit. There was also qualitative evidence that indirect competitive effects forced down the price of domestic products. The ABPI believes that parallel trade causes economic damage (see Table 2). 2 It estimates that the UK pharmaceutical industry lost 1.3 billion in 2005 but the NHS and patients see little of this money, which is largely translated into profits for wholesalers. In 2004, a report by the London School of Economics, partly funded by Johnson & Johnson, contradicted the York report. 8 Focussing on six high-volume product categories proton pump inhibitors, statins, ACE inhibitors,

3 angiotensin-ii antagonists, SSRIs and atypical antipsychotics accounting for 21 per cent of the brand retail market, it found that direct savings in the UK were only 4.7 million in 2002, equivalent to 0.3 per cent of the market. By contrast, wholesaler profits totalled 352 million. Pharmacists also benefited, though their profit could not be estimated. There were no benefits to patients, no effects on competition and there was no downward pressure on prices. Impact on patients The ABPI claims that parallel trade poses risks to patient well-being. It says that repackaging increases the risks of labelling errors, that lengthening the supply chain increases opportunities for piracy and counterfeiting, and that patients may be confused by overlabelled packs bearing a foreign language. 2 It is unclear how common these concerns are and they are not unique to parallel imports. Errors do occur with repackaging: a batch of imported Tegretol Retard was recently recalled because the blister strips had been overlabelled as Tegretol. 9 UK manufacturers also make mistakes: in January 2006, Merck recalled a batch of Slozem capsules labelled with the wrong strength. 10 Parallel traders dismiss the claim that lengthening the supply chain increases risks, arguing that they are governed by the same rules as original manufacturers and their additional checks may actually reveal problems that would otherwise be missed. 11 Pfizer says that counterfeiters who recently introduced fake atorvastatin into the UK supply chain were able to do so Pros possible cost savings to the NHS downward pressure on pricing Cons possible patient confusion/ confidence issues increased risk of counterfeiting decreased profit for UK-based pharmaceutical manufacturers Table 2. Pros and cons of parallel trade because of the complex and fragmented nature of European medicines distribution; the company adds that 140 million medicine packs are parallel traded across Europe each year, all are opened and altered and can travel through as many as pairs of hands before finally reaching the patient. 12,13 Again, fake medicines are not unique to parallel trade.

4 Key points parallel trade is made possible by the EU single market parallel imported medicines are dispensed against 1 in 17 NHS prescriptions the UK parallel import market is worth around 1.3 billion annually the scale of savings to the NHS are disputed in theory, the process of parallel importing is more susceptible to fraud and error than the domestic supply chain there is no evidence that patients are harmed by parallel imports but the true scale of the problem is unknown Counterfeits are known to be available by mail order and over the internet. In 2005, a UK wholesaler sold counterfeit tadalafil (Cialis) and sibutramine (Reductil) to a pharmacy knowing them to be fake, having obtained them from an unlicensed supplier. 14 What is different about parallel trade is access to the legitimate supply chain, which could allow larger quantities of fake medicines to be sold. However, the government said as recently as January 2006: Currently, there is little evidence in the UK that the repackaging processes of parallel trade have been the route for introducing counterfeit medicines into the legitimate supply chain. 15 There is a lack of evidence that patients are being confused by packs bearing a foreign language or packaging errors. The ABPI refers enquiries to the National Patient Safety Agency (NPSA) but the NPSA does not have examples of this problem or statistics on its frequency. Events that qualify as a patient safety incident (any unintended or unexpected incident that could have or did lead to harm for one or more patients receiving NHS-funded care) 16 should be reported to the NPSA, which says it is preparing guidance on dispensing standards that will address possible problems caused by overlabelling. The government has admitted that individual patients, carers and health professionals have written to the MHRA about packaging of parallel imports. The MHRA reviewed the cases and the importer was asked to address the concern raised; the MHRA has also informed the NPSA of its requirements. 17 Conclusion The parallel trade in medicines is an anomaly caused by the mismatch between EU aspirations for a single market and the determination of member states to control their health expenditure. Economists disagree over its impact on the public purse but it is costly to the UK pharmaceutical industry. However, there is little evidence that it is a significant cause of harm to patients or a unique cause of product quality failures. Research is needed to establish whether the industry s concerns are real or imagined and patient safety incidents caused by packaging and labelling should be reported to the NPSA. References 1. MHRA. Parallel import (PI) licences granted in February l-reg/documents/licensing/ con pdf. 2. ABPI. Parallel trade in medicines. MedBrief016B. March MHRA. Manufacturer s and wholesale dealer s licences. uk/home/idcplg?idcservice=ss_ GET_PAGE&nodeId= MHRA. Parallel import licences. IdcService=SS_GET_PAGE&node Id= MHRA. Regulation of medicines labels and patient information leaflets. idcplg?idcservice=ss_get_page&no deid= British Association of European Pharmaceutical Distributors. www. baepd.co.uk. 7. York Health Economics Consortium. Benefits to payers and patients from parallel trade. May downloads/paralleltrade_exec Summ.pdf. 8. Kanavos P, Costa-i-Font J, Merkur S, et al. The economic impact of pharmaceutical parallel trade in European Union member states: a stakeholder analysis. 26 Prescriber 5 September

5 LSEHealthAndSocialCare/pdf/Work ingpapers/paper.pdf. 9. MHRA. Class 2 Drug Alert: Tegretol Retard tablets 400mg, Polyfarma Ltd.EL(06)A/05. home/idcplg?idcservice=ss_get_ PAGE&useSecondary=true&ssDoc Name=CON &ssTargetNodeId = MHRA. Class 3 Medicines recall (action within 5 days), Merck, Slozem capsules, EL(06)A/03. gov.uk/home/idcplg?idcservice=ss_ GET_PAGE&useSecondary=true&ss DocName=CON &ssTarget NodeId= Freudenberg R. Dispelling the myths. European Pharmaceutical Executive, Jan/Feb org/admin/files/06_janfeb_ european_pharmaceutical_ executive_dispelling_the_myths_ richard_freudenberg.pdf. 12. Pfizer Ltd. Counterfeit medicines may put European patients at risk. id= Pfizer Ltd. Pfizer urges the British government and European authorities to take action on counterfeit medicines Anon. Wholesaler knew drugs it bought were counterfeits. Pharm J 2005;274: editorial/ /news/p636 counterfeits.html. 15. Hansard. Oral answers to questions. 26 January www. parliament.the-stationery-office. co.uk/pa/cm200506/cmhansrd/cm /debtext/ htm. 16. NPSA. National Reporting and Learning System General. display?contentid=2390#q Hansard. Written answers to questions. 9 December pa/cm200405/cmhansrd/ vo041209/text/41209w30.htm. Steve Chaplin is a pharmacist who specialises in writing on therapeutics Prescriber 5 September