This document discusses parallel imports of pharmaceuticals. It begins by defining parallel imports as the importation of non-counterfeit products without the authorization of the patent holder, often occurring when prices vary between markets. It then examines reasons for price differentiations internationally and provides examples of large price differences for common drugs between the US and India. The document outlines arguments for and against parallel imports, different countries' legal approaches, and India's stance, concluding that parallel imports have limited practical utility for India.
2. INTRODUCTION
• What is it ????
It is importation of non-counterfeit product without the authorization of the person holding
the patent rights in the goods – called ‘ GREY MARKET ’
• Why is it ????
When price of patented products varies between two different markets
traders to import the product from cheaper source
Grey Market Goods
they are neither legal nor
illegal and hence fall in the
intervening grey area.
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4. Price Comparison
Drug Cost / Tab
US INDIA
Ibuprofen
(For Pain)
Rs.10.00* Re.0.60
Amoxicillin
(For Infection)
Rs.90.00** Rs.6.50
Pantoprazole
(For Acidity)
Rs.180.00*** Rs.1.30
15 + times more
expensive
*Advil,**Amoxil, *** Protonix
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which is compromised primarily
through increased transport and packing activities in the products’ supply chain
5. PARALLEL IMPORTING
• Reduces price of pharmaceuticals by introducing competition
• Fundamental principle of intellectual property law - once an article is sold, its re-sale by
the purchaser wherever he wants cannot be stopped by the IPR holder.
• Concept of exhaustion of intellectual property rights
• Territoriality of IPRs- states that intellectual property rights are limited to the nation
granting them.
3 modes of exhaustion:
National/Territorial Exhaustion
International Exhaustion
Community Exhaustion/Regional Exhaustion
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6. The Legal Status of Parallel Trade in Pharmaceuticals
• Patents provide inventors of new products and technologies the legal right to exclude
rivals from making, selling, and distributing those inventions.
o National/Territorial Exhaustion: exclusive rights end upon first sale within a country but IPR
owners may exclude parallel imports from other countries.
o International Exhaustion: rights are exhausted upon first sale anywhere and parallel Imports
cannot be excluded.
o Community Exhaustion/Regional Exhaustion: rights end upon original sale within a group of
countries, thereby allowing parallel trade among them, but are not ended by first Sale outside
the region.
• A country could treat parallel imports (PI) and parallel exports (PE) separately.
PI
PE PE
PI
The European Union pursues
regional exhaustion but excludes
PI coming from nonmembers
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7. • There are now a number of E-commerce "pharmacies" (distributors) offering
prescription, trademarked drugs to consumers at prices below retail.
• Trademark law in USA- could be open to PI subject to its “common-control
exception”. (This rule allows trademark owners to bar PI except when both
the foreign and U.S. trademarks are owned by the same entity or when the
foreign and U.S. trademark owners are in a parent-subsidiary relationship)
• Two legal restraints prevent PI in prescription drugs:
o American patent owners are protected from parallel imports by an explicit right of
importation
o PI of trademarked, prescription drugs are explicitly excluded under terms of a
1988 law covering pharmaceuticals
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8. • JAPAN allows PI in patented and trademarked goods unless the goods are
explicitly barred from parallel trade by contract provisions or unless their original
sale was subject to foreign price regulation.
• AUSTRALIA generally permits parallel imports in trademarked goods but patent
owners may block them. Thus, Australian consumers cannot benefit from cheaper
drugs available on foreign markets.
• Developing countries, including ARGENTINA, THAILAND, AND SOUTH
AFRICA, recently have enacted laws permitting parallel imports of
pharmaceutical products.
• INDIA follows a regime of international exhaustion in trademarked and patented
goods
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9. Indian legal regime
• First statutory provision on parallel import was introduced in patent
amendment act of 2002.
• Section 107 A(b) states “importation of patented product by any person
who is duly authorized by patentee to sell or distribute the product, shall
not be considered as infringement of patent rights”
• This was considered restrictive in scope.
• The potential of restrictive interpretation of section 107A and consequent
thwarting of principle of international exhaustion forced Indian parliament
to bring an amendment in 2005.
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10. Indian Patent Act says about International exhaustion in Patents
Amendment Act, 2005 :
“Importation of patented products by any person from a person
who is duly authorized under the law to produce and sell or
distribute the product shall not be considered as an
infringement of patent rights.”
11. TRIPS compatibility
TRIPS agreement in Article 6 states that this practice cannot be
challenged under the WTO dispute settlement system and so is
effectively a matter of national discretion.
13. • Allows traders from comparatively more expensive market to import
the product from cheaper source
• Effects of parallel trade on various nations differ widely due to
differences in pricing structures, tax structures, transportation costs,
labor costs, consumer tastes and preferences.
• This parallel trade mechanism will succeed only if the pharmaceutical
companies maintain a broad difference in price of their patented
drugs across the globe.
• A nation must first judge the effects of parallel trade on its economy
before taking a decision on parallel trade.
• Pharma sector requires more subtle balance to be drawn between
protecting creative interest of innovator and general public so that to
ensure a steady supply of life saving drugs at affordable price.
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14. FOR INDIA
• For developing countries like India which is good in generic pharmaceutical industry, this
type of parallel trade holds no attraction. India’s technology base is so strong that during
absence of patent regime all patented drugs were being manufactured at half price.
• Very limited scope for traders of countries like India to import drugs from other countries
to ensure affordable medicines for its population
• It would be necessary to identify the possible sources in world where drugs are cheaper
than India and chances of which are very less.
Parallel trade provisions have no practical utility for India.
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15. REFERENCES
• Research Paper for the Competition Commission of India, June-July 2010, by Avinash B
amaranth.
• Parallel Trade and its Implication on the Availability of Patented Drugs: A Theoretical
Approach by Mainak Mazumdar, Institute for Social and Economic Change (ISEC),
Bangalore, India.
• Exhausting patent rights in India, by Shamnad basheer Journal of intellectual property
rights, vol 13, September 2008, pp 486-497.
• Parallel imports in pharmaceuticals: implications for competition and prices in developing
countries, final report to world intellectual property organization by Keith E Maskus.
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